RAKHEE MANILAL WADHWA,MUMBAI vs. ASST CIT CIR 15(2), MUMBAI

We heard the parties and perused the record. The assessee had received a sum of Rs.5.00 lakhs from her Grandmother. The assessee claimed the same to be a loan, but did not furnish any confirmation letter. Later the assessee submitted that it was a gift received from her grandmother and agreed to offer the same as her income, in order to buy peace of mind. Accordingly the AO assessed the above said sum of Rs.5.00 lakhs as income of the assessee and levied penalty u/s 271(1)(c) of the Act.

From the assessment order, we notice that the assessing officer has initiated penalty proceedings for “furnishing of inaccurate particulars of income”. However, in the penalty order, the AO has levied penalty for concealment of income. In the case of CIT Vs. Lakhdir Lalji (85 ITR 79), the Hon’ble Gujarat High Court held that the penalty order is liable to be quashed when the penalty was initiated under one a limb of sec. 271(1)(c), but the penalty was levied under another limb, since the ground on which the penalty was initiated disappeared. Under this legal ground alone, we are of the view that the impugned penalty order is liable to be quashed. Accordingly we set aside the order passed by Ld CIT(A) and direct the AO to delete the impugned penalty.

In the result, the appeal filed by the assessee is allowed.