Girish Hiralal Kothlawala, Surat vs Assessee

This appeal filed by the assessee is against the order of CIT(A)-II, Surat dated 02-05-2011 for A.Y. 2007-08. I.T.A No. 1794/Ahd/2011 A.Y. 2007-08 Page No 2 Girish Hiralal Kothlawala vs. ITO

2. In this case, on the date of hearing, despite the service of notice in advance through Registered AD about the date of hearing, none appeared on behalf of the assessee but however written submissions were filed. We therefore proceed to decide the issue ex- parte qua the assessee on the basis of material available on record and the written submissions made by the assessee.

3. The facts as culled out from the material on record are as under:

4. Assessee is an individual stated to be running tuition classes styled as "Sunshine Classes" and also as stock broker under the name "Sun Shine Investment". Assessee filed his return of income for A.Y. 2007-08 on 29-08-2008 declaring total income at Rs. 1,88,783/-. The case was selected for scrutiny and thereafter the assessment was framed u/s. 143(3) vide order 16-12-2009 and the total income was determined at Rs.3,04,800/-. Aggrieved by the order of AO, Assessee carried the matter before CIT(A) who vide order dated 02-05-2011 dismissed the appeal of the assessee. Aggrieved by the aforesaid order of I.T.A No. 1794/Ahd/2011 A.Y. 2007-08 Page No 3 Girish Hiralal Kothlawala vs. ITO

CIT(A), Assessee is now in appeal before us and has raised the following grounds:-

"1. On the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in confirming the levy of penalty of Rs. 8,161/- u/s. 271(1)(c) of the Act, in respect of gif t of Rs. 40,000/- received by the appellant from his f ather-in-law and which has been voluntarily offered as income, which is absolutely erroneous and bad in law and needs to be deleted in the interest of natural justice and equity."

5. During the course of assessment proceedings, the AO noticed that assessee had received gift in cash of Rs. 40,000/- from his father-in-law, Shri Dineshchandra Chunawala. AO noticed that Shri Dineshchandra Chunawala in the affidavit had stated that he was not maintaining bank account, he does not have taxable income and has not filed his return of income. AO was therefore of the view that the capacity and the creditworthiness of the donor had remained unexplained and the genuineness of gift remained unexplained. He accordingly considered the cash gift of Rs. 40,000/- as unexplained cash credit u/s. 68 of the Act and made the addition of Rs. 40,000/-. On the aforesaid addition of Rs. 40,000/- made by AO u/s. 68 of the Act, AO vide order dated 08/02/2010 levied penalty on account of concealment of income u/s. 271(1)(c) of the Act of Rs. 8,161/-. Aggrieved by the I.T.A No. 1794/Ahd/2011 A.Y. 2007-08 Page No 4 Girish Hiralal Kothlawala vs. ITO

penalty order of AO, Assessee carried the matter before Ld. CIT(A) who confirmed the action of AO of levying penalty by holding as under:-

"4.1 I have duly considered the submission of the appellant and find that the Assessing Officer has discussed that the appellant filed an affidavit from Shrl Chunawala. A copy of which has been filed during the course of appellate proceedings also, wherein Shri Chunawala has stated that he is carrying on the business of carting of building materials on meager scale and not filing return of income, since his income is below taxable income, and also has no bank a/c. In the said affidavit, Shri Chunawala has also stated that the appellant is husband of his daughter and that the statement given by him in the affidavit is true and correct and he is in the knowledge that filing of wrong affidavit is an offence. The above amount was surrendered by the appellant during the course of assessment proceedings for the reason that he does not have full evidences in support of bona fides of the gift. The addition has also been made for the same reason. The genuineness of the gift has not been established; as the donor's capacity to make gift of the above amount has not been established. In order to levy penalty u/s 271(l)(c) of the Act, the following conditions as laid down by the Lucknow Bench of the ITAT in Star International (P) Ltd. Vs ACIT (2008) 23 SOT 83 (Lucknow), have to be cumulatively satisfied.

"1) The assessee offers an explanation which he is not able to substantiate;

2) The fails to prove that such explanation is bond fide; and

3) All the facts relating to the same and material facts to the computation of total income then disclosed by him."

Taking into account the above ingredients, I find that the appellant's father-in-law has not substantiated as to when I.T.A No. 1794/Ahd/2011 A.Y. 2007-08 Page No 5 Girish Hiralal Kothlawala vs. ITO

he is not filing return of income and not having any bank a/c, what is his monthly income and how much monthly savings he is able to make after meeting his household expenses. The explanation offered by the appellant, therefore, has not been substantiated. He has also failed to prove that the explanation offered by him is bonafide, which is evident as the appellant has not even furnished details of weekly, monthly or net annual receipts of his father-in-law's income from carting business and has also not satisfied the third condition that all the facts relating to the same and material facts to the computation of total income have been disclosed by him, I, therefore, hold that the Explanation 1 to section 271(1)(c) of the Act, is applicable in the case of the appellant, and confirm the penalty levied in his case."

6. Aggrieved by aforesaid order of Ld. CIT(A), Assessee is now in appeal before us.

7. Before us Ld. DR supported the order of AO and CIT(A). In the written submissions, the assessee has submitted that the gift was received in cash from his father-in-law who was aged about 61 years. It was further submitted that during the course of assessment proceedings, proof of identity of the donor in the form of driving license of the donor, notarized affidavit of the donor affirming the gift along with complete name, address, amount was submitted. It was further submitted that assessee had voluntarily and suo moto surrendered the gift of Rs. 40,000/- for tax to buy mental peace of mind and to avoid I.T.A No. 1794/Ahd/2011 A.Y. 2007-08 Page No 6 Girish Hiralal Kothlawala vs. ITO

litigations. It was also submitted that the Assessee has completely discharged primary onus cast to the assessee to prove the identity and creditworthiness of the donor as also the genuineness of the transaction. It was further submitted that merely because bank account is not maintained by the donor, gift received in cash cannot be considered to be non-genuine and that too in the absence of any corroborative evidences and further that there is no finding that the details furnished by the assessee in respect of gift received from his father-in-law was incorrect, erroneous or false. It was therefore submitted that the penalty levied in the present case be deleted.

8. We have heard the Ld. D.R. and perused the material on record. In the present case, penalty on account of concealment of income u/s. 271(1)(c) has been levied on the cash gift of Rs. 40,000/- received by the assessee from his father in law which according to the AO has remained unexplained. In the present case, it is an undisputed fact that the cash gift of Rs. 40,000/- has been received by the assessee from his father in law. The only reason for making the addition u/s. 68 was that the father in law in his affidavit had stated that he does not have a bank account and his income is below taxable limit. On perusing the I.T.A No. 1794/Ahd/2011 A.Y. 2007-08 Page No 7 Girish Hiralal Kothlawala vs. ITO

affidavit of the donor dated 11/12/2009, it is seen that the relationship of the assessee and the donor is not in doubt, his age being 61 years is also not in dispute. In the affidavit, the donor has stated that he has made gift out of past saving of carting business. Before us, Revenue has not brought any material on record to demonstrate that the donor could not have earned and saved the amount which he has gifted to his son in law. Further it is a well settled law that penalty proceedings are entirely distinct from assessment proceedings and however relevant and good, the findings in assessment proceedings may not be conclusive so far as penalty proceedings are concerned. It is well settled that the parameters of judging the justification for addition made in the assessment proceedings is different from the penalty imposed on account of concealment of income or filing of inaccurate particulars of income and that certain disallowance/additions could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s.271(1)(c) of the Act on preponderance of probability and the Revenue has to prove that the claim of the assessee was not genuine or was inflated its tax liability. Further merely because additions have confirmed in appear or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Considering the aforesaid I.T.A No. 1794/Ahd/2011 A.Y. 2007-08 Page No 8 Girish Hiralal Kothlawala vs. ITO

and peculiar facts of the case and considering the fact that the amount of gift to be a meager amount from the relative of Assessee, we are of the view that in the present case, no case for penalty has been made. We thus direct the deletion of penalty.

9. In the result, the appeal of Assessee is allowed.

Order pronounced in open court on the date mentioned hereinabove at caption page

Sd/- Sd/-

(MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 26/02/2015 ak

आदे श क ूितिल प अमे षत / Copy of Order Forwarded to:-

1. Assessee

2. Revenue

3. Concerned CIT

4. CIT (A)

5. DR, ITAT, Ahmedabad

6. Guard file.

By order/आदे श से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद