TMI Blog1984 (12) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ut also disallowed the claim of interest thereon as a deduction in computing business income. Penalty proceeding under section 271(1)(c) of the Income-tax Act, 1961, was initiated and the matter was referred to the Inspecting Assistant Commissioner of Incometax who held that the assessee has concealed the particulars of income and furnished inaccurate particulars thereof. He, therefore, imposed penalty amounting to Rs. 17,000 for the assessment year 1961-62, Rs. 71,000 for the assessment year 1962-63 and Rs. 40,000 for the assessment year 1963-64. The assessee went on appeal before the Appellate Tribunal. The Tribunal on a consideration of the facts and circumstances of the case, held that the assessee failed to establish the true nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there are certain infirmities in the penalty proceedings which would render the orders of penalty illegal and invalid. His first submission is that in this case, notices were issued by the Incometax Officer whereas the penalty was imposed by the Inspecting Assistant Commissioner. Therefore, the orders are void. In support of his contention, he has relied on a decision in the case of Shop Siddegowda and Family v. CIT [1 964] 53 ITR 57 (Mys). In that case, one Income-tax Officer issued a notice under section 28(3) of the Indian Income-tax Act, 1922, to the assessee calling upon him to appear and show cause why penalty should not be levied and the assessee submitted his explanation in writing, but did not choose to appear or ask for an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nullity. In support of his contention, he has relied on a decision in the case of Serajuddin and Co. v. State of Orissa, AIR 1974 Cal 296; 78 CWN 61. This decision reiterates the well-settled principles that if an order is passed in violation of rules of natural justice, such Order would be a nullity and if the order of an inferior tribunal is a nullity, the decision of the Appellate Tribunal from the order of the inferior tribunal can have no better effect. He has also relied on a decision in the case of Leary v. National Union of Vehicle Builders [1970] 2 All ER 713 (Ch D), where Megarry J., held that lack of natural justice before the trial body could not be cured by a sufficiency of natural justice before an appellate body and if ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings. Thus on the basis of the principles laid down in the case of CIT v. Anwar Ali [1970] 76 ITR 696 (SC), the order of penalty cannot be sustained. He has submitted that in the absence of cogent material evidence, apart from the falsity of the explanation of the assessee, no penalty could be imposed. The Inspecting Assistant Commissioner in this case did not find out any material apart from the material in the assessment orders to support his finding that the assessee concealed the income or particulars of such income. He has also referred on another decision of the Supreme Court in the case of CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369, where the Supreme Court observed that the penalty cannot be levied solely on the basis of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Each case will depend on its own facts. We have, carefully considered the reasons given by the Inspecting Assistant Commissioner and the Appellate Tribunal. The Tribunal has considered the relevant circumstances justifying the imposition of penalty. In the case of Anwar Ali [1970] 76 ITR 696 (SC), the Supreme Court has not laid down that under no circumstances, the material gathered in the assessment proceeding can be relied on for imposing penalty. Evidence given in the assessment proceeding is good evidence in the penalty proceeding but, before penalty can be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee did not get any statement of the creditors recorded. It was not proved that the consideration for hundis was real. The signatures of the creditors and acceptance of the hundis were not verified nor were the signatures proved. The hundis were not discounted, nor could the parties be traced or identified. There is nothing on the record to show that the hundis were endorsed, negotiated or transferred. There was, therefore, no presumption that the hundis were drawn or accepted for a valid consideration. The assessee claimed that the loans were obtained under hundis and, accordingly, it was for the assessee to discharge, by leading evidence, the primary onus which lay on the assessee in respect of its claim that the hundi loans were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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