P. ELIZEBETH,CHENNAI vs. ITO, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 2, Chennai, dated 27.06.2016 and pertains to assessment year 2009-10.

Shri N. Quadir Hoseyn, the Ld.counsel for the assessee, submitted that the Assessing Officer levied penalty under Section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act'). During the year under consideration, the Assessing Officer found that the assessee has purchased property for `75,00,000/-. The assessee claimed before the Assessing Officer that a sum of `70.5 lakhs was received as loan from 7 relatives. According to the Ld. counsel, the assessee has also claimed that jewels to the extent of `5.52 lakhs was sold. The assessee has filed notorised affidavit in support of the loan taken from the relatives / family members. The Assessing Officer found that the source of investment to the extent of `6.75 lakhs remains unexplained. According to the Ld. counsel, the Assessing Officer has not found that the assessee has concealed any part of income or furnished inaccurate particulars. The fact that the property was purchased for `75,00,000/- was disclosed to the Assessing Officer. Unless and until there is a categorical finding by the Assessing Officer that the assessee has furnished inaccurate particulars or concealed any part of her income, the Assessing Officer cannot levy penalty under Section 271(1)(c) of the Act. According to the Ld. counsel, the Assessing Officer on a casual observation that there are lot of loose ends involved in the investments made by the assessee and inconsistency in the return of income, he levied penalty under Section 271(1)(c) of the Act.

On the contrary, Shri B. Sahadevan, the Ld. Departmental Representative, submitted that the assessee purchased a property for `75,00,000/- and the same was said to be sold for `80,00,000/- Subsequently, the assessee has purchased another property for `1.16 Crores. The assessee explained before the Assessing Officer that `70.5 lakhs was borrowed from close relatives / family members and another sum of `5,52,342/- was received on sale of jewels. According to the Ld. D.R., the assessee has also incurred an expenditure of `6.75 lakhs for registration. In the absence of any material to support the source of investments, the Assessing Officer levied penalty under Section 271(1)(c) of the Act. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the same.

We have considered the rival submissions on either side and perused the relevant material available on record. From the orders of the lower authorities it appears that the assessee purchased a property on 17.09.2008 for `75,00,000/-. The very same property was sold on 06.10.2008 for `80,00,000/-. Subsequently, on 06.03.2009, the assessee has purchased another property for `1.16 crores. The assessee explained before the Assessing Officer regarding the source for investment in the property. The assessee has explained that `70.5 lakhs was borrowed from close relatives / family members. To support this claim, the assessee has filed notorised affidavit. The assessee further claimed that jewels were sold for `5,52,342/-. The Assessing Officer has also found that the assessee incurred expenses towards registration to the extent of `7,20,000/-. The Assessing Officer found that in the absence of any supporting material, for sale of jewellery and other funds said to be borrowed, the assessee concealed the particulars of income.

We have also gone through the provisions of Section 271(1)(c) of the Act which reads as follows:-

The Assessing Officer is empowered to levy penalty in case the assessee furnishes inaccurate particulars of income or concealed any part of her income. In the case before us, it is nobody’s case that the assessee has furnished inaccurate particulars of her income. The assessee could not substantiate the source for making investment in the property. The assessee admittedly disclosed the investments. The assessee has also claimed before the Assessing Officer that she borrowed `70.5 lakhs from her close relatives and family members. The assessee has also filed notarised affidavit in respect of borrowed funds. Apart from this, the assessee has also claimed that jewels to the extent of `5,52,342/- were sold. When the assessee has furnished all the details of the investments, this Tribunal is of the considered opinion that merely because the assessee could not substantiate the claim, it cannot be said that the assessee has furnished inaccurate particulars or concealed any part of her income. if the assessee could not explain the source of investment that may be a reason for making addition in the assessment proceedings. However, it cannot be said that the assessee concealed any part of her income or furnished inaccurate particulars of her income.

In view of the above discussion, we are unable to uphold the orders of both the authorities below. Accordingly, the same are set aside and penalty levied by the Assessing Officer to the extent of ` 8,57,260/- is deleted.

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