2007 (5) TMI 282 - AT - Income Tax

Summary

Issues Involved:
1. Imposition of penalty u/s 271(1)(c) of the Income Tax Act.
2. Voluntary surrender of income and its implications on penalty.
3. Proof of concealment of income and furnishing of inaccurate particulars.

Summary:

1. Imposition of penalty u/s 271(1)(c) of the Income Tax Act:
The Revenue appealed against the CIT(A) Bareilly's order canceling the penalty of Rs. 2,20,000 imposed u/s 271(1)(c) for the assessment year 2002-03. The assessee, a doctor, had his income assessed at Rs. 8,80,280 against a returned income of Rs. 1,95,010. The AO treated Rs. 6.50 lakhs as unexplained cash credit u/s 68 and initiated penalty proceedings u/s 271(1)(c).

2. Voluntary surrender of income and its implications on penalty:
The assessee surrendered Rs. 6.50 lakhs during assessment proceedings, claiming it was to purchase peace and avoid litigation, despite having documentary evidence of the gifts. The AO did not accept this explanation, asserting that the assessee failed to prove the genuineness of the gifts and thus levied a penalty of Rs. 2.20 lakhs.

3. Proof of concealment of income and furnishing of inaccurate particulars:
The CIT(A) canceled the penalty, noting that the gifts were shown in the return of income and details were provided during assessment proceedings. The CIT(A) emphasized that concealment implies a direct attempt to hide income, which was not the case here. The CIT(A) referenced the Gujarat High Court's decision in National Textiles vs. CIT, stating that penalty requires evidence of conscious concealment or furnishing of inaccurate particulars, which was not proven by the AO.

Tribunal's Observations:
The Tribunal upheld the CIT(A)'s decision, noting that the assessee provided substantial evidence supporting the gifts and loans, including gift deeds, income-tax assessment records, and PAN details of donors. The Tribunal cited several precedents, including the Supreme Court's decision in CIT vs. Suresh Chandra Mittal, which held that penalty cannot be levied if additional income is offered to buy peace and avoid litigation. The Tribunal concluded that the AO failed to provide independent material proving concealment or furnishing of inaccurate particulars by the assessee.

Conclusion:
The appeal by the Revenue was dismissed, affirming that the assessee's voluntary surrender of income to avoid litigation did not constitute concealment of income or furnishing of inaccurate particulars, and thus, penalty u/s 271(1)(c) was not justified.