Law: Income Tax Act, 1922

Section: 66,66(1),66[2)

[Indian Income Tax Act, 1922 (XI of 1922)]........Sections 66(1), 66[2)-Reference to High Court--Question of fact-Rule Nisi-Assessee submitting to assessment in its made of profits of another on the basis of compromise -Appellate Tribunal-Finding that there was no concealment-Whether question of law artises-Held no-High Court-Application for Reference Rule Nisi-Dismissal without speaking order- Whether proper- Held no. During the accounting period relevant to the assessment year 1952-53, the respondent company had transactions in jute which resulted in a profit of Rs. 59,91,721, of which the company claimed that a profit of Rs. 40,05,S25- was earned by-D.J. & Co. and that Rs. 14,30,561 was paid to D.C.P.M Co. as the latters profit, but the Income Tax Officer assessed the two amounts as its income. Before the Appellate Assistant Commissioner, however, the respondent company abandoned its claim as regards the sum of Rs. 40,05,825 ; and on a reference the High Court excluded ,the sum of Rs. 14,30,561 from assessment. Later, the Supreme Court reversed the decision of the High Court. In the meantime, the Income Tax Officer imposed a ,penalty of Rs. 20lakhs on the respondent company under Section 28(1)(c) of the Indian Income Tax Act, 1922, for concealment of income to the extent of Rs. 5431.386 comprised of the two sums. The Appellate Assistant Commissioner reduced the penalty of Rs. 15 lakhs on the basis of the decision of the High Court. On further appeal, the Appellate Tribunal accepted the explanation of the respondent company that to avoid protracted proceedings a compromise was effect between the respondent and D. J. & Co., whereby the sum of Rs. 40,05,825 was to be assessed in the hands of the respondent and the balance of profits retained by it ; and accordingly set aside the pena1ty l he Tribunal refused to state a case under section 66(1); and the High Court, after issuing a rule nisi, rejected the departments application under Section 66(2), On appeal : Held, (i) that the High Court, having issued a rule nisi, ought not to have dismissed the application under Section 66(2) without a speaking order, but as the case had been argued on the merits it…

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