2009 (3) TMI 229 - AT - Income Tax

ITA Delhi-I: Penalties under Section 271(1)(c) deleted for lack of evidence.

Puneet Sehgal And Others. Versus Income-Tax Officer.

Puneet Sehgal And Others. Versus Income-Tax Officer. - TTJ 123, 566, Issues involved: Reopening of assessments based on information received, imposition of penalty under section 271(1)(c) of the IT Act, 1961 on assessees for receiving gifts from deceased donor, applicability of Explanation 1 to section 271(1)(c), relevance of judgments in similar cases.Relevant Details:1. The appeals were filed by five different assessees for assessment years 2000-01 and 2001-02 based on common issue of receiving gifts from a deceased donor, Shri Sanjay Mohan Agarwal, who was found to be involved in giving bogus gifts. Assessments were reopened by respective Assessing Officers (AOs) based on information received, leading to penalty proceedings under section 271(1)(c) of the IT Act.2. Assessees submitted evidence of gifts received, including memorandum of gift, donor's affidavit, and financial documents. However, as the donor had passed away before assessments were reopened, assessees surrendered the gift amounts as income to avoid litigation. The penalty was imposed by the AO and confirmed by the CIT(A), leading to further appeal before the ITAT.3. The Authorized Representative argued that due to the donor's death, it was impossible to produce him as evidence. Citing relevant judgments, the representative contended that the penalty should be deleted as the explanation for surrendering the gifts was bona fide. The Departmental Representative supported the lower authorities' orders.4. The ITAT examined the case and found that the donor's death before reopening assessments made it impossible for assessees to produce him as evidence. Referring to Explanation 1 to section 271(1)(c), the ITAT noted that assessees had provided relevant documents to support their claim of gifts. The Revenue's doubts were not substantiated with evidence of bogus gifts.5. The ITAT distinguished the case from the judgment of Dharamendra Textile Processors, as there was no willful concealment alleged by the assessees. The ITAT also analyzed the judgment of National Textiles, emphasizing that the concealment of gifts was not established beyond doubt, leading to the deletion of penalties in all cases.6. Following the precedent set by the Hon'ble Gujarat High Court, the ITAT allowed all appeals of the assessees, concluding that the penalties imposed were not justified due to the circumstances surrounding the gifts and the inability to produce the deceased donor as evidence.Judgment Summary: The ITAT Delhi-I allowed all appeals of the assessees, deleting the penalties imposed under section 271(1)(c) of the IT Act, 1961, based on the inability to produce the deceased donor as evidence and the lack of conclusive evidence supporting the Revenue's doubts regarding the gifts received.