Income Tax Appellate Tribunal - Delhi
Her Narain Aggarwal, vs Department Of Income Tax on 28 February, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'C': NEW DELHI
BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER &
SHRI K.D. RANJAN, ACCOUNTANT MEMBER
ITA no. 2252/Del/2007
Assessment Year : 2004-05
ACIT, Shri Harnarain Aggarwal,
Central Circle - 14, A-8, Bhagwan Das Nagar,
New Delhi Vs. New Delhi
(Appellant) (Respondent)
PAN: AAIPA 6308 B
Appellant by : Shri Jayant Kumar, Sr. D.R.
Respondent by : Shri R.S. Singhavi, CA
ORDER
PER: C.L. SETHI, J.M. The assessee is in appeal against the order dated 28.02.2007 passed by the ld. CIT(A) deleting the penalty levied u/s. 271(1)(c) of the Income Tax Act, 1961 ("the Act") by the AO for the A.Y. 2004-05.
2. Solitary ground raised by the revenue is as under:
"On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the penalty of Rs. 29,55,845/- imposed u/s. 271(1)(c) of the I.T. Act, 1961 by the AO."
3. We have heard both the parties and have carefully gone through the orders of the authorities below.
ITA no. 2252/Del/2007
4. In this case, a search and seizure action u/s. 132 of the Act was conducted on 18.06.2003 at the residential premises of the assessee.
Return of income for A.Y. 2004-05 was filed on 28.10.2004. During the course of assessment proceedings, the AO issued notice u/s. 142(1) alongwith questionnaire on 10.10.2005. After issuance of aforesaid questionnaire, the assessee had offered vide letter dated 02.12.2005, further amount Rs. 89,57,106/- for taxation, being the amount received by way of gift, the confirmation in respect of aforesaid gifts were filed. The AO accepted declaration and completed the assessment. However, the AO initiated penalty proceedings u/s. 271(1)(c) of the Act. In reply to show cause notice, the assessee stated that assessee has filed copy of gift deeds and other related papers to support the gift, which was offered to taxation to buy peace. The assessee offered the amount voluntarily without there being any detection by the department. But, this explanation of the assessee was not accepted by the AO, and the penalty u/s. 271(1)(c) was levied by the AO, against which the assessee preferred an appeal before the CIT(A).
5. On an appeal before the CIT(A), the learned CIT(A) deleted the penalty after making an elaborate discussion as to the facts of the case and the legal decisions refereed to in this connection by the assessee before him.
Page 2 of 12ITA no. 2252/Del/2007
6. The ld. DR has submitted that when assessee has offered the gift for taxation, it is clearly established that the assessee did not disclose his true income in the return of income filed by him and, therefore, the penalty has been rightly levied. He further contended that there is no burden upon the revenue to establish any mensrea on the part of the assessee as so held by the Hon'ble Supreme Court in the case of Union of India vs. Dharmendra Textile Processor (2008) 306 ITR 277 (SC).
7. The assessee's submission before the CIT(A) which have been reiterated before us are as under:-
"Therefore, keeping in view of the fact that:
1. the appellant had submitted the sufficient evidence regarding the genuineness of receipt of gift.
2. the gift amount is being offered for taxation without accepting that the gift amount was his concealed income.
3. the appellant had offered the gift amount as income for taxation purpose at the initial stage of assessment proceedings.
4. the appellant had surrendered additional income before AO could detect the concealment of income
5. the appellant had surrendered the amount on the condition that penalty would not be levied and the addition was being made on the basis of such surrender.
6. the appellant has surrendered the amount of gift merely for avoiding further litigation without accepting that he had deliberately furnished inaccurate particulars or concealed any income.Page 3 of 12
ITA no. 2252/Del/2007
7. there may be a ground for making addition in the income of the assessee but that alone will not be enough for imposing penalty in absence of any material brought out by the Department to prove that assessee had willfully or due to fraud had concealed the income.
8. there was no circumstances to lead to a reasonable and positive inference that the assessee's case - that the gift received was false.
9. the facts and circumstances are equally consistent with the hypothesis that it could have been genuine gift. Therefore, even taking recourse to Explanation, same circumstances or state of evidence on which the gift were treated as income, could not by themselves justify imposition of penalty without anything more on record produced by the assessee or the Department.
10. there is no clinching evidence as regards to the concealment.
11. there was no fraud or gross or willful neglect on the part of the assessee in returning the correct income and that the initial burden cast on the assessee stood discharged. Moreover, the department in penalty proceedings made no effort to enquire the status of surrendered Gift.
8. The ld. counsel for the assessee had relied upon the Third Member decision of ITAT in the case of ACIT vs. Prem Chand Garg reported in (2009) 31 SOT 97 (Del) (TM)
9. At this stage, it is pertinent to note the observation of the AO while making the assessment u/s. 143(3) of the Act. The AO's assessment order u/s. 143(3) reads as under:
"Assessee filed return of income on 28.10.2004 for the assessment year 2004-05 declaring total income Page 4 of 12 ITA no. 2252/Del/2007 of Rs. 25,92,126/-. Since a search was initiated u/s 132 of the Act on 18.06.2003 at his residence, a notice u/s 143(2) was issued on 07.10.2005. A detailed questionnaire alongwith notice u/s 142(1) of the Income Tax Act, 1961 was issued on 10.10.2005. Shri S.C. Verma, C.A. / A.R. of the assessee appeared before the undersigned from time to time and filed details in response to above questionnaire. He has further offered an amount of Rs. 89,57,106/- received on account of gift for taxation vide letter dated 02.12.2005. He has also filed a confirmation of the assessee in this regard. After the examination of seized materials pertaining to the assessee and reply filed by the A.R. of the assessee, income of the assessee is assessed at Rs. 1,15,49,232/-. Since the assessee has concealed the particulars of income and furnished inaccurate particulars of income, penalty proceedings u/s 271(1)(c) of the Income Tax Act are initiated."
10. On perusal of aforesaid assessment order, it is seen that the AO has included the amount of gift in the total income merely on the basis of assessee's declaration. No evidence or material has been pointed out by the AO to show and establish that the gift received by the assessee were bogus and sham. It is not the case of the AO in the assessment order that the assessee had offered the gift for taxation after the same was detected by the department to the effect that the transaction was not genuine but a sham and bogus. It is also not the case of the AO that no evidence was found during the course of search indicating that the gift transaction was an arranged affair to accommodate the assessee's unaccounted money.
From the assessment order, it is clear that the gift has been offered for taxation by the assessee voluntarily without there being any material Page 5 of 12 ITA no. 2252/Del/2007 available on record against the assessee. In this respect, the CIT(A) is very much justified in holding that the AO was not having any piece of information that the gift were not genuine and these were part of the undisclosed income of the assessee, and even in the questionnaire, which was issued in the most general way, it was only enquired to furnish the details of any gift/loan, if received during the relevant year.
11. After considering al the facts and position of law, the CIT(A) deleted the penalty by passing a speaking and reasoned order. We, therefore, find it proper to extract the order of the CIT(A) as under:-
"I have considered facts of the case and arguments taken by Sh. Verma including various judicial decisions relied upon by him quite carefully. It is true that the additional income which was offered was not a part of return of income filed, to begin wit for the Asstt. Year under consideration. However, it is further seen that during the course of research not a single evidence regarding non-genuineness of gift amount which is offered as additional income was found. On perusal of penalty order, it is seen that there is no mention of any inquiry/investigation/information that the Investigation Wing or with the assessing officer regarding the fact that whether the aforesaid gifts were not genuine one which were offered as additional income vide letter dated 02.12.2005. With this background, I have also gone through and copy of questionnaire dt. 10.10.2005 in which Assessing Officer has raised simply query at query no. 10 in the questionnaire for the Asst. Year. "Had you taken/given any loan/gift during the F.Y. under consideration? If yes, please furnish details."
This letter was received by the appellant on 12.10.205 and thereafter, vide letter dt. 2.12.2005, the appellant had furnished the details of gift received in the present year from NRIs and had also furnished the copies of gift deed along with reply. Besides this, in the same letter, the assessee made it Page 6 of 12 ITA no. 2252/Del/2007 clear that through the aforesaid amount was received by the appellant as a gift but to buy the peace and to avoid any dispute, the appellant was offering the amount of gift received from NRIs for the present A.Y. as taxable income subject to the condition that no penalty action shall be initiated against the assessee under any section of I.T. Act. In the same letter, it was further made clear by the appellant that the gift under consideration as shown to have been received were genuine one and related document of gift were annexed along with the letter. From this it is clear that the Assessing Officer was not having any piece of information regarding the fact that the gifts were not genuine one and these were part of total income of the appellant. Even in the questionnaire, in the most general way, it was inquired to furnished the details of any gift/loan if received during the relevant F.Y. It makes quite clear that this fact was not a detection by the Assessing Officer that the gifts were not genuine but it was the appellant who has offered without any specific inquiry regarding such gift by the Assessing Officer that the amount of gift can be considered as income though the relevant gift deed from NRIs from whom the gift claim to have been received were also filed along with the letter dt. 2.12.2005. It was further made clear in the aforesaid letter dt. 2.12.2005 that the said amount of gift has been offered as additional income without detection of the same by Assessing Officer. In this respect, the decision given by Hon'ble Supreme Court in the case of K.C. Builders vs. ACIT (2004) 265 ITR 562 and observations therein are quite relevant in which Hon'ble Supreme Court has observed that in the word "concealment" that there has been a deliberate act on the part of the assessee and the concealment inherently carries with it, the element of mensrea. Hon'ble Court has further observed that mere omission from return, any item of receipt does neither amount to concealment nor deliberate furnishing inaccurate particulars of income unless and until there is some evidence to show or some circumstance found from which it can be gathered that the omission was attributable to and intention or desire on the part of the assessee to hide or conceal the income so as to avoid imposition of tax there upon. Hon'ble Supreme Court in the same judgment has further observed that a penalty u/s. 271(1)(c) may be imposed when it has to be proved that the assessee has consciously made the Page 7 of 12 ITA no. 2252/Del/2007 concealment or furnished inaccurate particulars of income. In the background of aforesaid judgment, the facts of present case are quite matching. Here also, there is no evidence to show that the omission to offer additional income on account of gift received was attributable to any intention or desire on the part of the assessee to hide or conceal the income. Hon'ble M.P. High Court also in the case of CIT vs. S.V. Electricals P. Ltd. (155 Taxman 158) has given a finding that where the assessee surrenders its full income though at a later has given a finding that where the assessee surrenders it full income though at a later stage, there was no question of any concealment on its part and no penalty, u/s. 271(1)(c) was levied. Hon'ble Jharkhan High Court in the case of CIT vs. Ashim Kumar Aggarwal (153 Taxman 226) has given a finding in that particular case that omission from return of income did not amount to concealment. In that particular case during the course of search cash balance was found and explanation furnished was rejected in the assessment order and thereafter, the Assessing Officer has also imposed the penalty then Hon'ble Jharkhan High Court has observed that even if it was presumed that particulars of income had not been properly disclosed by the assessee, then also, mere omission of the same form return of income did not amount to concealment. Contrary to this, in the present case, the affidavit from the donors were furnished, there was no show cause seeking specific information regarding genuineness of specific gifts under consideration and it was the appellant who along with furnishing necessary evidence and explanation for genuineness of the gift had offered on his own the amount of gifts from NRIs as additional income for both the A.Ys. under consideration. Hon'ble Kolkata High Court in the case CIT vs. Kusum Products Ltd. (203 ITR 672) had held that without through revised return, the appellant has offered additional amount of cash credit though to begin with the confirmatory letters from the lenders were filed and the lenders subsequently denied the fact the fact of giving loan. However, in the present case, the donor has not denied the fact of giving gift. Similarly, Hon'ble Patna High Court in the case of CIT vs. Bimla Devi Sharma (192 ITR 482) has observed that mere rejection of assessee's explanation did not amount of concealment. In that particular, the explanation furnished regarding cash credit was not accepted by the AO.
Page 8 of 12ITA no. 2252/Del/2007 In the present case also, the explanation and evidence regarding fact of receiving the genuine gift were furnished and over and above, the same was offered as additional income. Further, Hon'ble Delhi ITAT in the case of Ram Commercial Enterprises Ltd. vs. ACTI (52 ITD 147) has given a finding that the assessee had substantiate its explanation with evidence regarding cash credit u/s. 68 when he filed confirmation and affidavit regarding source of money then penalty in that case u/s. 271(1)(c) was held to be not justified. Quite similarly in the present case, the confirmation and affidavit regarding genuineness of the gifts were furnished which means that the assessee has substantiated its explanation that evidence and, therefore, the facts of present case are also matching with the aforesaid decision.
6. Considering the aforesaid judicial analysis of various decisions, including various decisions quoted by Sh. Verma, in my considered view, the AO was not justified in imposing the penalty u/s. 271(1)(c) of I.T. Act of Rs. 29,55,845/- for the A.Y. 2004-05 and, therefore the same is hereby cancelled by allowing relevant ground of appeal. Here it shall be out of place to mention that the decision given by the Hon'ble Supreme Court in the case of K.P. Madhusudan is not applicable in the facts of the case rather the decision given by the Hon'ble Supreme Court in the case of K.C. Builders is squarely applicable to which is discussed and analyzed by me in the earlier part of this appellate order."
12. In the case of ACIT vs. Prem Chand Gard, the Third Member after considering the various decision of Hon'ble Supreme Court including the decision of Dharmendra Textile Processor (supra) has held as under:-
I. Surrender of the amount after receipt of the questionnaire could not lead to an inference that it was not voluntary in absence of any material on record suggesting it to be bogus or untrue.Page 9 of 12
ITA no. 2252/Del/2007 II. To decide whether there is concealment of income or whether inaccurate particulars have been furnished, all the attending circumstances have to be taken into account III. The correct and accurate disclosure may be made by filing the revised return or by furnishing the particulars of such income before the detection by the Assessing Officer. The mere fact that the assessee had not revised returns or that the offer was made by letter to avoid harassment to the assessee and the donors who were non-resident persons, it could not convert an offer to tax as concealment of income. Therefore, the assessee had not furnished inaccurate particulars of the income in the returns before detection by the revenue.
IV. Therefore, mere omission of the surrendered income from the return of an item of receipt does neither amount to concealment nor furnishing of inaccurate particulars of income, unless and until there is some evidence to show or some circumstances are found from which it can be gathered that the omission was attributable to an intention or a desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. Apart of the surrender there was nothing more on record to hold the assessee guilty of offering the said amount on Page 10 of 12 ITA no. 2252/Del/2007 detection of the concealment. Even in assessment order there was nothing of that sort.
V. On a perusal of the questionnaire, it was evident that it was general in nature without specifying the names of the donors or any other such details on the basis of which it could not be presumed that the Assessing Officer had information to call for specific information. There was neither any detection, nor any information in the possession of the revenue, nor in the manner of its communication to the assessee which might lead to a detection of concealment.
VI. There was no specific provocation or an apprehension of detection prevailing at the time when the offer was made and in the absence of any such imminent fear from the side of the revenue, if the assessee came forward and paid the tax thereon by adding the same in the returned income, it had to be taken as a voluntary offer to tax. On the face of the evidence in the shape of confirmation letters, bank accounts, passport, etc., in the hands of the assessee, it might be valid gift that would have convinced a reasonably minded person, specially a person exercising a judicial function. The accepted position of law is that merely because an assessee had agreed to the assessment, that cannot bring in automatic levy of penalty.Page 11 of 12
ITA no. 2252/Del/2007
13. In the light of the facts of the present case, which are identical to the case decided by the Third Member of Tribunal in the case of ACIT vs. Prem Chand Garg and, in the light of the reasons given by the CIT(A) in deleting the penalty, and the discussions made above by us, we do not find any justification to interfere with the order of the CIT(A) in deleting the penalty. The order of the CIT(A) is, thus, upheld.
14. In the result, the appeal filed by the revenue is dismissed.
15. This decision was pronounced immediately after the hearing was over on 23rd December, 2009.
(K.D. RANJAN) (C.L. SETHI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 23rd December, 2009.
*Nitasha
Copy to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT, New Delhi.
By Order
Deputy Registrar
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