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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI S.V. MEHROTRA
O R D E R PER S.V. MEHROTRA, A.M :
This is an appeal filed by the assessee against the order dated 31.03.2016 passed by the Commissioner of Income Tax (Appeals)-10, New Delhi, u/s 271(1)(c) of the Income Tax Act, 1961 (in short “the Act”) relating to assessment year 2008-09.
Brief facts of the case are that the assessee had filed return declaring total income of Rs.1,70,300/-. In the course of assessment proceedings, it was noticed that assessee had deposited cash of Rs.19,05,375/- on different dates in Savings Bank Account maintained with ICICI Bank Ltd.. The assessee explained the source of cash deposits as under :-
• Rs.6,00,000/- : Gift received from mother Mrs. Usha Budki URF Chuni Budki on 01/02/2008. In support of capacity of the donor, the assessee stated that after “Compromise Deed of Property”, she received 1/3rd share of settlement amount of Rs.14,00,000/- out of which 6,00,000/- was gifted to the daughter. • Rs.7,00,000/- : Gift received from father Shri Chuni Lal Budki on 01/02/2008. In support of capacity of donor, the assessee furnished copy of agreement to sale of plot at Jammu. • Rs.2,70,000/- : Loan received from daughter Ms. Serena Anand on 23/02/2008. The assessee stated that source of loan received from daughter was out of gift received in cash from grandmother given out of her agriculture income. • Rs.3,80,000/- : Loan received from son Mr. Harshneet Anand on 23/02/2008. The assessee stated that source of loan received from son is out of gift received in cash from grandmother given out of her Agriculture income.
The Assessing Officer, after examining the capacity of donors, concluded that the amount represented unexplained cash credit and, therefore, made addition u/s 68. Ld. CIT(A) confirmed the findings of Assessing Officer. The said addition was partly confirmed by the Tribunal vide its order dated 01.02.2016 in ITA No.2451/Del/2013. The Tribunal deleted the addition in respect of gift of Rs.6,00,000/- from mother of the assessee; out of the gift of Rs.7,00,000/- from father of the assessee, the Tribunal deleted the addition to the extent of Rs.3,70,000/- and confirmed the addition to the extent of Rs.3,30,000/-. As regards the loan of Rs.6,50,000/- from children of the assessee, the same was confirmed by the Tribunal. In the backdrop of these facts, the Assessing Officer had levied penalty of Rs.6,58,210/- being 100% of tax sought to be evaded which was partly confirmed by ld. CIT(A), inter-alia, for the reason that even at appellate stage before Tribunal, assessee failed to offer any cogent reply, duly supported with documentary evidence, for the amount of Rs.9,80,000/- (Rs.3,30,000/- + Rs.6,50,000/-) which remained unexplained before the Assessing Officer. He pointed out that during the penalty stage also no reply was furnished to the Assessing Officer to explain the source of above deposit and even during the appellate stage, assessee failed to substantiate his claim with documentary evidence. He, therefore, concluded that Explanation 1 to section 271 was attracted. He, inter-alia, relied on the decision of Hon’ble Apex Court in the case of MAK Data P. Ltd. vs. CIT, 1 SCC 674, wherein, it has been laid down that even if income was surrendered during the assessment proceedings to buy peace, penalty can still be levied by Assessing Officer. He has also discussed the facts obtaining in the judgement which primarily pertain to share application money which was surrendered by the assessee. In the backdrop of this decision, ld. CIT(A) observed as under :-
“4.1.9 The above judgment is important in the sense that it lays down a ratio that, assessee cannot circumvent the provisions of section 271(1)(c) merely by making voluntarily disclosure in assessment proceedings. Even if all the particulars are disclosed and there is no discrepancy in the particulars disclosed in return of income to that with books of account, onus is still on the assessee to substantiate why a particular income or expenses was treated in a specific way in return of income, which is different from the way AO is treating. 4.1.10 Thus in the first instance, it recognizes the burden on the part of assessee for advancing the explanation for all the claims made in return of income and only after assessee is able to substantiate his claim with cogent and reliable evidence, burden shifts on revenue. Further, Court also lay down that Assessee cannot plead bonafide after particular discrepancy is detected by AO as it raises presumption that assessee was holding back the issue to escape from it; If genuine bonafide exists, it must be proved by way of an evidence. 4.1.11 On the basis of ratio of above judicial pronouncement, it is held that appellant failed to discharge his onus while filing the return of income by disclosing the true and full particulars of income for the assessment year under consideration to the extent of Rs.9,80,000/- as discussed above, which has been upheld by even the Hon'ble ITAT, which is the final fact finding authority. In view of the above facts on record, it is held that out of the total addition of Rs.19.50 lacs being cash credit u/s. 68, the basis on which penalty was imposed by the Assessing Officer u/s. 271(1)(c) only quantum addition of Rs.9,80,000/- (i.e. Rs.3,30,000/- + Rs.6,50,000/-) survives and balance addition of Rs.9,70,000/- stands deleted. In view of these facts and circumstances of the case, since there is drastic change in the quantum of concealed income, the basis on which penalty was imposed, I am of the considered view that penalty needs to be recalculated by giving the assessee benefit of relief allowed to her to the extent of Rs.9,70,000/-. Thus, the concealed income remains only Rs.9,80,000/-. Therefore, AO is directed to recalculate the penalty on the above concealed income.”
From the above observations of ld. CIT(A), it is evident that since the Tribunal had confirmed certain additions, therefore, ld. CIT(A) concluded that assessee failed to substantiate its explanation. However, Explanation 1 to section 271(1)(c) is attracted under following conditions :-
(a) A person fails to offer an explanation (b) Offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner to be false.
(c) Person offers an explanation which he is not able to substantiate and fails to prove that such explanation was bonafide and that all the facts relating to the same and material to the computation of his total income had been disclosed by him.
Under the aforementioned conditions, only the amount added or disallowed in computing the total income of such assessee would lead to levy of penalty as it would be deemed to represent the income in respect of which particulars had been concealed.
Thus, in order to justify the levy of penalty, two factors must co-exist, (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee’s income. It is not enough for the purpose of penalty that the amount has been assessed as income, and (ii) the circumstances must show that there was animus i.e. conscious concealment or act of furnishing inaccurate particulars on the part of assessee.
Admittedly, assessee’s case is not covered by clause (A) of Explanation 1 because assessee had offered an explanation and his explanation has not been found to be false. As far as the last condition is concerned, it is evident that mere failure on the part of the assessee to substantiate his explanation will not automatically lead to levy of penalty but a further condition has to be fulfilled regarding Explanation not being bona-fide and facts relating to the same and material to the computation being not disclosed by him.
In the present case, I find the Tribunal had partly confirmed the addition. As regards gift of Rs.7,00,000/- from father of the assessee on 01.02.2008, the facts were that father of assessee passed away on 31st July, 2009. He was Superintendent in the Jammu & Kashmir Electricity Board. The Tribunal observed that before it the assessee had not submitted any evidence except the gift deed and assessee explained his inability to bring documents such as account statement and income-tax return or any other evidence regarding this amount. However, the assessee had submitted that a plot of land was sold in Jammu on 31st December, 2001 for a sum of Rs.3,70,000/-. The Tribunal confirmed the addition only to the extent of Rs.3,30,000/- but has not observed that explanation furnished by assessee was not bona-fide. It cannot be disputed that after father expired on 31st July, 2009 it became difficult for the assessee to furnish necessary evidence to substantiate its explanation. However, that does not lead to the conclusion that the assessee’s explanation was not bona-fide. It is well- settled law that mere confirmation of addition does not automatically lead to levy of penalty. Therefore, I do not find any basis for confirmation of penalty in regard to sum of Rs.3,30,000/- out of Rs.7,00,000/- gifted by father.
As far as addition of Rs.6,50,000/- is concerned, the assessee’s explanation was that sum of Rs.6,50,000/- was received from children of the assessee on 23.02.2008. The loan of Rs.2,70,000/- was received from her daughter Ms. Serena Anand and Rs.3,80,000/- from her son Harshneet Anand through account payee cheque. The assessee explained that this amount had been received as a gift from Smt. Prem Kaur, the grandmother of the children of the assessee. It was explained that Smt. Prem Kaur was an agriculturist and it is not disputed that she was in possession of agricultural land. Smt. Prem Kaur had confirmed the factum of gift by gift deed executed in favour of her grand children. The Tribunal confirmed this addition observing that amount of loan of Rs.6,50,000/- received from children of the assessee through gift from grandmother was not supported by any concrete evidence and confirmed the addition observing that assessee failed to explain the source of the loan from her children. A bare reading of the Tribunal’s order makes it clear that the assessee’s explanation of receiving gift from her children has not been found to be false or mala- fide. The assessee had clearly explained that the grandmother had gifted the amounts to grand children which were given to assessee through account payee cheques. If this explanation is examined on the touchstone of pre- ponderance of probabilities it cannot be said that this explanation was improbable. Under the Hindu Society, grandmothers do give handsome gifts to their grand children and, therefore, it cannot be said that the explanation offered by assessee was in any way not bona-fide. Merely because explanation was not accepted by the Tribunal it cannot lead to levy of penalty. I, therefore, do not concur with the findings recorded by ld. CIT(A) and, accordingly, while allowing the assessee’s appeal direct the Assessing Officer to delete the penalty levied by him.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 28th day of February, 2017.