2009 (11) TMI 656 - AT - Income Tax

Summary

Issues Involved:
1. Sustenance of penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income.
2. Validity of reopening of assessment under section 148.
3. Burden of proof regarding the genuineness of the gift received.
4. Applicability of Explanation 1 to section 271(1)(c).

Issue-wise Detailed Analysis:

1. Sustenance of Penalty under Section 271(1)(c):

The core issue in this appeal is the sustenance of the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) for a sum of Rs. 1,05,000, which was confirmed by the CIT(A). The AO added Rs. 3,50,000 to the assessee's income, considering it as income from undisclosed sources, and initiated penalty proceedings for concealment of income or furnishing inaccurate particulars. The assessee argued that the amount represented a gift and was not required to be added to the income. However, the AO rejected this explanation, stating that the assessee failed to prove the nature of the gift, thus amounting to concealment and furnishing inaccurate particulars.

2. Validity of Reopening of Assessment under Section 148:

The assessment was reopened based on the intimation received from the Joint DIT (Investigation) regarding accommodation entries received by the assessee. The assessee contended that there was no justification for reopening as the sums represented gifts and long-term capital gains, which were duly reflected in the return of income. However, the reopening was upheld as the AO had credible information suggesting the need for reassessment.

3. Burden of Proof Regarding the Genuineness of the Gift Received:

The assessee provided evidence in the form of a gift deed, affidavit, and bank account details to substantiate the claim of receiving a gift. However, the AO issued a summon under section 131 to the donor, which could not be served. The assessee later surrendered the amount, citing an inability to locate the donor. The Tribunal noted that the AO did not discharge the onus of proving the gift as bogus, and the assessee's explanation was not disproven.

4. Applicability of Explanation 1 to Section 271(1)(c):

Explanation 1 to section 271(1)(c) provides that the amount added or disallowed in computing the total income shall be deemed to represent the income in respect of which particulars have been concealed unless the assessee offers a bona fide explanation. The Tribunal observed that the AO did not specify whether the penalty was for concealment or furnishing inaccurate particulars. The Tribunal cited the Gujarat High Court's decision in New Sorathia Engg. Co. Ltd., which mandates a clear finding on the specific charge for penalty.

The Tribunal concluded that the assessee had discharged the onus by providing a plausible explanation and evidence for the gift. The AO failed to prove the explanation as false. The Tribunal also relied on the Supreme Court's decisions in Sir Shadi Lal Sugar & General Mills Ltd. and Suresh Chandra Mittal, which support the view that mere surrender of income does not automatically lead to penalty.

Conclusion:

The Tribunal held that the penalty order under section 271(1)(c) could not be sustained due to the lack of a specific charge and the assessee's bona fide explanation. The penalty was deleted, and the appeal was allowed.