2007 (12) TMI 246 - AT - Income Tax

Surrendered amount represent as Concealed Income? - Penalty levied u/s 271(1)(c) - Onus to prove - creditworthiness and genuineness of the transaction - HELD THAT - We find no force in the argument of the learned counsel for the assessee that there is a jurisdictional defect in initiating the penalty proceedings as the AO has failed to record any satisfaction in terms of s. 271(1)(c) of the Act in the assessment order inasmuch as the said satisfaction is discernable from the assessment order. The AO while considering the said gift has specifically observed penalty proceedings under s. 271 (1)(c) are being initiated on this point as the onus to prove genuineness of this amount was not discharged by the assessee. Following the ratio laid down in the case of CIT vs. Aggarwal Pipe Co. 1999 (7) TMI 57 - DELHI HIGH COURT squarely applies to the instant case. Therefore we are of the view that the AO was not justified to impose the penalty under s. 271(1)(c) on the assessee. We therefore direct to delete the penalty. In the result the appeal filed by the assessee is allowed.

Summary

Issues:
1. Penalty under section 271(1)(c) of the Act for assessment year 2001-02.
2. Failure to produce donor for gift of Rs. 5 lacs.
3. Imposition of penalty without proving concealment or inaccurate particulars of income.
4. Onus on assessee to prove identity, creditworthiness, and genuineness of transaction.

Detailed Analysis:
1. The appeal was against the penalty imposed under section 271(1)(c) of the Act for the assessment year 2001-02. The CIT(A) confirmed the penalty after the AO detected concealment regarding a gift of Rs. 5 lacs from a donor. The assessee surrendered the amount to avoid litigation, subject to no penalty. The penalty was imposed as the donor was not produced, and genuineness of the gift was not proven.

2. The assessee failed to produce the donor despite various opportunities due to the donor's illness. The donor confirmed the gift via affidavit and in the return of income. The AO initiated penalty proceedings under section 271(1)(c) as the genuineness was not substantiated. The onus was on the assessee to prove the transaction's authenticity, which was not fulfilled.

3. The argument was made that the penalty initiation lacked clarity on whether there was concealment or inaccurate particulars of income. The jurisdictional defect was raised, citing cases where surrender due to inability to produce creditors did not warrant a penalty. The satisfaction required under section 271(1)(c) was also questioned, emphasizing the need for a proper recording during assessment.

4. The onus to prove identity, creditworthiness, and genuineness of the transaction rested on the assessee. Despite providing documentation, the donor's absence led to surrendering the amount. The Tribunal emphasized that if the explanation was bona fide, even without full substantiation, no penalty could be imposed. Citing precedent, it was concluded that the penalty was unjustified, and the appeal was allowed.

This detailed analysis covers the issues involved in the legal judgment, highlighting the arguments presented, the legal principles applied, and the final decision rendered by the Tribunal.