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TMI Blog2012 (3) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same as unexplained cash credits u/s 68. 2. The assessee in the present case is an individual who is engaged in the business of trading in cloths in the name and style of his proprietary concern M/s Shah Fabrics. The return of income for the year under consideration was filed by it on 25-10-2000 declaring total income of ₹ 1,77,350/-. During the course of assessment proceedings, the AO noticed that the assessee has introduced capital of ₹ 11,25,000/- in the year under consideration, source of which was claimed to be gifts received from 8 donors. The claim of the assessee of having received the said gifts was examined by the AO and on such examination, he found that all the donors were hardly of sufficient means to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to establish that the said gifts were arranged by the assessee by paying his own money. It was also submitted on behalf of the assessee that the addition made on account of alleged bogus gift in the assessment and partly sustained by the learned CIT(Appeals) has been challenged in an appeal filed before the Tribunal. The explanation of the assessee was not found acceptable by the AO. He held that to the extent of additions confirmed by the learned CIT(Appeals) in the quantum proceedings, it was properly proved that the gifts were bogus and were obtained on payment of premium. He held that the case of the assessee thus was covered by Explanation 1 to section 27(1)(c) and it was a fit case to impose penalty u/s 271(1)(c). Accordingly he impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus and added the entire amount of gifts to the total income of the assessee u/s 68 treating the same as unexplained cash credit on the ground that the donors had no financial capacity to give such gifts to the assessee. He also found that cash was deposited in the bank accounts of many donors just before giving cheques to the assessee towards gifts. It is observed that the total addition of ₹ 11,25,000/- made by the AO on account of bogus gifts, however, has been restricted initially by the learned CIT(Appeals) to ₹ 6,25,000/- and finally by the Tribunal to ₹ 3,50,000/- in the quantum proceedings accepting the remaining amount of gifts as genuine. Moreover, even if it has been alleged by the AO that the gifts were arra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed sources. In the case of CIT vs. Balbir Singh reported in 214 CTR 147, the Hon'ble Punjab & Haryana High Court has held that the amount allegedly received by the assessee as gift having been disclosed by him and the same having come through banking channels and the identity of the donor having been established, penalty u/s 271(1)(c) was not imposable even though the genuineness of gift was not accepted and the amount of gift was added to the total income of the assessee u/s 68. 6. Keeping in view the legal position emanating from the judicial pronouncements discussed above and having regard to the facts of the case, we are of the view that the present case is not a fit case to impose penalty u/s 271(1)(c) in respect of addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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