2016 (5) TMI 878 - AT - Income Tax

Penalty under section 271(1)(c) - non genuineness of the gift - Held that - The assessee had not during the penalty proceedings filed any explanation about the genuineness of the gift. The FAA surprisingly states that the AO had not made any new material or did not make inquiries. In our opinion he was shifting the burden of proof from the assessee to the AO. We agree that assessment and penalty proceedings are different proceedings but it does not mean that the assessee is absolved of filing an explanation rather a plausible explanation about the claims made by him in the return that have been questioned by the AO. Explanation 1 to Sec. 271(1)(c) of the Act raises a presumption of concealment when a difference is noticed by the AO between the reported and assessed income. The burden is then on the assessee to show otherwise by cogent and reliable evidence. The Hon ble Supreme Court in MAK Data (P. ) Ltd. s case (2013 (11) TMI 14 - SUPREME COURT) has held that the assessee should first show by cogent and reliable evidence that there was neither concealment of particulars of income nor furnished inaccurate particulars of income. Because of the failure of the assessee to file cogent and reliable evidence we are of the opinion that the order of the FAA has to be reversed. Secondly penalty proceedings are not criminal in nature and the rationale behind the provisions of section 271(1)(c)of the Act is to compensate the State exchequer for the revenue loss caused due to commission or omission of an assessee. In the case before us the assessee has tried to deprive the State by showing taxable income as not taxable in the garb of Gift. Such an action justifies invoking of the provisions of section 271(1)(c)of the Act. - Decided in favour of revenue

Issues Involved:

1. Condonation of delay in filing cross objections.
2. Addition of income under the head unproved gift.
3. Levy of penalty under Section 271(1)(c) of the Income Tax Act for filing inaccurate particulars of income.
4. Distinction between assessment proceedings and penalty proceedings.

Detailed Analysis:

1. Condonation of Delay in Filing Cross Objections:

The assessee filed a petition for condonation of delay in filing cross objections, stating that she was advised by her husband in tax matters and later by her CA to file the objections. The petition, accompanied by an affidavit, was considered by the Tribunal. The Department Representative left the issue to the discretion of the Bench. The Tribunal found a delay of 150 days but condoned it, considering the totality of facts and circumstances, and opined that there was reasonable cause for not filing the cross objections in time.

2. Addition of Income Under the Head Unproved Gift:

During the assessment proceedings, the AO found that the assessee declared an income of Rs. 28.71 lakhs and received a gift of Rs. 30 lakhs from an unrelated donor, Mrs. Chandra Hingorani. The AO added Rs. 30 lakhs to the total income under unproved gift and Rs. 1 lakh for low household expenses. The First Appellate Authority (FAA) dismissed the assessee's appeal. The Tribunal upheld the FAA's order, confirming the addition under Section 68 of the Act, as the gift was not genuine and lacked the element of love and affection, which are essential for a valid gift.

3. Levy of Penalty under Section 271(1)(c) of the Income Tax Act:

The AO issued a notice for levying penalty under Section 271(1)(c) for filing inaccurate particulars of income. During penalty proceedings, the assessee's representative argued that the donor's identity and creditworthiness were established, and the transaction was genuine. However, the AO held that the assessee failed to provide a plausible explanation for not levying the penalty. The AO referred to case laws and concluded that the assessee concealed particulars of income. The FAA, however, held that the AO did not make further inquiries during penalty proceedings and that the assessee's case was covered by the Supreme Court's decision in Reliance Petro Products Private Limited. The FAA concluded that the AO was not justified in levying the penalty.

4. Distinction Between Assessment Proceedings and Penalty Proceedings:

The Tribunal emphasized that penalty proceedings are distinct from assessment proceedings. It noted that the FAA incorrectly shifted the burden of proof from the assessee to the AO. The Tribunal highlighted that the assessee must provide a plausible explanation for the claims made in the return. The Tribunal referred to Explanation 1 to Section 271(1)(c), which raises a presumption of concealment when there is a difference between reported and assessed income. The initial burden is on the assessee to provide cogent and reliable evidence, failing which the penalty provisions apply. The Tribunal reversed the FAA's order, holding that the FAA was not justified in deleting the penalty. The Tribunal also referred to the Supreme Court's decision in MAK Data (P.) Ltd., emphasizing that the assessee must show reliable evidence to avoid penalty.

Conclusion:

The Tribunal allowed the appeal filed by the AO and dismissed the cross objections by the assessee. The Tribunal held that the FAA was not justified in deleting the penalty and emphasized the importance of providing a plausible explanation and reliable evidence to avoid penalty under Section 271(1)(c) of the Act. The Tribunal's decision was pronounced in the open court on 18th May, 2016.

← Previous Next →