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TMI Blog1984 (12) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties accepted the summons, they did not comply with the terms of the said summons. As the assessee did not avail of the opportunities given for producing the five creditors before him for the purpose of verification of the loans, the Income-tax Officer treated the sum total of the credit with interest at Rs. 1,26,000 as the assessee's income from undisclosed source. Penalty proceeding under section 271(1)(c) of the Act was initiated and the same was referred to the Inspecting Assistant Commissioner for imposition of penalty as the minimum penalty exigible would exceed Rs. 1,000. In the course of the penalty proceeding, the Inspecting Assistant Commissioner heard the assessee. In his opinion, there could not be any charge of concealment of income on account of addition to the business income. The assessee denied any charge of concealment of income inasmuch as the confirmation letters stating income-tax file number were submitted from the loan creditors, and, therefore, the onus of proving the loans was claimed to have been discharged. The Inspecting Assistant Commissioner found that after the confirmation letters were issued, three of the five creditors confessed before the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the confession of creditors. After considering the submissions from both sides, the Appellate Tribunal concluded that the alleged confessional statements of some of the creditors denying the genuineness of loans had not been proved in any proceeding against the assessee before the penalty was imposed and, therefore, by submitting the confirmation letters from the creditors who were income-tax assessees, the assessee had discharged its burden which was thereafter shifted to the Department. According to the Tribunal, penalty could not be imposed when the guilt of the assessee was not brought home by the facts on record and, therefore, the Department's contention to defer the hearing of the case until the decision of the Appellate Assistant Commissioner on the question of the confessions made by the creditors was rejected. It was observed that the Appellate Assistant Commissioner's decision would amount to material available to the Revenue after the order of penalty was passed and evidence gathered after the order of penalty was passed could not be used to support the imposition of penalty. The penalty order was, therefore, cancelled. The Revenue filed an application under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable in this case. In that view of the matter, the Tribunal should not have disposed of the penalty appeal until the decision of the Appellate Assistant Commissioner was known. On the facts and in the circumstances of this case, we are unable to accept the contention of Mr. Bagchi. The question before the Tribunal in the penalty proceeding was whether the assessee discharged the onus lay on it to prove that the loans obtained by the assessee were genuine. The assessee filed letters of confirmation and furnished other relevant information about the creditors and their assessments. The nature and source of the credit, identity of the creditors and the creditworthiness of the creditors had been proved by the assessee. The confessional statements had not been produced before the Inspecting Assistant Commissioner who imposed the penalty in this case. The Tribunal found that the assessee has discharged the initial negative onus imposed on him by section 271(1)(c). This finding was challenged by the Commissioner in specific question being question No. 2 in the reference application. But the Tribunal rejected the said question. The second question asked for by the Department in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings were not before the Inspecting Assistant Commissioner who imposed the penalty. The jurisdiction of an authority to impose penalty must be decided with reference to the facts found or brought on record in the penalty proceeding. If any materials are gathered in the penalty proceeding, such materials can be relied on by the authority imposing the penalty after giving the assessee a reasonable opportunity of being heard before the order imposing penalty is passed. But after a penalty has been imposed on the basis of the facts found and materials available at the time of imposition of penalty, the Tribunal has to decide the validity of such imposition with reference to those facts and materials. In this case, the penalty was imposed by the Inspecting Assistant Commissioner solely on the basis of the confessional statements which were not proved before him in any proceeding against the assessee. Even if in the quantum appeal restored to the Appellate Assistant Commissioner by the Tribunal, any finding is recorded in favour of the Revenue in respect of the confessional statements, such finding cannot be relied on by the Revenue before the Tribunal in the penalty appeal as the concl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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