2012 (6) TMI 181 - HC - Income Tax

Whether Tribunal was justified in law in cancelling the penalty u/s 271(1)(c) without appreciating that the surrender of income on account of bogus gift by the assessee partly by filing a revised return and partly by surrender before the Ld. CIT(A) was not voluntary but was only after the scam of giving and accepting bogus gifts was detected by the Investigation Wing of the Department - Held that - assessee-respondent had produced Smt. Usha Jain. She accepted having made a gift to the assessee-respondent and proved the source of the gift by furnishing statement of her saving bank account. assessee is not a person who has failed to offer an explanation or the explanation offered by her was found to be false or that she was unable to substantiate the explanation or that the transactions were not bona fide so as to attract the deeming provision contained in Explanation 1(B) to Section 271(1)(c) of the Act. tribunal has come to a conclusion and recorded a finding that there is no primary evidence to establish that the assessee has concealed her income or furnished inaccurate particular, no exception to the same can be taken. it cannot be held that the surrender/disclosure on the part of the assessee-respondent was not voluntarily. - Decided in favour of the assessee-respondent and against the revenue.

Summary

Issues:
Income Tax Appeal against penalty order concerning assessment year 2001-02.

Analysis:
The appeal was filed against the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The respondent initially disclosed income of Rs. 1,34,696, later revised it to Rs. 3,84,696, including additional income of Rs. 2,50,000. The assessing officer assessed the taxable income at Rs. 6,34,696, including the additional Rs. 2,50,000. Penalty proceedings were initiated, and a penalty of Rs. 1,50,000 was imposed, which was later waived by the tribunal.

The main issue was whether the tribunal was justified in canceling the penalty under Section 271(1)(c) of the Act. The provision requires satisfaction that the assessee concealed income or furnished inaccurate particulars. The Explanation added in 1976 clarified that deliberate concealment or furnishing inaccurate particulars is essential for penalty imposition. The legal position was further explained through various court judgments, emphasizing the requirement of mens rea for concealment or furnishing inaccurate particulars.

In this case, the assessee disclosed the gifts received and surrendered them as income. The assessing authority viewed this as a compelled act due to a detected tax evasion scheme. However, the gifts were received through proper channels, and the explanation provided by the assessee was not proven false. The tribunal found no evidence of deliberate concealment or furnishing inaccurate particulars. Therefore, the penalty was rightly canceled as the assessee's actions did not meet the criteria for penalty imposition.

The judgment highlighted that the burden of proof lies on the department to establish concealment. The tribunal's decision was based on factual findings, concluding that the surrender by the assessee was voluntary and there was no deliberate concealment or inaccurate furnishing of returns. As a result, the appeal was dismissed, ruling in favor of the assessee and against the revenue.