1994 (9) TMI 119 - AT - Income Tax

Additional Evidence, Assessing Officer, Criminal Court, Criminal Proceedings, Criminal Prosecution, Penalty For Concealment

Issues Involved:
1. Confirmation of penalty by the CIT(A) under Section 271(1)(c) of the Income-tax Act for concealment of income.
2. Admissibility of additional evidence in the form of statements recorded during criminal proceedings.
3. Validity and significance of the confessional statement made by a partner of the assessee-firm.
4. Denial of natural justice due to lack of opportunity for cross-examination.
5. Burden of proof in penalty proceedings under Section 271(1)(c).

Detailed Analysis:

1. Confirmation of Penalty by the CIT(A) under Section 271(1)(c) of the Income-tax Act for Concealment of Income:
The appeal was filed by the assessee against the confirmation of a penalty of Rs. 28,800 levied by the Assessing Officer (A.O.) under Section 271(1)(c) for concealment of income. The A.O. based the penalty on the discovery of four bank drafts, each for Rs. 5,000, which were not recorded in the assessee-firm's books but were credited in the books of M/s Karmjit Singh Baljit Singh. The Tribunal had earlier sustained an addition of Rs. 20,000 to the income of the assessee-firm based on a confessional statement by Sh Pritam Singh, a partner of the firm.

2. Admissibility of Additional Evidence:
The assessee's counsel submitted additional evidence, including statements recorded during criminal proceedings, arguing their relevance to the penalty proceedings. The Tribunal referenced decisions from various High Courts, including Gujarat, Madras, Karnataka, Kerala, and Madhya Pradesh, to establish that it had the discretion to admit additional evidence. The Tribunal accepted the additional evidence on the grounds of relevancy and subsequent events.

3. Validity and Significance of the Confessional Statement:
The Tribunal examined multiple statements made by Sh Pritam Singh. The initial statement recorded on 25-1-1982 did not relate to the four drafts in question. The confessional statement in the letter dated 27-1-1982 was retracted by Sh Pritam Singh in a criminal court. The Tribunal noted that the confessional statement was allegedly made under coercion and lacked evidentiary value. The Tribunal also considered statements from other partners, Sh Ram Singh and Sh Baljit Singh, and found inconsistencies and lack of direct evidence linking the drafts to the assessee-firm.

4. Denial of Natural Justice:
The Tribunal noted that the assessee was not given an opportunity to cross-examine Sh Baljit Singh and other relevant witnesses, which constituted a denial of natural justice. The Tribunal referenced decisions from the Kerala, Allahabad, Gujarat, and Punjab and Haryana High Courts, and the Supreme Court, emphasizing the importance of allowing cross-examination and communication of material relied upon by the A.O.

5. Burden of Proof in Penalty Proceedings:
The Tribunal discussed the burden of proof in penalty proceedings, referencing decisions from the Supreme Court and various High Courts. The Tribunal concluded that the department failed to conclusively prove that the drafts were purchased by the assessee-firm or that there was a wilful act of concealment of income. The Tribunal found that the penalty proceedings were solely based on the confessional statement of Sh Pritam Singh, which was insufficient to sustain the penalty.

Conclusion:
The Tribunal accepted the appeal and deleted the penalty, concluding that the evidence presented, including the retracted confessional statement and lack of opportunity for cross-examination, was insufficient to prove concealment of income by the assessee-firm.

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