Revenue appeal partly allowed, restoring penalty on gift from Shri Vimlesh Kumar. Assessee's cross-objection dismissed.

The appeal by the revenue was partly allowed, restoring the penalty in respect of the gift from Shri Vimlesh Kumar, while the penalty in respect of the other two gifts was canceled. The cross-objection filed by the assessee was dismissed, upholding the validity of the penalty proceedings.

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Issues Involved:
1. Deletion of penalty by CIT(A)
2. Non-declaration of bogus gifts
3. Element of mens rea
4. Validity of revised return
5. Satisfaction recording for penalty

Issue-wise Detailed Analysis:

1. Deletion of penalty by CIT(A):
The revenue challenged the CIT(A)'s decision to delete the penalty of Rs. 1,35,000 imposed under section 271(1)(c) of the Income-tax Act. The CIT(A) reasoned that the assessee had voluntarily filed a revised return before any detection by the department and had paid self-assessment tax on the surrendered amount of Rs. 3 lakhs. The CIT(A) concluded that the penalty was unwarranted as the revised return was filed to avoid protracted litigation and not due to any detection of concealment by the department.

2. Non-declaration of bogus gifts:
The assessee initially filed a return on 31-7-2001, which did not disclose the gifts received in the names of his minor children. The department's investigation revealed that one of the donors, Shri Vimlesh Kumar, was a man of no means and was providing accommodation entries. The assessee later filed a revised return on 5-2-2003, declaring the gifts as income after the department's investigation commenced. The Assessing Officer argued that the revised return was not valid under section 139(5) as there was no omission or wrong statement in the original return, and the gifts were known to be bogus from the beginning.

3. Element of mens rea:
The CIT(A) found no element of mens rea, stating that the assessee's conduct indicated a lack of intent to conceal income. The assessee had voluntarily declared the gifts before any adverse detection by the department. The CIT(A) relied on the Supreme Court's decision in Dilip N. Shroff v. Jt. CIT and the Gujarat High Court's decision in National Textiles v. CIT, which emphasized the absence of mens rea in penalty imposition under section 271(1)(c).

4. Validity of revised return:
The revenue contended that the revised return filed on 5-2-2003 was not valid under section 139(5) as it did not involve any bona fide omission or wrong statement. The Tribunal upheld this view, stating that the revised return did not qualify under section 139(5) because the gifts' bogus nature was known to the assessee at the time of filing the original return. The Tribunal distinguished between the gifts from Shri Vimlesh Kumar, which were proven bogus, and the other two donors, for which the department had no concrete evidence at the time of filing the revised return.

5. Satisfaction recording for penalty:
The assessee argued that the penalty order was not maintainable as the requisite satisfaction was not recorded. The Tribunal found that the Assessing Officer had clearly stated in the assessment order that the revised return was illegal and that the assessee had concealed income. This was deemed sufficient for inferring proper and lawful satisfaction before levying the penalty.

Conclusion:
The appeal by the revenue was partly allowed, restoring the penalty in respect of the gift from Shri Vimlesh Kumar, while the penalty in respect of the other two gifts was canceled. The cross-objection filed by the assessee was dismissed, upholding the validity of the penalty proceedings.

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