2016 (7) TMI 244 - AT - Income Tax

Penalty u/s 271(1)(c) - inaccurate particulars of income by claiming expenses of inadmissible in nature and not showing income under proper head of income - Held that - In assessment year 2002-03 we find that the assessee has claimed in the return of income that he has inherited this capital from his mother Smt. Sajjanbai. The assessee has added this amount in his capital account. The AO and the ld. CIT(A) has confirmed the same but the I.T.A.T. has restricted this addition and this capital was inherited from his mother. We find that the assessee has disclosed the entire facts before the authorities and the assessee has made the claim in his return of income and it was his bona fide claim. The Tribunal has accepted the claim that the assessee has claimed Rs. 5, 49, 542/- but the Tribunal has restricted the above addition to Rs. 2, 99, 542/-. Therefore we are of the view that the assessee could not prove the claim that he has carried forward the amount and he has inherited this capital from his mother. The assessee could not prove that he has inherited Rs. 5, 49, 542/- but the Tribunal has accepted the fact that the assessee has inherited the capital from his mother. Therefore we are of the view that the assessee has made his claim in his return of income and explained the facts. The same were not accepted by the authority but the assessee s claim was bona fide. Therefore the claim has been accepted partly. Therefore we are of the view that no penalty can be levied on this account. Therefore we delete the penalty. Interest expenses claim in return of income - Held that - In assessment years 2003-04 and 2004-05 we find that the assessee during the course of assessment proceedings has conceded that it was his mistake that he has claimed certain expenses which are inadmissible in nature and he agreed to include such expenses in its total income. We find that the AO and CIT(A) is justified in imposing the penalty because the assessee had agreed to this addition and surrender was made. When the assessee has surrendered this income penalty has to be levied as per the decision of Hon ble Supreme Court in the case of Mak Data Private Limited 2013 (11) TMI 14 - SUPREME COURT . Therefore if the assessee agreed to surrender the income for mental peace the penalty has to be imposed. Therefore we confirm the order of the penalty on account of bogus expenses against interest income from M/s.Tirupati Starch & Chemicals Limited. Receipt of gift from Shri Nitish Patni and Shri Vinod Bangar - Held that - As during the course of assessment proceedings it is established that the assessee has received the gifts from two persons but the gift was not genuine and it was proved beyond doubt that the gifts were bogus. Therefore when the claim of the assessee is bogus the assessee is liable for the penalty. Therefore we confirm the penalty in respect of gifts.

Summary

Issues Involved:
1. Penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income.
2. Treatment of interest income and related expenses.
3. Treatment of inherited capital from a deceased mother.
4. Validity of gifts received and their genuineness.
5. Time-barred penalty proceedings under Section 275(1)(a).

Detailed Analysis:

1. Penalty Proceedings under Section 271(1)(c) for Furnishing Inaccurate Particulars of Income:
The appeal concerns the imposition of penalties under Section 271(1)(c) for furnishing inaccurate particulars of income. The assessee had claimed certain expenses which were found inadmissible and not deductible from the income received. The penalty was initiated after the assessment proceedings revealed that the assessee had submitted inaccurate particulars of income by claiming inadmissible expenses.

2. Treatment of Interest Income and Related Expenses:
The assessee received interest income from Tirupati Starch and Chemicals Limited, which was treated as income from other sources. The assessee had claimed expenses against this interest income, reflecting losses. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] found these claims inadmissible, leading to the initiation of penalty proceedings. The assessee admitted his mistake during the penalty proceedings and agreed that the expenses claimed were inadmissible. The AO and CIT(A) held that the assessee had submitted inaccurate particulars of income.

3. Treatment of Inherited Capital from a Deceased Mother:
For the assessment year 2002-03, the assessee claimed an inherited capital of Rs. 5,49,542 from his deceased mother, Smt. Sajjanbai. The AO and CIT(A) confirmed the addition, but the Income Tax Appellate Tribunal (ITAT) restricted the addition to Rs. 2,99,542. The ITAT found that the assessee had disclosed all facts and made a bona fide claim, although it was not fully accepted by the authorities. Consequently, the penalty on this account was deleted.

4. Validity of Gifts Received and Their Genuineness:
In the assessment year 2004-05, the AO imposed a penalty on the ground that the assessee had received gifts of Rs. 1,00,000 each from Shri Nitin Patni and Shri Vinod Bangar. During the assessment proceedings, Shri Vinod Bangar admitted that he did not have the capacity to give such a gift, and Shri Nitin Patni did not appear. The AO concluded that the gifts were not genuine and levied penalties accordingly. The ITAT confirmed the penalty, stating that the assessee could not prove the genuineness of the gifts.

5. Time-Barred Penalty Proceedings under Section 275(1)(a):
The assessee argued that the penalty proceedings were time-barred under Section 275(1)(a). The CIT(A) had passed the order on 25/06/2010, and the AO initiated penalty proceedings on 16/04/2012, passing the penalty order on 21/05/2012. The ITAT found that the penalty order was beyond the period of limitation, which should have expired on 31st March 2011. Therefore, the penalty order was deemed time-barred and invalid.

Conclusion:
- Assessment Year 2002-03: The penalty for the opening balance of inherited capital was deleted as the claim was bona fide, though not fully accepted.
- Assessment Years 2003-04 and 2004-05: The penalties for claiming inadmissible expenses against interest income were confirmed, as the assessee admitted the mistake and surrendered the income.
- Assessment Year 2004-05: The penalty for the bogus gifts was confirmed, as the assessee could not prove the genuineness of the gifts.
- Time-Barred Penalty Proceedings: The penalty order was found to be time-barred and invalid under Section 275(1)(a).

The ITAT allowed the appeal for the assessment year 2002-03 and dismissed the appeals for the assessment years 2003-04 and 2004-05.