2015 (7) TMI 1083 - HC - Income Tax

Penalty under section 271(1)(c) - undisclosed gifts - Held that - The assessee furnished the details regarding the bank accounts from where she got the gifts, the dates, the details of the bank accounts and the demand drafts of Toronto Dominion Bank, Canada, were furnished to substantiate that the gift was from her brother who was residing at Canada. The concealment, as such, in the facts and circumstances, was missing, as admittedly, it was not that the amount was detected subsequently but the factum of the gifts from the brother and sister had been mentioned in the note in the income- tax return. The explanation was later on asked for and further particulars could not be furnished on account of sour relationship and the fact that she was not in touch with her brother who had allegedly shifted from Canada, thereafter. In such circumstances, the discretion which has been exercised by the Tribunal, in setting aside the penalty, cannot be said to be perverse or suffering from such illegality which would warrant interference. - Decided in favour of assessee

Summary

Issues:
- Appeal against order of Income-tax Appellate Tribunal setting aside penalty under section 271(1)(c) of the Income-tax Act, 1961.
- Substantial questions of law raised by the appellant.
- Assessment of gifts received by the respondent.
- Penalty proceedings initiated due to failure to substantiate claims.
- Discrepancies in the confirmation of gifts received.
- Decision of Commissioner of Income-tax (Appeals).
- Tribunal's decision to reverse the penalty imposition.
- Argument by Revenue regarding failure to furnish income particulars.
- Tribunal's exercise of discretion in setting aside the penalty.

Analysis:
1. The appeal was filed by the Revenue against the Income-tax Appellate Tribunal's decision to set aside the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961, for inaccurate income particulars for the assessment year 2009-10 amounting to Rs. 46,09,590.

2. The appellant raised substantial questions of law regarding the Tribunal's direction to cancel the penalty, emphasizing the failure to fulfill basic requirements under section 68 of the Act for confirming gifts received.

3. The respondent declared receiving gifts from family members in the return, but discrepancies arose when evidence of the source of deposits was requested by the Department, leading to penalty proceedings for incomplete income particulars.

4. Despite explanations provided by the respondent regarding the gifts, the Assessing Officer made additions under "Income from other sources" and initiated penalty proceedings due to failure in substantiating claims and providing documentary evidence.

5. The Commissioner of Income-tax (Appeals) upheld the penalty, stating that the gifts were the respondent's undisclosed income, concealed and surrendered only upon detection, highlighting the lack of effort to confirm the gifts' legitimacy.

6. The Tribunal overturned the penalty, considering the gifts' declaration in the income computation, accepting the strained relationship as a reason for lack of confirmation, and noting the payment of taxes and proper banking channels used for the gifts.

7. The Tribunal's decision was based on the factual matrix, finding no concealment as the gifts were disclosed in the return, and the inability to confirm was due to strained relationships and lack of contact with the gift givers.

8. The Revenue argued that the respondent failed to furnish income particulars and substantiate explanations, justifying the penalty imposition.

9. The Tribunal's exercise of discretion in setting aside the penalty was deemed valid, as the factual aspects were thoroughly discussed, and the benefit granted to the respondent was based on valid grounds, not warranting interference by the court.

10. Consequently, the court dismissed the appeal, upholding the Tribunal's decision to reverse the penalty imposition.