2009 (3) TMI 1039 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of penalty levied u/s 271(1)(c) of the Act.
2. Determination of the residential status of the assessee.
3. Addition on account of low withdrawal for household expenses.

Summary:

Issue 1: Confirmation of Penalty Levied u/s 271(1)(c) of the Act

The sole ground of appeal is the confirmation of the penalty of Rs. 23,42,010/- levied u/s 271(1)(c) of the Act. The AO initiated penalty proceedings under section 271(1)(c) of the Act, observing that the assessee had concealed the particulars of his income and furnished inaccurate particulars of such income. The AO found that the assessee had filed a revised return only after scrutiny notices were issued, changing his status from "non-resident" to "resident" and offering the foreign remittance of Rs. 69.97 lacs for taxation.

Issue 2: Determination of the Residential Status of the Assessee

The AO found that the assessee was in India for 80 days during the assessment year and, upon examining the details of stay in India and abroad in earlier years, concluded that the assessee was a "resident" and not a "non-resident." The assessee filed a revised return offering the foreign remittance for taxation after the AO called for details of stay in India and abroad.

Issue 3: Addition on Account of Low Withdrawal for Household Expenses

The AO made an addition of Rs. 1 lac to the income of the assessee on account of low withdrawal for household expenses, stating that the assessee did not have enough money to run his household expenses. The Learned Commissioner of Income Tax (Appeals) upheld this addition, stating that the appellant failed to show the source of income for incurring household expenses.

Judgment:

The Tribunal observed that the AO levied the penalty on the ground that the assessee was guilty of both concealment of income and furnishing inaccurate particulars of income. However, the Tribunal referred to the decision of the Hon'ble Gujarat High Court in the case of New Sorathia Engineering Co. Vs. Commissioner of Income-tax, [2006] 282 ITR 0642(Guj), which held that the AO must arrive at a positive finding as to whether the assessee was guilty of concealment of income or furnishing inaccurate particulars of income. The Tribunal found that the AO did not arrive at a clear conclusion and used the term "and/or," indicating ambiguity.

In view of the decision of the jurisdictional High Court, the Tribunal concluded that the order of the AO suffered from a legal error and was bad in law. Therefore, the Tribunal set aside the order of the lower authorities and deleted the penalty of Rs. 23,42,010/-. The appeal of the assessee was allowed.