2013 (9) TMI 7 - AT - Income Tax

Penalty u/s 271(1)(c) of the Income Tax Act Gift received from the foreign friends of the assessee - Assessee has received two credit entries in the bank account of the assessee amounting to Rs. 1 lakh and Rs. 5,46,575/- respectively from Amrit Dilawari and Shri Charanjeet P. Singh respectively - Held that - It may be true that the assessee may not remember the full addresses but atleast the persons who is giving a sum of Rs. 1 lakh and Rs. 5,46,575/-, he should have known the State or city of U.S.A. where such donees were living, the assessee do not remember even that - This clearly shows that the gifts are bogus - Further a question was asked that on what occasion the gifts were given. The assessee had stated that the gifts were received because the assessee was in a great financial difficulty. This is totally wrong - Copy of bank statement has been filed by the assessee. First gift is shown to have received on 29.10.2002. On that date balance in the Saving Bank account was Rs. 42,17,965/- and in fact statement has been filed from period 10.8.202 before us throughout August to October, 2002 there has been a balance ranging from Rs. 40 lakhs to Rs. 58.95 lakhs. The second gift was received on 16.1.2003 and before receipt of gift, bank balance in same account is Rs. 12,33,939/- - Huge bank balance in the Saving Bank Account in the Financial Year 2002-03 clearly show that the assessee was not in any financial difficulty and therefore, it is clear that these are bogus gift - Explanation (1) to Section 271 (1)(c) would not be attracted Fit case for levy of penalty Decided against the assessee.

Issues Involved:

1. Levy of penalty under Section 271(1)(c) of the Income Tax Act for concealment of income.
2. Treatment of received gifts as income.
3. Application of quasi-criminal proceedings to the facts of the case.
4. Validity of penalty proceedings distinct from assessment proceedings.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act for Concealment of Income:

The primary issue in this appeal is whether the penalty levied under Section 271(1)(c) for concealment of income is justified. The assessing officer noticed two credit entries in the assessee's bank account, amounting to Rs. 1 lakh and Rs. 5,46,575/-, which were claimed to be gifts from friends. The assessee failed to provide satisfactory evidence to establish the genuineness and creditworthiness of these gifts. The Tribunal confirmed the addition of these amounts as bogus gifts under Section 68 of the Act. The assessee argued that the gifts were received due to financial difficulties and were not taxable as income during the financial year 2002-03. However, the explanation provided by the assessee was deemed unsatisfactory, leading to the penalty imposition.

2. Treatment of Received Gifts as Income:

The assessee contended that gifts from abroad are not considered income and thus should not attract penalty. However, the assessing officer treated the gifts as unexplained credits and added them to the income, citing the lack of evidence to prove the genuineness of the transactions. The Tribunal upheld this view, stating that the gifts were not received on any special occasion and the assessee's financial status did not justify the need for such gifts. The Tribunal found the explanation given by the assessee to be false, thereby justifying the penalty under Section 271(1)(c).

3. Application of Quasi-Criminal Proceedings to the Facts of the Case:

The assessee argued that penalty proceedings are quasi-criminal in nature and should not be applied in the absence of deliberate concealment or willful neglect. The Tribunal referred to the explanation (1) to Section 271(1)(c), which creates a legal fiction that deems the assessee to have concealed income if no satisfactory explanation is provided. The Tribunal emphasized that the burden of proof shifts to the assessee to show that there was no concealment. The Tribunal concluded that the explanation given by the assessee was not bona fide, and thus the penalty was justified.

4. Validity of Penalty Proceedings Distinct from Assessment Proceedings:

The assessee argued that penalty proceedings are distinct from assessment proceedings and should be treated separately. The Tribunal acknowledged this distinction but clarified that the findings in the assessment proceedings regarding the bogus nature of the gifts directly impacted the penalty proceedings. The Tribunal noted that the assessee had failed to provide any credible evidence during the penalty proceedings to substantiate the genuineness of the gifts. The Tribunal held that the penalty proceedings were valid and the penalty imposed was justified.

Conclusion:

The Tribunal dismissed the appeal, upholding the penalty levied under Section 271(1)(c) of the Income Tax Act. The Tribunal found that the assessee failed to provide a satisfactory explanation for the received gifts, which were treated as unexplained credits. The penalty was deemed justified as the explanation given by the assessee was found to be false, attracting the provisions of explanation (1) to Section 271(1)(c). The Tribunal emphasized that penalty proceedings are distinct yet related to assessment proceedings and confirmed the validity of the penalty imposed.

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