2014 (6) TMI 770 - AT - Income Tax

Penalty u/s 271(1)(c) of the Act Addition made u/s 68 of the Act Gifts received from various persons - Held that - There is no discussion in the penalty order in respect of gift of Rs 13,00,000/- received from the seven persons as to why the AO was satisfied that it represents concealed income of the assessee and liable for penalty u/s. 271(1)(c) of the Act - such an order of penalty is unsustainable - penalty proceeding is different from assessment proceeding and the considerations which apply in penalty proceeding is different from the considerations that apply in an assessment proceeding Relying upon Vasantlal Amrutlal Doriwala (HUF) Prop. of M/s. Nirav Rayon s Versus Income Tax Officer 2014 (6) TMI 527 - ITAT AHMEDABAD - the declaration of gift was filed by the assessee. Copies of those declarations are furnished before us in a compilation. Penalty has been levied by invoking the deeming provisions under Section 68 of the IT Act - 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 - no material could be brought on record by the AO to show that the amount added u/s. 68 in the assessment proceedings represents the actual concealed income of the assessee thus, the penalty levied in respect of entire addition is unsustainable Decided in favour of Assessee.

Summary

Issues: Appeal against penalty u/s. 271(1)(c) of the Income Tax Act, 1961 for addition made u/s. 68 - Identity verification of donors - Justification of penalty - Distinction between penalty and assessment proceedings.

Analysis:
1. Grounds of Appeal: The appeal was filed against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, based on an addition of Rs 27,00,000 made in the assessment under section 68. The primary contention was that the Commissioner of Income Tax (Appeals) erred in confirming the penalty.

2. Assessing Officer's Observations: The Assessing Officer levied the penalty due to discrepancies in the claimed gifts. Issues were raised regarding the verification of identities of donors, especially Mrs. Deeptiben Vora and Mr. Hasitkumar Shah, where details were found lacking, leading to doubts about the legitimacy of the gifts.

3. Confirmation of Penalty: Both the Assessing Officer and the Commissioner of Income Tax (Appeals) upheld the penalty, emphasizing the need for proper verification and documentation to support the claimed gifts.

4. Appellant's Defense: The Authorized Representative of the assessee provided evidence to support the legitimacy of the gifts, including statements from donors, bank account details, and declarations of gift. The defense argued that the Assessing Officer failed to establish that the gifts were bogus or constituted actual income.

5. Judicial Precedent: Reference was made to a previous Tribunal decision highlighting the necessity for concrete evidence linking the assessed amount to the assessee's income and proving conscious concealment or furnishing of inaccurate particulars for justifying a penalty under section 271(1)(c).

6. Tribunal's Decision: The Tribunal found the penalty order lacking discussion on gifts totaling Rs 13,00,000 from seven donors, deeming the penalty unsustainable. Emphasizing the distinction between penalty and assessment proceedings, the Tribunal ruled that the penalty was not justified as no material proved the added amount represented concealed income.

7. Final Verdict: The Tribunal, based on the lack of evidence connecting the added amount to concealed income, revoked the penalty of Rs 9,03,648 levied under section 271(1)(c) and allowed the appeal of the assessee. The judgment was pronounced on June 6, 2014, in Ahmedabad.