2012 (11) TMI 226 - AT - Income Tax

Penalty levied u/s 271(1)(c) against income from undisclosed sources as bogus gift assessee before CIT(A) has surrendered the above amounts on the condition that no penalty should be imposed. Held that - assessee has submitted various documents in support of the gifts. It is not the case of the Revenue that the documents submitted in this regard are false. It is also a fact that during the appellate proceedings the assessee has himself agreed to surrender the above amounts. Under the circumstances, in our considered opinion, when the Revenue has not been able to find any fault in the documents submitted by the assessee in this regard, in our considered opinion, the penalty u/s. 271(1)(c) is not justified. - Decision in favour of assessee.

Summary

Issues:
- Imposition of penalty under section 271(1)(c) of the Income Tax Act based on alleged bogus accommodation entries received by the assessee.

Detailed Analysis:
1. Background of the Case:
The appeal is against the order of the Ld. Commissioner of Income Tax (Appeals) pertaining to assessment year 2002-03. The issue revolves around the imposition of a penalty of Rs. 4,65,208/- on the assessee under section 271(1)(c) of the Income Tax Act.

2. Assessment and Penalty Proceedings:
The Assessing Officer initiated proceedings under section 148 based on information from the Investigation Wing indicating that the assessee received bogus accommodation entries totaling Rs. 15 lacs from three parties. The gifts of Rs. 5 lacs each were treated as undisclosed income, leading to penalty proceedings under section 271(1)(c).

3. Initial Orders and Appeals:
The Ld. Commissioner of Income Tax (Appeals) upheld the penalty, noting that the gifts were received from unrelated parties without a valid explanation. The assessee surrendered the amount during appellate proceedings, hoping to avoid the penalty, but the Commissioner sustained it.

4. Arguments and Submission:
The assessee submitted various documents to establish the genuineness of the transactions, including gifts declared in the income tax return and supported by bank account details. The counsel argued that the penalty was unjustified as the documents were not proven false.

5. Judgment and Legal Precedents:
The ITAT considered the submissions and legal precedents. Referring to the Supreme Court decision in CIT vs. Reliance Petro Products Ltd., it emphasized that penalty for inaccurate particulars or concealment of income requires deliberate defiance or contumacious conduct. Citing Hindustan Steel vs. State of Orissa, the ITAT highlighted that penalties should not be imposed for technical breaches or bona fide beliefs.

6. Decision and Rationale:
After thorough consideration, the ITAT concluded that the penalty under section 271(1)(c) was not justified in this case. Given the genuine documents submitted by the assessee and the lack of evidence proving them false, the ITAT deleted the penalty imposed by the Assessing Officer and affirmed by the Commissioner.

7. Final Verdict:
Consequently, the appeal filed by the Assessee was allowed, and the penalty under section 271(1)(c) was deleted. The judgment was pronounced on 20/7/2012 by the ITAT, Delhi.

This detailed analysis encapsulates the legal proceedings, arguments presented, judicial considerations, and the final decision in the case involving the imposition of a penalty under section 271(1)(c) of the Income Tax Act.