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Facts
The assessee, an agriculturist, received gifts totaling ₹11,15,000, including ₹3,00,000 from three cousins. The Assessing Officer treated the amount from cousins as taxable income under Section 56(2)(vii) as they are not "relatives" as per the Act, and levied a penalty of ₹97,743/- under Section 271(1)(c) for furnishing inaccurate particulars. The CIT(A) confirmed this action.
Held
The Tribunal found that the assessee acted under a bona fide mistaken belief regarding the definition of "relative" and had disclosed all material facts. Applying Supreme Court precedents, the Tribunal held that penalty under Section 271(1)(c) is not attracted in cases of bona fide and unintentional errors when there is no attempt to conceal facts. Thus, the penalty was directed to be deleted.
Key Issues
Whether penalty under Section 271(1)(c) for furnishing inaccurate particulars of income can be levied on an agriculturist for claiming gifts from cousins as exempt, given a bona fide mistaken belief about the definition of "relative" and full disclosure of facts.
Sections Cited
147, 263, 56, 56(2)(vii), 271(1)(c)
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आयकर अपील�य अ�धकरण, च�डीगढ़ �यायपीठ, च�डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, ‘SMC’, CHANDIGARH BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER आयकर अपील सं./ �नधा�रण वष� / Assessment Year : 2010-11 Gurmeet Singh, ITO, बनाम 939, Type II, Ward 2(2), Nuhon Colony Ghanauli, Ropar Vs. Rupnagar 140113 �थायी लेखा सं./PAN NO: AGEPS7897P अपीलाथ�/Appellant ��यथ�/Respondent ( Virtual Hearing ) �नधा�रती क� ओर से/Assessee by : Shri. Parikshit Aggarwal,CA राज�व क� ओर से/ Revenue by : Smt. Surinder Kaur Waraich, Addl. CIT, Sr. DR सुनवाई क� तार�ख/Date of Hearing : 27-08-2025 उदघोषणा क� तार�ख/Date of Pronouncement : 27-08-2025 आदेश/Order
This appeal by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 22.07.2024, for the assessment year 2010-11.
The facts in brief are that the assessee filed his return of income declaring total income of ₹3,36,320/-. During reassessment proceedings u/s 147 r.w.s. 263 of the Act, it was noticed that the assessee had received gifts aggregating to ₹11,15,000/-. Out of these, amounts of ₹1,00,000/- each were received from three cousins, namely, Shri Baldev Singh, Shri Jaswinder Singh and Shri Nirmal Singh. The Assessing Officer treated the sum of ₹3,00,000/- as taxable income under the head “Income from other sources,” on the ground that cousins do not fall within the definition of “relative” as provided in section 56(2)(vii) of the Act. The penalty proceedings u/s 271(1)(c) were thereafter initiated and penalty of ₹97,743/- was levied on the assessee
In appeal, the Ld. CIT(A) confirmed the action of the Assessing Officer, holding that the assessee had furnished inaccurate particulars of income by claiming gifts from cousins as exempt, though such persons are not covered in the statutory definition of “relative” under section 56.
Before me, the Ld. Authorised Representative for the assessee submitted that the assessee is an agriculturist of old age, having limited knowledge of the Income-tax law. He received financial assistance from his cousins for the bona fide purpose of sending his son abroad. Under a genuine but mistaken belief, he considered his cousins to be covered within the scope of “relative” and did not include such receipts as taxable income. It was thus pleaded that the lapse, if any, was purely unintentional, without any element of concealment or furnishing of inaccurate particulars.
Per contra, Ld. DR relied on the orders of the lower authorities and submitted that the Assessee could not produce any evidence to substantiate his claim and, thus, was unable to controvert the penalty order.
I have considered the rival contentions and perused the record. There is no dispute that the gifts in question were received from cousins and that such relations do not fall in the definition of “relative” as envisaged under section 56(2)(vii) of the Act. However, the surrounding circumstances show that the assessee, being an agriculturist with limited exposure to legal provisions, acted under a bona fide and mistaken impression. The financial support from cousins was a matter of family arrangement, and the assessee disclosed the transactions in the assessment proceedings by filing affidavits and identity documents of the donors. This shows that there was no attempt to conceal facts.
The Hon’ble Supreme Court in various decisions has held that penalty u/s 271(1)(c) cannot be levied where there is a bona fide and inadvertent mistake and the assessee has disclosed primary facts. Applying this settled principle, the assessee’s case falls within the ambit of bona fide and unintentional error. The imposition of penalty in such facts is unjustified.
Accordingly, I hold that the assessee cannot be fastened with penal liability for a mere wrong claim arising out of ignorance of technical definition of “relative.” The penalty of ₹97,743/- levied u/s 271(1)(c) is directed to be deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced on 27.08.2025.