2019 (8) TMI 1419 - HC - Income Tax

Penalty u/s 271(1)(c) - addition u/s 68 on gift received - HELD THAT - In the present case, the Assessing Officer did not record any finding as to incorrect, erroneous or false return of income filed by the assessee which could lead to the fact that assessee has furnished inaccurate particulars of income and make him liable for penalty under Section 271(1)(c) of the Act. AO had only doubted the genuineness of the gifts on ground of human probabilities and had also doubted the creditworthiness of donors and genuineness of transaction. The Tribunal on the other hand had recorded finding regarding the identity of creditors, their creditworthiness and genuineness of the transactions which were before the AO but he had not properly appreciated the same and discarded and doubted the genuineness of gifts on ground of human probabilities, though they were tax payers and the amounts gifted had been disclosed in their tax return for relevant year. Instant case, is not a case of either concealment of income or of furnishing inaccurate particulars as neither the assessing authority nor first appellate authority recorded any finding to such effect that details furnished by the assessee to be incorrect, erroneous or false. We are of the considered opinion that the Tribunal had recorded finding of fact that no penalty can be imposed u/s 271(1)(c) of the Act as Revenue has failed to establish that assessee has concealed income or furnished inaccurate particulars. - Decided in favour of assessee.

Issues Involved:
1. Deletion of penalty imposed by the AO.
2. Contradiction in findings regarding the genuineness of the gifts.

Issue-Wise Analysis:

1. Deletion of Penalty Imposed by the AO:
The case revolves around the penalty of ?75,76,441 imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2000-01. The penalty was based on the AO's finding that the assessee had concealed particulars of income by treating exempted gifts received by the assessee's minor son as income from other sources. The AO's assessment order was upheld by the Commissioner of Income Tax (CIT) and the Income Tax Appellate Tribunal (ITAT) in the quantum appeal. However, the ITAT later deleted the penalty, leading to the present appeals.

The court noted that the penalty under Section 271(1)(c) can only be levied if the assessee has concealed particulars of income or furnished inaccurate particulars. The explanation to the section further clarifies that the penalty applies if the assessee fails to offer a bona fide explanation or fails to substantiate the explanation provided. The court emphasized that the burden of proof in penalty proceedings is different from that in assessment proceedings and that findings in assessment proceedings cannot automatically be adopted in penalty proceedings.

The court cited several judgments, including those of the Supreme Court, which established that penalty proceedings require fresh consideration of the material before the authorities and that the mere falsity of the explanation given by the assessee is insufficient to attract a penalty without additional cogent material or evidence.

In this case, the court found that the AO had not recorded any finding of incorrect, erroneous, or false return of income by the assessee. The AO had only doubted the genuineness of the gifts based on human probabilities, without properly appreciating the evidence provided by the assessee. The ITAT had recorded a finding that the identity of the donors, their creditworthiness, and the genuineness of the transactions were established, and the AO's doubts were not substantiated by tangible evidence.

2. Contradiction in Findings Regarding the Genuineness of the Gifts:
The second issue raised by the Revenue was that the ITAT's deletion of the penalty contradicted its findings in the quantum appeal, where the gifts were held to be designed to avoid tax. The Revenue argued that the findings in the quantum proceedings should be considered conclusive for the penalty proceedings. However, the court rejected this argument, reiterating that penalty proceedings require independent consideration of whether the assessee has concealed income or furnished inaccurate particulars.

The court referred to the Supreme Court's judgment in Anantharam Veersinghaiah and Company, which held that findings in assessment proceedings constitute good evidence in penalty proceedings but are not conclusive. The court also referred to the judgment in Dilip N. Shroff, which clarified that concealment of income and furnishing inaccurate particulars refer to deliberate acts by the assessee and that mere omission or negligence does not constitute concealment.

In this case, the court found that the AO had not provided any cogent material or evidence to establish that the assessee had consciously concealed income or deliberately furnished inaccurate particulars. The ITAT had analyzed the evidence provided by the assessee, including the statements of the donors, and found that the gifts were genuine. The court concluded that the Revenue had failed to establish that the assessee had concealed income or furnished inaccurate particulars, and therefore, no penalty could be imposed under Section 271(1)(c).

Conclusion:
The court dismissed the appeals, holding that the ITAT was justified in deleting the penalty imposed by the AO. The court found that the Revenue had failed to establish that the assessee had concealed income or furnished inaccurate particulars, and the penalty proceedings required independent consideration of the evidence. The question of law was answered in favor of the assessee and against the Revenue.

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