Akshay Bhandar Vs. Commissioner of Income-tax - Court Judgment

Excerpt:
- - the assessee-firm filed its return of total income for the assessment year 1977-78 on or about august 31, 1977, together with its trading, profit and loss account as well as the balance-sheet. the tribunal further held that the assessee-firm had failed to substantiate the claim that the cash sales shown on the concerned date for the year under consideration were not the cash sale proceeds but the concealed income of the assessee. 8. for a proper appreciation, it would be appropriate to set out section 271 of the income-tax act, 1961, in so far as it is relevant :271. (1) if the income-tax officer or the appellate assistant commissioner or the commissioner (appeals) in the course of any proceedings under this act, is satisfied that any person- (a) .or (b) .or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,-(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 twice, 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 :explanation 1. where in respect of any facts material to the computation of the total income of any person under this act, (a and having failed to produce any other witness by the assessee-firm, the income-tax officer as well as the tribunal jumped to the conclusion that the appellant was guilty because in spite of the repeated opportunities given to the assessee-firm. it is well-established law that the proceedings under section 271(1)(c) for imposition of penalty are quasi-criminal in nature and as such some evidence must be there before the income-tax officer comes to a conclusion that there was concealed income. it is also a well-settled principle that the statement of witnesses without being cross-examined is not a proper evidence for determining a particular fact. , speaking for the bench, observed thus (page 47) :if in an appropriate case, the tribunal or the fact-finding body is satisfied by the evidence on record and inference drawn from the record that the assessee was not guilty of any fraud or any gross or wilful neglect and if the revenue had not adduced any further evidence, then in such case, the assessee cannot come within the mischief of the section and suffer the imposition of penalty. we do not find any finding in that respect in the relevant orders of the income-tax officer as well as the tribunal. d.n. baruah, j.1. the income-tax appellate tribunal at the instance of the assessee referred the following three (3) questions under section 256(1) of the income-tax act, 1961 (for short, 'the act') for opinion of this court : '(1) whether, on the facts and in the circumstances of the case, the tribunal was justified in law in reversing the order of the commissioner of income-tax (appeals) and in restoring the order of the income-tax officer imposing a penalty of rs. 32,208 under section 271(1)(c) of the income-tax act, 1961 ? (2) whether, on the facts and in the circumstances of the case, the tribunal was justified in law in holding that the penalty of rs. 32,208 was correctly levied in the instant case under section 271(1)(c) of the income-tax act, 1961, referring and relying on the explanation 1 to the said section ? (3) whether, on the facts and in the circumstances of the case, the tribunal was justified in law in reversing the order of the commissioner of income-tax (appeals) deleting the penalty of rs. 32,208 imposed by the income-tax officer distinguishing the case-laws on the point relied on by the assessee and relying on the case-laws mentioned in the order passed on appeal?'2. the facts for the purpose of answering the above questions may be stated as follows : the assessee is a firm registered under the partnership act and is engaged in the business of purchase and sale of various types of hardware goods including g. c. i. sheets. the assessee-firm follows the mercantile system of accounting. during the assessment year 1977-78 on or about march 15, 1977, the assessee-firm in the regular course of business of dealing in hardware goods, sold 45 bundles of g. c. i. sheets valued at rs. 24,250 to one biswas brothers of dharmanagar in the state of tripura. the contention of the assessee was that the sale was made on cash payment, vide cash memo no. 7690 for the said amount issued by the assessee-firm. it was a local sale and the delivery was effected on the spot to the representative of biswas brothers and, therefore, no central sales tax was charged and this cash payment was credited in the cash book of the assessee-firm on the same day, i.e., march 15, 1977. certain other goods were also sold by the assessee-firm to the said dharmanagar firm, biswas brothers. those other sales were made on credit and the assessee-firm has also issued two bills bearing nos. 2813 and 2814/ab/ of 1983 and in those two bills central sales tax was also charged in view of the fact that the goods were sold on credit and it was necessary to despatch the same to agartala and in due course the assessee-firm received payment of the aforesaid bills of rs. 1,330 and rs. 3,722.78, respectively, aggregating to rs. 5,052.78, on subsequent date, i.e., on april 5, 1977, and it was entered in the books of account of the assessee-firm kept in the regular course of business. the assessee-firm filed its return of total income for the assessment year 1977-78 on or about august 31, 1977, together with its trading, profit and loss account as well as the balance-sheet. the assessment was completed by the income-tax officer, 'a' ward, guwahati, in the month of december, 1977, showing a total income of rs. 4,59,780. however, this assessment order was subsequently rectified on march 23, 1978, under section 154 of the act and thus the total income was redeter-mined. in or about the month of february, 1978, the assessee-firm received a letter dated february 20, 1978, from the income-tax officer, agartala, who was the assessing officer of the said firm, biswas brothers. in the said letter, it was informed, that biswas brothers had booked 45 bundles of g. c. sheets on march 15, 1977, and despatched it to dharmanagar by railway. it also mentioned that the aforesaid 45 bundles of g. c. i. sheets were purchased on credit. one, mr. p. k. biswas of the said biswas brothers paid the amount at gauhati on april 6, 1977, along with another sum of rs. 5,052.78 in full payment of two other bills. the letter further indicated that biswas brothers could not produce in the course of their assessment proceedings any credit memo or bill in evidence of their having purchased the said 45 bundles of g. c. sheets on credit. however, biswas brothers had produced a katcha slip (fardi) containing particulars regarding 45 bundles of g. c. sheets costing rs. 24,402 and it was claimed by sri biswas of biswas brothers that the said katcha slip was sent to them by the assessee-firm along with two bills by post. the income-tax officer, agartala, therefore, requested the assessee-firm to confirm whether the said 45 bundles of g. c. i. sheets were sold on credit to biswas brothers and whether it received the payment of rs. 24,402 in cash on april 6, 1977. the assessee-firm replied to the said letter stating that on march 15, 1977, mr. p.k. biswas of the said firm visited their shop and placed orders for some hardware goods including 45 bundles of g. c. i. sheets and these orders were noted on katcha slip fardis as per practice followed for delivery and subsequently on march 15, 1977, the representative of biswas brothers came for taking delivery of the goods. the assessee-firm also disputed the averments made by the dharmanagar firm, biswas brothers, and no katcha slip (fardi) was sent to shri biswas by post. it was further informed that a sum of rs. 5,052.78 was received by the assessee-firm from the said sri biswas at gauhati on april 5, 1977, and not on april 6, 1977, as alleged by biswas brothers, on or about april 26, 1979, the income-tax officer, gauhati, issued a notice under section 131 of the act to one of the partners of the asses see-firm, shri ashit kumar banik, to appear before the income-tax officer with books of account, cash memos, bill books, cash book, etc., in respect of the assessment year 1977-78. this notice was complied with and the said shri ashit kumar banik appeared before the income-tax officer. the statement of shri banik was recorded on may 9, 1979, in compliance with the notice issued under section 131 of the act, the income-tax officer asked the said banik to produce further witness to prove the case of the assessee-firm and several adjournments had been given for that purpose. however, no further witness was examined. thereafter, the income-tax officer initiated reassessment proceedings by issuing notice under section 147/148 of the income-tax act, 1961. in response to the notice, the assessee-firm filed a return under protest. there was some disturbance and annoyance caused to the firm because of these proceedings, besides that was a time of unrest in the state in connection with foreigners' issue and gauhati was the political pivot of the movement. the partners of the assessee-firm being members of the minority community, were naturally panicky and in unrest. most of the employees of the assessee-firm were irregular in attending their duties on account of political unrest. because of all these activities, the business was almost at a standstill. in such condition and state of mind, the assessee-firm wrote a letter on november 29, 1981, offering to pay tax on the said sum of rs. 24,250 just to avoid harassment and requested the income-tax officer to exempt them from penalty proceedings. however, the income-tax officer, 'a' ward, gauhati, initiated proceedings under section 271(1)(c) of the act and issued show-cause notice as to why penalty should not be imposed. cause was shown by the assessee-firm. however, the income-tax officer rejected the contentions of the assessee-firm and levied a penalty of rs. 32,208 by his order dated march 13, 1984. the contention of the assessee-firm was that the imposition of penalty was misconceived, contrary to the provision of law and suffers from various legal infirmities. according to the assessee-firm, the penalty was imposed by the order of the income-tax officer solely on the basis of an oral statement made by one, shri p.k. biswas of biswas brothers. even the whole oral statement was not supported by document and that the statement was recorded behind the back of the assessee-firm and depriving the assessee-firm of any opportunity to cross-examine and verify the testimony of the said sri biswas. he also could not produce any document in support of his contention because according to the assessee-firm in the case of credit sale definitely he would have received credit memo and such credit memo ought to have been produced just after he received the goods. according to the assessee-firm, there was no reason to believe an oral statement given by the said p.k. biswas of biswas brothers and any partner or any representative of the assessee-firm and disbelieving the contention of the assessee-firm. the assessee-firm has also pointed out that it was a cash sale and it is a fact that these bundles were consigned from guwahati to dharmanagar by rail by biswas brothers who admittedly acted as consignor and consignee both and this was sufficient to indicate that there was no credit sale. notwithstanding the fact, the income-tax officer imposed penalty. against that the appeal was filed before the commissioner of income-tax (appeals), gauhati, and the commissioner of income-tax (appeals), however, after going through the entire matters held the penalty imposed by the income-tax officer under section 271(1)(c) was unjustified and accordingly the same was cancelled. while passing the said order cancelling the assessment, the commissioner of income-tax (appeals) considered that the assessee-firm had sold goods worth rs. 5,052.78 on march 15, 1977, on credit to biswas brothers, dharmanagar, tripura, and the goods were despatched by rail by the assessee being the consignor and biswas brothers, dharmanagar, was the consignee. in respect of cash sale worth rs. 24,250 sold on march 15, 1977, the goods were despatched by the aforesaid biswas brothers of dharmanagar and that the firm itself was both consignor and consignee. thereby, the commissioner of income-tax (appeals) came to the conclusion that in the case of a credit same goods could have been despatched by the assessee along with the other goods being the consignor and not by biswas brothers, who happens to be both the consignor and consignee. the assessee also contended that there was no positive evidence of concealment of facts.3. the revenue, dissatisfied with the order passed by the commissioner of income-tax (appeals) preferred an appeal before the income-tax tribunal. the tribunal, however, after considering the various aspects of the matter came to the conclusion that there had been a concealment of accounts. the tribunal further held that the assessee-firm had failed to substantiate the claim that the cash sales shown on the concerned date for the year under consideration were not the cash sale proceeds but the concealed income of the assessee. accordingly, the order passed by the commissioner of income-tax (appeals) was reversed and the order of the income-tax officer was restored. at the instance of the assessee, the above three (3) questions had been preferred for the opinion of this court.4. heard mr. j.p. bhattacharjee, learned senior counsel assisted by mr. r.k. joshi, on behalf of the assessee, and dr. a.k. saraf, learned special counsel appearing on behalf of the revenue.5. before taking up the entire matter, dr. saraf, learned special counsel for the revenue, has raised a preliminary objection that these questions are all finding of facts and these questions cannot be answered. according to dr. saraf, the finding of the tribunal that the assessee had concealed income is a question of fact and no question of law is involved.6. mr. bhattacharjee, learned senior counsel, however, disputes the contention. according to him all the three (3) questions are questions which involve questions of law and, therefore, this court is to give opinion.7. it is true normally when a tribunal comes to a conclusion that the assessee had concealed certain income, it may be a question of fact if after proper assessment of the facts placed before the tribunal, the tribunal comes to the conclusion but, while finding an assessee of his guilt of concealment after the procedure prescribed is not followed, and if the tribunal goes contrary to the provisions of law in arriving at such conclusion, in our opinion, it is definitely a question of law. in this case learned counsel for the assessee has drawn our attention to the provision of section 271(1)(c) and also proviso to the said explanation 1. according to learned counsel for the assessee that the tribunal jumped to the conclusion regarding the guilt of the assessee without first deciding whether the provisions contained in the proviso are fulfilled or not. we find sufficient force in the contention of learned counsel for the assessee and, therefore, we reject the submission of the special counsel appearing on behalf of the revenue.8. for a proper appreciation, it would be appropriate to set out section 271 of the income-tax act, 1961, in so far as it is relevant : '271. (1) if the income-tax officer or the appellate assistant commissioner or the commissioner (appeals) in the course of any proceedings under this act, is satisfied that any person- (a) ... ., or (b) . . . ., or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,--.... (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 notexceed twice, 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 : . . . . explanation 1. -- 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 appellate assistant commissioner or the commissioner (appeals) 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 ; provided that nothing contained in this explanation shall apply to a case referred to in clause (b) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him.' 9. the first contention of mr. bhattacharjee is that the income-tax officer proceeded to impose penalty and in fact, the income-tax officer imposed penalty without going through any acceptable evidence on record. mr. bhattacharjee further submits that the sole basis for imposing penalty was the statement of one p.k. biswas recorded by the income-tax officer, agartala, under section 131 of the act. this statement was recorded in a different proceeding in respect of the assessment of the aforesaid firm, biswas brothers, and that too in the absence of the partners of the assessee-firm. this statement was forwarded by the income-tax officer, agartala, to his counterpart at gauhati income-tax 'a' ward, gauhati, and this was the sole basis for coming to a conclusion that the assessee had concealed the income. no effort was made by the assessing officer, namely, the income-tax officer, to examine the said shri p.k. biswas in the present penalty proceedings and in the presence of any of the partners or representatives of the assessee-firm.10. on the other hand, the income-tax officer asked one of the partners of the assessee-firm to produce all the records and also evidence. one shri a.k. banik, as partner of the assessee-firm, appeared before the income-tax officer and gave his statement and also produced the relevant records including the credit memo in respect of the other two sales that took place simultaneously on the same day, i.e., march 15, 1977. thereafter, the assessing officer, i.e., the income-tax officer, insisted that the assessee-firm produce more witnesses to substantiate the claim. the income-tax officer and the tribunal also had given much emphasis to the assessee-firm for production of more materials by examining witnesses, etc. and having failed to produce any other witness by the assessee-firm, the income-tax officer as well as the tribunal jumped to the conclusion that the appellant was guilty because in spite of the repeated opportunities given to the assessee-firm. he took the goods and that was cash sale and not credit sale. in this connection law is very clear. it is well-established law that the proceedings under section 271(1)(c) for imposition of penalty are quasi-criminal in nature and as such some evidence must be there before the income-tax officer comes to a conclusion that there was concealed income. it is also a well-settled principle that the statement of witnesses without being cross-examined is not a proper evidence for determining a particular fact. a statement recorded in different proceedings in the absence of the assessee, any of the partners or representatives of the assessee-firm cannot be a piece of evidence. besides if the spirit of the evidence act is to be followed, we have serious doubt that statement recorded in a particular proceeding can be brought into for the purpose of imposing penalty in a different proceeding. we have already stated the proceeding for imposition of penalty under section 271(1)(c) of the income-tax act is quasi-criminal in nature.11. however, the income-tax officer did not consider to bring the said witness, sri p.k. biswas, in the penalty proceedings. it is true that when some evidence is there, it is the duty of the assessee-firm/partners to establish and prove his/their case, but that question of repeated concealment of income will come only when such acceptable evidence is placed before the authority. in the present case as we have already stated that there was no acceptable evidence put forward before the present penalty proceedings. in our opinion, the conclusion arrived at by the income-tax officer regarding guilt of the assessee-firm for concealment of income cannot be sustained and this aspect in the matter was totally ignored by the tribunal.12. in this connection, a reference can be made to a decision of our high court in cit v. gurudayalram , where dr. b.p. saraf j., speaking for the bench, observed thus (page 47) : 'if in an appropriate case, the tribunal or the fact-finding body is satisfied by the evidence on record and inference drawn from the record that the assessee was not guilty of any fraud or any gross or wilful neglect and if the revenue had not adduced any further evidence, then in such case, the assessee cannot come within the mischief of the section and suffer the imposition of penalty. that appears to be the true effect of the explanation.'13. from the above decision, it is abundantly clear that the fact-finding body, namely, the income-tax officer or the appellate authority has to decide whether on the basis of certain materials which are acceptable materials that the assessee had committed fraud in concealment of income. we have gone through the judgment of the tribunal. we do not find any finding in this regard.14. dr. saraf, learned counsel for the revenue, has strenuously argued that after the amendment of 1964 the word 'deliberately' has been deleted and, therefore, the revenue department is relieved of the onus of proving the mens rea which was obligatory prior to 1964 amendment.15. it is true that by the said amendment, deletion of the word 'deliberately' which preceded the word 'concealed', shifted the onus to prove the mental state to the assessee. we are of the view that the onus that has been shifted is rebuttable. it also does not mean that the income-tax officer or the tribunal should not look into the fact as to whether the assessee-firm fraudulently concealed the income. we do not find any finding in that regard. we also find that the assessee-firm has been deprived of the right to rebut the alleged statement of shri p.k. biswas as the said shri biswas was not produced or examined in the said penalty proceeding. in our considered view, the income-tax officer or the tribunal ought to have considered as to whether the assessee-firm has been prevented from giving/offering effective statement to substantiate his explanation that the assessee-firm was not guilty of any fraud or any gross or wilful neglect or such explanation, if any, is bona fide or not in the absence of the evidence or oral statement of shri p.k. biswas before the income-tax officer, a-ward, gauhati. we do not find any finding in that respect in the relevant orders of the income-tax officer as well as the tribunal. however, we find that without considering this aspect of the matter, the tribunal hastily jumped to the conclusion.16. in view of the above, in our opinion, all the questions are answered in the negative and in favour of the assessee and against the revenue.17. a copy of this judgment under the signature of the registrar and the seal of the high court shall be transmitted to the income-tax appellate tribunal.18. in the facts and circumstances of the case, there will be no direction as to costs.

Judgment:

D.N. Baruah, J.

1. The Income-tax Appellate Tribunal at the instance of the assessee referred the following three (3) questions under Section 256(1) of the Income-tax Act, 1961 (for short, 'the Act') for opinion of this court :

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in reversing the order of the Commissioner of Income-tax (Appeals) and in restoring the order of the Income-tax Officer imposing a penalty of Rs. 32,208 under Section 271(1)(c) of the Income-tax Act, 1961 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty of Rs. 32,208 was correctly levied in the instant case under Section 271(1)(c) of the Income-tax Act, 1961, referring and relying on the Explanation 1 to the said section ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in reversing the order of the Commissioner of Income-tax (Appeals) deleting the penalty of Rs. 32,208 imposed by the Income-tax Officer distinguishing the case-laws on the point relied on by the assessee and relying on the case-laws mentioned in the order passed on appeal?'

2. The facts for the purpose of answering the above questions may be stated as follows :

The assessee is a firm registered under the Partnership Act and is engaged in the business of purchase and sale of various types of hardware goods including G. C. I. sheets. The assessee-firm follows the mercantile system of accounting. During the assessment year 1977-78 on or about March 15, 1977, the assessee-firm in the regular course of business of dealing in hardware goods, sold 45 bundles of G. C. I. sheets valued at Rs. 24,250 to one Biswas Brothers of Dharmanagar in the State of Tripura. The contention of the assessee was that the sale was made on cash payment, vide Cash Memo No. 7690 for the said amount issued by the assessee-firm. It was a local sale and the delivery was effected on the spot to the representative of Biswas Brothers and, therefore, no Central sales tax was charged and this cash payment was credited in the cash book of the assessee-firm on the same day, i.e., March 15, 1977. Certain other goods were also sold by the assessee-firm to the said Dharmanagar firm, Biswas Brothers. Those other sales were made on credit and the assessee-firm has also issued two bills bearing Nos. 2813 and 2814/AB/ of 1983 and in those two bills Central sales tax was also charged in view of the fact that the goods were sold on credit and it was necessary to despatch the same to Agartala and in due course the assessee-firm received payment of the aforesaid bills of Rs. 1,330 and Rs. 3,722.78, respectively, aggregating to Rs. 5,052.78, on subsequent date, i.e., on April 5, 1977, and it was entered in the books of account of the assessee-firm kept in the regular course of business. The assessee-firm filed its return of total income for the assessment year 1977-78 on or about August 31, 1977, together with its trading, profit and loss account as well as the balance-sheet. The assessment was completed by the Income-tax Officer, 'A' Ward, Guwahati, in the month of December, 1977, showing a total income of Rs. 4,59,780. However, this assessment order was subsequently rectified on March 23, 1978, under Section 154 of the Act and thus the total income was redeter-mined. In or about the month of February, 1978, the assessee-firm received a letter dated February 20, 1978, from the Income-tax Officer, Agartala, who was the Assessing Officer of the said firm, Biswas Brothers. In the said letter, it was informed, that Biswas Brothers had booked 45 bundles of G. C. sheets on March 15, 1977, and despatched it to Dharmanagar by railway. It also mentioned that the aforesaid 45 bundles of G. C. I. sheets were purchased on credit. One, Mr. P. K. Biswas of the said Biswas Brothers paid the amount at Gauhati on April 6, 1977, along with another sum of Rs. 5,052.78 in full payment of two other bills. The letter further indicated that Biswas Brothers could not produce in the course of their assessment proceedings any credit memo or bill in evidence of their having purchased the said 45 bundles of G. C. sheets on credit. However, Biswas Brothers had produced a katcha slip (fardi) containing particulars regarding 45 bundles of G. C. sheets costing Rs. 24,402 and it was claimed by Sri Biswas of Biswas Brothers that the said katcha slip was sent to them by the assessee-firm along with two bills by post. The Income-tax Officer, Agartala, therefore, requested the assessee-firm to confirm whether the said 45 bundles of G. C. I. sheets were sold on credit to Biswas Brothers and whether it received the payment of Rs. 24,402 in cash on April 6, 1977. The assessee-firm replied to the said letter stating that on March 15, 1977, Mr. P.K. Biswas of the said firm visited their shop and placed orders for some hardware goods including 45 bundles of G. C. I. sheets and these orders were noted on katcha slip fardis as per practice followed for delivery and subsequently on March 15, 1977, the representative of Biswas Brothers came for taking delivery of the goods. The assessee-firm also disputed the averments made by the Dharmanagar firm, Biswas Brothers, and no katcha slip (fardi) was sent to Shri Biswas by post. It was further informed that a sum of Rs. 5,052.78 was received by the assessee-firm from the said Sri Biswas at Gauhati on April 5, 1977, and not on April 6, 1977, as alleged by Biswas Brothers, On or about April 26, 1979, the Income-tax Officer, Gauhati, issued a notice under Section 131 of the Act to one of the partners of the asses see-firm, Shri Ashit Kumar Banik, to appear before the Income-tax Officer with books of account, cash memos, bill books, cash book, etc., in respect of the assessment year 1977-78. This notice was complied with and the said Shri Ashit Kumar Banik appeared before the Income-tax Officer. The statement of Shri Banik was recorded on May 9, 1979, in compliance with the notice issued under Section 131 of the Act, The Income-tax Officer asked the said Banik to produce further witness to prove the case of the assessee-firm and several adjournments had been given for that purpose. However, no further witness was examined. Thereafter, the Income-tax Officer initiated reassessment proceedings by issuing notice under Section 147/148 of the Income-tax Act, 1961. In response to the notice, the assessee-firm filed a return under protest. There was some disturbance and annoyance caused to the firm because of these proceedings, besides that was a time of unrest in the State in connection with foreigners' issue and Gauhati was the political pivot of the movement. The partners of the assessee-firm being members of the minority community, were naturally panicky and in unrest. Most of the employees of the assessee-firm were irregular in attending their duties on account of political unrest. Because of all these activities, the business was almost at a standstill. In such condition and state of mind, the assessee-firm wrote a letter on November 29, 1981, offering to pay tax on the said sum of Rs. 24,250 just to avoid harassment and requested the Income-tax Officer to exempt them from penalty proceedings. However, the Income-tax Officer, 'A' Ward, Gauhati, initiated proceedings under Section 271(1)(c) of the Act and issued show-cause notice as to why penalty should not be imposed. Cause was shown by the assessee-firm. However, the Income-tax Officer rejected the contentions of the assessee-firm and levied a penalty of Rs. 32,208 by his order dated March 13, 1984. The contention of the assessee-firm was that the imposition of penalty was misconceived, contrary to the provision of law and suffers from various legal infirmities. According to the assessee-firm, the penalty was imposed by the order of the Income-tax Officer solely on the basis of an oral statement made by one, Shri P.K. Biswas of Biswas Brothers. Even the whole oral statement was not supported by document and that the statement was recorded behind the back of the assessee-firm and depriving the assessee-firm of any opportunity to cross-examine and verify the testimony of the said Sri Biswas. He also could not produce any document in support of his contention because according to the assessee-firm in the case of credit sale definitely he would have received credit memo and such credit memo ought to have been produced just after he received the goods. According to the assessee-firm, there was no reason to believe an oral statement given by the said P.K. Biswas of Biswas Brothers and any partner or any representative of the assessee-firm and disbelieving the contention of the assessee-firm. The assessee-firm has also pointed out that it was a cash sale and it is a fact that these bundles were consigned from Guwahati to Dharmanagar by rail by Biswas Brothers who admittedly acted as consignor and consignee both and this was sufficient to indicate that there was no credit sale. Notwithstanding the fact, the Income-tax Officer imposed penalty. Against that the appeal was filed before the Commissioner of Income-tax (Appeals), Gauhati, and the Commissioner of Income-tax (Appeals), however, after going through the entire matters held the penalty imposed by the Income-tax Officer under Section 271(1)(c) was unjustified and accordingly the same was cancelled. While passing the said order cancelling the assessment, the Commissioner of Income-tax (Appeals) considered that the assessee-firm had sold goods worth Rs. 5,052.78 on March 15, 1977, on credit to Biswas Brothers, Dharmanagar, Tripura, and the goods were despatched by rail by the assessee being the consignor and Biswas Brothers, Dharmanagar, was the consignee. In respect of cash sale worth Rs. 24,250 sold on March 15, 1977, the goods were despatched by the aforesaid Biswas Brothers of Dharmanagar and that the firm itself was both consignor and consignee. Thereby, the Commissioner of Income-tax (Appeals) came to the conclusion that in the case of a credit same goods could have been despatched by the assessee along with the other goods being the consignor and not by Biswas Brothers, who happens to be both the consignor and consignee. The assessee also contended that there was no positive evidence of concealment of facts.

3. The Revenue, dissatisfied with the order passed by the Commissioner of Income-tax (Appeals) preferred an appeal before the Income-tax Tribunal. The Tribunal, however, after considering the various aspects of the matter came to the conclusion that there had been a concealment of accounts. The Tribunal further held that the assessee-firm had failed to substantiate the claim that the cash sales shown on the concerned date for the year under consideration were not the cash sale proceeds but the concealed income of the assessee. Accordingly, the order passed by the Commissioner of Income-tax (Appeals) was reversed and the order of the Income-tax Officer was restored. At the instance of the assessee, the above three (3) questions had been preferred for the opinion of this court.

4. Heard Mr. J.P. Bhattacharjee, learned senior counsel assisted by Mr. R.K. Joshi, on behalf of the assessee, and Dr. A.K. Saraf, learned special counsel appearing on behalf of the Revenue.

5. Before taking up the entire matter, Dr. Saraf, learned special counsel for the Revenue, has raised a preliminary objection that these questions are all finding of facts and these questions cannot be answered. According to Dr. Saraf, the finding of the Tribunal that the assessee had concealed income is a question of fact and no question of law is involved.

6. Mr. Bhattacharjee, learned senior counsel, however, disputes the contention. According to him all the three (3) questions are questions which involve questions of law and, therefore, this court is to give opinion.

7. It is true normally when a Tribunal comes to a conclusion that the assessee had concealed certain income, it may be a question of fact if after proper assessment of the facts placed before the Tribunal, the Tribunal comes to the conclusion but, while finding an assessee of his guilt of concealment after the procedure prescribed is not followed, and if the Tribunal goes contrary to the provisions of law in arriving at such conclusion, in our opinion, it is definitely a question of law. In this case learned counsel for the assessee has drawn our attention to the provision of Section 271(1)(c) and also proviso to the said Explanation 1. According to learned counsel for the assessee that the Tribunal jumped to the conclusion regarding the guilt of the assessee without first deciding whether the provisions contained in the proviso are fulfilled or not. We find sufficient force in the contention of learned counsel for the assessee and, therefore, we reject the submission of the special counsel appearing on behalf of the Revenue.

8. For a proper appreciation, it would be appropriate to set out Section 271 of the Income-tax Act, 1961, in so far as it is relevant :

'271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person-

(a) ... ., or

(b) . . . ., or

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income,

he may direct that such person shall pay by way of penalty,--....

(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 twice, 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 : . . . .

Explanation 1. -- 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 Appellate Assistant Commissioner or the Commissioner (Appeals) 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 ;

Provided that nothing contained in this Explanation shall apply to a case referred to in Clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him.'

9. The first contention of Mr. Bhattacharjee is that the Income-tax Officer proceeded to impose penalty and in fact, the Income-tax Officer imposed penalty without going through any acceptable evidence on record. Mr. Bhattacharjee further submits that the sole basis for imposing penalty was the statement of one P.K. Biswas recorded by the Income-tax Officer, Agartala, under Section 131 of the Act. This statement was recorded in a different proceeding in respect of the assessment of the aforesaid firm, Biswas Brothers, and that too in the absence of the partners of the assessee-firm. This statement was forwarded by the Income-tax Officer, Agartala, to his counterpart at Gauhati Income-tax 'A' Ward, Gauhati, and this was the sole basis for coming to a conclusion that the assessee had concealed the income. No effort was made by the Assessing Officer, namely, the Income-tax Officer, to examine the said Shri P.K. Biswas in the present penalty proceedings and in the presence of any of the partners or representatives of the assessee-firm.

10. On the other hand, the Income-tax Officer asked one of the partners of the assessee-firm to produce all the records and also evidence. One Shri A.K. Banik, as partner of the assessee-firm, appeared before the Income-tax Officer and gave his statement and also produced the relevant records including the credit memo in respect of the other two sales that took place simultaneously on the same day, i.e., March 15, 1977. Thereafter, the Assessing Officer, i.e., the Income-tax Officer, insisted that the assessee-firm produce more witnesses to substantiate the claim. The Income-tax Officer and the Tribunal also had given much emphasis to the assessee-firm for production of more materials by examining witnesses, etc. And having failed to produce any other witness by the assessee-firm, the Income-tax Officer as well as the Tribunal jumped to the conclusion that the appellant was guilty because in spite of the repeated opportunities given to the assessee-firm. He took the goods and that was cash sale and not credit sale. In this connection law is very clear. It is well-established law that the proceedings under Section 271(1)(c) for imposition of penalty are quasi-criminal in nature and as such some evidence must be there before the Income-tax Officer comes to a conclusion that there was concealed income. It is also a well-settled principle that the statement of witnesses without being cross-examined is not a proper evidence for determining a particular fact. A statement recorded in different proceedings in the absence of the assessee, any of the partners or representatives of the assessee-firm cannot be a piece of evidence. Besides if the spirit of the Evidence Act is to be followed, we have serious doubt that statement recorded in a particular proceeding can be brought into for the purpose of imposing penalty in a different proceeding. We have already stated the proceeding for imposition of penalty under Section 271(1)(c) of the Income-tax Act is quasi-criminal in nature.

11. However, the Income-tax Officer did not consider to bring the said witness, Sri P.K. Biswas, in the penalty proceedings. It is true that when some evidence is there, it is the duty of the assessee-firm/partners to establish and prove his/their case, but that question of repeated concealment of income will come only when such acceptable evidence is placed before the authority. In the present case as we have already stated that there was no acceptable evidence put forward before the present penalty proceedings. In our opinion, the conclusion arrived at by the Income-tax Officer regarding guilt of the assessee-firm for concealment of income cannot be sustained and this aspect in the matter was totally ignored by the Tribunal.

12. In this connection, a reference can be made to a decision of our High Court in CIT v. Gurudayalram , where Dr. B.P. Saraf J., speaking for the Bench, observed thus (page 47) :

'If in an appropriate case, the Tribunal or the fact-finding body is satisfied by the evidence on record and inference drawn from the record that the assessee was not guilty of any fraud or any gross or wilful neglect and if the Revenue had not adduced any further evidence, then in such case, the assessee cannot come within the mischief of the section and suffer the imposition of penalty. That appears to be the true effect of the Explanation.'

13. From the above decision, it is abundantly clear that the fact-finding body, namely, the Income-tax Officer or the appellate authority has to decide whether on the basis of certain materials which are acceptable materials that the assessee had committed fraud in concealment of income. We have gone through the judgment of the Tribunal. We do not find any finding in this regard.

14. Dr. Saraf, learned counsel for the Revenue, has strenuously argued that after the amendment of 1964 the word 'deliberately' has been deleted and, therefore, the Revenue Department is relieved of the onus of proving the mens rea which was obligatory prior to 1964 amendment.

15. It is true that by the said amendment, deletion of the word 'deliberately' which preceded the word 'concealed', shifted the onus to prove the mental state to the assessee. We are of the view that the onus that has been shifted is rebuttable. It also does not mean that the Income-tax Officer or the Tribunal should not look into the fact as to whether the assessee-firm fraudulently concealed the income. We do not find any finding in that regard. We also find that the assessee-firm has been deprived of the right to rebut the alleged statement of Shri P.K. Biswas as the said Shri Biswas was not produced or examined in the said penalty proceeding. In our considered view, the Income-tax Officer or the Tribunal ought to have considered as to whether the assessee-firm has been prevented from giving/offering effective statement to substantiate his explanation that the assessee-firm was not guilty of any fraud or any gross or wilful neglect or such explanation, if any, is bona fide or not in the absence of the evidence or oral statement of Shri P.K. Biswas before the Income-tax Officer, A-Ward, Gauhati. We do not find any finding in that respect in the relevant orders of the Income-tax Officer as well as the Tribunal. However, we find that without considering this aspect of the matter, the Tribunal hastily jumped to the conclusion.

16. In view of the above, in our opinion, all the questions are answered in the negative and in favour of the assessee and against the Revenue.

17. A copy of this judgment under the signature of the Registrar and the seal of the High Court shall be transmitted to the Income-tax Appellate Tribunal.

18. In the facts and circumstances of the case, there will be no direction as to costs.