1993 (7) TMI 133 - AT - Income Tax

Tribunal cancels penalty citing lack of evidence & violations of natural justice. Assessee wins appeal.

The Tribunal canceled the penalty imposed under section 271(1)(c) due to violations of natural justice, lack of positive evidence from the Revenue, and ... Penalty For Concealment, Concealment Of Income Issues Involved:1. Initiation of proceedings under section 148.2. Imposition of penalty under section 271(1)(c).3. Application of the Explanation to section 271(1)(c).4. Violation of principles of natural justice.5. Burden of proof in penalty proceedings.6. Reliability of the statement of Rao Bir Bikram Singh.Detailed Analysis:1. Initiation of Proceedings under Section 148:The Income Tax Officer (ITO) initiated proceedings under section 148 based on the allegation of cash credit entries of Rs. 15,000 in the name of Rao Bir Bikram Singh on 13-11-1972. Rao Bir Bikram Singh allegedly stated on oath that he gave merely Hawala of Rs. 15,000 and no actual cash was given. Consequently, the ITO added Rs. 15,000 and interest of Rs. 230 to the assessee's income as income from other sources. This addition was confirmed up to the Tribunal stage, and even the assessee's Reference Application before the Rajasthan High Court was rejected.2. Imposition of Penalty under Section 271(1)(c):The ITO imposed a penalty of Rs. 15,230 under section 271(1)(c) for the alleged concealed income of Rs. 15,000 and interest of Rs. 230. The penalty was confirmed by the Deputy Commissioner (Appeals), who invoked the Explanation to section 271(1)(c). The assessee argued that the penalty proceedings were separate from the quantum proceedings and required re-appreciation of evidence in the light of quasi-criminal proceedings.3. Application of the Explanation to Section 271(1)(c):The Deputy Commissioner (Appeals) confirmed the imposition of penalty by invoking the Explanation to section 271(1)(c). The assessee contended that he had maintained regular books of account, produced vouchers bearing the signatures of the creditor, and filed an affidavit from Chiranjilal Choudhary, who confirmed the genuineness of the cash credits. The Tribunal noted that the ITO did not impose the penalty on the ground that the returned income was less than 80% of the assessed income but merely because the cash credits were added to the income.4. Violation of Principles of Natural Justice:The assessee was not provided with a copy of Rao Bir Bikram Singh's statement nor given an opportunity to cross-examine him, which was a flagrant violation of the principles of natural justice. The Tribunal emphasized that no evidence could be used against a person unless the person was confronted with that evidence and given a reasonable opportunity to rebut it. The Tribunal cited several decisions, including Gargi Din Jwala Prasad v. CIT and Kishinchand Chellaram v. CIT, to support this principle.5. Burden of Proof in Penalty Proceedings:The Tribunal highlighted that the burden of proving concealment for the imposition of penalty under section 271(1)(c) was on the Revenue. The Tribunal found that the ITO initiated proceedings based on Rao Bir Bikram Singh's statement, which was not recorded in connection with the assessee's case. The Tribunal noted that the Revenue failed to provide any positive evidence to prove that the cash credits were the assessee's own income or that the entries in the books of account were false.6. Reliability of the Statement of Rao Bir Bikram Singh:The Tribunal questioned the reliability of Rao Bir Bikram Singh's statement, noting that he had given similar statements in other cases, such as M.D. Jewellers, which were not found reliable. The Tribunal observed that the penalty was imposed based on a statement given by a depositor in proceedings connected with another case, and the assessee was not given an opportunity to cross-examine the depositor. The Tribunal found this to be a serious flaw in the imposition of the penalty.Conclusion:The Tribunal concluded that the penalty under section 271(1)(c) could not be sustained due to the violation of principles of natural justice, lack of positive evidence from the Revenue, and the assessee's discharge of the burden of proof. The Tribunal canceled the penalty imposed by the Deputy Commissioner (Appeals) and allowed the appeal filed by the assessee.