TaxTMI 
TaxTMI 
1980 (2) TMI 122
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....e IT Act, 1961. 2. The assessee derives incomes from liquor contract business. For the A.Y. 1973-74 a return of income was filed declaring the total income at Rs. 15,000. The ITO, however, completed the assessment on a total income of Rs. 33,335 by his order dt. 19th Jan., 1976. The following additions were made towards the total income of the assessee: (1) Addition on account of personal expenses Rs. 4,500 (2) Income from property in the name of Smt. Kusumlata devi, first wife. Rs. 5,000 (3) ... do... Ahilyabai, second wife Rs. 5,535 (4) Income from interest in the name of Smt. Kusumlata devi. Rs. 3,300 Total additions Rs. 18,335 The facts leading to the addition of the above items are as under: 3. Du....
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....onged to his two wives who had filed separate returns of income disclosing the income from the said property and the interest income earned by them and they had also been assessed on these incomes. According to the assessee, the sales in question were genuine and, hence, income from the house property and the interest income exclusively belonged to the two ladies and could not be clubbed in his hands for the purposes of assessment. The ITO did not accept the assessee's contention and held that the house property in question was a benami transfer and the assessee was the owner of the said property. He, therefore, included towards the total income of the assessee relevant for the Asst. yr. 1973-74, the income of Rs. 5,000 derived by the asses....
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....TO, the assessee went in appeal and before the AAC it was submitted that the sale of the property to the two ladies was a genuine transaction and supported by the registered sale deeds. It was also pointed out that the two ladies had already disclosed the income from property and the interest in their personal income-tax returns and the ITO has also assessed the said income in their hands. It was further pleaded that the mere fact that the assessee's explanation, which was supported by necessary evidences, has been rejected by the Department would not automatically lead to the conclusion that the assessee concealed his income or furnished inaccurate particulars thereof, and, in these circumstances, no penalty under s. 271(1)(c) was leviable....
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....ns(3). The ld. Deptl. Rep. on the other hand, relied on the order of the AAC and the order of the Tribunal in the quantum appeal and submitted that on the facts of the case, the assessee clearly set up a device to divert the income from property only to avoid the incidence of tax liability, and, hence, he was clearly liable to penalty under s. 271(1)(c) of the IT Act, 1961. 9. I have carefully considered the rival contentions, and, in my opinion, the assessee deserves to succeed. So, far as the addition on account of personal expenses is concerned, the facts of the case are clearly covered by the decision of the M.P. High Court,(2). No penalty can be imposed on the assessee on account of income from property in the names of two wives and....
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.... its falsity could be a good basis for making an addition of the said income in the hands of the assessee, but would not form the basis for levying a penalty on the assessee under s. 271(1)(c). The above proposition has been clearly laid down by Their Lordships of the Supreme Court in (2) and (4) as well as by the (1). It may be true that the assessee attempted to set up a device whereby the income from property, which should have been assessed in his own hands, was shown to have been earned by his two wives, but even this fact would not establish a case of concealment of income on the part of the assessee. In this connection, it would be pertinent to reproduce the following observations of Their Lordships of the Supreme Court in CIT vs. A.....