1992 (12) TMI 77 - AT - Income Tax

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income-tax Act.
2. Admission of cash credits as concealed income.
3. Voluntariness of statements made by the assessee and creditors.
4. Right to cross-examine witnesses.
5. Impact of criminal proceedings on penalty proceedings.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income-tax Act:
The appeal concerns the levy of a penalty of Rs. 85,000 under section 271(1)(c) for the assessment year 1984-85. The Income-tax Officer (ITO) found that the assessee had introduced its own money in the form of bogus cash credits. The ITO, not satisfied with the explanations provided, initiated penalty proceedings under section 271(1)(c), which were upheld by the Commissioner of Income-tax (Appeals) (CIT (Appeals)) and subsequently confirmed by the Tribunal.

2. Admission of Cash Credits as Concealed Income:
The ITO discovered cash credits in the names of Sri Ramavatar Sharma and Smt. Bhagirathi Sharma. Despite initial confirmations, Sri Ramavatar Sharma later confessed that the money deposited in his account was actually the assessee's. Sri Omprakash, the managing partner, admitted that the firm had deposited its own money in the creditors' accounts. The Tribunal found that these admissions were voluntary and without any inducement or threat, thereby confirming the concealment of income.

3. Voluntariness of Statements Made by the Assessee and Creditors:
The Tribunal examined the statements of Sri Ramavatar Sharma and Sri Omprakash. Sri Ramavatar Sharma confessed that the money deposited in his account was the assessee's, and Sri Omprakash corroborated this. The Tribunal found no evidence of inducement or threat by the ITO. The statement of Sri Omprakash was recorded in the presence of independent witnesses and the assessee's counsel, further validating its voluntariness.

4. Right to Cross-examine Witnesses:
The assessee argued that the right to cross-examine Sri Ramavatar Sharma was denied. However, the Tribunal noted that Sri Ramavatar Sharma was produced by the assessee and thus was their own witness. The ITO had also offered the opportunity for cross-examination during assessment proceedings, which the assessee declined. The Tribunal held that the right to cross-examine was not violated.

5. Impact of Criminal Proceedings on Penalty Proceedings:
The assessee was also prosecuted under section 276C of the IT Act and sections 193 and 196 of the IPC. However, the Andhra Pradesh High Court acquitted the assessee, finding no concealment of income. The Tribunal distinguished between criminal proceedings and penalty proceedings, noting that the standard of proof for penalties is not as rigorous as for criminal prosecution. The Tribunal held that the decision in the criminal case did not preclude the imposition of a penalty under section 271(1)(c).

Conclusion:
The Tribunal dismissed the assessee's appeal, confirming the levy of penalty under section 271(1)(c). The Tribunal found that the assessee had concealed income by introducing its own money as bogus cash credits, and the statements made by the assessee and creditors were voluntary and without any inducement or threat. The right to cross-examine was not violated, and the acquittal in the criminal case did not affect the penalty proceedings.