No Penalty on Gift of Resurgent India Bonds from Non Relative NRI

Gift was received by the assessee in the form of India resurgent bonds amounting to USD 10,000. Bonds were duly certified by Certificate No. 0066493 and Register Folio No. of transferor RIB-417865 issued by SBI. The donor has filed confirmation of gift. The assessee has also filed copy of letter from State Bank of India stating the mode of transfer of the bonds in the name of the assessee. Gift was made by Shri Vikram Singh, a family friend of assessee, whose details and address along with copy of his pass-port were also submitted before the lower authorities. Before giving the gift, the donor was holding the bonds for six years, which proves his creditworthiness and genuineness.

Hon’ble Allahabad High Court in the case of Kanchan Singh vs. CIT, (supra), have held that where the assessee has established nature and source of money, no addition was justified in respect of gift of Resurgent India bonds.

However, the facts in the instant case are more strong insofar as identity of the donor was not in doubt, whose copy of pass port was submitted to the Assessing Officer along with gift declaration. Genuineness of gift was also substantiated by the assessee by filing Bank certificate stating the mode of transfer of bond in the name of assessee. Creditworthiness of donor was established in view of his holdings of bond for six years prior to the date of gift. Under these circumstances, the question arises as to whether Assessing Officer was justified in imposing penalty u/s 271(1)(c) by disbelieving the factum of gift. The issue was examined by the I.T.A.T., Indore Bench in the case of Phoolchand Agarwal in I.T.A.No. 372/Ind/2006 order dated 26^th March, 2012, and it was held that where nature and source of gift in the form of resurgent India bonds is established, no addition was warranted. Here, we are not dealing with the quantum appeal but the facts discussed above fully support our view that it is not a fit case for levy of penalty u/s 271(1)(c) of the Act. Accordingly, we reverse the orders of both the lower authorities and direct the Assessing Officer to cancel the penalty imposed u/s 271(1)(c) of the Act.

IN THE INCOME TAX APPELLATE TRIBUNAL,

INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARMA, A.M.

PAN NO. : AFRPR2233L

I.T.A. No. 566/Ind/2012.
A.Y.: 2004-05

Smt.Sangeeta Rathi vs ITO

Appellant by : Shri Pankaj Shah & Manoj Gupta, CAs

Respondent by : Shri R.R.Meena, Sr. DR

Date of Hearing : 07.05.2013

Date of pronouncement : 09.05.2013

ORDER

PER R. C. SHARMA, A.M.

This is an appeal filed by the assessee against the order passed by the CIT(A) dated 29.08.20 12, for the assessment year 2004-05, in the matter of imposition of penalty u/s 271(1)(c) of the Income-tax Act, 1961.