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TMI Blog2019 (8) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... tted on 16.11.2016 on the following question of law:- "(A) Whether on the facts and circumstances of the case, the Hon'ble ITAT, New Delhi is legally justified in deleting the penalty of Rs. 75,76,441/- imposed by the AO ignoring the quantum appeal which had been confirmed by the Ld. CIT(A) as well as the ITAT, New Delhi on which the penalty was imposed. (B) Whether on the facts and circumstances of the case, the ITAT has not erred in law in deleting the penalty of Rs. 75,76,441/- imposed by the AO contradicting their findings in deciding the quantum appeal that the whole transaction was designed to show huge amounts as gifts without any liability of paying taxes." 3. Income Tax Appeal No. 276 of 2015 for the assessment year 2000-01 is being treated as leading case. The brief facts of the case are that under Section 132 of the Act, search and seizure was conducted on the business premises of the persons related to Begum Gutkha Group on 09.12.2003. During course of search and seizure, various books of accounts and other documents were found and seized. In response to notice under Section 153-A of the Act, the assessee filed a letter on 23.02.2007 stating that his original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order clearly demonstrated the gifts to be a sham transaction and the said finding has been upheld by the CIT holding these transactions being designed to avoid payment of tax. It was also contended that the order of the assessing authority, First Appellate Tribunal was confirmed by the Tribunal, imposition of tax under Section 68 of the act and the findings given therein had become final and further no appeal was filed by the assessee. 8. The second limb of argument of the counsel for the Revenue is that order impugned passed by the Tribunal setting aside the penalty, in fact is an order passed by Tribunal as if it was sitting in appeal against the order of the Tribunal in the quantum proceedings. It has also been submitted that the findings of original assessment proceedings are good item of evidence in penalty proceeding, and when that is the case that the finding of creation of a malicious design, on the part of the assessee, would clearly be a relevant evidence and has to be taken into account while passing the penalty order. He further laid stress that Tribunal has made fresh inquiry and set aside the finding given by the Tribunal itself in quantum proceedings and rejected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden to prove resting on the revenue, to ascertain whether a particular amount is a revenue receipt. No doubt, the fact that the assessment order contained a finding that the disputed amount represents income constitutes good evidence in the penalty proceeding but the finding in the assessment proceeding cannot be regarded as conclusive for the purposes of the penalty proceeding. That is how the law has been understood by this court in Anwar Ali's Case [1970] 76 ITR 696 (SC), and we believe that to be the law still. It was also laid down that before a penalty can be imposed the entirety of the circumstances must be taken into account and must point to the conclusion that the disputed amount represents income and that the assessee has consciously concealed particulars of his income or deliberately furnished inaccurate particulars. The mere falsity of the explanation given by the assessee, it was observed, was insufficient without there being in addition cogent material or evidence from which the necessary conclusion attracting a penalty could be drawn.These principles were reiterated by this court in CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369." 12. He further relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en considering the said explanation in the light of penalty proceedings. It was further submitted that the explanations had not remained unsubstantiated and further it can also not be held that explanation was not bona fide as prescribed in explanation to Section 271(1)(c) of the Act. 16. A decision of this Court in case of CIT vs. Sonali Jain, IT Appeal No. 88 of 2008 has been relied upon, wherein this Court held in Para Nos. 16 and 17 as under:- "16. In view of above, neither the assesseerespondent failed to furnish any explanation regarding the material facts for computation of her income nor the explanation so furnished by her was false. At least there is no finding to this effect. At the same time, the assessee-respondent having surrendered the above gifts as part of her income just in order to buy peace of mind, may be on realising that she may also be ultimately affected by the racket of gift deeds busted by the department without any such thing being deducted in respect of her return or gifts, cannot be said to have failed to prove or substantiate her explanation regarding the to be bona fides of the two transactions. 17. Accordingly, the assessee is not a person who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading of Section 271(1)(c), it is clear that that the said provisions contemplate for levy of penalty where two conditions are satisfied, that the assessee has concealed particulars of his income or has furnished inaccurate particulars of such income thus, concealment of income and furnishing of inaccurate particulars of income are two basic ingredients for the initiation of proceedings for penalty under the relevant section. The explanation further provides, where any such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner to be false or such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof was for the purpose of Clause (c) of this Sub-section, be deemed to represent the income in respect of which particulars have been concealed. 20. The Apex Court while considering the case CIT Madras v. Khoday Eswarsa and Sons [1972] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either for the purpose of concealment of income or furnishing of inaccurate particulars. 50. The term "inaccurate particulars" is not defined. Furnishing of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the Explanations are taken recourse to, a finding has to be arrived at having regard to clause (A) of Explanation 1 that the assessing officer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income. 51. The explanation, having regard to the decisions of this Court, must be preceded by a finding as to how and in what manner he furnished the particulars of his income. It is beyond any doubt or dispute that for the said purpose the Income Tax Officer must arrive at a satisfaction in this behalf. [See ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings the taxing authorities have to independently arrive at a finding regarding the 'concealment of income' or of 'inaccurate particular'. 25. 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. The Assessing Officer 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 Assessing Officer 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. 26. Instant case, is not a case of either concealment of income or of furnishing inaccurate particulars as n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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