TMI Blog1996 (7) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... r apart from what has been found he would intend to make any disclosure of the concealed income or wealth in his individual capacity or in the HUF capacity or in the status of a partner of various firms in which he is a partner. The said partner replied that a sum of Rs. 10 lacs in M/s Bihar Coke Producing Co. would be surrendered for the assessment year 1988-89 and the tax will also be paid. He would like to surrender Rs. 5 lacs in M/s Kejriwal Brothers (this appellant-firm) for the assessment year 1988-89 and tax will be paid. He further stated that he was making the declaration on behalf of all the partners of the respective firms and that payment of tax on the surrendered amount would be his personal liability. There were some other answers also, but they are not relevant for the purpose of deciding this appeal. In page three of the statement, it is declared that the statement has been given in the name of God with knowledge of the contents/answers given and there has been no duress or threat ; that is to say, the oath statement was voluntary. Copy of the said oath statement which is partly in Hindi and partly in English has been placed by the assessee's counsel in the paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal the assessee remained unsuccessful. 5. During the pendency of the quantum appeal before this Tribunal, the Assessing Officer issued show-cause notice before penalising the assessee under section 271(1)(c) of the Act for concealment of income of Rs. 5 lacs. A reply was submitted through one of the partners of the assessee-firm wherein it has been submitted that there has been neither concealment of income nor furnishing of inaccurate particulars of income warranting levy of penalty under section 271(1)(c) of the Act on the strength of the alleged statement of Shri Sheo Kumar Kejriwal given under section 132(4) of the Act. It was also contended before the Assessing Officer in penalty proceedings that the appellant-firm has not earned such alleged income of Rs. 5 lacs and hence question of such declaration or acceptance by the assessee-firm does not arise, In para 5 of the said letter, it was stated that on threat of being arrested by the police who surrounded the premises at the time of search operations the oath statement of that partner was taken under section 132(4) of the Act. It was prayed that the proceedings initiated under section 271(1)(c) may be dropped. Alternati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no concealment of income warranting imposition of penalty under section 271(1)(c) of the Act. According to him on the basis of statement of one of the partners of the assessee-firm the sum of Rs. 5 lacs cannot be assessed as income of the appellant-firm. But even if it is subjected to tax the same has to be limited for the assessment purpose only and that such a statement under section 132(4) cannot make the appellant-firm exigible for penalty of Rs. 2,60,000 under section 271(1)(c) of the Act, because the assessment proceedings and penalty proceedings both stand on different footing. Shri Rastogi contended that apart from reiterating the facts narrated in the assessment order, the Assessing Officer has not done anything more nor conducted any valid enquiry to establish whether there has been real and actual concealment of income by the appellant-firm. The assessee's counsel again reiterated that the statement of one of the partners, Shri Sheo Kumar Kejriwal was an involuntary statement given on the search day and the same was obtained under threat of arrest by the police who accompanied the search party surrounding the residential premises of the said partner. According to him, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat he was making the statement for and on behalf of all the partners of the appellant-firm and that they would abide by it and would pay there tax of disclosed income. Since the sum of Rs. 5 lacs was not disclosed and was not offered for taxation the Assessing Officer took aid of the oath statement of the said partner of the appellant-firm given on search day and made the addition negativing the plea that the statement was recorded under threat and duress because it was not proved and established so. This addition on appeal before the Commissioner got seal of confirmation and again before this Tribunal also. The Tribunal in quantum appeal, in sum and substance, while agreeing with the Commissioner who confirmed the addition of Rs. 5 lacs held that the appellant-firm has failed to establish and discharge the onus about the threat being used on the said partner, Shri Sheo Kumar Kejriwal on the search day for giving such a statement about the disclosing of Rs. 5 lacs as income of the appellant-firm for the year under appeal. 10. The Act of concealing income is a conscious positive act and the same has to be established by the revenue by cogent material and evidence after the delinq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order regarding total income is, therefore, not the final word for imposition of penalty for concealing income. In the penalty proceedings it has firmly to be established by the Assessing Officer that there has been conscious concealment of income and it is only then that penalty can be imposed and sustained in appeals. It is by now well-settled through catena of decisions of Supreme Court and various High Courts in this country commencing from the most two celebrated decisions of the Apex Court ; one in the case of CIT v. Khoday Eswarsa Sons [1972] 83 ITR 369 and the other in the case of Anantharam Veerasinghaiah Co. that the findings contained in the assessment order do not operate as res judicata in penalty proceedings though this would be the relevant and admissible material because considerations differ in assessment and penalty proceedings. 14. The penalty order, the relevant contents of which we have extracted above do not contain any independent finding based on valid inquiry regarding concealment of income to the extent of Rs. 5 lacs by the appellant-firm. The contents of the penalty order are a brief repetition from the assessment order and a reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not establish concealment of income at all. The sum of Rs. 5 lacs was simply added on the ground that since one of the partners stated an search day that the firm would offer Rs. 5 lacs for taxation purposes and having failed to do so the said sum represented the concealed income attracting section 271(1)(c) of the Act. If the answer given by the said partner is studied and analysed carefully and intelligently it would raise several queries and give more than one meaning or answers. To us the statement of the said partner of the firm does not expose the appellant-firm to the guilt or charge of concealing income to the extent of Rs. 5 lacs. To assess a person on admission or concessions is one thing and to penalise is altogether a different thing. The Revenue has to firmly establish mens rea under the substantive provisions of section 271(1)(c), after the assessee furnishes an explanation denying the charge of concealment, as in this case. It is no doubt a heavy burden on the Revenue. But, nonetheless it has to be discharged as per the substantive provisions of section 271(1)(c) of the Act in spite of the Explanation 1 appended to the said provisions. 17. We are once again wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of consideration of the written representation only, is bound to be an unfair one and, in my view, such a decision does not satisfy the mandatory requirement of section 18(2) of the said Act" 18. It is not necessary to discuss and analyse in detail the facts or the ratio and principle laid down by various Courts in numerous cases relied by the assessee's counsel that penalty proceedings are quasi-criminal in nature and the Revenue has to establish the guilt of concealment of income warranting imposition of penalty under section 271(1)(c) of the Act. This principle is far too well-settled and crystallised over the years and does not now require any authority or precedent to support the argument that conscious concealment has to be established by the Revenue, though Explanation 1 has been inserted to the said penal provisions. 19. From the above discussion, we are unable to uphold the brief and cryptic order passed by the Commissioner confirming the imposition of penalty of the sum of Rs. 2,60,000 under section 271(1)(c) of the Act. We reverse the impugned order, cancel the penalty and direct the Assessing Officer to refund, as per law, the penalty amount, if any, pa ..... 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