TMI Blog1974 (7) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid hundi loans. Summonses under section 131 of the Income-tax Act, 1961, were issued to the above parties requesting them to produce their books of account and bank pass books, etc., for the relevant accounting period for corroboration and verification of the transactions in question. None of these Summonses could be served. The alleged lenders were found to be not traceable at the addresses given by the assessee. In the circumstances, on the 20th January, 1967, the Income-tax Officer informed the assessee that the summons could not be served on these persons and their identity, therefore, remained unverified. The assessee was given another opportunity to establish the identity of these persons and the genuineness of the transactions. The assessee was informed that if these informations were not supplied, an adverse inference would be drawn against the assessee. On the 28th January, 1967, the assessee pursuant to these summonses wrote a letter to the Income-tax Officer in which the assessee, inter alia, stated that it had filed before the Income-tax Officer various letters of the creditors confirming that they had advanced the loans in question. According to the assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the said account. The Inspecting Assistant Commissioner, therefore, levied a penalty of Rs. 78,468 under section 271(1)(c) of the Income-tax Act, 1961. The assessee, thereafter, preferred an appeal as mentioned hereinbefore both from the assessment order and from the order imposing penalty. The Tribunal took up the two appeals together and this reference has been made in respect of the order passed by the Tribunal out of the said combined order in respect of the two appeals. The Tribunal upheld the order but allowed the appeal of the assessee so far as the imposition of penalty was concerned. In the circumstances above mentioned, three questions have been referred to this court under section 256(1) of the Income-tax Act, 1961. Two of these questions are at the instance of the assessee and one is at the instance of the Commissioner of Income-tax. The questions referred at the instance of the assessee are as follows : " 1. Whether, on the facts and in the circumstances of the case, the assessment order under section 143(3) is invalid because the penalty proceedings started in the course of the assessment had not been completed along with the assessment ? 2. Whether, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lightly different form in the sense that according to counsel for the assessee the penalty proceeding must be concluded before the assessment proceedings and if the same were not so concluded, the assessment proceeding could not be completed thereafter. Really the question forms part of the larger aspect whether, in cases where a proceeding had been taken for imposition of penalty, these proceedings must terminate at the equal point of time or whether the penalty proceeding must be completed before the completion of the assessment proceedings. For the reasons which we have mentioned in our previous judgment in Income-tax Reference No. 390/69, Nawn Estates Private Ltd.. v. Commissioner of Income-tax [1977] 106 ITR 384 (Cal), we are, however, unable to accept the submissions of counsel for the assessee on this aspect of the matter. We may incidentally refer that our conclusion is strengthened by the provisions of the new Act where the special period of time is provided for completion of penalty under section 275 of the Act and in view of the provisions of section 274(2) of the Income-tax Act, 1961, the authority for imposition of the penalty is really different. Therefore, though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese persons, the burden of proof that these were undisclosed income of the assessee lay upon the revenue. In support of this contention reliance was placed on several decisions, namely, the decisions in the cases of Commissioner of Income-tax v. Best Co. (Pvt.) Ltd. [1966] 60 ITR 11 (SC), Parimisetti Seetharamamma v. Commissioner of Income-tax [1965] 57 ITR 532 (SC) and of Maharaja Chintamani Saran Nath Sah Deo v. Commissioner of Income-tax [1971] 82 ITR 464 (SC), where certain sums of money were credited in the books of an assessee under what circumstances the explanation given by the assessee can be considered to be unsatisfactory by the revenue, depend upon the facts and circumstances of the particular case. Section 68 of the Income-tax Act, 1961, is a statutory recognition of what was previously established by the judicial decisions under the Indian Income-tax Act, 1922, namely, that where certain sums of money were claimed by the assessee to have been borrowed from certain persons, it was for the assessee to prove by cogent and proper evidence that these were genuine loans. The reason for this can be found in section 106 of the Evidence Act which though not strictly applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee did not bring any other evidence to refute these allegations. It is true that these allegations were not made in any proceeding in which the assessee was a party. It is also true that these allegations were not made at a time when the assessee had any opportunity to cross-examine these persons but the fact that these persons had made these statements had been brought to the notice of the assessee who was given an opportunity to contradict or bring evidence contrary thereto. This is a piece of evidence, the value and weight of which will have to be judged in conjunction with other facts. In this connection we may refer to the decision of the Supreme Court in the case of Udhavdas Kewalram v. Commissioner of Income-tax [1967] 66 ITR 462 at page 464 (SC) and also the decision of the Supreme Court in the case of Killick Nixon Co. v. Commissioner of Income-tax [1967] 66 ITR 714 at page 719 (SC). Having regard to the facts and circumstances of the case we cannot say that the conclusion reached by the Income-tax Officer and upheld by the Tribunal was not a probable or possible conclusion. So far as the contention of the assessee that section 2(22)(e)(ii) and section 2(24) did not in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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