TMI Blog1989 (6) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... he correct income arose either from fraud or from gross or wilful neglect on his part ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the order of penalty made under section 271 (1) (c) of the Income-tax Act, 1961 ?" The facts shortly stated are that, in the course of assessment proceedings, the Income-tax Officer noticed that the assessee claimed to have taken a loan of Rs. 1 lakh from M/s. Raj Kumar Jain and Co., on September 6, 1963. After making an enquiry, he concluded that the assessee had concealed his income to this extent and consequently added the amount as the assessee's income from concealed sources. Simultaneously he initiated proceedings under section 274(2)/273 rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittedly, the assessee asked for an opportunity to cross-examine the said partner if his confession was sought to be used against him and that opportunity was not vouchsafed to him. If the partner had made a confession, we fail to see how the right to cross-examine that partner could be denied to the assessee on the ground that the party was not traceable. In the penalty proceedings, the Inspecting Assistant Commissioner relied upon the confession said to have been made by the partner of the creditor-firm which was not subjected to the test of cross-examination. This circumstance which is violative of the principles of natural justice vitiates the penalty order. By producing the confirmation letter of the creditor-firm and by showing that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Tribunal. We have already stated the facts and circumstances of this case as appearing from the order of the Tribunal. The Tribunal has found that the Department has not proved by any cogent evidence that the amount credited as loan taken from M/s. Raj Kumar Jain and Co. was the income of the assessee and that the assessee failed to disclose that income in his return. The Tribunal, on the facts, came to the finding that there was no case for levying penalty. That apart, the order of penalty is vitiated because of non-compliance with the principles of natural justice. The assessee was , not afforded any opportunity to cross-examine the partner whose confession was sought to be used against him. Accordingly, the confession on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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