1989 (6) TMI 12

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....tion to section 271(1)(c) of the Income-tax Act, 1961, that the assessee's failure to return the correct income arose either from fraud or from gross or wilful neglect on his part ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the order of penalty made under section 271 (1) (c) of the Income-tax Act, 1961 ?" The facts shortly stated are that, in the course of assessment proceedings, the Income-tax Officer noticed that the assessee claimed to have taken a loan of Rs. 1 lakh from M/s. Raj Kumar Jain and Co., on September 6, 1963. After making an enquiry, he concluded that the assessee had concealed his income to this extent and consequently added the amount as the assessee's inc....

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....the basis of the confession said to have been made by partner of the creditor-firm is unsustainable. Admittedly, the assessee asked for an opportunity to cross-examine the said partner if his confession was sought to be used against him and that opportunity was not vouchsafed to him. If the partner had made a confession, we fail to see how the right to cross-examine that partner could be denied to the assessee on the ground that the party was not traceable. In the penalty proceedings, the Inspecting Assistant Commissioner relied upon the confession said to have been made by the partner of the creditor-firm which was not subjected to the test of cross-examination. This circumstance which is violative of the principles of natural justice viti....