2012 (11) TMI 504 - AT - Income Tax

Income from Undisclosed Sources - Validity of Gifts - In the present case gift was made by unrelated donor to the assessee. There was no relationship between the assessee and the donor and no occasion was also specified for making the gifts. Furthermore, the Assessing Officer has noted that no evidence has been furnished with the original return of income proving the identity, creditworthiness and genuineness of the alleged gift.. Under the circumstances, the inference made by the authorities below that gifts were bogus is quite cogent enough. Burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. As decided in case of Rajiv Tondon v. Asstt. CIT 2007 (7) TMI 40 - HIGH COURT , DELHI held that - The taxing authorities were entitled to look into the surrounding circumstances, which they did, and come to the conclusion that the gifts could not be said to be genuine. The reason offered by the assessee did not appear to be reasonable, much less acceptable. Therefore, there was no error in the view taken by the Tribunal.The burden is on the assessee to take the plea that, even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature. There is no infirmity in the order of the lower authorities on this issue and accordingly, addition is sustained - In the result, Appeal filed by the Assessee stand dismissed. Penalty u/s 271(1)(c) Held that - Following the decision of court in case of Hindustan Steel v. State of Orissa 1969 (8) TMI 31 - SUPREME COURT held that - An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. levy of penalty is dismissed in favour of assessee.

Summary

Issues Involved:
1. Legality of the service of notice under section 148.
2. Validity of the reasons to reopen the assessment.
3. Addition of the gift received by the assessee.
4. Imposition of penalty under section 271(1)(c).

Issue-wise Detailed Analysis:

1. Legality of the Service of Notice under Section 148:
The appellants challenged the legality of the service of notice under section 148. The Commissioner of Income Tax (A) found that a notice under section 148 was issued on 29.5.2001 and served on Shri Dilbag Singh on the same date through the Notice Server. The notice was also dispatched by post on 31.5.2001. The appellants did not provide evidence that the notice was not received or that Shri Dilbag Singh was not their representative. The participation of the appellant in the assessment proceedings indicated receipt of the notice. The Tribunal upheld the Commissioner's finding that there was proper service of notice, dismissing the appellant's ground on this issue.

2. Validity of the Reasons to Reopen the Assessment:
The appellants argued that the Commissioner of Income Tax (A) erred in dismissing their objections regarding the validity of the reasons to reopen the assessment. The Commissioner noted that the Assessing Officer had applied his mind and formed his own belief based on information from the Investigation Wing/Survey Wing. The Assessing Officer believed that the assessee had omitted to disclose material facts, leading to income escaping assessment. The Tribunal found that the appellant had not specifically raised this ground before the Commissioner and that the Commissioner had nonetheless adjudicated on the issue. Thus, the Tribunal dismissed this ground of appeal.

3. Addition of the Gift Received by the Assessee:
The main issue on merits pertained to the addition of gifts received by the assessees from donors. The Assessing Officer found that the assessees failed to provide evidence of the identity, creditworthiness, and genuineness of the gifts. The alleged donor denied making any gift, stating he was a student who had never visited India. The Assessing Officer concluded that the money belonged to the assessee and assessed it as income from undisclosed sources. Additionally, the Assessing Officer added amounts for the premium allegedly paid by the assessee for the bogus gifts. The Commissioner of Income Tax (A) affirmed the Assessing Officer's findings, noting the absence of evidence regarding the relationship with the donor and the occasion for the gift. The Tribunal upheld the lower authorities' decision, citing precedents that supported the conclusion that the gifts were not genuine.

4. Imposition of Penalty under Section 271(1)(c):
The appeals also challenged the penalty orders under section 271(1)(c). The Assessing Officer imposed penalties, noting the assessee's failure to establish the genuineness of the gifts and the donor's denial of making any gift. The Commissioner of Income Tax (A) confirmed the penalties. However, the Tribunal found that the penalty was not automatic upon confirmation of the quantum addition. The Tribunal noted that the assessee had disclosed the gifts and there was no concealment. The Tribunal relied on the Supreme Court's decision in CIT v. Reliance Petro Products (P.) Ltd., which stated that penalty should not be imposed merely because a claim is not accepted by the Assessing Officer. The Tribunal also referred to the Supreme Court's decision in Hindustan Steel v. State of Orissa, which held that penalty should not be imposed unless the conduct was contumacious or dishonest. Consequently, the Tribunal deleted the penalties, allowing the appeals on this issue.

Conclusion:
The Tribunal dismissed the appeals regarding the legality of the service of notice, validity of the reasons to reopen the assessment, and the addition of the gifts. However, the Tribunal allowed the appeals concerning the imposition of penalties under section 271(1)(c), finding that the assessee's conduct did not warrant such penalties.