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TMI Blog2014 (10) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... iends and it cannot be said that natural love and affection remains only between blood relations and not between the friends - There is no salary income from the assessee or no business income from any business in which assessee is also connected - one family giving gift to another family year after year, it can be said to be against human probabilities, but that may not be sufficient to hold the assessee guilty of concealment of income or furnishing of inaccurate particulars. If the details supplied by the assessee in the return of income are found to be incorrect, erroneous or false, then only it can be said that the assessee has furnished inaccurate particulars of income so as to make him liable for penalty u/s 271(1)(c) of the Act - the copy of the income tax returns of the donors and the statements of the donors, the AO has not pointed out any of the details furnished by the assessee to be incorrect, erroneous or false - The AO has not accepted the gift by doubting the creditworthiness of the donors and the genuineness of the transactions. So far as Assessing Officer’s finding that the capacity of the donors is not proved is concerned, that finding was factually incorrect and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee stated that for AY 1999-2000, the penalty sustained is a small sum of ₹ 67,193/-. Though the assessee does not accept any concealment of income by him, but, due to smallness of the penalty sustained, does not want to pursue the appeal for AY 1999-2000. He also stated that the facts of AY 1999-2000 are altogether different than the facts in all the subsequent years and, therefore, the outcome of the assessee's appeal for AY 1999-2000 will have no bearing on the subsequent years' appeals. He, therefore, submitted that the assessee's appeal for AY 1999-2000 may be treated as not pressed. 4. Accordingly, the assessee's appeal for AY 1999-2000 is dismissed as not pressed. 5. With regard to AY 2000-01 to 2005-06, it is submitted by the learned counsel that the facts in all the years are almost similar and, therefore, if the appeal of the assessee as well as of the Revenue for AY 2000-01 is decided, it will take care of the remaining years. Learned DR also agreed that the facts of all the years from AY 2000-01 to 2005-06 are more or less similar. We, therefore, proceed to decide the assessee's as well as Revenue's appeals for AY 2000-01 first. 6. The facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing not satisfied with the replies of the assessee, the addition was made by the AO and the same was confirmed by CIT(A), against which assessee is in further appeal before us with respect to the various additions made in the hands of different assessees on account of gifts received by them. From the details of the facts brought on record by the AO it is very clear that the assessee is in the habit of showing gifts in large sums in his name and in the hands of other family members. It has been conclusively established by the AO that the two donors by name Sh. Naresh Jain and Sh. Anil Jain are only a neighbours without any relationship with the family of the appellant. It is totally unimaginable to think that the neighbours could give millions of rupees to unknown persons without any consideration. Gifts usually flow from close blood relations and childhood friends. That too only on an important occasions. Mostly these gifts are prevalent among relations and they are reciprocal in nature. Most of these gifts are in kind and cash gifts do exists but they are in small denomination. Seldom we see huge sums of lands of rupees as gifts especially to minors. In this case the appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al amounts not associated with any occasion from relatively unknown persons in successive years defies any amount of logic. As discussed in preceding paras the whole transaction is designed to show huge amounts as gifts without any liability of paying taxes. The findings so recorded by the lower authorities could not be controverted by the learned AR by bringing any material, much less a cogent material so as to persuade us to deviate from the alleged finding. We therefore do not find any reason to interfere in the order of the lower authorities in respect of the addition made on account bogus gifts. In the result, the grounds taken by all the assessees with regard to gifts in various years, are being dismissed." 8. The Assessing Officer levied penalty under Section 271(1)(c) vide order dated 26.02.1010 at ₹ 75,66,441/- which was 150% of the tax sought to be evaded. On appeal, learned CIT(A), vide order dated 23.12.2010, sustained the penalty at 100% of the tax sought to be evaded. Both the parties, aggrieved with the order of learned CIT(A), are in appeal before us. The Revenue, vide ITA No.1350/Del/2011 is in appeal for reduction of the penalty from 150% to 100% while the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been accepted. However, the financial capacity of the donors is in crores and their income is also in crores and these evidences were placed before the Assessing Officer as well as ITAT. Therefore, the decision of the ITAT on which the Assessing Officer has relied upon while levying the penalty is based upon incorrect facts. However, when a query was asked by the Bench whether the assessee had filed the appeal or the miscellaneous application against the order of the ITAT, it is stated by the learned counsel that, unfortunately, not. He further stated that in any case, the dispute before the ITAT is with regard to the levy of penalty under Section 271(1)(c) i.e., whether the assessee can be said to be guilty of the concealment of income or furnishing of inaccurate particulars. He stated that the Assessing Officer has levied the penalty on the ground that the assessee has furnished inaccurate particulars of its income. It is stated by the learned counsel that the assessee and his minor sons had received the gifts by cheque and he had produced the confirmation of the donor, affidavit of the donor, declaration of gift, bank account of the donor, income tax return of the donor and more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing decisions:- (i) Jubilant Biosys Ltd. Vs. ITO - [2014] 032 ITR (Trib) 0343 (ITAT- Del). (ii) DCIT Vs. Jubilant Enpro P.Ltd. - [2014] 032 ITR (Trib) 0702 (ITAT- Del). (iii) CIT Vs. Splender Construction - [2013] 352 ITR 0588 (Del). (iv) Chadha Sugars P.Ltd. Vs. ACIT - [2012] 017 ITR (Trib) 0316 (ITAT- Del). (v) ACIT Vs. Kanchenjunga Advertising P.Ltd. - [2011] 010 ITR (Trib) 0649 (ITAT-Del). (vi) CIT Vs. Zoom Communication P.Ltd. - [2010] 327 ITR 0510 (Del). (vii) CIT Vs. Escort Finance Ltd. - [2010] 328 ITR 0044 (Del). (viii) CIT Vs. Harparshad and Company Ltd. - [2010] 328 ITR 0053 (Delhi). (ix) Ajay Jain Vs. ACIT - [2013] 021 ITR (Trib) 0041 (ITAT-Delhi). (x) ACIT Vs. Dinesh Goel - [2011] 010 ITR 0330 (ITAT-Delhi). (xi) Microsoft Corporation (India) P.Ltd. Vs. DCIT - [2011] 008 ITR (Trib) 0058. 11. In the rejoinder, it is stated by the learned counsel that there is no law that gift can be given only by the persons related by blood. It has already been explained that the family of the assessee and the family of the donors are known to each other from decades and from the time of their parents. In support of this contention, he relied upon the following decisions:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion that the respondent had concealed its income or that it had furnished deliberately inaccurate particulars. Against the order of the ITAT, the assessee filed application before the High Court of Mysore which was rejected and the Revenue's appeal to the Apex Court was also dismissed. While dismissing the Revenue's appeal, their Lordships at page 376 and 377 of ITR 83 held as under:- "No doubt the original assessment proceedings, for computing the tax may be a good item of evidence in the penalty proceedings but the penalty cannot be levied solely on the basis of the reasons given in the original order of assessment. In the case before us we have already pointed out that in the order levying penalty the Income-tax Officer has categorically stated that the reasons for adding the disputed amounts in the total income of the assessee have been already discussed in the original order of assessment and that they need not be repeated again. The Appellate Assistant Commissioner, we have already pointed out, has made only a guess-work. That clearly shows that except the reasons given in the original assessment order for including the disputed items in the total income, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation indicated that the said section has been enacted to provide for the remedy for loss of revenue. The penalty under the provisions is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability. In view of the facts discussed above, I hold that by showing its taxable income as gifts and claiming it to be exempt in its return of income, the assessee has furnished inaccurate particulars and has concealed particulars of its income amounting to ₹ 1,52,00,000/- under the provisions of section 271(1)(c) and that penalty is imposable under the provisions of section 271(1)(c) in this case." 17. From the above, it is evident that the Assessing Officer had levied the penalty mainly on the ground that the assessee has shown its taxable income as gifts and claiming it to be exempt in its return of income. Thus, the assessee has furnished inaccurate particulars of his income amounting to ₹ 1,52,00,000/-. Before proceedings to the facts of the assessee's case, it would be appropriate to refer the decision of Hon'ble Apex Court in the case of Reliance Petroproducts (supra) relied upon by the learned counsel. In the above decision, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure as well as income in its return, viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature." (emphasis by underlining supplied by us) 18. From the above decision, it would be evident that the assessee would be said to have furnished inaccurate particulars of income if the details supplied by the assessee in the return were found to be incorrect or erroneous or false. Let us examine the facts of the assessee's case whether the details furnished by the assessee in the return of income were found to be incorrect, erroneous or false. In the return of income, it is claimed that the assessee and his minor sons together received the gift of ₹ 1,52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectness of the assessee's claim, the Assessing Officer asked the assessee to produce Shri Naresh Jain and Shri Anil Jain. Both were produced before the Assessing Officer and their statements were recorded. Both of them have affirmed having given gifts to the assessee or his minor sons and have also explained their relationship with the assessee and his family. It would be appropriate to reproduce the relevant portion of their statements. The statement of Shri Naresh Jain recorded by the Assessing Officer on 1st May, 2007 reads as under:- "Question 1 : Please identify yourself ? Answer 1 : I am Naresh Jain S/o Shri Shori Lal Jain having PAN AAIPJ3097J. Question 2 : What are your sources of income? Answer 2 : I derive income from these properties 1. E-39 Kamla Nagar 2. 6929 Subji Mandi 3. 2216 H.S. Road, Karol Bagh I have income from business as prop. of M/s Fashion Emporium 65 Janpath besides income from FDR & Savings a/c. I am also prop. of M/s Navkar Enterprises. Question 3 : Do you assessed to tax? Answer 3 : I am assessed to tax with ACIT Circle 31(1) New Delhi. Question 4 : Have you filed return of income up to date including for AY 1999-2000 to AY 2004-05. Answer 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration in lieu of the above gift? Answer 13 : No Question 14 : You accepted that gift was made to Dinesh Jain and his son, but how verbally or otherwise? Answer 14 : An affidavit, gift letter as confirmation thereof was given and gift was accepted by Sh. Dinesh Jain." 20. From the above statement of Shri Naresh Jain, it is evident that Shri Naresh Jain is the proprietor of two enterprises viz., M/s Fashion Emporium and M/s Navkar Enterprises. Besides income from proprietorship business, he derives income from FDRs and also rental income from house property. He is assessed to income tax year after year and submitted the copy of his income tax return along with the computation before the Assessing Officer. He maintained bank accounts with several banks, details of which is given to the Assessing Officer. He explained how he knew the family of the assessee i.e. Shri Dinesh Jain. He affirmed the gift given by him to the minor sons of the assessee. He also explained the source of the gift and the reason for giving the gift to assessee's sons. Thus, the assessee's claim in the return of income that his sons received the gift from Shri Naresh Jain is supported by various docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ources of income? Ans. I get income from property, business & interest from bank deposits & saving bank a/c. Ques 3. Are you assessed to tax. If yes, give details. Ans. I am assessed to tax with I.T.O. Ward 20(1), New Delhi PAN AAFPJ3129A. Ques 4. Since when you are in business or started earning? Ans. Since more than 17 years as proprietor and prior to that since 1975 I was in business of readymade garments at Janpath with my father (expired). I become partner in Manidhari Exports, other partner is my wife Smt. Rashmi Jain since 1994. Ques 5. Please give particular of firm, companies or proprietorship concern where you are interested as proprietor, partner, director etc. Ans. I am proprietor of M/s Stylewears 91 Janpath Market, New Delhi. I am also partner in the M/s Manidhari Exports W109 Kamla Nagar, Delhi. I am also director in M/s Paramount Town Planners Pvt.Ltd. G-36 Connaught Place, New Delhi (1st floor) since 1996-97 approx. Ques 6. Do you maintain bank a/c or bank a/cs and if so please give details. Ans. I have following bank a/c maintained in my name and are being operated by me. 1. Bank of Baroda, Shakti Nagar S.B. A/c 102996 2. Citi Bank Jeevan Bharati Build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lped my father in the establishment in business in sixties. My father desire that the gift should be made to grand children of Shri Prakash Chand Jain, which I immediately agreed and made gifts by cheques in Sept 1999 as under:- Mudit Jain ₹ 50 lacs Mayank Jain ₹ 50 lacs Namit Jain ₹ 45 lacs Ques 14. Did you execute any gift deed in favour of the donees referred to above? Ans. To the best of my knowledge gift deeds were signed by me at Delhi and it was in the form of memorandum of gifts or affidavit, gift letter duly accepted by Shri Dinesh Jain father and natural guardian of the donnes and also confirmation given by me for making gifts. Ques 15. Do you maintain any personal account? Ans. No accounts are maintained by the firm and proprietary concerns. The bank accounts in my name are properly reflected in my return of income wherein the interest on saving bank account and FDR is declared as would be noted from the computation sheet enclosed with return of income, the copies of which are submitted. Ques 16. What was the nature and source of making gifts to the above donees? Ans. The gifts were made by cheques drawn on my saving bank account with Citi Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to their Guruji together. In reply to question No.12, he gave the details of the gift given by him to the minor sons of the assessee. In reply to question No.14, he stated that in support of the gift, gift deed was signed by him and affidavit etc. were also given by him. None of the facts stated in the above statement were found to be erroneous, incorrect or false by the Assessing Officer. On the other hand, the details furnished by him in the form of his copy of income tax returns for four years corroborates the statement given by him. From his income tax return, it is evident that his rental income was ₹ 12,52,335/-. His income from bank interest was ₹ 50,86,571/-, income from partnership firm is exempt and his returned income was ₹ 64,58,000/-. From his balance sheet as on 31st March, 2000, it is evident that his opening capital balance was ₹ 11.73 crores, income during the year under consideration was ₹ 1.24 crores, total withdrawal including the withdrawal for gifts was ₹ 3.06 crores and the balance capital as on 31st March, 2000 was ₹ 9.91 crores. From the assets side, there is immovable property at ₹ 1.55 crores, investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason given by the Assessing Officer was that the gift was given without natural love and affection. From the statement of the donors, it is evident that the donors are close family friends and it cannot be said that natural love and affection remains only between blood relations and not between the friends. The third point taken by the Assessing Officer was that the gifts are given by the persons who are connected with the business or were in the employment of the family of Shri Dinesh Jain. This ground taken by the Assessing Officer is contrary to the facts on record because we have seen the statement of Shri Naresh Jain and Shri Anil Jain. Both of them have denied any business connection with the assessee. We have also seen their computation of income for AY 2000-01. There is no salary income from the assessee or no business income from any business in which assessee is also connected. Shri Naresh Jain had income from two proprietorship firms while Shri Anil Jain has income from one proprietorship firm and one partnership firm. In the said partnership firm, the assessee has no interest. The fourth point taken by the Assessing Officer is that the donors had strangely borrowed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to have furnished inaccurate particulars of income or have concealed the income so as to make him liable for penalty under Section 271(1)(c). Hon'ble Apex Court in the case of Dilip N. Shroff (supra) have held that the burden of proof in penalty proceedings varies from that in assessment proceedings. A finding in the assessment proceedings that a particular receipt is income cannot automatically be adopted in penalty proceedings. In view of the above decisions of Hon'ble Apex Court, we have examined the facts of the assessee's case in the light of the decision of Hon'ble Apex Court in the case of Reliance Petroproducts (supra), wherein their Lordships have defined the meaning of the phrase "furnishing of inaccurate particulars of income". Their Lordships of the Apex Court have held that if the details supplied by the assessee in the return of income are found to be incorrect, erroneous or false, then only it can be said that the assessee has furnished inaccurate particulars of income so as to make him liable for penalty under Section 271(1)(c) of the Act. After considering the details furnished by the assessee, the copy of the income tax returns of the donors and the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, we have relied upon the principles laid down by the three decisions of the Hon'ble Apex Court and no contrary decision of Hon'ble Apex Court is pointed out before us. Therefore, for the sake of brevity, we are not discussing in detail the facts and the ratio laid down in the decisions relied upon by the learned DR so as to point out how they are distinguishable on facts. 28. In view of the above, we are of the opinion that the learned CIT(A) was not justified in sustaining the penalty at 100% of the tax sought to be evaded. Accordingly, the penalty levied by the Assessing Officer under Section 271(1)(c) of the Act is cancelled. 29. It was submitted by both the parties at the time of hearing before us that the facts in all the subsequent years are similar and therefore, whatever is the outcome of their arguments for AY 2000-01, would be applicable to the subsequent years. Therefore, for the detailed discussion above for AY 2000-01, we hold that the levy of penalty for the remaining assessment years, i.e., AY 2001-02 to 2005- 06, was also not justified. The same is cancelled. 30. In the result, the appeal of the assessee for AY 1999-2000 is rejected, for AY 2000-01 to 2005-06 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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