Income Tax Appellate Tribunal - Ahmedabad
Rajesh Mukundlal Shah, Baroda vs Department Of Income Tax on 3 April, 2006
IN THE INCOME TAX APPELLATE TRIBUNAL : C' BENCH : AHMEDABAD
(Before Hon'ble Shri T.K. Sharma, J.M. & Hon'ble Shri D.C. Agrawal, A.M.)
I.T.A. No. 1396/AHD./2006
Assessment Year : 2002-2003
Shri Rajesh Mukundlal Shah, Baroda -vs.- Income Tax Officer, Ward-5(4), Baroda
(PAN : AHCPS 7751 F)
(Appellant) (Respondent)
&
I.T.A. No. 1545/AHD/2006
Assessment Year : 2002-2003
Income Tax Officer, Ward-5(4), Baroda -vs.- Rajesh Mukundlal Shah, Baroda
Assessee by : Smt. Urvashi Shodhan
Department by : Shri M.C. Pandit, Sr. D.R.
ORDER
Per Shri T.K. Sharma, Judicial Member :
This cross appeal is against the order dated 03.04.2006 of Learned Commissioner of Income Tax(Appeals)-V, Baroda confirming the penalty of Rs.8,67,650/- being @125% of the tax sought to be evaded as against Rs.18,31,940/- levied by the A.O. under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2002-03.
2. Briefly stated the facts are that in the assessment order under section 143(3) framed on 28.02.2005, the A.O. made the following two additions :-
(i) addition on account of ceased liabilities Rs.45,56,635/- under section 41(1) of the Act
(ii) Addition on account of unexplained Rs. 2,32,705/-
addition in capital account under section 69 of the Income Tax Act, 1961 TOTAL Rs.47,89,340/-
Subsequently vide order dated 24.08.2005, the A.O. levied the penalty of Rs.18,31,940/- under section 271(1)(c) in respect of concealment of aforesaid income of Rs.47,89,340/-.
2ITA Nos. 1396 & 1545/AHD/2006
3. In appeal against the order of levying penalty, before the Learned Commissioner of Income Tax(Appeals) the assessee contended that out of addition of Rs.45,56,635/- made by the A.O. under section 41(1), addition to the extent of Rs.19,53,951/- was deleted. With regard to balance addition of Rs.26,02,684/- and addition of Rs.2,32,705/- made under section 69 of the Act, before the Learned Commissioner of Income Tax(Appeals) it was contended that on these two additions penalty under section 271(1)(c) is not leviable because neither the assessee concealed the particulars of income nor furnished inaccurate particulars thereof. Both these additions were made due to difference of opinion, complete facts were disclosed, therefore, penalty be deleted.
4. In the impugned order, the Learned Commissioner of Income Tax(Appeals) held that the assessee has concealed income of Rs.28,35,389/- (Rs.26,02,684/- + Rs.2,32,705/-). However, the Learned Commissioner of Income Tax(Appeals) held that penalty @ 125% of the tax sought to be evaded is excessive. Therefore, he confirmed the penalty of Rs.8,67,650/- being 125% to 100% of tax sought to be evaded on Rs.28,35,389/-. Aggrieved by this order of Learned Commissioner of Income Tax(Appeals) both sides are in appeal before us.
5. The only grievance of the assessee in its appeal is that the Learned Commissioner of Income Tax(Appeals) erred in confirming the penalty to the extent of Rs.8,67,650/- in respect of following two additions :-
(a) On account of alleged ceased liability u/s. 41(1) of I.T. Act......Rs.26,02,684/-
(b) Alleged unexplained addition to the capital u/s. 69 of the Act....Rs. 2,32,705/-
6. The only ground raised by the Revenue in its appeal is as under :-
"On the facts and in the circumstances of the case, the ld. C.I.T.(A) erred in reducing the penalty imposed u/s. 271(1)(c) from Rs.18,31,940/- to Rs.8,67,650/- on the ground that the addition relating to the balance amount of penalty was deleted by him, disregarding the fact that the deletion of this addition has been contested by the Department before the ITAT and the same also represents concealment just like the amount of addition confirmed".3
ITA Nos. 1396 & 1545/AHD/2006
7. At the time of hearing, on behalf of assessee Smt. Urvashi Shodhan appeared and produced a copy of the decision dated 08.01.2010 of Hon'ble ITAT, 'D' Bench, Ahmedabad in assessee's own case in ITA No. 424/AHD/2006 & 609/AHD/2006 for the assessment year 2002-
03. She pointed out that against the order of Learned Commissioner of Income Tax(Appeals) in quantum appeal, both sides filed appeals before the Tribunal. The Hon'ble ITAT, 'D' Bench vide order dated 08.01.2010 (supra) for the detailed reasons given in para 9.4 on pages 10 & 11 upheld the order of Learned Commissioner of Income Tax(Appeals) deleting the addition of Rs.19,53,951/- out of total addition of Rs.45,56,635/-. Further in this para itself, Tribunal has confirmed the balance amount of addition of Rs.26,02,684/-. Thus after the Tribunal's order, entire addition of Rs.45,56,635/- made by the A.O. under section 41(1) stands deleted. Therefore, mere the addition on which penalty under section 271(1)(c) was levied, itself deleted, there remains no basis at all for levying penalty. With regard to the addition to the extent of Rs.2,32,705/- confirmed by the Tribunal, the ld. counsel of the assessee pointed out that the A.O. made this addition because the assessee has not furnished the copy of Bank account of the donors for the month of October, 2001. The ld. counsel of the assessee further pointed out that in quantum appeal, the Learned Commissioner of Income Tax(Appeals) as well as Tribunal confirmed the said addition on the ground that (i) the assessee has not established the capacity of the donor, (ii) occasion on which the said gift was received, (iii) copy of Bank a/c. and proof thereof by furnishing I.T. return by the donor. She pointed out that the donor is not relative of the assessee and this addition has been made on account of difference of opinion, by disbelieving the explanation of the assessee, without finding it false, therefore, on this addition penalty under section 271(1)(c) is not leviable.
8. Shri M.C. Pandit, Sr. D.R. appearing on behalf of the Revenue fairly conceded that after the Tribunal's order, penalty under section 271(1)(c) is not leviable in respect of addition of Rs.45,56,635/- made by the A.O. under section 41(1) of the Income Tax Act, 1961. However, he contended that in respect of bogus gift, penalty is leviable because addition made is confirmed right upto the Tribunal. The ld. D.R. drew our attention to the reasoning given by the decision dated 08.01.2010 by the Tribunal for confirming the said addition of Rs.2,32,705/- in para 14.3 & 14.4 on pages 14 & 15 in quantum appeal and contended that penalty levied in respect of this addition is rightly confirmed by the Learned Commissioner of Income Tax(Appeals).
4ITA Nos. 1396 & 1545/AHD/2006
9. Having heard both the sides, we have carefully gone through the orders of authorities below. After the Tribunal's order in quantum appeal, penalty under section 271(1)(c) is not leviable in respect of addition of Rs.45,56,635/- made under section 41(1) of the Act.
9.1. With regard to the addition of Rs.2,32,705/-, which is confirmed by the Tribunal, we have carefully gone through the said order. The reasoning given by the Tribunal in pages 14 & 15 at paras 14.3 & 14.4. referred by the ld. D.R. is extracted below 14.3. In the present case, not only that the assessee failed to prove the creditworthiness of the person making the payment of such amount to the assessee. the AO and the ld. CIT(A) found that the gifts were not real in nature. Since the claim of gift is made by the assessee, the onus lies on him not only to establish the identity of the person making [he gift but also his capacity to make a gift and that it has actually been received as a gift from the donor. The genuineness of a gift transaction cannot be determined without looking into the aspect of human probabilities, relationship of donor and donee, occasion for making the gift and existence of reciprocity, if any. It means that while considering the genuineness of the gift transaction the above-mentioned aspects are of no less significance. Further, in case the assessee fails to establish anyone of these ingredients the gift amounts received by the assessee can be treated as assesee's income from undisclosed income representing assessee's own money, which was introduced in the garb of a gift by the assessee. Thus, keeping in mind these principles laid down for considering the genuineness of a gift transaction, we find that admittedly, Shri Sunil Patel was not related to the assessee. There is on record regarding either occasion of the gift or that the same were made on account of natural love and affection. It has not been explained before us as to why the donors parted with such huge amounts by gifting the assessee, when neither there was any occasion nor they were the assessee nor there was any reciprocity between them regarding exchange of such gifts. Now, the simple question which arises in mind is whether it is humanly probable that a person may give away his hard earned money, earned in foreign country, as a gift to an Indian acquaintance merely out of love and affection when that Indian is not related to him and that NRI donor has no occasion for giving the amount in gift. If we put this question to any human hawing a normal human behaviour the obvious answer_would be 'no'. Therefore, applying the test of human probabilities, as laid down by the Apex Court in their various decisions , the Assessing Officer was fully justified in coming to a conclusion that these were bogus gifts and thereby adding the same to the income of the assessee.
14.4. It is also well settled that mere identification of donor and showing the movement of gift amount through banking channel is not enough to prove genuineness of the gift. The assessee was required to establish that the donor had the means and the gift was genuine, for natural love and affection as held in the case of Lall Chand Kalra -vs.- CIT [1981] 22 CTR 135, Sajan Dass and Sons - vs.- CIT [2003] 264 ITR 435 (Del.), CIT -vs.- Durga Prasad More [1971] 82 ITR 540 (SC) and Sumati Dayal -vs.- CIT [1995] 214 TR 801 (SC) and recently 5 ITA Nos. 1396 & 1545/AHD/2006 in the case of Jaspal Singh -vs.- CIT (2006) 205 CTR (P&H) 624 : (2007) 290 ITR 306 (P&H) and in ACIT -vs.- Rajiv Tandon, 294 ITR SP 219 (Delhi). In view of the foregoing, we are of the opinion that the assessee failed to discharge the burden which lay upon him to prove the genuineness of the gifts and capacity of the donor".
10. It is well settled law that confirmation of addition of Tribunal does not mean concealment or inaccurate particulars of income within the meaning of section 271(1)(c). In respect of gift, the assessee has proved the identity but could not prove the capacity of donor to the satisfaction of A.O. as well as appellate authorities. The addition is confirmed looking into the aspect of human probabilities, relationship of donor and donee, occasion for making the gift and existence of reciprocity. The assessee has furnished the explanation. Therefore, he has discharged his onus and rebutted the presumption available to revenue under Explanation1 to section 271(1)(c). The explanation given by the assessee again cannot be regarded to be false until and unless revenue proves that explanation given by the assessee is false. In the case of National Textiles -vs.- CIT [2001] 249 ITR 125] (Guj.) the question before the Hon'ble Gujarat High Court was about the levy of penalty u/s. 271(1)(c) in respect of addition made u/s. 68 by recourse to Explanation 1 below section 271(1)(c).
11. Explanation 1 to section 271(1)(c) provides that an amount added or disallowed in computing the total income of a person falling under clause (A) or (B) of Explanation 1 refers to two situations in which presumption of concealment created by Explanation 1 is available. The first situation is where the assessee, in respect of any facts material to the computation of his total income, fails to offer an explanation or offers an explanation which is found by the A.O. or the Commissioner to be false. The second situation is where the assessee, in respect of any facts material to the computation of his total income, offers an explanation which he is able to substantiate and also fails to prove that such explanation was bonafide and that all the facts relating to the computation of total income have been disclosed by him. The prescription available under Explanation 1 cannot be drawn unless the case of the assessee falls under either of the clauses, viz. clause (A) or clause(B).
The presumption under Explanation 1 is rebuttable and not conclusive. The assessee can submit the explanation as the onus shifted on the assessee to prove that he has not concealed the 6 ITA Nos. 1396 & 1545/AHD/2006 particulars of the income. In this case, the Hon'ble Gujarat High Court in the case of National Textiles (supra) while holding lie imposition of penalty was not justified observed :_ "In order to justify the levy of penalty, two factor must co-exist, (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessed income. It is not enough for the purpose of penalty that the amount has been assessed as income, and (ii) the circumstances must show that there was animus, i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation 1 to section 27l(1)(c) has no bearing on factor No. 1 but has a bearing only on factor No 3. The Explanation does not make the assessment order I conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount (does not represent concealed income with the hypothesis that it does. If the assesses gives an explanation which is unproved but not disproved. i,e. it is not accepted but circumstances do not lead to the reasonable and positive inference that the assesses ease is false, the Explanation cannot help the Department because there will be no, material to show that the amount in question was the income of the assessee. Alternatively, treating the Explanation as dealing with both the ingredients (i) and (ii) above, where the circumstances do not lead to the reasonable and positive inference that the assessee's explanation is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his pan. liven in this view of the matter the Explanation alone can not justify levy of penalty, Absence of proof acceptable to the Department cannot he equated with fraud or willful default."
12. From the above discussion, it is clear that when addition is made on account of cash credit/ gift, penalty under section 271(1)(c) cannot automatically be imposed unless the explanation of the assessee is found false. In this case, the addition has been made merely on the ground that the addition is confirmed by the appellate authority, in our opinion is not a ground to levy the penalty under section 271(1)(c). We, therefore, hold that no penalty under section 271(1)(c) is leviable.
13. In the result, the appeal of the assessee is allowed and the appeal of the Revenue is dismissed.
The Order was pronounced in the Court on 18.02.2010
Sd/- Sd/-
(D.C. Agrawal) (T.K. Sharma)
Accountant Member Judicial Member
DATED : 18/ 02 / 2010
7
ITA Nos. 1396 & 1545/AHD/2006
Copy of the order is forwarded to :
1) The Assessee
(2) The Department.
3) CIT(A) concerned, (4) CIT concerned, (5) D.R., ITAT, Ahmedabad.
True Copy By Order Deputy Registrar, ITAT, Ahmedabad Laha/Sr.P.S.