Commissioner of Income-tax Vs. B. Kishanlal Khandasari Sugar Mills - Court Judgment

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direct taxation - concealed income - sections 254, 261 and 271 (1) of income tax act, 1961 - penalty proceedings initiated by income tax officer against assessee on ground of concealment of income - simultaneously criminal proceedings also initiated on grounds of concealment - assessee convicted at trial stage and subsequently acquitted in appeal - appellate tribunal's order of levy of penalty challenged on grounds that acquittal in criminal proceedings not considered - conviction order at trial stage was not relied and thus acquittal also loose relevance - assessee's case falls under mischief of section 271 (1) (c) - order of levy of penalty cannot be challenged. head note: income tax appeal (tribunal)--jurisdiction of tribunal--penalty appeal pending before tribunal--acquittal in prosecution case in the meantime held: the tribunal confirmed the levy of penalty on the facts and circumstances of the case unrelated to and without reference to the judgment of the magistrate. it is, thus, clear that the judgment of the magistrate had played no part in the conclusion that was arrived at by the tribunal. if so, the judgment of acquittal would equally be not relevant. when the tribunal is not placing any reliance upon the judgment of the magistrate in the criminal proceedings, it was not bound nor was it necessary for it to adjourn the matter or postpone the delivery of judgment to enable the assessee to produce the judgment of the criminal appellate court acquitting the partners. income tax act 1961 s.253 - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal by insured and insurer - held, the language employed in enacting sub-section (2) of section 149 appears to be plain and simple and there is no ambiguity in it. it shows that when an insurer is impleaded and has been given notice of the case, it is entitled to defend the action only on grounds enumerated in sub-section (2) of section 149 of the act, and no other grounds are available to it. the insurer is not allowed to contest the claim of the injured or heirs of the deceased on other grounds, which are available to the insured. if insurer is permitted to contest the claim on other grounds it would mean adding more grounds of contest to the insurer and will be negation of the intention of the legislature and annihilate mandate of the provisions of sections 170 and 149 of the act. the insured can pursue appeal only after giving up the insurer as the appellant and not otherwise. in the instant case, the insurer has not withdrawn from party array but has remained prosecuting the appeal with the insured on the grounds which are available only to the insured. therefore, the joint appeal as filed by the insured and the insurer is not maintainable. section 166: [v. gopala gowda & jawad rahim, jj] claim for compensation accident due to mechanical defect in the vehicle held, it is not in dispute that the claimant suffered injuries in an accident, which occurred during the course of his employment, albeit due to his negligence but law does not render him remediless. statutory right is conferred on him, accruing by virtue of his employment under insured to claim compensation under workmens compensation act. the insurer is statutorily duty bound to discharge the liability of the owner of the vehicle, to pay such compensation to the employee, as mandated under the provisions of section 149 of the act. the right of an injured employee or his dependents as the case may be to be compensated, when injury is suffered or death occurs during his employment, is recognised not only under workmens compensation act, but also under benevolent provisions under section 166 and 167 of the m.v. act. the right of driver to seek compensation is not restricted only to the workmens compensation act, it has been enlarged to enable such person to seek just compensation (sections 166 and 168), conferring upon him the right of election engrafted under section 167 of the act to choose either of the two forum. the only defence which the insurer could take is limit of its liability as enumerated under section 147 of the act, leading to contest, inter alia, only between insured and insurer and does not impact claimants right to recover the compensation determined by the tribunal which crystallizes into enforceable right against both. in the instant case, the claimant/driver has exercised right of election under section 167 of the act to seek compensation under section 166 of the act resulting in award passed by the tribunal. therefore, the insured and the insurer have no escape but to discharge the said award as directed. undisputedly, in this case as deduced for proved facts, the vehicle in question was not properly maintained by the owner and despite faulty brake system, the claimant had undertaken the hazardous journey to his peril at the behest of and at the instruction of the owner. the owner is therefore, tortfeasor. section 168: [v. gopala gowda & jawad rahim, jj] insurers limit of liability - held, it is well settled that the liability of the insurance company for payment of compensation can be statutory or contractual. is for the insurance company to show that the insurance policy was a statutory policy and not a contractual policy to restrict its liability. that issue was neither raised before the tribunal nor is raised in this appeal requiring decision. thus, if at all the insurer has any valid ground to restrict its liability, it can proceed against the insured but firstly it has to discharge the award as required under section 149 (1) of the act. where the owner/insured has failed to maintain the vehicle as per prescribed safety standards and has caused the claimant to drive the vehicle with mechanical defects, the owner would be the tortfeasor and the claimant can maintain a petition seeking compensation under the provisions of the act, instead of seeking compensation under the workmens compensation act. on facts, held, the material evidence on record, particularly, with regard to the income of the claimant, his age, medical evidence and the evidence relating to pecuniary loss has not been considered by the tribunal in the correct perspective, which has resulted in passing of the impugned award, disproportionate to the pecuniary loss and the loss of future income of the victim. the settled principles governing determination of compensation has been given a go-bye. compensation of rs.4,15,150/- awarded by the tribunal was enhanced to rs.8,20,000/-. - further appeal to the tribunal also failed. it is also not considered that because the criminal court has acquitted the assessee, the penalty proceedings under the act should necessarily fail.b.p. jeevan reddy, j. 1. two questions are referred for our opinion under section 256(1) of the income-tax act, 1961. they are as follows : '1. whether, on the facts and in the circumstances of the case, when the attention of the tribunal was drawn to the order pronounced by the additional sessions judge acquitting the partners of the assessee-firm in respect of the same charge for which the penalty in question was levied prior to the actual passing of the order by the tribunal, the tribunal was justified in refusing proper opportunity to the assessee to produce the said judgment of the additional sessions judge in support of its stand that there is no justification for levy of penalty and in refusing to reopen and rehear the appeal 2. if question no. 1 is answered in the affirmative, whether, on the facts and in the circumstances of the case, the tribunal is justified in confirming the levy of penalty of rs. 1,39,261 under section 271(1)(c) of the income-tax act, 1961 ?' 2. the assessee is a registered firm carrying on business in the manufacture and sale of khandasari sugar. for the assessment year 1970-71, that is, for the accounting year ending on october 31, 1969, the assessee filed a return showing certain income. the income-tax officer made a few additions to the income, disbelieving certain entries in the account books maintained by the assessee. he also initiated penalty proceedings under section 271(1)(c) of the act and levied a penalty. against the order levying penalty, the assessee filed an appeal which was dismissed by the appellate assistant commissioner. further appeal to the tribunal also failed. 3. the partners were also prosecuted in a criminal court for the said concealment of income and for filing a false return. they were convicted by the trial court and sentenced to imprisonment for six months on march 31, 1979. they filed an appeal and the appellate court, viz., the metropolitan additional sessions judge, by his judgment and order dated august 20, 1979, acquitted them. 4. it may be stated that the order of the appellate assistant commissioner in the penalty proceedings is dated march 28, 1978, which means that by the date of that order, the order of the criminal court, either of the trial court or the appellate court, was not available. however, by the date the appeal was heard by the income-tax appellate tribunal, the trial court's order had been pronounced and the appeal was pending it appears that the arguments in the income-tax appellate tribunal and the arguments in the court of the metropolitan additional sessions judge were heard almost simultaneously. before the tribunal, the departmental representative, inter alia, placed reliance upon the judgment of the trial court convicting the partners while supporting the orders of the appellate assistant commissioner. the tribunal heard the arguments and reserved the matter for judgment. within three days thereafter, the metropolitan additional sessions judge pronounced his judgment and order acquitting the partners. on the same day, it appears, the assessee filed an application before the tribunal informing it of the said fact and requesting it to give some time to enable the assessee to produce a copy of the said judgment before the tribunal. the tribunal, however, passed no orders nor did it grant any time for producing the judgment. it proceeded to deliver its judgment on august 23, 1979. 5. we have seen the judgment of the tribunal. it confirmed the levy of penalty on facts, unconnected with and without relying upon the order of the trial court (magistrate) in criminal proceedings. having thus confirmed the levy of penalty, towards the end of its judgment, the tribunal referred to the contention of the departmental representative that the partners have been prosecuted and convicted by a criminal court for the very same offence of concealment/filing of false returns. though the tribunal notes the said contention, it does not refer to the contents or the conclusion of the criminal court, although a copy of the said judgment appears to have been filed before it. on the other hand, after referring to the argument of the departmental representative, the tribunal reiterates that on the facts and circumstances placed before it, the appellant's case fell within the mischief of section 271(1)(c) and that there are no reasons to differ from the conclusion arrived at by the appellate assistant commissioner. after the appellate tribunal pronounced its judgment, the assessee filed a petition for review, being miscellaneous petition no. 65 of 1979. in this petition, the assessee sub-mitted as to what had happened during the course of the hearing and immediately after the hearing was over and submitted that he has suffered injustice and prejudice by the tribunal's not granting time for producing a copy of the judgment of the metropolitan additional sessions judge. the assessee, therefore, requested that the judgment of the tribunal may be set aside and the matter be reheard taking into consideration the judgment of the metropolitan additional sessions judge. this petition was dismissed by the appellate tribunal on june 24, 1980. the tribunal was of the opinion that there are no grounds for review. it stated further that it had come to the conclusion that it is a lit case for levy of penalty on an exhaustive consideration of the facts of the case and that it had given three or four reasons for sustaining the levy of penalty and that it did not place any reliance upon the judgment of the magistrate convicting the partners. it said that the fact of conviction of the partners was brought in only by way of a 'side-wind'. it, accordingly, dismissed the petition for review. thereupon, the assessee applied for and obtained this reference. 6. sri t. anantha babu, learned counsel for the assessee, contended that the factum of conviction by the magistrate was brought to the notice of the tribunal at the hearing of the appeal by the departmental representative and that fact should have weighed with the tribunal in confirming the penalty. though the judgment of the tribunal does not show that the tribunal has placed any reliance upon the said fact, it is not possible to predicate or say with any assurance that the said fact has not influenced the decision of the tribunal. he submitted further that though the assessee brought to the notice of the tribunal before it delivered the judgment, that the metropolitan additional sessions judge has allowed the appeal and acquitted the partners, the tribunal in its judgment does not refer to this fact but refers to the argument of the departmental representative which goes to show that the said fact did play a part in forming the opinion, which led to the dismissal of the appeal by it. he further says that, in any event, once the fact of acquittal by the criminal court was brought to the notice of the tribunal, it was but fair and proper on its part to give reasonable time to the assessee to produce a copy of the judgment and that it did not act fairly in not doing that. we are unable to see any substance in the argument of learned counsel. the penalty was levied by the income-tax officer on the facts and circumstances before him de hors any judgment or opinion of the magistrate or any other court. similarly, the appellate assistant commissioner confirmed the penalty on the facts and circumstances before him without any reference to the orders of the court because, as stated above, the orders of the criminal court (that is, either of the magistrate or of the appellate court) were not even pronounced by the date of the judgment of the appllate assistant commissioner. 7. now, coming to the tribunal's order the tribunal also confirmed the levy of penalty on the facts and circumstances of the case, unrelated to and without reference to the judgment of the learned magistrate. after having come to that conclusion, it merely referred to the argument of the departmental representative based upon the judgment and order of the learned magistrate, but it neither referred to the contents of the said order nor to the conclusion to the learned magistrate, but reiterated that it had confirmed the penalty on the facts and circumstances before it and for the reasons already recorded by it. this is what it said when the assessee moved a review petition. it said that it confirmed the penalty for the three or four reasons mentioned by it in its order and that the judgment of the criminal court was brought in only by way of a side-wind. it is thus clear that the judgment of the learned magistrate had played no part in the conclusion that was arrived at by the tribunal. if so, the judgment of acquittal would equally be not relevant. it is not urged before us that the judgment of the criminal court has any legal relevance or bearing on the issue in controversy. it is also not considered that because the criminal court has acquitted the assessee, the penalty proceedings under the act should necessarily fail. in such a case, reopening the matter on the grounds alleged and directing rehearing, in our opinion, is unnecessary, uncalled for and is a superfluous exercise. in this connection, it may also be noticed that the assessee has not chosen to ask for any reference against the main order of the tribunal in the penalty proceedings. only after its review petition has been dismissed, it has chosen to ask for referring several questions, of which the tribunal has referred only two questions referred to above. we are also of the opinion that question no. 1 is framed in a very technical and involved manner. it relates to the justifiability of the procedure adopted by the tribunal. even so, we must say, when the tribunal is not placing any reliance upon the judgment of the learned magistrate in the criminal proceedings, it was not bound nor was it necessary for it to adjourn the matter or postpone the delivery of judgment to enable the assessee to produce the judgment of the criminal appellate court acquitting the partners. accordingly, we answer the first question referred to us in the affirmative, that is, in favour of the revenue and against the assessee. 8. once we answer the first question in the affirmative, the second question does not arise for consideration. accordingly, we decline to answer the second question in view of our answer to question no. 1. reference ordered accordingly. no costs. 9. learned counsel for the assessee makes an oral request for leave to appeal to the supreme court under section 261 of the income-tax act. we do not, however, think that this is a fit case for grant of such a certificate. the oral request is, accordingly, rejected.