2014 (6) TMI 527 - AT - Income Tax

Levy of penalty u/s 271(1)(c) of the Act - Addition made u/s 68 of the Act Gifts received from various persons - Held that - The declaration of gift was filed by the assessee - Copies of the declarations are furnished in a compilation - assessee has also furnished the photocopies of the return filed by those donors Relying upon National Textiles Versus Commissioner Of Income-Tax 2000 (10) TMI 19 - GUJARAT High Court Explanation 1 does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee - penalty has been levied by invoking the deeming provisions u/s 68 of the IT Act the deeming provisions cannot be extended to hold that the assessee has concealed the income especially when the assessee has placed on record certain evidences such as gift declarations and bank accounts to show that the gift was received under bona fide belief that the same was a genuine gift - it was taxed during assessment proceedings but the penalty u/s 271(1)(C) cannot be levied automatically thus the order of the CIT(A) is set aside Decided in favour of Assessee.

Summary

Issues:
- Levy of penalty under section 271(1)(c) of the Income Tax Act based on addition under section 68 of the IT Act.

Analysis:
1. Levy of Penalty under Section 271(1)(c):
- The appeal was filed by the assessee challenging the penalty imposed under section 271(1)(c) based on the addition under section 68 of the Income Tax Act.
- The Assessing Officer (AO) had raised doubts about the genuineness of the gifts received by the assessee and the donors' bank accounts.
- The AO noted discrepancies in the pay orders issued in favor of the assessee and raised concerns about the source of the funds.
- The AO imposed a penalty of Rs. 3,60,110/-, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].

2. Arguments and Legal Precedents:
- The Revenue argued that the gifts were not satisfactorily proved, justifying the disallowance and penalty imposition.
- The assessee relied on legal precedents such as the case of Jalaram Oil Mills and National Textiles to argue against the penalty imposition under section 271(1)(c) when an addition is made under section 68 of the IT Act.

3. Decision and Reasoning:
- The Tribunal considered the evidence presented by the assessee, including gift declarations, bank account details, and donors' income tax returns.
- Referring to the legal proposition from the case of National Textiles, the Tribunal emphasized the need for material or circumstances showing conscious concealment or furnishing of inaccurate particulars to justify a penalty under section 271(1)(c).
- The Tribunal concluded that the deeming provisions under section 68 could not automatically lead to the imposition of a penalty, especially when the assessee had provided evidence supporting the genuineness of the gifts.
- Citing the decisions mentioned, the Tribunal reversed the findings of the lower authorities and directed the deletion of the penalty under section 271(1)(c), ultimately allowing the appeal of the assessee.

4. Outcome:
- The Tribunal allowed the appeal of the assessee, overturning the penalty imposed under section 271(1)(c) based on the addition under section 68 of the IT Act.