TaxTMI 
TaxTMI 
2014 (10) TMI 153
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....under:- Assessment Year Penalty levied by the AO Sustained by CIT(A) 1999-2000 1,00,790 67,193 2000-01 75,76,441 50,50,961 2001-02 13,16,250 8,77,500 2002-03 23,34,383 15,56,258 2003-04 35,43,750 23,62,500 2004-05 12,87,000 8,58,000 2005-06 30,29,400 20,19,600 3. At the time of hearing before us, the learned counsel for the assessee stated that for AY 1999-2000, the penalty sustained is a small sum of Rs. 67,193/-. Though the assessee does not accept any concealment of income by him, but, due to smallness of the penalty sustained, does not want to pursue the appeal for AY 1999-2000. He also stated that the facts of AY 1999-2000 are altogether different than the facts in all the subsequent years and, therefore, the outcome of the assessee's appeal for AY 1999-2000 will have no bearing on the subsequent years' appeals. He, therefore, submitted that the assessee's appeal for AY 1999-2000 may be treated as not pressed. 4. Accordingly, the assessee's appeal for AY 1999-2000 is dismissed as not pressed. 5. With regard to AY 2000-01 to 2005-06, it is submitted by the learned counsel that the facts in all the years are almo....
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....g the assessment order on 8.11.2007. The assessee submitted that the copies of the statements were never confronted to the assessee by the AO inspite of his special request made by him in response to show cause notice issued by the AO before passing the assessment order. The assessee pleaded that the addition made on account of gift is totally arbitrary and the same is made on suspicion only. Being not satisfied with the replies of the assessee, the addition was made by the AO and the same was confirmed by CIT(A), against which assessee is in further appeal before us with respect to the various additions made in the hands of different assessees on account of gifts received by them. From the details of the facts brought on record by the AO it is very clear that the assessee is in the habit of showing gifts in large sums in his name and in the hands of other family members. It has been conclusively established by the AO that the two donors by name Sh. Naresh Jain and Sh. Anil Jain are only a neighbours without any relationship with the family of the appellant. It is totally unimaginable to think that the neighbours could give millions of rupees to unknown persons without any consider....
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....ts cannot be held as genuine. From the perusal of family details it can be seen that a number of close relations are available but none of them had gifted any sums to the assessee. However, assessee could receive substantial amounts as gifts from a remotely connected persons. Assessee also could not confirm to the fact that he knew the donors intimately. This type of one-sided gifts of substantial amounts not associated with any occasion from relatively unknown persons in successive years defies any amount of logic. As discussed in preceding paras the whole transaction is designed to show huge amounts as gifts without any liability of paying taxes. The findings so recorded by the lower authorities could not be controverted by the learned AR by bringing any material, much less a cogent material so as to persuade us to deviate from the alleged finding. We therefore do not find any reason to interfere in the order of the lower authorities in respect of the addition made on account bogus gifts. In the result, the grounds taken by all the assessees with regard to gifts in various years, are being dismissed." 8. The Assessing Officer levied penalty under Section 271(1)(c) vide order d....
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....urs the person should have been worth crores of rupees having income of substantial nature. No such confirmations are forthcoming to establish the financial soundness of these two donors." From the above observation of the ITAT, it is evident that the ITAT was of the belief that had the worth of the donors in crores and substantial income in their hands, the gifts could have been accepted. However, the financial capacity of the donors is in crores and their income is also in crores and these evidences were placed before the Assessing Officer as well as ITAT. Therefore, the decision of the ITAT on which the Assessing Officer has relied upon while levying the penalty is based upon incorrect facts. However, when a query was asked by the Bench whether the assessee had filed the appeal or the miscellaneous application against the order of the ITAT, it is stated by the learned counsel that, unfortunately, not. He further stated that in any case, the dispute before the ITAT is with regard to the levy of penalty under Section 271(1)(c) i.e., whether the assessee can be said to be guilty of the concealment of income or furnishing of inaccurate particulars. He stated that the Assessing Offic....
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....sought to be evaded was quite fair and reasonable. The CIT(A) was not justified in reducing the penalty at 100% of the tax sought to be evaded. Therefore, the order of the CIT(A) to that extent needs modification and the penalty should be confirmed at 150% of the tax sought to be evaded as was originally levied by the Assessing Officer. In support of this contention, she relied upon the following decisions:- (i) Jubilant Biosys Ltd. Vs. ITO - [2014] 032 ITR (Trib) 0343 (ITAT- Del). (ii) DCIT Vs. Jubilant Enpro P.Ltd. - [2014] 032 ITR (Trib) 0702 (ITAT- Del). (iii) CIT Vs. Splender Construction - [2013] 352 ITR 0588 (Del). (iv) Chadha Sugars P.Ltd. Vs. ACIT - [2012] 017 ITR (Trib) 0316 (ITAT- Del). (v) ACIT Vs. Kanchenjunga Advertising P.Ltd. - [2011] 010 ITR (Trib) 0649 (ITAT-Del). (vi) CIT Vs. Zoom Communication P.Ltd. - [2010] 327 ITR 0510 (Del). (vii) CIT Vs. Escort Finance Ltd. - [2010] 328 ITR 0044 (Del). (viii) CIT Vs. Harparshad and Company Ltd. - [2010] 328 ITR 0053 (Delhi). (ix) Ajay Jain Vs. ACIT - [2013] 021 ITR (Trib) 0041 (ITAT-Delhi). (x) ACIT Vs. Dinesh Goel - [2011] 010 ITR 0330 (ITAT-Delhi). (xi) Microsoft Corporation (India) P.Ltd.....
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....x Court in the case of Khoday Eswarsa and Sons (supra) wherein additions made by the Assessing Officer to the income returned by the assessee were sustained in the appellate proceedings but the penalty levied under Section 271(1)(c) was deleted by the Tribunal and the Tribunal held that though there might be justification in making addition in the assessment order, these additions, by themselves, could not lead to the conclusion that the respondent had concealed its income or that it had furnished deliberately inaccurate particulars. Against the order of the ITAT, the assessee filed application before the High Court of Mysore which was rejected and the Revenue's appeal to the Apex Court was also dismissed. While dismissing the Revenue's appeal, their Lordships at page 376 and 377 of ITR 83 held as under:- "No doubt the original assessment proceedings, for computing the tax may be a good item of evidence in the penalty proceedings but the penalty cannot be levied solely on the basis of the reasons given in the original order of assessment. In the case before us we have already pointed out that in the order levying penalty the Income-tax Officer has categorically stated that th....
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....see failed to substantiate the correctness of the gift transaction in the name of his minor sons. The Hon'ble Supreme Court in the case of Dhamendra Textile Processors has held "that the explanation appended 271(1)(c) of the Income Tax Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing returns. Object behind enactment of 271(1)(c) deals with explanation indicated that the said section has been enacted to provide for the remedy for loss of revenue. The penalty under the provisions is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability. In view of the facts discussed above, I hold that by showing its taxable income as gifts and claiming it to be exempt in its return of income, the assessee has furnished inaccurate particulars and has concealed particulars of its income amounting to Rs. 1,52,00,000/- under the provisions of section 271(1)(c) and that penalty is imposable under the provisions of section 271(1)(c) in this case." 17. From the above, it is evident that the Assessing Officer had levied the penalty mainly on the ground that the assesse....
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.... take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature." (emphasis by underlining supplied by us) 18. From the above decision, it would be evident that the assessee would be said to ....
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.....Y. 2003-04 - ITR with balance sheet for A.Y. 2005-06 (xiii) AO's order u/s 143(3) for AY 1996-97 (xiv) Intimation u/s 143(1) for AY 96-97 (xv) Balance sheet as on 31.3.96 (xvi) Intimation u/s 143(1) for AY 1998-99 (xvii) Intimation u/s 143(1) for AY 99-2000 (xviii) Intimation u/s 143(1) for AY 2000-01 with ITR etc (xix) Intimation u/s 143(1) for AY 2002-03 with ITR etc (xx) Intimation u/s 143(1) for AY 2003-04 with ITR etc (xxi) Intimation u/s 143(1) for AY 2005-06 with ITR etc" 19. To verify the correctness of the assessee's claim, the Assessing Officer asked the assessee to produce Shri Naresh Jain and Shri Anil Jain. Both were produced before the Assessing Officer and their statements were recorded. Both of them have affirmed having given gifts to the assessee or his minor sons and have also explained their relationship with the assessee and his family. It would be appropriate to reproduce the relevant portion of their statements. The statement of Shri Naresh Jain recorded by the Assessing Officer on 1st May, 2007 reads as under:- "Question 1 : Please identify yourself ? Answer 1 : I am Naresh Jain S/o Shri Shori Lal Jain having PAN AA....
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....: Because my father was indebted to the parents of Sh. Dinesh Jain who had helped my father in the establishment of business and otherwise also he has extended financial help in 1961-62 when I was a child. It was because of this respect & gratitude I made gift to Sh. Dinesh Jain & his son. My elder brother have also made similar gift to the family of Sh. Dinesh Jain. Question 11 : Have you ever made gift to anybody else? Answer 11 : No. Question 12 : Have you ever made gift subsequent to the above period? Answer 12 : No Question 13 : Did you or family member receive any cash or any other consideration in lieu of the above gift? Answer 13 : No Question 14 : You accepted that gift was made to Dinesh Jain and his son, but how verbally or otherwise? Answer 14 : An affidavit, gift letter as confirmation thereof was given and gift was accepted by Sh. Dinesh Jain." 20. From the above statement of Shri Naresh Jain, it is evident that Shri Naresh Jain is the proprietor of two enterprises viz., M/s Fashion Emporium and M/s Navkar Enterprises. Besides income from proprietorship business, he derives income from FDRs and also rental income from house property. He is a....
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....ute and irrevocable. 3. That I am assessed to income tax and my permanent account number is AAIPJ 3097 J." 21. None of the above documentary evidences furnished by the assessee in support of the gift and also the statement of Shri Naresh Jain is found to be incorrect, false or erroneous. 22. During the course of assessment proceedings, the Assessing Officer also recorded the statement of Shri Anil Jain which reads as under:- "Ques 1. Please identify yourself. Ans. I am Anil Jain s/o Late Shri Shori Lal Jain r/o 22A, Rajpura Road, Delhi. I am producing my PAN card for my identity. Ques 2. What are your sources of income? Ans. I get income from property, business & interest from bank deposits & saving bank a/c. Ques 3. Are you assessed to tax. If yes, give details. Ans. I am assessed to tax with I.T.O. Ward 20(1), New Delhi PAN AAFPJ3129A. Ques 4. Since when you are in business or started earning? Ans. Since more than 17 years as proprietor and prior to that since 1975 I was in business of readymade garments at Janpath with my father (expired). I become partner in Manidhari Exports, other partner is my wife Smt. Rashmi Jain since 1994. Ques 5. Plea....
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.... his family members in the last six or seven years. If yes, what was the occasion? Ans. Yes I made gifts to his three children namely Mudit Jain (now aged about 14 years). Mayank Jain (now aged about 17 years) and Namit Jain (now aged about 10 years) on the occasion of completion of my 8 days fast during Samvat-Shri Prav as per Jain rituals which are considerd as most sacred days. Ques 13. What was the compulsion at that point of time when you made gifts to the children of Shri Dinesh Chand Jain? Ans. There was no compulsion. It was a voluntary gifts made to children with 'Tyag Bhawna' and also to repay a debt of Shri Prakash Chand Jain father of Dinesh Chand Jain who helped my father in the establishment in business in sixties. My father desire that the gift should be made to grand children of Shri Prakash Chand Jain, which I immediately agreed and made gifts by cheques in Sept 1999 as under:- Mudit Jain Rs. 50 lacs Mayank Jain Rs. 50 lacs Namit Jain Rs. 45 lacs Ques 14. Did you execute any gift deed in favour of the donees referred to above? Ans. To the best of my knowledge gift deeds were signed by me at Delhi and it was in the form of memorandum of gifts....
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....ess which is at Kamla Nagar, Delhi. He is also director in one company. In reply to question No.6, he gave the details of his bank accounts. In reply to question No.7, he stated that he had filed the returns of income for AY 1999-2000 to 2004-05 and supplied the copy of such returns of income. In reply to question No.8, he explained how he knew Shri Dinesh Jain. He pointed out that he is known to Shri Dinesh Jain since last thirty years i.e. from the time of his father. Shri Dinesh Jain is his close friend and resides in the same complex at Civil Lines in which he is residing. In reply to question No.9, he stated that they practically meet every day, go to morning walk together and also go to their Guruji together. In reply to question No.12, he gave the details of the gift given by him to the minor sons of the assessee. In reply to question No.14, he stated that in support of the gift, gift deed was signed by him and affidavit etc. were also given by him. None of the facts stated in the above statement were found to be erroneous, incorrect or false by the Assessing Officer. On the other hand, the details furnished by him in the form of his copy of income tax returns for four years....
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....explained the amounts of Rs. 1,52,00,000/- represented by the gifts receipt during the year are hereby taxed as income from other sources. The facts further suggest furnishing of inaccurate particulars/claim and consequently the concealment on assessee's part for which penalty proceedings are also initiated." 24. The first ground why the gift was not accepted by the Assessing Officer was that the gift was given without any occasion. In our opinion, merely because the gift was given without any occasion would not be sufficient to hold that the gift is not genuine. It may be only one of the circumstances while considering the genuineness of the gift. The second reason given by the Assessing Officer was that the gift was given without natural love and affection. From the statement of the donors, it is evident that the donors are close family friends and it cannot be said that natural love and affection remains only between blood relations and not between the friends. The third point taken by the Assessing Officer was that the gifts are given by the persons who are connected with the business or were in the employment of the family of Shri Dinesh Jain. This ground taken by the Asses....
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.... income from business. 25. We are conscious that in quantum proceedings, the above finding of the Assessing Officer has been approved by the ITAT and the order of the ITAT has become final because there is no appeal filed by the assessee against the said order of the ITAT. However, as has been held by Hon'ble Apex Court in the case of Khoday Eswarsa and Sons (supra), the penalty cannot be levied solely on the basis of reasons given in the original assessment order. We have examined the facts of the case for the purpose of penalty proceedings afresh and we clarify that our finding is limited to and relevant for the purpose of determining whether the assessee can be said to have furnished inaccurate particulars of income or have concealed the income so as to make him liable for penalty under Section 271(1)(c). Hon'ble Apex Court in the case of Dilip N. Shroff (supra) have held that the burden of proof in penalty proceedings varies from that in assessment proceedings. A finding in the assessment proceedings that a particular receipt is income cannot automatically be adopted in penalty proceedings. In view of the above decisions of Hon'ble Apex Court, we have examined the facts of t....