2011 (2) TMI 289 - HC - Income Tax

Penalty - Income escaping assessment - Bogus or genuine gift - The revenue had approached this Court by filing ITA No. 356 of 2006 (Commissioner of Income Tax, Karnal v. Sh. Subhash Mittal) - Held that the alleged gift from NRE, Sh. Sanjeev Gupta was not a genuine gift, Once that is so, the only conclusion is that the assessee had furnished inaccurate particulars of his income and the order of the Tribunal deleting penalty is unsustainable in law - Decided against the assessee

Summary

Issues:
1. Whether the Tribunal was justified in canceling the penalty under Section 271(1)(c) based on the genuineness of a gift received by the assessee from a Non-resident Indian.
2. Whether the Tribunal's decision to delete the penalty was sustainable in law.
3. Whether the assessee concealed the particulars of income and was liable for penalty under Section 271(1)(c) of the Act.
4. Whether the initiation of penalty proceedings during the assessment process was valid.

Analysis:
1. The appeal was filed by the revenue challenging the Tribunal's decision to cancel the penalty under Section 271(1)(c) for the assessment year 1994-95. The assessee had received a gift of Rs.2,00,000 from a Non-resident Indian, which was deemed bogus by the Assessing Officer. The Commissioner of Income Tax (Appeals) affirmed the addition made by the Assessing Officer, leading to penalty proceedings. The CIT(A) later deleted the penalty based on the Tribunal's acceptance of the gift as genuine. The Tribunal dismissed the revenue's appeal, prompting the current appeal.

2. The High Court considered whether the alleged gift was genuine. In a previous case, it was established that the gift was not genuine, indicating that the assessee provided inaccurate particulars of income. The High Court concluded that the assessee concealed income details and was liable for penalty under Section 271(1)(c) of the Act. The Tribunal's decision to delete the penalty was deemed unsustainable in law based on the gift's authenticity.

3. The High Court referred to a judgment in another case where it was held that the assessee concealed income details and was liable for penalty under Section 271(1)(c) of the Act. The Court found that the initiation of penalty proceedings during the assessment process was valid based on previous legal precedents. Consequently, the substantial questions of law were answered in favor of the revenue and against the assessee. The appeal by the revenue was allowed.