2013 (12) TMI 1358 - AT - Income Tax

Penalty u/s 271(1)(c) of the act Bogus and unexplained gifts Held that - The assessee has furnished particulars of gifts in the return of income originally filed by him the particulars are not found false as no such satisfaction is found recorded in the orders of the authorities below - There is also no finding by the authorities below as to whether any details supplied in the return are incorrect, erroneous or false thus, it could not be a case of furnishing inaccurate particulars by the assessee for inviting penalty under section 271(1)(c) of the Act - Following CIT v. Reliance Petroproducts (P.) Ltd. 2010 (3) TMI 80 - SUPREME COURT - The assessing authority made no enquiry but jumped to the conclusion of imposition of penalty on the basis of quantum addition sustained by the Appellate Tribunal - Even the satisfaction as envisaged by section 271(1B) of the Act is not discernable from the body of the assessment order - The explanation furnished by the assessee is found bona fide thus, the penalty imposed is set aside Decided in favour of Assessee.

Summary

Issues:
Assessment of unexplained gifts as income, imposition of penalty under section 271(1)(c) of the Income-tax Act, confirmation of penalty by the Commissioner of Income-tax (Appeals), appeal against penalty imposition.

Analysis:
The appeal before the Appellate Tribunal ITAT Jaipur pertains to the assessment of unexplained gifts as income and the imposition of a penalty under section 271(1)(c) of the Income-tax Act. The assessee had returned income from trading activities but during assessment, the Assessing Officer treated gifts of Rs. 1,00,000 each received by the assessee's son and daughter as bogus and unexplained due to cash deposits in the donors' accounts prior to the gifts. Consequently, an addition of Rs. 2,00,000 was made to the returned income, leading to a penalty of Rs. 1,23,600 being imposed. The Commissioner of Income-tax (Appeals) upheld the penalty, citing lack of proof of the donors' creditworthiness and transaction genuineness by the assessee, as evident from the Tribunal's order on the addition's merits.

In the appeal, the assessee contended that all gift details were disclosed in the income tax return, emphasizing the penalty proceedings' distinct nature from the assessment. The assessee argued that the assessing authority failed to investigate the genuineness of the gifts and imposed the penalty arbitrarily based on the assessment findings. The assessee maintained that the donors were financially capable individuals with disclosed assets and liabilities, and the gifts were made out of natural love and affection. The assessee relied on judgments from the Punjab and Haryana High Court and the Gujarat High Court to support the explanation provided.

The Appellate Tribunal, after considering the submissions and case law, noted that the assessee had truthfully disclosed gift particulars in the income tax return without any findings of falsity by the authorities. There was no evidence of incorrect or false details in the return, precluding the imposition of penalty for furnishing inaccurate particulars under section 271(1)(c) of the Act. The Tribunal observed that the assessing authority had not conducted an inquiry but decided on the penalty based on the quantum addition upheld by the Tribunal. In light of the bona fide explanation provided by the assessee and the Supreme Court's ruling in CIT v. Reliance Petroproducts (P.) Ltd., the Tribunal concluded that a penalty in this case was unwarranted and canceled the penalty, allowing the appeal.

Therefore, the Appellate Tribunal ITAT Jaipur ruled in favor of the assessee, canceling the penalty imposed under section 271(1)(c) of the Income-tax Act, considering the genuine disclosure of gift particulars and the lack of evidence supporting the penalty imposition.