COMMISSIONER OF INCOME TAX vs. SUBHASH MITTAL

This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 2.3.2006 passed by the Income Tax Appellate Tribunal, Delhi Bench 'SMC', New Delhi (hereinafter referred to as “the Tribunal”) in ITA No. 4890/Del/2005, for the assessment year 1994-95, claiming following substantial questions of law:- “(a) Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in confirming the order of CIT(A) in cancelling the penalty levied under section 271(1)(c) by placing reliance upon the case of CIT Vs. Munish Iron Store (263 ITR 484), whereas -2- facts of the two are entirely different? (b) Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in confirming the order of CIT(A) in cancelling the penalty levied u/s 271(1)(c) particularly when the A.O. recorded its satisfaction as envisaged u/s 271(1)(c) of the Income Tax Act, 1961?”

Briefly stated, the facts necessary for adjudication as narrated in the appeal are that in pursuance of notice under Section 148 of the Act, the assessee filed his return on 20.9.2001 for the assessment year 1994-95 declaring an income of Rs.43,534/- with a note that during the financial year 1993-94, he had received a gift of Rs.2,00,000/- from NRE Account of Shri Sanjeev Gupta vide DD No.190733 dated 28.10.1993. The gift of Rs.2,00,000/- was held to be bogus as admitted by the donor Shri Sanjeev Gupta. The Assessing Officer made an addition of Rs.2,00,000/- treating it as undisclosed income of the assessee under Section 68 of the Act. Further, addition of Rs.20,000/- at the rate of 10% of bogus gift representing the premium paid for arranging such bogus gift was also made. Accordingly, total addition of Rs.2,20,000/- was made as undisclosed income. Penalty proceedings under Section 271(1)(c) of the Act for concealment of income were also initiated separately. Feeling aggrieved, the assessee took the matter in appeal and the Commissioner of Income Tax (Appeals) [hereinafter referred to as “the CIT(A)”] vide order dated 18.11.2003 affirmed the addition made by the Assessing Officer. The Assessing Officer vide order dated 18.3.2005 -3- imposed a penalty of Rs.91,825/- under Section 271(1)(c) of the Act against which the assessee filed an appeal before the CIT(A) who vide order dated 26.10.2005 deleted the said penalty on the ground that the Tribunal had deleted the addition of Rs.2,20,000/- by accepting the gift to be genuine. The department filed appeal challenging the deletion of the penalty. The Tribunal vide order dated 2.3.2006 dismissed the appeal of the revenue on the ground that the gift received by the assessee from Sh. Sanjeev Gupta had been held to be valid and the appeal of the revenue against quantum addition has already been dismissed. Hence, the present appeal by the revenue .

We have heard learned counsel for the parties.

The point for consideration in this appeal is whether the Tribunal was justified in holding that the alleged gift received by the respondent-assessee from a Non-resident Indian with whom the assessee had no relationship, was a genuine gift and consequently deleting the penalty imposed under Section 271(1)(c) of the Act.

The revenue had approached this Court by filing ITA No. 356 of 2006 (Commissioner of Income Tax, Karnal v. Sh. Subhash Mittal) challenging the legality and validity of alleged gift received by the assessee from Shri Sanjeev Gupta, wherein it has been held that the alleged gift from NRE, Sh. Sanjeev Gupta was not a genuine gift. Once that is so, the only conclusion is that the assessee had furnished inaccurate particulars of his income and the order of the Tribunal deleting penalty is unsustainable in law. Accordingly, it is held that the assessee had concealed the particulars of the income and was liable for penalty under Section 271(1)(c) of the Act. Further, the issue regarding -4- recording of satisfaction for initiation of penalty proceedings in the course of assessment proceedings stands concluded against the assessee in the judgment of this Court reported in Commissioner of Income Tax v. Pearey Lal & Sons (EP) Ltd. [2009] 308 ITR 438. 6. In view of the above, the substantial questions of law are answered in favour of the revenue and against the assessee. The appeal is allowed. (AJAY KUMAR MITTAL) JUDGE February 15, 2011 (ADARSH KUMAR GOEL) gbs JUDGE