2015 (9) TMI 5 - AT - Income Tax

Penalty u/s. 271(1)(c) - gift of ₹ 40,000/- received by the appellant from his father-in-law - reason for making the addition u/s. 68 was that the father in law in his affidavit had stated that he does not have a bank account and his income is below taxable limit - Held that - On perusing the affidavit of the donor dated 11/12/2009, it is seen that the relationship of the assessee and the donor is not in doubt, his age being 61 years is also not in dispute. In the affidavit, the donor has stated that he has made gift out of past saving of carting business. Before us, Revenue has not brought any material on record to demonstrate that the donor could not have earned and saved the amount which he has gifted to his son in law. Further it is a well settled law that penalty proceedings are entirely distinct from assessment proceedings and however relevant and good, the findings in assessment proceedings may not be conclusive so far as penalty proceedings are concerned. It is well settled that the parameters of judging the justification for addition made in the assessment proceedings is different from the penalty imposed on account of concealment of income or filing of inaccurate particulars of income and that certain disallowance/additions could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s.271(1)(c) of the Act on preponderance of probability and the Revenue has to prove that the claim of the assessee was not genuine or was inflated its tax liability. Further merely because additions have confirmed in appear or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for a gift received by the assessee from his father-in-law.

Detailed Analysis:

Issue 1: Levy of Penalty under Section 271(1)(c)
The case involved the appeal filed by the assessee against the order of CIT(A)-II, Surat for the assessment year 2007-08. Despite the notice served in advance, the assessee did not appear for the hearing, but written submissions were filed. The assessee, running tuition classes and a stockbroker, declared total income at Rs. 1,88,783, which was later determined at Rs. 3,04,800 by the assessing officer. The dispute arose from a cash gift of Rs. 40,000 received by the assessee from his father-in-law, leading to a penalty of Rs. 8,161 under section 271(1)(c) for concealment of income. The CIT(A) upheld the penalty, citing the lack of substantiation regarding the donor's capacity and creditworthiness. The CIT(A) applied the conditions laid down by the ITAT in a previous case to confirm the penalty, emphasizing the failure to establish the genuineness of the gift. The assessee appealed against this decision.

Issue 1 Analysis:
The tribunal considered the submissions made by both parties. The assessing officer had added Rs. 40,000 as unexplained cash credit under section 68 due to the lack of evidence regarding the donor's financial capacity. The tribunal noted that the donor, the father-in-law, had affirmed the gift in an affidavit, stating it was from past savings of his carting business. The tribunal highlighted that penalty proceedings are distinct from assessment proceedings and require separate justification. It emphasized that the burden of proof for the Revenue in penalty proceedings is higher than in assessment proceedings. The tribunal found that the Revenue failed to demonstrate that the donor could not have earned and saved the gifted amount. It concluded that the meager amount of the gift, the relationship between the donor and the assessee, and the absence of conclusive evidence against the genuineness of the gift did not warrant a penalty under section 271(1)(c). Consequently, the tribunal directed the deletion of the penalty levied on the assessee.

Conclusion:
The tribunal allowed the appeal of the assessee, ruling in favor of deleting the penalty imposed under section 271(1)(c) for the cash gift received from the father-in-law. The decision was based on the lack of sufficient evidence to establish concealment of income or filing of inaccurate particulars of income, considering the peculiar facts of the case and the meager amount involved.