Judgment:
1. This appeal by the assessee for assessment year 1984-85 against levy of penalty of Rs. 85,000, has been directed against the order of the Commissioner of Income-tax (Appeals).
2. The appellant is a registered firm doing business in certain brands of vanaspati mainly from Wipro Oils Ltd., Bombay. In addition, during the year, the firm had also dealt in G.P. sheets and khandasari sugar.
In the year under consideration, the appellant-firm consisted of three partners, viz., Sri Omprakash having 50 per cent share, Sri Vijay kumar having 45 per cent share and Sri Hazarilal having 5 per cent share. It appears from the facts of the case that Sri Omprakash is the managing partner who manages the business and finances of the appellant-firm.
During the year under consideration, the appellant-firm had filed return of income on 25-6-1984 disclosing a total income of Rs. 99,984.
3. The Income-tax Officer took up the case for investigation and issued a notice under Section 143(2) of the Income-tax Act. While examining the books of account, the ITO noticed certain cash credits in the names of some creditors including Sri Ramavatar Sharma and his wife Smt.
Bhagirathi Sharma. The ITO directed the appellant to produce confirmation letters in support of the cash credits and also to produce Sri Ramavatar Sharma and Smt. Bhagirathi Sharma for recording their deposition. He thus directed the assessee to prove the identity and the creditworthiness of the creditors and the genuineness of the transactions. As a result of the direction of the ITO, the assessee produced confirmation letter from Sri Ramavatar Sharma in which the creditor certified that he had given a loan of Rs. 62,000 to M/s.
Shivlal Dulichand Agarwal from his personal account. It was also mentioned in the said confirmation letter that Sri Ramavatar Sharma was assessed to income-tax. It has also mentioned that the loan was advanced by account payee cheque. Smt. Bhagirathi Sharma also filed a similar confirmation letter and brought to the notice of the ITO that she had advanced a loan of Rs. 55,000 by account payee cheque. She also mentioned that she was assessed to income-tax and her GIR number was given in the confirmation letter. The ITO was not, however, satisfied with the confirmation letters and insisted upon the production of the creditors.
4. Sri Ramavatar Sharma appeared before the ITO on 13-3-1985 and his sworn deposition was recorded by the ITO. Initially, the ITO questioned Sri Sharma on the fact of opening bank account in State Bank of Hyderabad, Mahboobganj branch, on 30-11-1982 and the deposit of a sum of Rs. 62,000 in the said bank account on 23-3-1983. The deponent narrated the circumstances leading to the opening of the said bank account in State Bank of Hyderabad, Mahboobganj branch, the account number being 2240 and stated before the ITO that the sum of Rs. 62,000 was deposited after it was collected by him from his friends. He stated that he had advanced loans to various friends and after collecting the same, the cash deposit was made in the above stated bank account. The ITO wanted the deponent to furnish the names and addresses of the friends from whom the money was stated to have been collected by him.
However, on the date of the sworn deposition, the deponent was able to give only the name of Sri Dhulichand, a clerk in Hindi Prachar Sabha, Nampally. Rest of the names, he stated, he had forgotten. During the initial deposition, the ITO did not put any direct question to the deponent regarding the loan of Rs. 62,000 given by the deponent to the appellant before us. However, towards the end of the deposition, the deponent changed his stand and submitted as under:- I confess that what I stated above was all not correct, I am apologetic for that. The modus operandi was that the Chartered Accountant Shri R.R. Mittal is approached by me through one of his relatives. His relative told me that he will make the file and get some money in this way. As per our plan, Shri Mittal, C.A. took my signatures on Returns of Income and statements. He told me that he will get the assts. done and took Rs. 1,500 from me. Later on, I was taken to Shri Omprakash of M/s Shivlal Dhoolichand Bhajranglal by one of my friends Shri Bishamberlal of K.C.P. Industries. Before Shri Omprakash, Partner, I signed the money deposit forms and a cheque for Rs. 62,000 issued in the name of M/s Shivlal Doolichand Agarwal. Later on, they had deposited the moneys on the basis of the forms signed by me and this amount was credited to my account in their books of account. This money was deposited in the Bank is belonging to them only. Regarding the interest it is at the rate of 12 per cent p.a. As per this understanding they give me the cheques for interest which I received for Rs. 4,000/33 after deducting Rs. 457 towards T.D.S. I have withdrawn this int. and of this I had given 50 per cent amt. to M/s. Shivlal Doolichand Agarwal.
Regarding my wife Smt. Bhagirathi Sharma, I got her signatures on the money deposit forms and also cheques issued in favour of M/s Shivlal Dhoolichand Agarwal for Rs. 55,000. Here also the above party deposited their moneys in the Bank and credited my wife's account. The above money is not belonging to my wife. To support this credit a file was built up in the name of my wife, with the help of Shri R.R. Mittal. Regarding the interest, we got the cheque deposited in our account and pay back 50 per cent to M/s. Shivlal Dhoolichand Agarwal.
The above confession on the reverse page given at the end of my sworn deposition is the only truth. The earlier part of my statement was incorrect and I am apologetic for that. We have not given moneys to M/s Shivlal Dhoolichand Agarwal. I affirm the above to be the truth. I stand by this. I am willing to stand by this truth for examination by anyone. The above statement, is out of my free will and is true to the best of knowledge and belief. I am in sound mind and I can understand English. I read over the statement and affirm it to have been recorded to my version truly and correctly.
This statement was recorded by the ITO in the presence of a witness, Sri M. Ramachandra Rao.
5. After recording the statement of Sri Ramavatar Sharma, the ITO put up the facts before Sri Omprakash and also recorded his sworn deposition on 27-3-1985. The ITO, by putting various initial questions, brought out the facts that Sri Omprakash was managing the entire business and was looking after the financial matters, purchases and sales and other connected business matters. A reading of the initial deposition demonstrates that Sri Omprakash was single handedly managing the affairs of the firm. Coming to the main issue of Sri Ramavatar Sharma's deposition, the ITO put some searching questions to the managing partner. In our view, it would be necessary to reproduce some of the questions and answers to complete the factual position: (Q) You have taken a copy of the sworn statement of Shri Ramavatar Sharma, one of the creditors for the assessment year 1984-85 on 23-3-1985. Is it correct (A) Yes, I have taken a copy of the sworn statement of Shri Ramavatar Sharma on 23-3-1985.
(Q) Shri Omprakashji I draw your attention to page-3 of the above referred sworn statement of Shri Ramavatar Sharma, wherein he made a confession that you have given a credit in his account on 23-3-1983 for Rs. 62,000 by depositing your moneys in his Bank A/c. and obtaining a cheque from him issued in the name of M/s Shivlal Dhoolichand Agarwal. Do you admit that it is true? (A) Yes, It is true that we have given credit to him for Rs. 62,000 by depositing our money in the Bank on 23-3-1983. We are very apologetic for this mistake. We are going to Settlement Commission to settle our case, by pardoning the mistakes crept into our case.
(Q) An amount of Rs. 4,567/33 was credited to Shri Ramavatar Sharma's A/c. towards interest. Of this, how much is the amount payable to him and what is the share of the firm in this? (A) I do not remember the correct percentage but it must be either 50 per cent or 60 per cent to him and balance is for the firm.
(Q) There is a credit in the account of Smt. Bhagirathi Sharma, W/o Ramavatar Sharma for Rs. 55,000 on 23-3-1983. As admitted by Shri Ramavatar Sharma this amt. belongs to you and that you are given credit to her for this amt. in your books. What do you say to this? (A) In this case also like in the case of Shri Ramavatar Sharma we have deposited our moneys in her account and given credit to her for this amt. Similarly, out of the interest credited to her a/c. @ 12 per cent p.a. about 50 per cent or 60 per cent was for the creditor and the balance to the firm. We request pardon from the Department for this thing that happened in our case. I request the ITO also to consider our case sympathetically and condone our default.
(Q) As the above referred credits are out of your moneys only and not belonging to the said creditor, I propose to treat the same as unexplained cash credits and assess as the income of the firm for the assessment year 1984-85 as the firm's income from 'undisclosed sources'. Do you have any objection (A) We have no objection for this, but we request that, no other severe action may be taken against us.
(Q) Besides this, there are some other fresh credits in some parties names introduced for the year ending 4-11-1983.1 say that those credits are also out of your moneys only, like in the above two cases. What do you say for this (A) No. All the other credits are genuine and correct. These are not out of our moneys. Only those two credits referred to above are not real and true credits. All others are genuine, correct and true.
(Q) I requested you to produce the other six creditors on 21-3-1985 for examination and you wanted time to produce those people till 27-3-1985. Have you brought them today for examination? (A) Yes. They are waiting outside the ITO's room and I can call them here for your examination. I could not produce those parties on 21 -3-1985 as there was curfew in our residential area.
(Q) Do you wish to cross-examine Shri Ramavatar Sharma or Smt.
Bhagirathi Sharma? (A) No. I affirmed above, that his confession in respect of the credits in his name and in his wife's name were correct and hence, there is no need to cross-examine.
(A) We pray and request that to the extent possible minimum amt.
should be added to the income returned. We pray that penalties may not be levied in our case.
6. In addition to above, Sri Omprakash, in his own handwriting, wrote the following:- I have given the above statement on oath and it is true and correct to the best of my knowledge and belief. I have given the statement out of my free will and without any force by anyone. I am aware of the facts correctly of which I have given the statement.
This statement was recorded by the ITO In the presence of two witnesses viz., Mahaveer Pershad and Nand Kishore. It is also seen from the copies of the order-sheet filed by the Revenue that Sri Y. Ratnakar, Advocate, was also present at the time of recording the statement.
7. On the basis of the material collected by the ITO, he was of the view that the cash credits in the names of Sri Ramavatar Sharma and his wife Smt. Bhagirathi Sharma were not genuine. In fact, in the opinion of the ITO, the assessee had introduced his own money in the form of bogus cash credits. He accordingly made addition and computed the income of the assessee at Rs. 2,30,600. It is important to mention that this addition was not contested in appeal by the, appellant.
8. During the course of assessment proceedings, the ITO also initiated penalty proceedings under Section 271(1)(c) by issuing a notice under Section 274 of the IT Act. The ITO wanted the assessee to show cause as to why he should not be held guilty of concealment within the provisions of Section 271 (1)(c) of IT Act. The show-cause notice issued by the ITO was replied to by the appellant vide its letter dated 17-3-1987. For the purpose of decision in the case, we consider it very relevant to reproduce the explanation of the assessee in the said letter which was written by Sri Omprakash: I invite your kind attention to the show-cause notice issued on 10-3-1987 giving us an opportunity of hearing for levy of penalties under Section 271 (1)(c) and under Section 273(l)(a) of theAct. In this connection I invite your kind attention to the assessment order dated 28-3-1985 wherein the statement of Mr. Ramavatar Sharma was reproduced. The Income-tax Officer handling the matters at the relevant time issued summons requiring my presence in connection with the above assessment proceedings. The Income-tax Officer showed me the sworn deposition dated 13-3-1985 of Mr. Ramavatar Sharma. I have explained to him that the money was received by way of account payee cheque and interest was also paid to him by way of account payee cheque. I do not know the circumstances under which Mr.
Ramavatar Sharma gave such a statement. The Income-tax Officer A. Bhaskara Reddy explained to me that Mr. Ramavatar Sharma gave a sworn deposition that the money does not belong to him and belongs to you, you need not have to pay the amount to him. He further stated instead of paying the amount to Mr. Ramavatar Sharma you can pay the same amount by way of tax and your capital will be increased by that amount. He also assured that there will be no further consequences and the total amount payable would be less than Rs. 1,17,000. Based on these assurances the Income-tax Officer started my sworn deposition although I requested him to wait till my authorised representative Mr. Y. Ratnakar is present to guide me in the proceedings. The Income- tax Officer stated it would be of no consequence to you as you don't have to pay the amount to Mr.
Ramavatar Sharma and the same may be utilised for payment of taxes.
The Income-tax Officer put the questions and also suggested the answers. From the assessment order it is clear that I am not capable of giving such answers with technical details such as Settlement Commission, etc. The Income-tax Officer asked me to sign the deposition stating that nothing would happen to you and there will not be any consequences for this statement. The Income-tax Officer did not even wait till my counsel Mr. Y. Ratnakar had come to the office and I signed the statement before his arrival. Considering the above facts and circumstances I request you to drop the penalty proceedings for levy of penalty under Section 273(1)(a) and under Section 271(1)(c) of the Act.
The ITO was not, however, satisfied with the explanation given by the assessee and for the reasons recorded by him in his penalty order, levied a penalty of Rs. 85,000 under Section 271(1)(c), 9. The assessee, as it appears from the facts of the case, simultaneously made an attempt for She waiver of penalty and interest under Sections 271(1)(c), 215 and 217 of the IT Act. In this regard, a petition dated 4-4-1985 was addressed to the Commissioner of Income-tax. In the said petition, after narrating the facts of the case, it was submitted before the Commissioner that the loans taken by the assessee-firm from Sri Ramavatar Sharma and his wife Smt.
Bhagirathi Sharma were genuine. It was also mentioned that Sri Sharma may have confessed with a view to avoid his own income-tax problems. It was also mentioned that the assessee had agreed for the addition with a view to avoid litigation and to buy peace. A request to the Commissioner was, therefore, made that the penalties under Sections 273 and 271(1)(c) and interest under Sections 215 and 217 should be waived.
The said petition was, however, rejected by the Commissioner.
10. To complete the factual position, it is also essential to mention that in addition to levy of penalty under Section 271(1)(c), the assessee was also prosecuted under Section 276C of the IT Act and under Sections 193 and 196 of Indian Penal Code, 1860. The department had filed the prosecution petition which was finally decided by the Andhra Pradesh High Court. The decision of the High Court in ITO v. Shivlal Dhulichand Agarwal [1990] 184 ITR 414. The Honourable High Court did not admit the confession of Sri Ramavatar Sharma as an evidence and for the reasons recorded in the said order, the Honourable Judge acquitted the assessee. The department, therefore, failed in the prosecution attempt.
11. Against the levy of penalty of Rs. 85,000 under Section 271 (1)(c) of the IT Act, the assessee filed an appeal before the CIT (Appeals).
The CIT(Appeals), after fully appreciating the facts of the case, agreed with the conclusions of the Assessing Officer and held that the assessee was in fact guilty of concealment and, therefore, was liable to be penalised under Section 271(1)(c). He accordingly upheld the order of the ITO.12. Aggrieved, the assessee has come up in appeal before us. The learned counsel, Sri Y. Ratnakar, who attended on behalf of the assessee, pointed out that the levy of penalty under Section 271(1)(c) is not justified. In addition to the initiation of penalty proceedings under Section 271(1)(c), the revenue had also initiated prosecution proceedings under Section 276C of the IT Act, but the Special Judge for Economic Offences, in C.C.No. 118 of 1986 dated 7-8-1989, had acquitted the assessee. A finding was given by the learned Judge that there was no concealment of income by the assessee for the year under consideration. The order of the learned Special Judge was also upheld by the High Court in the decision in the case of Shivlal Dhulichand Agarwal (supra). Sri Ratnakar takes us through the said decision of the Honourable High Court wherein, inter alia, it has been laid down that penalty proceedings are quasi-criminal in nature and the finding given in the assessment proceedings is not conclusive proof, but it is only a good piece of evidence. When there is only the explanation of the assessee and there is no other evidence and the said explanation is false, it does not follow that the receipt constitutes his taxable income. When the department has to prove its case even in penalty proceedings treating them as quasi-criminal in nature, by adducing cogent evidence; it is a much more onerous burden on the department to prove its case of concealment of income and other charges in the criminal proceedings. The courts can make a conviction on the basis of the admission made by a party if it is proved to be correct. But when the admission is not put forth as the true version and other evidence on record disproves the version of such admission, the courts cannot base the conviction on such admission, particularly where the prosecution has to prove the guilt of the accused beyond all reasonable doubt. On the facts, the Honourable High Court held: R had not been examined and his statement had not been proved.
Therefore, the Court could not consider his statement. The material on record clearly showed that R and his wife 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, excepting the statement of the partner admitting that the amounts belonged to the firm which statement was retracted by the partner in the Court on the ground that it was made to purchase peace, there was no evidence on record to show that Rand his wife had not advanced any amount to the assessee-firm. The firm filed a waiver petition under Section 273(a) within days of the assessment order stating that they had agreed to treat the amount as belonging to the firm with a view to purchase peace. Thus, the firm had put forth the case which was put forth before the Court by the partner even before the prosecution was launched. Considering all the facts and circumstances of the case, it could not be said that the statement of the partner was voluntary. In the circumstances of this case, even taking that the partner's statement was admissible, on the sole statement, when the facts of that statement had not been proved to be correct, the assessee could not be convicted. The prosecution had not proved the guilt of the accused beyond all reasonable doubt.
Sri Ratnakar, therefore, urges that a categorical finding has been given by the Honourable High Court that the department was not able to prove the case beyond all reasonable doubt, that the concealment was not established and that the statement of Sri Ramavatar Sharma was not voluntary. The decision of the Honourable High Court, therefore, lays down, without any ambiguity, that the assessee is not guilty of concealment. The facts found by the High Court, therefore, clearly indicate that the charge of concealment under Section 271(1)(c) has not been proved by the department. Sri Ratnakar also contends that the decision of the High Court in the criminal case is binding on the Tribunal in the penalty matter.
13. The learned counsel continues and states that the statement given by the partner before the ITO on 27-3-1985 in respect of cash credits is not a voluntary statement. The said statement was obtained by the officer under inducement due to which the partner accepted the cash credit as the firm's income. During the course of the assessment proceedings, the assessee was assured that a sympathetic view would be taken and penalty proceedings would be dropped, as a result of which the assessee was induced to confess that the cash credits in the names of Sri Ramavatar Sharma and his wife Smt. Bhagirathi Sharma were the income of the assessee-firm. Apart from the inducement, the learned counsel urges, there was a threat and coercion also and the assessee was told that if he did not accept the cash credits as his own income, the department will take further severe action. This issue, according to the learned counsel, can easily be proved by the assessee's letter dated 4-4-1985. Vide the said letter, the assessee had filed a petition under Section 273(a) of (he IT Act before the Commissioner of Income-tax. The said petition had been filed within days of the completion of the assessment. In the said petition, it was brought to the notice of the Commissioner that the ITO had informed the assessee that he would initiate no penalty proceedings under Section 271(1)(c) of the IT Act. It was also brought to the notice of the Commissioner that Sri Sharma may have confessed due to his own income-tax problems.
The assessee agreed to be assessed on the said amount with a view to avoid possible litigation and to purchase peace with the department.
The said petition to the Commissioner, therefore, conclusively proves that the assessee had agreed to be assessed with a view to purchase peace and, therefore, it cannot be punished under Section 271(1)(c) of the IT Act.
14. The levy of penalty under Section 271(1)(c) without giving any opportunity to the assessee to cross examine the creditor was also not proper on the part of the Assessing Officer. The learned counsel points out that the act of the ITO is violative of the principles of natural justice. As a matter of fact, vide its letter dated 27-2-1986, placed at page 33 of the material papers, a request was made to the Assessing Officer to allow the right of cross-examination to the assessee. As per the last paragraph of the said letter, it was submitted that if the penalty under Section 271 (1)(c) is to be proceeded with, the assessee should be given the right of cross-examination. However, without adducing any reasonable cause, the Assessing Officer denied the assessee the opportunity to cross-examine Sri Ramavatar Sharma. The learned counsel contends that during the course of the cross-examination, the assessee would have definitely established that the sworn statement of Sri Ramavatar Sharma was patently false. The assessee also would have brought on record material to show that Sri Sharma had in fact advanced the money to the assessee. Failure to give the right of cross-examination, therefore, had shut the door for the assessee to prove its case to escape the penalty under Section 271(1)(c). He further submits that it was not only before the ITO that the right of cross-examination was demanded but even before the CIT (Appeals), the assessee had taken a specific ground that before levying the penalty under Section 271(1)(c), the ITO should have given the assessee the right of cross-examination. The CIT (Appeals) did not even deal with this aspect of the case. The learned counsel thus submits that, on the facts of the case, the assessee is not guilty of concealment and, therefore, the penalty order of the Revenue should be cancelled.
15. Alternatively, the learned counsel urges that the matter should be sent back to the ITO and he should be asked to allow the opportunity of cross-examination of the creditor.
16. On the other hand, Sri D.U.V.G.V. Raghava Rao, learned departmental representative, strongly opposed the contention of the learned counsel for the assessee. He urges that if the present case is not a fit case to levy penalty under Section 271(1)(c), there may not be any other case to be brought within the purview of the said section. The facts of the present case reveal beyond any reasonable doubt that the assessee is guilty of conscious concealment and has in fact admitted as such during the sworn deposition of the partner. During his sworn deposition, Sri Ramavatar Sharma, in no uncertain terms, had admitted that the money was deposited in his bank account by the assessee itself against which he had issued a cheque to the assessee for identical amount. He had also admitted that out of the interest received by him by account payee cheque, 50 per cent or 60 per cent of the said sum of interest was returned back to the assessee. When this statement of Sri Ramavatar Sharma was put before the partner Sri Omprakash, he readily admitted that whatever had been stated by Sri Ramavatar Sharma in his sworn deposition is true. He also admitted that the firm had deposited its own money into the bank account of Sri Ramavatar Sharma against which the cheque for identical amount was obtained. Sri Omprakash also admitted that 50 per cent to 60 per cent of the interest amount was to be received back by the assessee-firm. Thus, the modus operandi narrated by Sri Sharma was confirmed by the partner Sri Omprakash. Sri Omprakash also agreed for the addition in the total income of the firm and was also apologetic for the lapse. These facts, therefore, conclusively prove that the assessee was guilty of concealment. The learned departmental representative contends that beyond this the Revenue need not prove anything else.
17. Sri Raghava Rao also points out that the penalties imposable under the Income-tax Act are distinct and apart from the offences and prosecution. These two, therefore, cannot be equated. The provisions regarding penalties under the various sections of the Income-tax Act are contained in Chapter XXI while the offences and prosecution are dealt with in Chapter XXII of the Act. Both the provisions are, therefore, distinct and have to be decided on different degrees of proof. By drawing our attention to the decision of the Andhra Pradesh High Court in the case of Thakur V. Hari Prasad v. C1T [1987] 167 ITR 603, the learned departmental representative points out that there is a marked distinction between prosecution for an offence punishable under the Income-tax Act and proceedings to impose penalties under Chapter XXI of the Act. The penalty proceedings are not criminal proceedings in the strict sense. In a criminal charge, unless the prosecution proves beyond reasonable doubt the offence committed by an assessee under the Act, the delinquent is entitled to the benefit of doubt and thereby goes scotfree. The acquittal is on the technical rule of presumed innocence. The standard of proof for the imposition of penalty is not as rigorous as that for the prosecution for an offence. The test in the case of penalty is the totality of circumstances. Evidence may be oral, documentary or circumstantial. The learned departmental representative, therefore, asserts that the decision of the jurisdictional High Court in the assessee's own case in a prosecution matter under Section 276C of the IT Act will not save the assessee from the penalty under Section 271(1)(c).
18. The learned departmental representative also draws our attention to the provisions of Section 271(1)(c) and Section 276C. To facilitate a proper understanding of these two sections, we reproduce the relevant provisions below:- 271(1) If the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person - (c) has concealed the particulars of his income or furnished inaccurate particulars of the such income, (iii) In the cases referred to in Clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income; To the provisions of Section 271(1)(c), Explanation have also been added which we propose to deal with at the appropriate place.
276C(1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,- (i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.
The learned departmental representative thus points out that Section 276C uses the word "wilfully" while there is no such word in Section 271(1)(c). As a matter of fact, the word "deliberately" in Section 271(1)(c) was omitted by Finance Act, 1964, with effect from 1-4-1964.
The language of Section 271 (1)(c), therefore, indicates that there is no need to prove mens reain cases of levy of penalty under Section 271(1)(c) of the IT Act. In the case of prosecution under Section 276C, however, mens rea has to be proved because of the use of the word "wilfully" and the prosecutor has to prove the case beyond all reasonable doubt. This distinction between these two sections, therefore, makes two things very clear, viz., (1) no mens rea need be proved in penalty proceedings under Section 271 and (2) the two provisions under Section 271 (1)(c) and Section 276C are totally distinct and apart. By drawing our attention to the Full Bench decision of the Andhra Pradesh High Court in the case of Addl. CIT v.Dargapanaarinath Tuljayya & Co. [1977] 107 ITR 850, the learned departmental representative points out that their lordships of the Andhra Pradesh High Court have held that the two provisions under Sections 271 and 276C are different. He quotes at length from the said decision which is reproduced as under:- The common law principle that metis rea is an essential ingredient of a criminal offence is a rule of construction. A presumption exists that criminal intent is not excluded, unless the statute excludes it expressly or by necessary implication. Where the statute provides for judicial or quasi judicial authorities under the Act and lays down its own objective test for levying penalty and excludes mens rea, then the statute should prevail and the question of proving mens rea does not arise.
A penalty imposed for tax delinquency is a civil obligation and is far different from the penalty imposed for a crime or a fine or forfeiture provided as punishment for violation of criminal orpenal laws. Hence, the proceedings under the Income-tax Act for levying penalty cannot be equated to that of prosecution attracting punishment and the penalty proceedings cannot be said to be criminal in nature.
Further, by drawing our attention to yet another decision of the Andhra Pradesh High Court in the case of Thakur V. Hari Prasad v. CIT [1988] 173 ITR 242, the learned departmental representative points out that in a criminal trial, the statements recorded under Section 162 of the Criminal Procedure Code, 1973, are used only to contradict the statement of the maker. But a penalty proceeding under the IT Act is not a criminal trial, nor the official court, as defined under the Evidence Act. The strict rule of evidence under the Evidence Act is inapplicable to penalty proceedings under the IT Act. The statements of officials like the District Collector constitute good evidence in penalty proceedings. Findings in the assessment proceedings are not conclusive but the totality of the circumstances including the findings recorded in the assessment proceedings are good and relevant evidence.
That in a penalty under Section 271(1)(c) mens rea need not be proved has also been laid down in the following decisions: - Thus, with the help of the above noted judicial pronouncements, the learned departmental representative states that proving mens rea is not a condition precedent for the penalties under Chapter XXI of the Income-tax Act.
19. Coming to the decision of the Andhra Pradesh High Court in the assessee's own case in Shivlal Dhulichand Agarwal [supra), the learned departmental representative asserts that while acquitting the accused in a prosecution trial, their Lordships of the High Court did so by mainly following the decision of the Supreme Court in the case of CIT v. Anwar Ali [1970] 76 ITR 696. However, after amendment of the Act and the omission of the word "deliberately" from Section 271(1)(c) and enactment of Explanation 1 to the said section, the decision in the case of Anwar Ali (supra) is no longer a good law. The learned departmental representative points out that the decision in the case of Anwar Ali [supra) had been reviewed in several subsequent cases in which it was held that the ratio laid down in the case of Anwar Ali [supra) is no longer a good law. In this regard, he draws our attention to the decision of the Orissa High Court in the case of CIT v. Gangaram Chapolia [1976] 103 ITR 613 (FB) and the decision of the Madras High in the case of CIT v. Imperial Automobiles [1983] 141 ITR 60. The learned departmental representative also points out that even the decision in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), has been reviewed by the Supreme Court, in the case of R.S. Joshi v. Ajit Mills Ltd. AIR 1977 SC 2279, in which it has been laid down that for economic offences no mens rea need be proved. Moreover, in the opinion of the learned departmental representative, the ratio of the decision in the case of Hindustan Steel Ltd. (supra) has also been eroded by the decision in the case of R.S. Joshi (supra).
20. Coming to the factual aspect of the case, the learned departmental representative points out that Sri Ramavatar Sharma had voluntarily admitted that the sums found credited in the books of the assessee in his name and in the name of his wife were bogus. He also explained the modus operandi viz., that the cash was supplied by the assessee which was deposited in his bank account and for identical sum a cheque was issued. He also confessed that the interest payment by cheque by the assessee has to be returned partly to the assessee. Sri Omprakash had also admittd this factual aspect. Moreover, the assessee, the departmental representative asserts, is haiping on the cross-examination of Sri Ramavatar Sharma. The cross-examination of Sri Sharma is not at all essential in view of the fact that the assessee cannot cross-examine his own witness as Sri Sharma was produced before the ITO by the assessee himself. Thus, before the ITO, Sri Sharma was the witness of the assessee and not of the ITO. The assessee cannot, therefore, cross-examine his own witness. Apart from this, it is fully borne out by the sworn deposition of Sri Omprakash that the ITO in fact asked him whether the assessee would like to cross-examine Sri Ramavatar Sharma but he refused to avail of the opportunity on the ground that whatever Sri Sharma had stated was the truth. Perhaps, the partner Sri Omprakash was aware of the falsity of the transaction and, therefore, he thought that no purpose would be served by examining Sri Ramavatar Sharma. If the deposition of Sri Sharma was not factually correct, the assessee would not have allowed the opportunity of cross-examination to go by without any reason. Thus, thevery fact that Sri Omprakash refused to examine Sri Ramavatar Sharma would conclusively prove that the loan transaction was bogus and the assessee had introduced its own money in the garb of loan in the name of Sri Ramavatar Sharma and his wife.
21. The learned departmental representative strongly refutes the allegation of the assessee that the statement of Sri Omprakash was obtained by inducement or threat. He points out that there is no material on record to suggest that the ITO has offered any inducement or had issued any threat to obtain the statement from Sri Omprakash.
Moreover, the learned departmental representative has also filed a copy of the order-sheet which bears the signature of Sri Y. Ratnakar. The order-sheet entry dated 27-3-1985 reads as under:-- Shri Omprakash Agarwal, Partner and Shri Y. Ratnakar, Advocate, present. Partner appeared inresponse to summons issued on 14-3-1985 and a sworn deposition was recorded from him. Also he produced Shri Mahendra Pershad and Shri Nand Kishore Rathi for creditors. Examined them on oath. Shri Omprakash, Partner, agrees for disallowance of Rs. 5,000 being the excess and unvouched expenditure claimed in hundi expenses account. Examined the case.
This entry on the order-sheet, the learned departmental representative points out, is authenticated by the signature of the learned counsel Sri Y. Ratnakar. In the presence of such a senior counsel, it is not understandable how the ITO could induce the partner or issue some threat to him. The contention of the assessee, therefore, that the partner's statement was obtained by inducement or threat, is not borne out by the facts of the case.
22. In the opinion of the learned departmental representative, the cross-examination of a witness is also not required in cases where the assessee himself admits that the sum found credited in his books of account as cash credits in the name of third parties represents his income. In such cases, no further evidence is needed to be proved by the ITO. The confession that it represents the concealed income of the assessee would be enough to successfully attract the provisions of Section 271(1)(c) of the IT Act. In this type of cases, the evidence collected during the course of assessment proceedings would be more than enough to Justify the levy of penalty under Section 271(1)(c) of the IT Act. In this regard, the learned departmental representative draws our attention to the decision of Rajasthan High Court in the case of CIT v. Dr. R.C. Gupta & Co. [1980] 122 ITR 567, wherein it has been laid down that in a case where the assessee himself has admitted that a certain amount represents his income, no further evidence would be necessary to show that it was an amount which represented his income and/or that it represented his concealed income. Similar proposition was also laid down by the Madras High Court in the case of CIT v.Krishna & Co. [1979] 120 ITR 144, in which it was laid down that in a case where the assessee himself had admitted that the amount represented his own income, no further evidence would be necessary to show that it was an amount which represented his income and it represented his concealed income. While dealing with the addition under Section 69 of the IT Act, the Calcutta High Court, in the case of Rahmat Development & Engg. Corporation v. CIT [1981] 130 ITR 602, had laid down that Section 69 of the Act deems unexplained investment to be the income of the assessee and that deposition has to be accepted in penalty proceedings also. The moment Section 69 is attracted, the unexplained investments become, by a fiction of law, the income of the assessee. If they become the income of the assessee and that income is not returned, there is a non-disclosure of income. By drawing our attention to the decision of the Bombay High Court in the case of Western Automobiles (India) v. CIT [1978] 112 ITR 1048, the learned departmental representative points out that where cash credits are discovered in the accounts and the assessee accepts the amounts as his income for the year in question, it would be sufficient to discharge the onus of the Revenue in penalty proceedings by relying upon this admission. At that stage, the onus would shift to the assessee to show in the penalty proceedings that the admission made by the assessee was incorrect, or that it was wrongly or illegally made, or that it was made for a reason which would suggest that it was not really the concealed income of the assessee. If the assessee is prevented from offering this explanation or if he avails of the second opportunity and can be said to have discharged such onus on him, then certainly, the penalty proceedings would be bad and the levy of penalty would require to be quashed. But, the levy of penalty would be valid if such second opportunity was not seriously availed of by the assessee. In the instant case, the Assessing Officer did offer the opportunity to the assessee to prove by some cogent material that the admission made by Sri Omprakash was incorrect or illegal. No such material was led by the assessee and therefore, the levy of penalty in this case should be held to be justified.
23. The learned departmental representative also points out that the case of the assessee squarely falls under Explanation 1 to Section 271 (1)(c) of the IT Act. The explanation furnished by the assessee in the course of penalty proceedings was not at all bona fide and, as a matter of fact, it has been proved to be false by the ITO. The assessee is, therefore, guilty of concealment and even under Explanation 1, the additions made can be deemed to be his concealed income.
24. In the end, the learned departmental representative submits that the decision of the Andhra Pradesh High Court in the assessee's own case in Shivlal Dhulichand Agarwal's case (supra) is not binding on the Tribunal as that decision was rendered by the Honourable High Court with reference to an offence under Section 276C of the IT Act. That decision, therefore, is not applicable to the matters dealt with in Chapter XXI of the IT Act. The learned departmental representative, therefore, submits that the order of the first appellate authority should be upheld.25. In reply, the learned counsel for the appellant, Sri Y. Ratnakar reiterates that the decision of the Andhra Pradesh High Court in the matter of prosecution is still relevant. It has been found as a matter of fact by their Lordships in the said decision that the assessee had agreed for the addition with a view to purchase peace. In such an eventuality, the penalty under Section 271(1)(c) cannot be imposed. In this regard, the learned counsel places reliance on the decision of the Allahabad High Court in the case of CIT v. Mansa Ram & Sons [1977] 106 ITR 307, wherein it was held: Though where an assessee admits a cash credit, or a deposit to be his income and surrenders it for assessment to tax, no further onus is left upon the Department to prove the charge of concealment, in the instant case, the admission of the assessee did not appear to be voluntary or free. It was clear that after the assessee had written the first letter disowning the cash credit, there was a discussion bbetween its representative an the Income-tax Officer, as a result whereof the cash deposits were surrendered for assessment as desired provided no penalty was imposed. The Income-tax Officer must have induced the assessee to surrender the cash deposits so as to avoid penalty which would be as high as one and half times the tax sought to be evaded. It was also clear from the letter quoted above that some sort of assurance was given by the Income-tax Officer to the assessee that if the amount was offered for assessment, no penalty would be levied. It was upon those considerations that the Tribunal appeared to have held that the charge of concealment was not proved and the Tribunal was justified in doing so.
This view, the learned counsel submits, is also supported by another decision of the Allahabad High Court in the case of Addl. CIT v. Kishan SinghChand [1977) 106 ITR 534. Even the jurisdictional High Court in the case of CIT v. Bombay Automobiles [1980] 123 ITR 582 (AP), has also laid down more or less the same law. The Income-tax Department has induced the assessee to come forward with a declaration that the cash credits were his own income and that inducement acted upon the assessee and he accordingly surrendered the amount with a view to avoid the penal consequences under Section 271(1)(c) of the IT Act. Thus, the levy of penalty under Section 271(1)(c) is not at all justified. The learned counsel, therefore, submits that the penalty order of the Revenue should be cancelled.
26. We have heard the rival submissions in the light of the judicial precedents relied upon by the parties to the dispute. First, we propose to examine whether the decision of the Andhra Pradesh High Court in a criminal case in Shivlal Dhulichand Agarwal's case (supra) in the assesse's own case, is relevant and binding for the purpose of deciding the issue of penalty under Section 271(1)(c) of the IT Act. As a matter of fact, we consider it necessary to mention that the learned counsel for the assessee, Sri Ratnakar, was allowed several adjournments to inform us whether the ratio of a criminal case is applicable in a penalty case under Section 271(1)(c) of the IT Act. Sri Ratnakar, however, was not able to place before us any authority in this regard.
There is ample authority for the proposition that there is a marked distinction between the prosecution for an offence punishable under Chapter XXII of the IT Act and proceedings to impose penalty under Chapter XXI of the IT Act. The penalty proceedings may be quasi-judicial or quasi-criminal proceedings, but are not criminal proceedings in the strict sense of the term. In a criminal case, it is the duty of the prosecution to prove beyond reasonable doubt the offence committed by an assessee under Chapter XXII of the IT Act. If the case is not proved beyond all reasonable doubts, the delinquent is entitled to get the benefit of doubt. Such, however, is not the position with regard to a penalty under Section 271(1)(c) of the IT Act. In this regard, we have already adverted above to the decision of the Andhra Pradesh High Court in Thakur V. Hari Prasad's case (supra).
27. The distincition between Section 271(1)(e) and Section 276C can also be very well seen from the language employed in both the sections.
Section 276C uses the word "wilfully" which signifies that for the successful prosecution, the prosecutor has to prove mens rea and a charge has to be brought beyond all reasonable doubt. Such is not the requirement under Section 271(1)(c) of the IT Act. As a matter of fact, there was a judicial difference of opinion regarding penalty under Section 271(1)(c) when the word "deliberately" in the said section was in the statute book. After the removal of the said word "deliberately", the position has become very clear and is without any ambiguity. The decision in a criminal case, therefore, cannot be blindly applied to a penalty which is more or less a civil obligation and has to be decided on the basis of preponderance of probabilities.
28. We are also unable to follow the ratio of the decision of the jurisdictional High Court in the assessee's own case in Shivlal Dhulichand Agarwal's case (supra), in view of the fact that for the purpose of prosecution, the confessional statement of Sri Ramavatar Sharma was not admitted as an evidence. The testimony given by the creditor, Sri Ramavatar Sharma, was, therefore, ignored by their Lordships for the purpose of prosecution under Section 276C of the IT Act. However, for the purpose of Section 271(1)(c), the testimony of Sri Ramavatar Sharma and the sworn deposition of Sri Omprakash, the managing partner, are before us which have to be taken into account to find out whether the assessee is in fact guilty of concealment of income. Considering all the facts and circumstances of the case, we are, therefore, of the view that the decision of thejurisdictional High Court in the assessee's own case (supra] does not assist us to decide the issue before us. In our view, penalties under Chapter XXI of the IT Act are to be construed within the terms and the language of the particular statute. The statute creating the penalty is the first and the last consideration in that respect. The popular and literary notion about penalty and the concepts associated with it have to subordinate themselves to the actual words and terms used in the statute creating the penalty and laying down the procedure for its imposition. The issue before us has, therefore, to be decided more on facts rather than on the legal issue whether the finding in a criminal case can be applied mutatis mutandis to the case of penalty for concealment. We, therefore, reject the contention of the learned counsel in this regard.
29. The issue before us regarding the levy of penalty under Section 271(1)(c) has to be decided mainly on the factual aspect. We have quoted above in detail the confessional statement of Sri Ramavatar Sharma, the creditor and the sworn deposition of Sri Omprakash, the partner. Our intention is not to repeat the depositions once again. It would suffice to say that out of his own volition, without any proved inducement or threat, Sri Ramavatar Sharma admitted that the assessee-firm had asked him to fill up the deposit form and also issue the cheque for the identical amount. He also admitted that on the basis of the deposit form, the money was deposited in his bank account by the assessee-firm itself. He also admitted that out of the total interest received by him, 50 per cent was to be given back to the assessee. The deposition of Sri Sharma in respect of his loan and the loan in the name of his wife leaves no doubt in one's mind that the transaction is bogus and the assessee had deposited his own money in the bank account of Sri Ramavatar Sharma against which the cheques were issued. Sri Sharma also explained the modus operandi of the interest amount to be returned partly to the assessee-firm itself. This statement of Sri Ramavatar Sharrna, as already mentioned above, was put before the partner Sri Omprakash. A careful reading of the statement of Sri Omprakash does not reveal any inducement given by the ITO or any threat issued to him. Sri Ompraksh, without any ambiguity, admitted that the assessee-firm had deposited "our monies" in the bank account of Sri Ramavatar Sharma and his wife Smt. Bhagirathi Sharma. The admission of depositing "our monies" clearly indicates that the assessee-firm had deposited its unaccounted money in the bank accounts of Sri Ramavatar Sharma and Smt. Bhagirathi Sharma. We are, therefore, in no doubt that it was a collusive transaction and the assessee had deposited his own money in the bank accounts of Sri Sharma and his wife with a view to show the bogus loans in his books of account. It may also be mentioned that the ITO had specifically asked Sri Omprakash whether he wished to cross-examine Sri Ramavatar Sharma. However, the partner affirmed the statement of Sri Ramavatar Sharma and admitted that the statement given by him was factually correct and there was no need for cross-examination. The ITO also put a question to him which was answered by Sri Omprakash without any hesitation. The question and the answer, being very material, are reproduced below: (Q) As the above referred credits are out. of your moneys only and not belonging to the said creditor, I propose to treat the same as unexplained cash credits and assess as the income of the firm for the assessment year 1984-85 as the firm's income from 'undisclosed sources'. Do you have any objection? (A) We have no objection for this, but we request that no other severe action may be taken against us.
Thus, during the course of the deposition, the ITO had brought to the notice of the managing partner that the credits shown in the names of Sri Ramavatar Sharma and his wife were bogus in nature and were in fact undisclosed income of the assessee which he wanted to bring to tax. To this proposition, the partner, Sri Omprakash, did not raise any objection. A reading of the sworn deposition of Sri Ompraksh as a whole, therefore, indicates without any ambiguity that he has admitted the fact of concealment.
30. During the course of deposition, the questions regarding the payment of interest were also put to Sri Omprakash. It may be mentioned that the deposition of Sri Omprakash was recorded when Sri Ramavatar was not, perhaps, present. Sri Ompraksh admitted that the loans were shown in the books at an interest rate of 12 per cent per annum but 50 per cent or 60 per cent was to be refunded by the creditor to the firm.
It is interesting to notice that Sri Ramavatar Sharma had also mentioned that 50 per cent was to be returned back to the firm. The sworn deposition of both the creditor and the appellant, therefore, corroborate the modus operandi employed by the assessee-firm to invest its own money in the form of cash credits.
31. It is also important to mention that during the course of the deposition, the ITO had also asked Sri Omprakash regarding the other creditors. The question and answer regarding this are as under:- (Q) Besides this, there are some other fresh credits in some parties' names introduced for the year ending 4-11-1983. I say that those credits are also out of your moneys only, like in the above two cases. What do you say for this? (A) No. All the other credits are genuine and correct. These are not out of our moneys. Only those two credits referred to above are not real and true credits. All others are genuine, correct and true.
The statement of Sri Omprakash, therefore, reveals that the statement given by him was voluntary and without any inducement or threat as alleged by the learned counsel. If there had been any inducement or threat, the assessee may have admitted all the credits as bogus.
However, in a very positive and vehement manner, Sri Omprakash stated that the other credits were not out of "our moneys". He stated that the other credits were genuine and the assessee was in a position to prove the same. We fail to understand how the inducement or threat, as alleged by the learned counsel, was only in the case of Sri Ramavatar Sharma and his wife and not in the case of other creditors. We are, therefore, of the very firm view that both Sri Ramavatar Sharma, the creditor and Sri Omprakash, the partner of the assessee-firm, had spoken the truth.
32. We are also not convinced that the sworn statement of Sri Omprakash was obtained by inducement or threat. A copy of the statement of Sri Omprakash placed before us reveals that the said sworn deposition was recorded in the presence of two witnesses, viz., Mahaveer Pershad and Nand Kishore. These two independent witnesses are not departmental people and were in fact other creditors of the appellant-firm. Had there been any inducement or threat by the ITO during the recording of sworn deposition, the assessee would have easily obtained the witness of these two persons to prove that in fact the sworn deposition was obtained by inducement or threat. These two witnesses were not even called upon to testify before the authorities whether during the course of deposition any inducement or threat was given by the ITO. Moreover, during the proceedings, the learned counsel, Sri Y. Ratnakar, was also present which could be seen from the order-sheet of the case records which he signed. The learned counsel also independently has not alleged that there was any inducement or threat given to Sri Omprakash.
Moreover, Sri Omprakash is a graduate and fully understands the import of the sworn statement. Apart from the questions and answers which have been written by the ITO in English, the partner Sri Omprakash himself, in his own hand-writing, has stated that he has given the statement on oath "out of my free will and without any force by any one". He has also mentioned that the statement given by him is factually correct.
33. During the course of the arguments, the learned counsel, Sri Ratnakar, mentioned that the statement of Sri Omprakash was obtained by inducement and the inducement was in the form of assurance given by the ITO that no penal consequences would follow. However, this assertion of the learned counsel is not borne out by the facts of the case. First of all, the ITO has no legal sanction to give any assurance that penalty proceedings will not be initiated and prosecution will not be launched.
Apart from this, a careful reading of the sworn deposition itself shows that such an assurance was not given by the ITO at all. While agreeing for the addition of the cash credits as income from undisclosed sources, Sri Omprakash has answered, "we have no objection for this, but we request that no other severe action may be taken against us".
Had it been a case of assurance given by the ITO, the partner would not have requested that no other severe action may be taken against the firm. At the time of recording of the statement, therefore, the partner himself was aware that the addition as income from undisclosed sources may lead to other penal consequences. If the ITO had in fact given the assurance that no penal consequences would follow, there was no necessity for the partner to make a request that no other severe action should be taken against the firm. This, therefore, proves that there was no assurance given by the ITO and the inducement or threat by which the deposition is stated to have been obtained is a figment of imagination and an afterthought. We are, therefore, convinced that there was no inducement or threat or assurance by the ITO.34. One more important factor to be noticed in this Case is that admittedly the money has not been returned to Sri Ramavatar Sharma.
Neither the assessee admits to have returned the money to Sri Ramavatar Sharma nor the latter admits to have received it back. Had it been a genuine transaction, the assessee was duty-bound to return the money to Sri Ramavatar Sharma and his wife. As a matter of fact, no such action has been taken by the assessee which also goes to show that the cash credits were bogus and the assessee had introduced its own funds in the guise of loans. The money was deposited in the bank accounts of Sri Ramavatar Sharma and his wife and cheques were obtained with a view to give the colour of genuineness to an otherwise bogus transaction. We are, therefore, convinced that the assessee is guilty of concealment.
35. It is true that the Explanation 1 to Section 271(1)(c) has not been invoked by the ITO or the CIT (Appeals). As a matter of fact, for the first time the matter has been argued before us by the learned departmental representative that the case of the assessee falls under Explanation I to Section 271(1)(c) of the Income-tax Act. We proceed to examine the applicability of the said Explanation in view of the fact that, in our view, the applicability of the said Explanation can be examined for the first time by the Tribunal also. The Explanation only postulates a rule of evidence and procedure and, therefore, no specific reference and reliance need be placed on the Explanation in the show-cause notice itself. The ITO can invoke the said Explanationin the course of penalty proceedings and even if he fails to do so, the Inspecting Assistant Commissioner or the Tribunal must examine its applicability before arriving at their decision whether a penalty is or is not leviable. In this regard, we are supported by the ratio of the decision in the cases of- CIT v. Drapco Electric Corporation [1980] 122 ITR 341 (Guj.), Addl.
CIT v. Motisingh [1983] 144 ITR 133 (MP); D.V. Patel & Co. v. CIT [1975] 100 ITR 524 (Guj.) and Addl. CIT v. Ram Prakash [1980] 121 ITR 774 (All.).
We, therefore, examine whether the said Explanation supports the levy of penalty.
36. The position after the insertion of Explanation 1, with effect from 1-4-1976, is different in the sense that this Explanation may well be considered as being more than a rule of evidence, as a rule of substantive law relating to penalty for concealment. This Explanation is to the effect that- Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellant Assitant Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of Clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.
It would be seen that this Explanation 1 considerably reduces, if not altogether removes, the department's onus to prove the concealment in assessments based on unexplained cash credits, unexplained investments and the like. By and large, therefore, it can now be said that the doctrine of Anwar Ali's case (supra) has been eroded and after Explanation 1, penalty under Section 271 (1)(c) tends to become almost automatic. In this regard, our views are strengthened by the ratio of the decision in the case of Imperial Automobiles [supra). We are, therefore, in agreemnet with the learned departmental representative that even under Explanation 1, the assessee is guilty of deemed concealment. As a matter of fact, we need not at all go to the Explanation in this case as the fact of concealment has already been established by the department.
37. Much has been made out by the learned counsel for the appellant regarding the right of cross-examination of Sri Ramavatar Sharma. It is true that the assessee had also taken a specific ground before the CIT (Appeals) that the right of cross-examination should be allowed to the assessee. But, we do not find any force in the contention of the assessee. It is pertinent to mention that Sri Ramavatar Sharma was produced by the appellant-firm before the ITO and, therefore, Sri Ramavatar Sharma was the witness for the assessee. It is settled legal position that one cannot cross-examine one's own witness. The right of cross-examination could not, therefore, be allowed to the assessee under these circumstances. Moreover, the sworn deposition of Sri Ramavatar Sharma was recorded during the course of the assessment proceedings and there the right of cross-examination was also given to the assessee. However, the assessee declined to put Sri Ramavatar Sharma on the stand and cross-examine him. As a matter of fact, Sri Omprakash affirmed the sworn deposition of Sri Ramavatar Sharma. During the course of the penalty proceedings, the ITO did not examine Sri Ramavatar Sharma as his witness and, therefore, there was no necessity for him to allow the right of cross-examination to the assessee. If the assessee wanted to produce Sri Ramavatar Sharma as his witness during the course of the penalty proceedings, he could have easily done so for which the ITO did not raise any objection. It was, therefore, for the assessee to bring Sri Ramavatar Sharma before the ITO to prove his case. If the assessee wanted assistance from the ITO, a specific request should have been made by the assessee to the ITO to issue a notice under Section 131 of the IT Act to Sri Ramavatar Sharma. The ITO could have enforced the attendance of the creditor and the creditor could have been examined or cross-examined or re-examined by both the parties to the dispute. Having failed to do so it does not lie in the mouth of the assessee now to come forward and insist that the right of cross-examination should have been allowed. We are, therefore, of the view that in this regard the case of the appellant is not well-founded.
38. It is true that assessment proceedings are apart and distinct from penalty proceedings. The evidence collected during the assessment proceedings may not be a conclusive evidence for the purpose of penalty under Section 271(1)(c), but the fact cannot be denied that it is good evidence. The evidence collected during the course of the assessment proceedings can successfully be used against the assessee in penalty proceedings in a case where the assessee has admitted that the cash credit represents his concealed income. There is ample authority for the proposition that the Revenue need not prove anything further during penalty proceedings if, during the assessment proceedings, the assessee has already admitted that the credits represented his concealed income.
As already mentioned above, in the case before us, the assessee had, without any ambiguity, admitted that the cash credits in the names of Sri Ramavatar Sharma and his wife were its own concealed income and, therefore, the ITO was not obliged to prove anything further at the time of penalty proceedings.
39. In view of the totality of the circumstances, we are, therefore, of the view that the assessee is guilty of concealment and penalty under Section 271(1)(c) has rightly been levied by the Revenue. We, accordingly, confirm the order of the CIT (Appeals).