The assessee declared income of Rs. 1,63,65,386 in his return of income and during the subject year the assessee received a gift from his minor son amounting to Rs. 1,52,20,000 which he shown as an exempt income in his return of income.
The assessing officer made an addition of Rs. 1,64,22,604 on account of gift received by the assessee and treated it as income under head income from other source. This addition was confirmed by CIT and further on appeal before Tribunal.
After such addition, the assessing officer on the basis of findings from his assessment order, initiated the penalty proceeding u/s 271(1)(c) read with section 68 on the assessee for concealing and producing inaccurate particulars in return of income for escaping income tax liability.
According to the assessee, the findings from the assessment order cannot be regarded as conclusive evidence for the purpose levy of the penalty u/s 271(1)(c).
Also, for imposing the penalty u/s 271(1)(c) the entire circumstances of the case must be taken into consideration and it should be proved by the income tax authorities that the assessee has consciously concealed particulars of income or deliberately furnished inaccurate particulars.
Therefore, on the basis of above facts the penalty proceedings u/s 271(1)(c) might not be initiated against the assessee.
Assessing officer contended that the assessment order clearly demonstrated the gifts to be a sham transaction and findings of the original assessment order are good evidence in penalty proceeding. When in the assessment proceedings it has been proved that the assessee has created a malicious design to escape tax liability. The findings of the assessment shall be a relevant evidence and shall be taken into account while framing penalty order.
After hearing both the respondents it is held that, the assessing officer has already made an addition of disputed amount in the total income of the assessee and reasons for such addition has been already discussed in the assessment order, also except the reason given in original assessment order the department has no other material evidence from which it could be ascertained that the assessee has consciously concealed the particulars of income and deliberately furnished an inaccurate particulars. Therefore, the assessee is not held liable for any penalty u/s 271(1)(c).
For imposing liability u/s 271(1)(c) the income tax authorities has onus to prove that the assessee has consciously concealed or has deliberately produced inaccurate particulars in his return of income to escape income tax liability and findings in assessment order shall not be automatically be adopted in penalty proceedings. Thus, in penalty proceedings income tax authorities have to independently arrive at a finding which points towards concealment of income or furnishing of inaccurate particulars, mere a doubt on the assessee cannot regarded as material for penalty proceedings.
Source: [2020] 116 taxmann.com 13 (Allahabad)
