SIR SHADI LAL SUGAR AND GENERAL MILLS LTD. & ANR. versus COMMISSIONER OF INCOME TAX, DELHI

Citation: [1987] 3 S.C.R. 692 · Decided: 31-07-1987 · Supreme Court of India · Bench: SABYASACHI MUKHERJI, G.L. OZA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
c 
SIR SHAD! LAL SUGAR AND GENERAL MILLS 
LTD. & ANR. 
v. 
COMMISSIONER OF INCOME TAX, DELHI. 
JULY 31, 1987 
[SABYASACHI MUKHARJI AND G.L. OZA, JJ.] 
Income Tax Act, 1961' ss. 256, 271 & 274/Jncome Tax Act, 1922: 
s. 66---lncome-tax Referenct7-Finding of fact by Tribunal-When 
could be transformed into question of law and interfered with. 
The assessee company, which derived its income from the 
manufacture and sale of sugar and confectionery, was assessed for the 
years 1958-59 by the Income Tax Officer under the Income Tax Act, 
1922 by making additions of Rs.48,500 for cane cost, Rs.67 ,500 for 
shortage in cane, and Rs.21,700 for salary of outstation staff. The asses-
+ 
D see did not challenge the said assessment order. Later in the year 1963 
the Income Tax Officer issued notice under s. 274 reall withs. 271 of the Y 
Income Tax Act, 1961 in respect of the assessment year 1958-59 for 
imposing penalty. Before the Inspecting Assistant Commissioner the 
assessee admitted that these amounts, which were not included in the 
return by the company, represented income. On finding that there was 
E 
deliberate understatement of income he imposed a penalty of 
-
Rs.70,000. 
~-
F 
G 
On appeal the Tribunal held that the mere fact that the amounts 
were agreed to be taken into account by the assessee did not ipso facto 
indicate any criminality in its action to conceal any portion of the in-
come, and that the assessee could very well have argued against the 
additions of the two sums, namely, Rs.67,500 and Rs.21,700. As re-
gards the sum of Rs.48,500 it found that the assessee had agreed to 
similar addition in the earlier years and so the penalty was warranted In 
similar amount for this year and taking into consideration that the sum 
involved was Rs.48,500, it considered that a smaller penalty of Rs.5,000 
was imposable. 
The High Court took the view that the onus of proving conceal-
ment was on the Revenue because proceedings for penalty were penal in 
character, and held that so far as the sum ofRs.48,500 was concerned it 
was not proved that there was any deliberate concealment, that the 
H Tribunal had not set aside the finding of the Assistant Inspecting Com-
692 
.r 
-
SHAD! LAL SUGAR MILLS v. C.I.T. DELHI 
693 
-1'-
missioner that the assessee surrendered the amount of Rs.67,500 when 
A 
it was faced with facts which clearly established concealment, that the 
assessee in fact had surrendered the amount only after the Income Tax 
Officer had conclusive evidence in bis possession that the amount re-
presented its income, that acceptance by the assessee was material to 
give proper weight to judge the criminality of the action which in its 
opinion was not given, and that the Tribunal omitted to take into B 
t 
account the fact that the assessee had admitted that the amount of 
Rs.21, 700 represented its income. 
In the appeal by special leave on the question as to how far the 
High Court in a reference could interfere with a finding of fact and 
transform the same into a question oflaw on the ground that there has C 
been non-consideration of all relevant facts. 
Allowing the appeal, 
HELD: 1.1 In an income tax reference a finding on a question of 
pure fact could be reviewed by the High Court only on the ground that D 
there was no evidence to support it or that it was perverse. If the 
High Court found that there was no such evidence, those circum-
stances would give rise to question of law and could be agitated in a 
reference. [700G-701A, 702H-703A] 
1.2 When a conclusion has been reached on an appreciation of a E 
number of facts established by the evidence, whether that is sound or 
not must be determined not by considering the weight to be attached to 
each single fact in isolation, but by assessing the cumulative effect of all 
the facts in their setting as a whole. Where an ultimate finding on an 
issue is an inference to be drawn from the facts found, on the applica-
tion of any principles of law, there would be a mixed question of law and F 
fact, and the inference from the facts found in such a case would be a 
question of law. But where the final determination of the issue equally 
with the finding or ascertainment of the basic facts did not involve the 
applicaton of any principle of law, an inference from the facts could 
not be regarded as one of law. The proposition that an inference from 
facts is one of law is, therefore, correct in its application to mixed G 
questions of law and fact, 

Excerpt shown. Read the full judgment & AI analysis in Lexace.