2012 (7) TMI 653 - AT - Income Tax

Penalty u/s 271(1)(c) Held that - Assessee has presented a wrong, incorrect and non-genuine claim of gift - assessee has presented incorrect and untrue facts regarding the amount received claiming as gift, which was found as not genuine - when the claim of the assessee was found factually incorrect, untrue and not genuine, then the benefit of bonafide explanation is not available to the assessee for the purpose of levy of penalty u/s 271(1)( c) of the Act - penalty u/s 271(1)( c) is upheld Against assessee

Summary

Issues:

1. Whether the penalty imposed under section 271(1)(c) of the Income Tax Act for the Assessment Year 2004-05 on the assessee is justified.
2. Whether the claim of receiving a gift of Rs. 50 lakhs by the assessee from an NRI was genuine or not.
3. Whether the explanation offered by the assessee regarding the gift claim was bonafide or not.
4. Whether the claim of gift made by the assessee, which was found to be incorrect and not genuine, warrants the levy of penalty under section 271(1)(c) of the Act.

Analysis:

1. The appeal by the assessee challenged the penalty order passed under section 271(1)(c) of the Income Tax Act for the Assessment Year 2004-05. The assessee contended that the penalty was unjustified as the addition made by the Assessing Officer was based on a gift received from an NRI, which the assessee claimed was out of natural love and affection and was disclosed in the income tax return. The assessee argued that there was no concealment of income. The Assessing Officer had added Rs. 50 lakhs to the total income of the assessee under section 68 of the Act, alleging the gift was not genuine but an arrangement of unaccounted funds used to purchase a flat. The Tribunal confirmed the addition made by the Assessing Officer, leading to the initiation of penalty proceedings under section 271(1)(c).

2. The Tribunal found that the gift claim by the assessee was not genuine, as there was no personal attachment between the donor and the donee, and the alleged donor was not even known to the assessee personally. The Tribunal upheld the findings that the claim of gift was incorrect and not genuine, leading to the addition to the total income of the assessee. The Tribunal concluded that the claim made by the assessee for the gift was knowingly incorrect and not genuine, and therefore, the benefit of bonafide explanation was not applicable in this case for the levy of penalty under section 271(1)(c) of the Act.

3. The Tribunal's decision was based on the fact that the claim of gift made by the assessee was found to be factually incorrect and untrue, and the investigation during the assessment proceedings established that the claim was not genuine. The Tribunal emphasized that when a claim is factually incorrect and not genuine, the bonafide explanation defense does not apply. The Tribunal rejected the arguments presented by the assessee's representative and upheld the penalty imposed under section 271(1)(c) by the authorities below, stating that the claim of the assessee was knowingly incorrect and not genuine, and did not fall under allowable claims under the law.

4. In conclusion, the Tribunal dismissed the appeal filed by the assessee, upholding the penalty imposed under section 271(1)(c) of the Income Tax Act for the Assessment Year 2004-05. The Tribunal's decision was based on the factual findings that the claim of receiving a gift of Rs. 50 lakhs by the assessee was not genuine, and the explanation offered by the assessee was knowingly incorrect, leading to the addition in the total income and the imposition of the penalty. The Tribunal found no error or illegality in the orders of the authorities below in levying the penalty, considering the facts and circumstances of the case.