TMI Blog2014 (10) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... m the assessee or no business income from any business in which assessee is also connected - one family giving gift to another family year after year, it can be said to be against human probabilities, but that may not be sufficient to hold the assessee guilty of concealment of income or furnishing of inaccurate particulars. If the details supplied by the assessee in the return of income are found to be incorrect, erroneous or false, then only it can be said that the assessee has furnished inaccurate particulars of income so as to make him liable for penalty u/s 271(1)(c) of the Act - the copy of the income tax returns of the donors and the statements of the donors, the AO has not pointed out any of the details furnished by the assessee to be incorrect, erroneous or false - The AO has not accepted the gift by doubting the creditworthiness of the donors and the genuineness of the transactions. So far as Assessing Officer’s finding that the capacity of the donors is not proved is concerned, that finding was factually incorrect and probably has been arrived at by the AO without properly appreciating the details of the donors furnished before him by the donors themselves, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,383 15,56,258 2003-04 35,43,750 23,62,500 2004-05 12,87,000 8,58,000 2005-06 30,29,400 20,19,600 3. At the time of hearing before us, the learned counsel for the assessee stated that for AY 1999-2000, the penalty sustained is a small sum of ₹ 67,193/-. Though the assessee does not accept any concealment of income by him, but, due to smallness of the penalty sustained, does not want to pursue the appeal for AY 1999-2000. He also stated that the facts of AY 1999-2000 are altogether different than the facts in all the subsequent years and, therefore, the outcome of the assessee s appeal for AY 1999-2000 will have no bearing on the subsequent years appeals. He, therefore, submitted that the assessee s appeal for AY 1999-2000 may be treated as not pressed. 4. Accordingly, the assessee s appeal for AY 1999-2000 is dismissed as not pressed. 5. With regard to AY 2000-01 to 2005-06, it is submitted by the learned counsel that the facts in all the years are almost similar and, therefore, if the appeal of the assessee as well as of the Revenue f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atements are said to have been recorded by the AO around six to nine months back before passing the assessment order on 8.11.2007. The assessee submitted that the copies of the statements were never confronted to the assessee by the AO inspite of his special request made by him in response to show cause notice issued by the AO before passing the assessment order. The assessee pleaded that the addition made on account of gift is totally arbitrary and the same is made on suspicion only. Being not satisfied with the replies of the assessee, the addition was made by the AO and the same was confirmed by CIT(A), against which assessee is in further appeal before us with respect to the various additions made in the hands of different assessees on account of gifts received by them. From the details of the facts brought on record by the AO it is very clear that the assessee is in the habit of showing gifts in large sums in his name and in the hands of other family members. It has been conclusively established by the AO that the two donors by name Sh. Naresh Jain and Sh. Anil Jain are only a neighbours without any relationship with the family of the appellant. It is totally unimaginable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction is of vital issue in gifts. Unless occasion and relationship is established, the gifts cannot be held as genuine. From the perusal of family details it can be seen that a number of close relations are available but none of them had gifted any sums to the assessee. However, assessee could receive substantial amounts as gifts from a remotely connected persons. Assessee also could not confirm to the fact that he knew the donors intimately. This type of one-sided gifts of substantial amounts not associated with any occasion from relatively unknown persons in successive years defies any amount of logic. As discussed in preceding paras the whole transaction is designed to show huge amounts as gifts without any liability of paying taxes. The findings so recorded by the lower authorities could not be controverted by the learned AR by bringing any material, much less a cogent material so as to persuade us to deviate from the alleged finding. We therefore do not find any reason to interfere in the order of the lower authorities in respect of the addition made on account bogus gifts. In the result, the grounds taken by all the assessees with regard to gifts in various years, are bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lished. He pointed out from the order of the ITAT wherein it was observed To give lakhs of rupees as gifts to neighbours the person should have been worth crores of rupees having income of substantial nature. No such confirmations are forthcoming to establish the financial soundness of these two donors. From the above observation of the ITAT, it is evident that the ITAT was of the belief that had the worth of the donors in crores and substantial income in their hands, the gifts could have been accepted. However, the financial capacity of the donors is in crores and their income is also in crores and these evidences were placed before the Assessing Officer as well as ITAT. Therefore, the decision of the ITAT on which the Assessing Officer has relied upon while levying the penalty is based upon incorrect facts. However, when a query was asked by the Bench whether the assessee had filed the appeal or the miscellaneous application against the order of the ITAT, it is stated by the learned counsel that, unfortunately, not. He further stated that in any case, the dispute before the ITAT is with regard to the levy of penalty under Section 271(1)(c) i.e., whether the assessee can be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITAT had rightly held the gifts as bogus gifts and the penalty levied by the Assessing Officer at 150% of the tax sought to be evaded was quite fair and reasonable. The CIT(A) was not justified in reducing the penalty at 100% of the tax sought to be evaded. Therefore, the order of the CIT(A) to that extent needs modification and the penalty should be confirmed at 150% of the tax sought to be evaded as was originally levied by the Assessing Officer. In support of this contention, she relied upon the following decisions:- (i) Jubilant Biosys Ltd. Vs. ITO [2014] 032 ITR (Trib) 0343 (ITAT- Del). (ii) DCIT Vs. Jubilant Enpro P.Ltd. [2014] 032 ITR (Trib) 0702 (ITAT- Del). (iii) CIT Vs. Splender Construction [2013] 352 ITR 0588 (Del). (iv) Chadha Sugars P.Ltd. Vs. ACIT [2012] 017 ITR (Trib) 0316 (ITAT- Del). (v) ACIT Vs. Kanchenjunga Advertising P.Ltd. [2011] 010 ITR (Trib) 0649 (ITAT-Del). (vi) CIT Vs. Zoom Communication P.Ltd. [2010] 327 ITR 0510 (Del). (vii) CIT Vs. Escort Finance Ltd. [2010] 328 ITR 0044 (Del). (viii) CIT Vs. Harparshad and Company Ltd. [2010] 328 ITR 0053 (Delhi). (ix) Ajay Jain Vs. ACIT [2013] 021 ITR (Trib) 0041 (ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argue that it has duly discharged the onus lay upon it under Section 68 of the Act. We find that this aspect was considered by Hon ble Apex Court in the case of Khoday Eswarsa and Sons (supra) wherein additions made by the Assessing Officer to the income returned by the assessee were sustained in the appellate proceedings but the penalty levied under Section 271(1)(c) was deleted by the Tribunal and the Tribunal held that though there might be justification in making addition in the assessment order, these additions, by themselves, could not lead to the conclusion that the respondent had concealed its income or that it had furnished deliberately inaccurate particulars. Against the order of the ITAT, the assessee filed application before the High Court of Mysore which was rejected and the Revenue s appeal to the Apex Court was also dismissed. While dismissing the Revenue s appeal, their Lordships at page 376 and 377 of ITR 83 held as under:- No doubt the original assessment proceedings, for computing the tax may be a good item of evidence in the penalty proceedings but the penalty cannot be levied solely on the basis of the reasons given in the original order of assessment. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) is justified. 16. The Assessing Officer has levied the penalty under Section 271(1)(c) with the following finding:- 6. The assessee failed to substantiate the correctness of the gift transaction in the name of his minor sons. The Hon'ble Supreme Court in the case of Dhamendra Textile Processors has held that the explanation appended 271(1)(c) of the Income Tax Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing returns. Object behind enactment of 271(1)(c) deals with explanation indicated that the said section has been enacted to provide for the remedy for loss of revenue. The penalty under the provisions is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability. In view of the facts discussed above, I hold that by showing its taxable income as gifts and claiming it to be exempt in its return of income, the assessee has furnished inaccurate particulars and has concealed particulars of its income amounting to ₹ 1,52,00,000/- under the provisions of section 271(1)(c) and that penalty is imposable under the provisions of section 271(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one s income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheet for AY 1999-2000 - Balance sheet for the year ended 31.3.2000 - ITR with balance sheet for A.Y. 2002-03 - ITR with balance sheet for A.Y. 2003-04 - ITR with balance sheet for A.Y. 2005-06 (xiii) AO's order u/s 143(3) for AY 1996-97 (xiv) Intimation u/s 143(1) for AY 96-97 (xv) Balance sheet as on 31.3.96 (xvi) Intimation u/s 143(1) for AY 1998-99 (xvii) Intimation u/s 143(1) for AY 99-2000 (xviii) Intimation u/s 143(1) for AY 2000-01 with ITR etc (xix) Intimation u/s 143(1) for AY 2002-03 with ITR etc (xx) Intimation u/s 143(1) for AY 2003-04 with ITR etc (xxi) Intimation u/s 143(1) for AY 2005-06 with ITR etc 19. To verify the correctness of the assessee s claim, the Assessing Officer asked the assessee to produce Shri Naresh Jain and Shri Anil Jain. Both were produced before the Assessing Officer and their statements were recorded. Both of them have affirmed having given gifts to the assessee or his minor sons and have also explained their relationship with the assessee and his family. It would be appropriate to reproduce the relevant portion of their statements. The statement of Shri Naresh Jain recorded by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncashment of multi deposit FDR s from the same bank. Question 10 : Why you choose to gift Sh. Dinesh Jain and one of his children Namit Jain? Answer 10 : Because my father was indebted to the parents of Sh. Dinesh Jain who had helped my father in the establishment of business and otherwise also he has extended financial help in 1961-62 when I was a child. It was because of this respect gratitude I made gift to Sh. Dinesh Jain his son. My elder brother have also made similar gift to the family of Sh. Dinesh Jain. Question 11 : Have you ever made gift to anybody else? Answer 11 : No. Question 12 : Have you ever made gift subsequent to the above period? Answer 12 : No Question 13 : Did you or family member receive any cash or any other consideration in lieu of the above gift? Answer 13 : No Question 14 : You accepted that gift was made to Dinesh Jain and his son, but how verbally or otherwise? Answer 14 : An affidavit, gift letter as confirmation thereof was given and gift was accepted by Sh. Dinesh Jain. 20. From the above statement of Shri Naresh Jain, it is evident that Shri Naresh Jain is the proprietor of two enterprises viz., M/s Fashion Emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri P.C. Jain R/o Unit No.4, 22A, Rajpur Road, Delhi on 02.12.99 vide cheque No.533510 dated 02.12.99 drawn on Citi Bank, N.A., Delhi. 2. That the above said gift is absolute and irrevocable. 3. That I am assessed to income tax and my permanent account number is AAIPJ 3097 J. 21. None of the above documentary evidences furnished by the assessee in support of the gift and also the statement of Shri Naresh Jain is found to be incorrect, false or erroneous. 22. During the course of assessment proceedings, the Assessing Officer also recorded the statement of Shri Anil Jain which reads as under:- Ques 1. Please identify yourself. Ans. I am Anil Jain s/o Late Shri Shori Lal Jain r/o 22A, Rajpura Road, Delhi. I am producing my PAN card for my identity. Ques 2. What are your sources of income? Ans. I get income from property, business interest from bank deposits saving bank a/c. Ques 3. Are you assessed to tax. If yes, give details. Ans. I am assessed to tax with I.T.O. Ward 20(1), New Delhi PAN AAFPJ3129A. Ques 4. Since when you are in business or started earning? Ans. Since more than 17 years as proprietor and prior to that since 1975 I was in bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jain or any of his family members in the last six-seven years. Ans. No Ques 12. Have you every given or made any gift to Shri Dinesh Jain, referred to above, or any of his family members in the last six or seven years. If yes, what was the occasion? Ans. Yes I made gifts to his three children namely Mudit Jain (now aged about 14 years). Mayank Jain (now aged about 17 years) and Namit Jain (now aged about 10 years) on the occasion of completion of my 8 days fast during Samvat-Shri Prav as per Jain rituals which are considerd as most sacred days. Ques 13. What was the compulsion at that point of time when you made gifts to the children of Shri Dinesh Chand Jain? Ans. There was no compulsion. It was a voluntary gifts made to children with Tyag Bhawna and also to repay a debt of Shri Prakash Chand Jain father of Dinesh Chand Jain who helped my father in the establishment in business in sixties. My father desire that the gift should be made to grand children of Shri Prakash Chand Jain, which I immediately agreed and made gifts by cheques in Sept 1999 as under:- Mudit Jain ₹ 50 lacs Mayank Jain ₹ 50 lacs Namit Jain ₹ 45 lacs Ques 14. Did yo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is partner in Manidhari Exports. In reply to question No.5, he gave the details of his proprietorship business which is operating from Janpath Market, New Delhi and also the partnership business which is at Kamla Nagar, Delhi. He is also director in one company. In reply to question No.6, he gave the details of his bank accounts. In reply to question No.7, he stated that he had filed the returns of income for AY 1999-2000 to 2004-05 and supplied the copy of such returns of income. In reply to question No.8, he explained how he knew Shri Dinesh Jain. He pointed out that he is known to Shri Dinesh Jain since last thirty years i.e. from the time of his father. Shri Dinesh Jain is his close friend and resides in the same complex at Civil Lines in which he is residing. In reply to question No.9, he stated that they practically meet every day, go to morning walk together and also go to their Guruji together. In reply to question No.12, he gave the details of the gift given by him to the minor sons of the assessee. In reply to question No.14, he stated that in support of the gift, gift deed was signed by him and affidavit etc. were also given by him. None of the facts stated in the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capacity itself is not proved to the satisfaction of the Revenue by producing evidences called for. From the above discussion only one conclusion can be drawn that the gifts are not genuine and allowable. After holding the gifts as unexplained the amounts of ₹ 1,52,00,000/- represented by the gifts receipt during the year are hereby taxed as income from other sources. The facts further suggest furnishing of inaccurate particulars/claim and consequently the concealment on assessee s part for which penalty proceedings are also initiated. 24. The first ground why the gift was not accepted by the Assessing Officer was that the gift was given without any occasion. In our opinion, merely because the gift was given without any occasion would not be sufficient to hold that the gift is not genuine. It may be only one of the circumstances while considering the genuineness of the gift. The second reason given by the Assessing Officer was that the gift was given without natural love and affection. From the statement of the donors, it is evident that the donors are close family friends and it cannot be said that natural love and affection remains only between blood relations and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer was that the capacity of the donors was not proved. This point, he has already taken in paragraph 4 and, we have pointed out that both the donors have sufficient capacity, they had huge house property income, interest from FDRs and the income from business. 25. We are conscious that in quantum proceedings, the above finding of the Assessing Officer has been approved by the ITAT and the order of the ITAT has become final because there is no appeal filed by the assessee against the said order of the ITAT. However, as has been held by Hon ble Apex Court in the case of Khoday Eswarsa and Sons (supra), the penalty cannot be levied solely on the basis of reasons given in the original assessment order. We have examined the facts of the case for the purpose of penalty proceedings afresh and we clarify that our finding is limited to and relevant for the purpose of determining whether the assessee can be said to have furnished inaccurate particulars of income or have concealed the income so as to make him liable for penalty under Section 271(1)(c). Hon ble Apex Court in the case of Dilip N. Shroff (supra) have held that the burden of proof in penalty proceedings varies from that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said to have furnished inaccurate particulars of income or have concealed the income so as to make him liable for penalty under Section 271(1)(c) of the Act. While taking this view, we have relied upon the ratio of the legal propositions laid down by Hon ble Apex Court in the case of Khoday Eswarsa and Sons (supra), Dilip N. Shroff (supra) and Reliance Petroproducts (supra). We have examined the facts of the assessee s case in the light of the ratio laid down by the above three decisions of Hon ble Apex Court. 27. Before we part with the matter, we may mention that the learned CIT-DR has relied upon the various decisions of the ITAT and Hon ble High Courts, the list of which is given by us in paragraph 10 above. We have gone through all the decisions. However, the facts in all the cases are different and therefore, none of the decisions would be applicable to the facts of the assessee s case. Moreover, we have relied upon the principles laid down by the three decisions of the Hon ble Apex Court and no contrary decision of Hon ble Apex Court is pointed out before us. Therefore, for the sake of brevity, we are not discussing in detail the facts and the ratio laid down in the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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