2014 (10) TMI 153 - AT - Income Tax

Levy of penalty @ 100% of the tax sought to be evaded u/s 271(1)(c) Held that - During the accounting year relevant to the assessment year under consideration, Shri Naresh Jain had given the gift to the assessee and to Shri Namit Jain, minor son of the assessee - the assessee would be said to have furnished inaccurate particulars of income if the details supplied by the assessee in the return were found to be incorrect or erroneous or false - The first ground why the gift was not accepted by the AO was that the gift was given without any occasion - merely because the gift was given without any occasion would not be sufficient to hold that the gift is not genuine - It may be only one of the circumstances while considering the genuineness of the gift - The second reason given by the Assessing Officer was that the gift was given without natural love and affection - the donors are close family friends and it cannot be said that natural love and affection remains only between blood relations and not between the friends - There is no salary income from the assessee or no business income from any business in which assessee is also connected - one family giving gift to another family year after year, it can be said to be against human probabilities, but that may not be sufficient to hold the assessee guilty of concealment of income or furnishing of inaccurate particulars. If the details supplied by the assessee in the return of income are found to be incorrect, erroneous or false, then only it can be said that the assessee has furnished inaccurate particulars of income so as to make him liable for penalty u/s 271(1)(c) of the Act - the copy of the income tax returns of the donors and the statements of the donors, the AO has not pointed out any of the details furnished by the assessee to be incorrect, erroneous or false - The AO has not accepted the gift by doubting the creditworthiness of the donors and the genuineness of the transactions. So far as Assessing Officer s finding that the capacity of the donors is not proved is concerned, that finding was factually incorrect and probably has been arrived at by the AO without properly appreciating the details of the donors furnished before him by the donors themselves, in the form of their income tax returns, which clearly establishes their creditworthiness - The sound financial capacity of the donors was proved from their income tax record - So far as the genuineness of the transactions is concerned, the AO has doubted the genuineness of the gifts on the ground of human probabilities - what is humanly probable is certainly a matter of opinion and, therefore, the denial of the acceptance of gifts in the assessment proceedings on the basis of human probability may be justified, but, the same cannot the basis for the purpose of levying penalty u/s 271(1)(c), specially when there are overwhelming documentary evidences in support of the genuineness of the gifts which is further fortified by the statements of the donors - the assessee cannot be said to have furnished inaccurate particulars of income or have concealed the income so as to make him liable for penalty u/s 271(1)(c) of the Act - CIT(A) was not justified in sustaining the penalty at 100% of the tax sought to be evaded Decided in favour of assessee.

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Validity of gifts received by the assessee and his minor sons.
3. Assessment of the genuineness, creditworthiness, and identity of the donors.
4. Burden of proof in penalty proceedings versus assessment proceedings.
5. Applicability of judicial precedents in penalty proceedings.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The core issue was the levy of penalty under Section 271(1)(c) for AY 1999-2000 to 2005-06. The Assessing Officer (AO) had levied penalties at 150% of the tax sought to be evaded, which the CIT(A) reduced to 100%. The Tribunal examined whether the assessee had concealed income or furnished inaccurate particulars. The Tribunal noted that the penalty proceedings are independent of the assessment proceedings and that the burden of proof in penalty proceedings lies on the Department.

2. Validity of Gifts Received:
The assessee and his minor sons received gifts totaling Rs. 1,52,00,000 from Shri Naresh Jain and Shri Anil Jain. The AO did not accept these gifts as genuine and added the amount as unexplained income. The CIT(A) and ITAT upheld the AO's decision in the quantum proceedings. However, the Tribunal emphasized that the penalty proceedings require a separate evaluation of facts.

3. Assessment of Genuineness, Creditworthiness, and Identity of the Donors:
The Tribunal scrutinized the documentary evidence provided by the assessee, including affidavits, confirmations, gift deeds, and income tax returns of the donors. The donors, Naresh Jain and Anil Jain, affirmed their financial capacity and the genuineness of the gifts in their statements recorded by the AO. The Tribunal found that the AO's reasons for rejecting the gifts (lack of occasion, absence of natural love and affection, and improbability) were not sufficient to levy a penalty under Section 271(1)(c).

4. Burden of Proof in Penalty Proceedings versus Assessment Proceedings:
The Tribunal referred to the Supreme Court's decisions in Khoday Eswarsa and Sons and Dilip N. Shroff, emphasizing that the burden of proof in penalty proceedings is different from assessment proceedings. The Tribunal held that the details furnished by the assessee were not found to be incorrect, erroneous, or false, and thus, the penalty under Section 271(1)(c) was not justified.

5. Applicability of Judicial Precedents in Penalty Proceedings:
The Tribunal relied on the Supreme Court's decision in Reliance Petroproducts, which clarified that merely making a claim that is not accepted by the AO does not amount to furnishing inaccurate particulars. The Tribunal concluded that the assessee had furnished all necessary details, and the AO's rejection of the gifts based on human probabilities was not a valid ground for penalty.

Conclusion:
The Tribunal canceled the penalties levied by the AO for AY 2000-01 to 2005-06, holding that the assessee had not furnished inaccurate particulars or concealed income. The appeal of the assessee for AY 1999-2000 was dismissed as not pressed, while the appeals for AY 2000-01 to 2005-06 were allowed. The appeals of the Revenue for AY 2000-01 to 2005-06 were dismissed. The decision was pronounced on 26th September 2014.