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TMI Blog1989 (8) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... e lent sums of Rs. 62,457 and Rs. 55,406, respectively, to A-1 firm. During the assessment proceedings, P. W-1 (Income-tax Officer) took up the enquiry of A-1 firm. During the enquiry, the accountant of the firm filed before him exhibits P-8 and P-9, confirmatory letters given by the creditors, Mr. and Mrs. Sharma, confirming the lending of aforesaid amounts. P.W-1 directed the authorised representative to produce the two creditors before him on March 12, 1985. On March 13, 1985, the authorised representative produced Ramavatar Sharma. P. W-1 then recorded his statement, exhibit P-10. During the course of examination, initially, Ramavatar Sharma maintained that the loans were advanced from his savings from his salary and performing puja and by tuitions, etc., but, after persistent examination, Ramavatar Sharma is said to have broken down and admitted before him that it was A-1 firm itself that deposited the amounts of Rs. 62,000 and Rs. 55,000 in their names in the State Bank of Hyderabad and withdrew the amounts by cheques issued by him and his wife. Thereafter, P. W-1 examined A-2 on March 27, 1985, and recorded his statement, exhibit P-11, wherein he admitted that the amounts we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the firm and taxed and, thereafter, penalty proceedings were also started. The present prosecution was also filed. Learned counsel appearing for the Income-tax Department contended that the statement of Ramavatar Sharma, exhibit P-10, and the statement of A-2, i.e., exhibit P-11, and the letters, exhibits P-8 and P-9, written by Ramavatar Sharma and his wife, Bhagirathi Sharma, addressed to the Income-tax Officer stating that they advanced the loan of Rs. 62,000 and Rs. 55,000 clinchingly proved that A-1 firm has concealed its income and shown as if the said amount is borrowed from Ramavatar Sharma and his wife, Bhagirathi Sharma, by fabricating the records falsely. Therefore, on the above documents themselves, the respondents can be convicted for the offence for which they are charged. Learned counsel for the respondents, Sri Ratnakar, contended that the letters, exhibits P-8 and P-9, and the statement of Ramavatar Sharma, exhibit P-10, are not admissible as the said Ramavatar Sharma, though cited was not examined to prove the same. The alleged statement of A-2, i.e., exhibit P- 11, was made under inducement and threat and he has gone back on the statement and wrote a letter, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposing penalty which is akin to section 271(1) of the present Act, is penal in character. Their Lordships considered the views of the High Courts of Bombay, Gujarat and Patna which took view that the proceedings under section 28(1)(c) of the Indian Income-tax Act are penal in nature and it was, therefore, for the Department to establish that the assessee is guilty of concealment and found that the order imposing penalty is a quasi-criminal proceeding. Their Lordships further considered the question as to what should be the nature of the burden upon the Department for establishing that the assessee is liable to payment of penalty. Their Lordships, in unambiguous terms, held that the Department must establish that the receipt of the amount in dispute constitutes income of the assessee. Their Lordships went on to add, that if there is no evidence on the record except the explanation given by the assessee, which explanation was false, it does not follow that the receipt constitutes his taxable income. Their Lordships also considered the question whether the finding given in the assessment proceedings for determining the tax is conclusive and answered it by saying that it was not conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove fact clearly shows that A-1 firm was contracting heavy loans for conducting its business. There is no dispute regarding the other loans advanced by Ramavatar Sharma and Bhagirathi Sharma. P. W-1 admitted that he was aware of the fact that Ramavatar Sharma was an income-tax assessee. He also stated that he did not examine anybody to find out whether Ramavatar Sharma was giving loans to others. He further stated that excepting exhibit P-10 statement made by A-2, he has not examined any person on record about the loans advanced by Ramavatar Sharma and his wife, Bhagirathi Sharma. He further stated that he is not aware if Mr. and Mrs. Sharma were being assessed from 1979-80 till 1984-85. P.W-2 also confirms that he did not enquire from the Department if Mr. and Mrs. Sharma were submitting their returns from 1979-80 to 1984-85. Therefore, the above statements clearly show that except the statement of Ramavatar Sharma, which is inadmissible in evidence, and the statement of A-2, i.e., exhibit P-11, there is nothing on record to show that the advancement of loans by Ramavatar Sharma and Bhagirathi Sharma was bogus or false. Exhibits P-19 and P-20 are the returns of income of Ramavata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence clearly shows that Ramavatar Sharma and his wife, Bhagirathi Sharma, were giving loans and earning interest and they were income-tax assessees and they filed returns and their cases were decided by the income-tax authorities. Therefore, it cannot be said that Ramavatar Sharma and Bhagirathi Sharma have no capacity to lend loans. Except exhibit P- 11 statement which is retracted by A-2 in the present case, there is no evidence on the record to show that Ramavatar Sharma and Bhagirathi Sharma have not advanced any amount to A-1 firm. Next coming to exhibit P-11 statement which is given by A-2 before the Income-tax Officer, A-2 retracted it in the court and stated that he had given that statement under inducement for peace and good relations with the Income-tax Department so that the matter may be settled without any further complications. Exhibit P-11 statement was recorded on March 27, 1985. Immediately on April 4, 1985, a letter was addressed to the Commissioner of Income-tax stating that an application was filed under section 273(a) of the Act by A-1 firm. It was delivered on April 6, 1985. So, it is clear that the waiver petition is filed within days of the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove referred sworn statement of Shri Ramavatar Sharma, wherein he made a confession that you have given a credit in his account on March 23, 1983, for Rs. 62,000 by depositing your moneys in his bank account and obtaining a cheque from him issued in the name of Messrs. Shivlal Dhoolchand Agarwal. Do you admit that it is true ? Answer : Yes. It is true that we have given credit to him for Rs. 62,000 by depositing our money in the bank on March 23, 1983. We are very apologetic for this mistake. We are going to the Settlement Commission to settle our case, by pardoning the mistakes which have crept into our case. Question : An amount of Rs. 4,567.33 was credited to Shri Ramavatar Sharma's account towards interest. Of this, how much is the amount payable to him and what is the share of the firm in this ? Answer : I do not remember the correct percentage but it must be either 50% or 60% to him and the balance is to the firm. Question : There is a credit in the account of Smt. Bhagirathi Sharma, W/o Ramavatar Sharma for Rs. 55,000 on March 23, 1983. As admitted by Shri Ramavatar Sharma, this amount belongs to you and you have given credit to her for this amount in your books. What do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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