TMI Blog2001 (7) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of unexplained cash credits under section 68. 3. The said assessment was set aside by the CIT (Appeals) vide order dated 31-3-1988, and the matter was restored to the file of Assessing Officer with the following directions: (a) The IAC (Asstt.) (Assessing Officer) should have considered the statement of each and every witness on its merits and should have given his conclusion in respect of each such witness. (b) The statements recorded behind the back of the assessee were relied upon by the IAC (Asstt.) and used as evidence against the assessee without making such statements available to the assessee to explain the correctness of the said statements and giving an opportunity to rebut the same. (c) The IAC(A) has examined more than 250 persons and has not accepted the statement of any of them. He has given reasons for not accepting the statements of about 30 persons only and has come to the conclusion, and generalising the conclusion has applied it in respect of statements of all the witnesses. He should have discussed the statements of each witness before rejecting all of them. (d) The IAC(A) has not given any reason for not accepting the assessee's submission in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at their addresses at which summons were issued." 5. In view of the above inferences, the Assessing Officer held as under: 1. That claim of assessee was acceptable to the extent of 537.980 kgs. as per assessment order dated 23-2-1985. 2. That claim of the, assessee to the extent of 915.772 kgs. was acceptable on the basis of original statements/evidences under seizure. 3. The claim of the assessee was acceptable to the extent of 136.215 kgs. on the basis of statement recorded for test check. 4. The claim of the assessee was not acceptable to the extent of 580.621 kgs. on account of specific denial by the witnesses. 5. The unexplained ornaments thus, accounted to 799.992 kgs. out of which 50 per cent was being accepted and 50 per cent was being added to the total income on the basis of probabilities. The value of the above 50 per cent was worked out to Rs. 24,75,672 and the same was added to the total income on account of unexplained investment in silver and silver ornaments. The addition on account of peak credits of squared up accounts amounting to Rs. 37,500 and on account of cash credits amounting to Rs. 42,427 as made in the original assessment proceedings was aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing any appeal against the order of assessment and penalty and the department had also not launched the prosecution. However, suddenly after 1 1/2 years, the assessee was taken by surprise when warrant of arrest was received by the assessee. Faced with the situation, immediately within a month, the appeal against the penalty order was filed and CIT(Appeals) was pleased to condone the delay. However, he confirmed the penalty on the ground that assessee had agreed to it. So according to him, there was breach of trust by the department. The assessee would not have agreed to such assessment and penalty, had the department not accepted such offer. Accordingly it was prayed by him that assessee should not be prevented now from contesting the appeal on merits. He further offered to honour the agreement and withdrew the appeal if the department is ready to withdraw the prosecution. 6.1 At this stage, we directed the learned DR to seek the instructions from the concerned CIT or CCIT as to whether the department is ready to withdraw the prosecution, the case was being adjourned on day to day basis to accommodate the DR. Ultimately we were informed that at this stage it was not possible to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leaded that levy of penalty must be held to be justified at least to the extent the witnesses of the assessee had categorically denied to have given the jewellery to the assessee, since to that extent, the onus has been fully discharged by the revenue. 9. Before adjudication of the issue before us, we would like to mention that a breach of trust has been committed by the department in as much as the circumstances of the case clearly indicate that there was tacit agreement between the assessee and the department that assessee would be assessed on a particular income and the tax, interest and penalty thereon would be paid by the assessee and no credit of such income would be taken for the income so assessed and further no appeal would be filed against such assessment and levy of penalty subject to the only condition that no prosecution would be launched by the department against the assessee. The letter of the Assessing Officer dated 11-4-1989 addressed to CIT which was read before us in the open court from the file of the Assessing Officer clearly shown that the prosecution of the assessee had not been recommended keeping in view the facts of the case. It may be noted that initial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than recorded by the assessee in his books of account. The assessee was required to explain the discrepancy. The explanation of the assessee was that such excess stock belonged to other persons who had left the same with the assessee for remaking. In this connection, certain persons were examined and most of them had accepted the claim of the assessee in their examination/cross-examination while some of them had categorically denied of ever giving any silver ornaments for remaking. Further is also truth that all the persons could not be examined for the reasons mentioned in the assessment year. On the basis of the examination of witnesses, the Assessing Officer has himself partially accepted the claim of the assessee to the extent witnesses had accepted the claim of the assessee and has also given benefit of doubt to the assessee in respect of balance stock remained unexplained because of non examination of witnesses. Only 50 per cent of such stock has been added to the total income of the assessee as unexplained stock of silver ornaments where witnesses could not be examined. Further addition was also made where witnesses had denied altogether the claim of the assessee. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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