M/S RAJASTHAN TEXTILES INDUSTRIES vs. C.I.T.

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR D.B. Income Tax Reference No.9/1993 M/s Rajasthan Textiles Industries Versus Commissioner Income Tax, Jaipur Date of Order : 25/08/2009 Hon'ble Mr. Justice R.C. Gandhi Hon'ble Mr. Justice K.S. Chaudhari None present for petitioner. Mr. R.B. Mathur, for respondent. (Oral) This reference has been made in compliance of the High Court order dated 30.10.1991 passed on the Reference Application of the assessee under Section 256(2) of the Income Tax Act, 1961. The assessment pertains to the year 1967-68, 71- 72 to 75-76 in Reference Application No.141to146/JP/88 arising out of ITA Nos.868 to 873/JP/88. The assessee firm consisted of three partners namely Shri Devendra Kumar, Shri Moolchand and Smt. Keval Devi. They used to carry on the business of manufacturing sized beams. The firm awarded sole selling agency for selling sized beams produced by it to M/s. Luhadia Brothers, a proprietory concern of Smt. Ratan Devi, wife of one of the partners namely Shri Devendra Kumar. Smt. Ratan Devi used to carry on her business of sale

2 through Shri Madanlal Sethi, her sister's son. Shri Nirmal Kumar s/o. Smt. Ratan Devi also assisted her in the business. The assessee firm claimed before the Income Tax Officer that it be paid the following commission to M/s. Luhadia Brothers: Rs.13,919/- for 1967-68 Rs.19,811/- for 1971-72 Rs.13,712/- for 1972-73 Rs. 3,946/- for 1973-74 Rs.15,844/- for 1974-75 Rs. 2,552/- for 1975-76 The Income Tax Officer disallowed the gross amount of commission paid to Smt. Ratan Devi holding her to be the Benamidar of the assessee invoking the provisions of Section 40A(2)(A) of the Income Tax Act. The assessee preferred appeals before the Appellate Assistant Commissioner, B-Range, Jaipur who allowed the appeals. The Revenue preferred appeals before the Income Tax Appellate Tribunal against the order of the Appellate Assistant Commissioner, who accepted the appeals vide order dated 28.06.1983. A Miscellaneous Application for modification of order dated 28.06.1983was filed before the Tribunal. The Tribunal modified the order by allowing the application partly vide order dated 05.06.1984. The Income Tax Officer started proceedings under Section 271(1)(c) for imposition of penalty. He issued notice to the assessee. It was challenged by way of appeal before

3 the Appellate Assistant Commissioner. The appeals were allowed. The Revenue challenged the order of the Appellate Assistant Commissioner before the Tribunal. The Tribunal, vide order dated 15.01.1988, allowed the appeals of the Revenue and further directed that Income Tax Officer to recompute the penalty on the net addition made in the income of the assessee on account of bogus claim of commission. Under these circumstances, this reference has been made at the instance of the assessee for opinion of the Court on the following question of law: "Whether on the facts and in the circumstances of the case, the assessing authority was justified in imposing penalty under Section 271(1)(c) of the Act on the assessee and as to whether the Tribunal was justified in upholding the order passed by the assessing authority with the modification made by it in the order dated 15.01.1988?" The assessee has not turned up to assist the Court, soliciting opinion of the Court. We have perused the interim orders recorded in this file. Notice was issued to the assessee, at whose instance reference has been made, asking him to prepare or cause to be prepared the paper books within three months from the date of receipt of this notice. Notice was served upon the assessee and the respondent. The reference was listed before the Court on 03.08.1994. 4 The assessee did not opt to appear whereas Mr. G.S. Bapna, learned Advocate General appeared on behalf of the respondent. It was again listed on 17.01.1996, Mr. K.S. Gupta appeared on behalf of the petitioner. Today the assessee is not present. Under these circumstances, we return the reference back as unanswered. (K.S. Chaudhari) J.

(R.C. Gandhi) J. Mohit