2015 (7) TMI 650 - AT - Income Tax

Penalty levied by the AO u/s 271(1)(c) - gift received from relative or on occasion of marriage of the individual or by way of inheritance have no application to HUF as such the exception in case of HUF is restricted to the gift by will or in contemplation to death and the gift of ₹ 10,00,000/- was to be treated as income from other sources as per AO - AO did not accept the contention of the assessee as it was a clear case of tax evasion by furnishing wrong particulars as assessee came forward only when the notice u/s 148 of the Act and further noticed u/s 142(1) of the Act were issued - Held that - The assessee was under a bonafide belief that the gift received from father of the Karta was exempt under the proviso (a) to section 56(2)(iv) of the Act and even the AO while framing the original assessment u/s 143(3) of the Act on 31.03.2009 did not make any addition and accepted the particulars furnished by the assessee. Therefore, the mistake of the assessee was a bonafide which was rectified by filing the revised return before receiving any notice u/s 142(1) of the Act and before receiving the copy of reasons recorded by the AO for reopening the assessment. There was no question of furnishing of inaccurate particulars of income as the gift was received by the assessee HUF from the father of the Karta and this fact was available to the AO who framed the original assessment u/s 143(3) of the Act on 31.03.2009. Later on, when a notice u/s 148 of the Act was received by the assessee the return of income was revised and the said gift which was earlier considered as exempt under a bonafide belief in view of proviso (a) to section 56(2)(iv) of the Act was offered for taxation and due taxes were paid. Therefore, in view of the ratio laid down in the case of Price Waterhouse Coopers Pvt. Ltd. Vs CIT (2012 (9) TMI 775 - SUPREME COURT) and CIT Vs Escorts Finance Ltd. 2009 (8) TMI 677 - DELHI HIGH COURT , the penalty u/s 271(1)(c) of the Act was not leviable in the peculiar facts of the present case. Decided in favour of assessee.

Summary

Issues involved:
Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:

1. Issue of Penalty Deletion:
The case involved an appeal by the department against the deletion of penalty levied by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act. The AO had initiated penalty proceedings after making an addition to the income of the assessee Hindu Undivided Family (HUF) regarding a gift received from a family member. The AO considered the gift as taxable income and imposed a penalty of 200% of the tax sought to be evaded. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty after considering the submissions of the assessee. The CIT(A) observed that the assessee had a bonafide belief that the gift was exempt under the Act and had voluntarily revised the return to include the gift for taxation before receiving any notice from the AO. The CIT(A) concluded that there was no intention to conceal income or provide inaccurate particulars.

2. Legal Precedents and Arguments:
The counsel for the assessee cited various case laws to support the contention that the penalty was not justified in this case. The arguments emphasized the bonafide belief of the assessee regarding the tax treatment of the gift and the voluntary disclosure made before any formal notice from the tax authorities. The case laws highlighted the principles that penalties for concealment or inaccurate particulars can only be imposed in cases of deliberate suppression or fraudulent claims, which were not applicable in this scenario.

3. Judicial Findings and Decision:
The Appellate Tribunal considered the facts of the case and the legal precedents cited by both parties. It noted that the assessee had rectified the error in the return before any formal notice from the AO, indicating a bonafide mistake rather than intentional concealment. The Tribunal referred to judgments by the Supreme Court and the High Court to support the decision that penalties should not be imposed in cases of inadvertent errors made in good faith. Therefore, the Tribunal upheld the CIT(A)'s decision to delete the penalty under section 271(1)(c) of the Act, stating that there was no valid ground to interfere with the findings of the lower authority.

4. Conclusion:
The appeal by the department against the deletion of the penalty was dismissed by the Appellate Tribunal. The judgment emphasized the importance of bonafide belief, voluntary disclosure, and absence of deliberate concealment in determining the applicability of penalties under the Income Tax Act. The decision highlighted the need for a conscious effort to conceal income or provide inaccurate particulars to warrant penalty imposition, which was not evident in this case.