2016 (5) TMI 1376 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - addition on account of gifts received by the assessee from his NRI relatives and friends on the occasion of the marriage of his daughter - no bonafide explanation - Held that - No fresh evidence or fresh circumstances were produced by the assessee at penalty stage to explain the penalty matter. There is no bonafide explanation on the part of the assessee that gift amount is exempted from tax because assessee is not entitled for any exemption of income under section 56(2)(vi) of the Income Tax Act. It is a case of no evidence and no explanation offered by assessee to explain the genuineness of the gift in the matter. Assessee merely gave name of the donors but did not prove their identity, creditworthiness and genuineness of the transaction in the matter and further claim of assessee under section 56(2)(vi) was found to be wrong and bogus. Since assessee did not offered any explanation and whatever explanation was offered was not substantiated through any evidence or material on record therefore explanation 1 to section 271(1)(c) of the Income Tax Act is clearly attracted in the case of assessee and will prove deemed concealment on the part of the assessee so as to levy the penalty under section 271(1)(c) of the Income Tax Act. Thus Authority below have rightly levied the penalty under section 271(1)(c) of the Act against the assessee. - Decided against assessee.

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act.
2. Addition of ?21,07,513/- as income from other sources under Section 56(2)(vi) of the Income Tax Act.
3. Genuineness and creditworthiness of gifts received from NRI relatives and friends.

Detailed Analysis:

1. Levy of Penalty Under Section 271(1)(c) of the Income Tax Act:
The core issue revolves around the penalty levied under Section 271(1)(c) for concealing particulars of income or furnishing inaccurate particulars. The Assessing Officer (AO) initiated penalty proceedings after adding ?21,07,513/- to the assessee's income, which was received as gifts on the occasion of his daughter's marriage. The AO concluded that the assessee concealed his income, and the penalty was upheld by both the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench. The CIT(A) emphasized that the assessee failed to substantiate the bonafide nature of the gifts and did not provide necessary evidence to prove the creditworthiness of the donors. The ITAT confirmed these findings, noting that the assessee's explanation lacked credibility and the gifts were not exempt under Section 56(2)(vi).

2. Addition of ?21,07,513/- as Income from Other Sources Under Section 56(2)(vi):
The AO added ?21,07,513/- to the assessee's income, treating the gifts received from NRI relatives and friends as income from other sources under Section 56(2)(vi). The AO's rationale was that the gifts were received by the assessee and not by his daughter, thus not qualifying for exemption. The CIT(A) and ITAT upheld this addition, emphasizing that the gifts were credited to the assessee's bank account and not transferred to his daughter's account. The CIT(A) further noted that the assessee failed to provide evidence of the donors' creditworthiness and the relationship between the donors and the assessee. The ITAT concurred, stating that the routing of funds through banking channels did not establish the genuineness of the transactions.

3. Genuineness and Creditworthiness of Gifts Received:
The genuineness and creditworthiness of the gifts were scrutinized at multiple levels. The CIT(A) and ITAT found that the assessee did not provide sufficient evidence to prove the identity and financial standing of the donors. The letters from the donors were deemed stereotypical and lacking in detail. The CIT(A) highlighted that the assessee did not produce bank account statements or other relevant documents to verify the donors' creditworthiness. The ITAT noted that the assessee's claim of exemption under Section 56(2)(vi) was based on incorrect facts, as the gifts were not received on the occasion of his own marriage. The Tribunal emphasized that the burden of proof was on the assessee to substantiate the genuineness of the gifts, which he failed to do.

Conclusion:
The ITAT upheld the levy of penalty under Section 271(1)(c) and the addition of ?21,07,513/- as income from other sources. The Tribunal found that the assessee failed to provide credible evidence to support the bonafide nature of the gifts and their exemption under Section 56(2)(vi). The assessee's explanation was deemed insufficient, and the penalty for concealing income was confirmed. The judgment underscores the importance of providing substantial evidence to prove the genuineness and creditworthiness of gifts to claim exemptions under the Income Tax Act.