- (1.) THE ITO, A-Ward (now Distt. 1 (2), Ludhiana, filed a complaint under Section 277 of the I. T. Act, 1961 (hereinafter called as "the Act"), and Sections 193, 196, 420 and 511 of the Indian Penal Code, pertaining to the assessment year 1965-66, in the court of the Judicial Magistrate at Ludhiana, against the respondents, who are partners of M/s. Variety Hosiery Mills, Ludhiana. However, they were acquitted by the Trial Magistrate, vide his order dated 24th May, 1980. Hence, this appeal by the ITO against their acquittal.
(2.) THE prosecution case as set up at the trial was that the respondents were partners of the firm, M/s. Variety Hosiery Mills, Ludhiana, in the financial year relevant to the assessment year 1965-66. Return of income for the assessment year 1965-66 was filed on behalf of M/s. Variety Hosiery Mills on 13th August, 1965, showing an income of Rs. 85,909, along with the statement of accounts like trading accounts (i. e. , malkhata, wooltops account, woollen yarn account, colour account), profit and loss account and balance-sheets. This return was filed by Sawan Mal, partner, in the prescribed manner. Later on, the respondents filed details of colour and chemicals purchased, consumed and sold on 9th July, 1968, as Rs. 11,232. 04, Rs. 6,124. 04 and Rs. 5,097. 60, respectively.
(3.) THE Income-tax Department found that the aforesaid details were inflated ones and that the respondents as assessee had not shown as to what happened to the imported dyes and colours purchased by them for Rs; 4,530. The respondents had stated that those were used in the manufacture of cotton hosiery goods and that the same had been supplied to the fabricators who dyed and fabricated cotton hosiery goods for the respondents. One of such fabricators was mentioned as M/s. Maghera Knitting Works, whose proprietor, Dalip Singh, was summoned and examined by the income-tax authorities. Dalip Singh, however, denied, having received the dyes and colours from the respondents. The respondents further showed sale of imported dyes and colours to a firm, M/s. Dina Nath and Sons, Amritsar, for Rs. 5,098 on 24th February, 1965. M/s. Dina Nath and Sons, in turn, had shown the sales of these very goods to M/s. Ajay Textiles, Amritsar, and the latter firm had shown the sale of these very goods to M/s. New Egerton Woollen Mills Ltd. , Dhariwal (hereinafter referred to as "the Dhariwal Mills"), for Rs. 8,255, These two firms of Amritsar admitted before the income-tax authorities that the goods were sold by the respondents to the Dhariwal Mills, whereas they (Amritsar firms) only acted intermediaries by charging a nominal commission. The respondents, thus, reduced their profits and tried to conceal their true account. Not only the dyes and chemicals account, but the wooltops account of the respondents also, was found to be false by the income-tax authorities. The respondents had disclosed having sold wooltops weighing 12,322 lbs. to M/s. Asha Wool Trading Co. , Panipat (hereinafter referred to as "the Panipat firm") @ Rs. 6. 50 per lb. for a total sale price of Rs. 80,093 through Bill No. 20, dated 11th August, 1964. The Panipat firm, on enquiries, alleged to have sold the same goods to M/s. British India Corporation Ltd. , Kanpur (hereinafter referred to as "the B. I. C. , Kanpur"), on 6th August, 1964, @ Rs. 13. 70 per lb. and the Panipat firm issued the bill on 6th August, 1964, in favour of the B. I. C. , Kanpur, which bill was earlier in date than that issued by the respondents firm on 11th August, 1964, to the Panipat firm. The goods were sold at Ludhiana. Thus, the allegation is that the respondents had allegedly introduced bogus intermediaries to reduce their profits, and in this manner the respondents had wilfully and knowingly concealed income of Rs. 1,04,500 as confirmed by the Income-tax Appellate Tribunal, vide its order dated 31st May, 1973, by making false statements of accounts, making wrong entries in the books of account and also making wrong declarations in the income-tax return.;