2014 (8) TMI 1113 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowing the commission payment - inaccurate particulars of income - Held that - In the instant case, when the AO has not disputed the particulars of income furnished by the assessee nor he has disputed the amount on which commission is claimed to have been paid by the assessee, the disallowance on the ground of challenging the capabilities of Ms. Divya Khanna to provide tips for purchasing shares etc. is merely a subjective findings which are not sustainable. These days it is a matter of common knowledge that persons of 20 years of age are capable enough to advice and carry on such business even on their own. When the AO himself has allowed the commission of ₹ 5,00,000/- having been paid to Mr. Sanjeev Khurana, merely disallowing the commission payment on the basis of subjective satisfaction without calling upon the assessee as to what type of advice and know-how has been provided by Ms. Divya Khanna to earn the business income on which tax has already been paid, the penalty cannot be imposed nor does it amount to furnishing of inaccurate particulars. So, in the given circumstances, we are unable to hold that the assessee has furnished inaccurate particulars of income for making payment of ₹ 6,00,000/- to Ms. Divya Khanna so as to attract the penalty u/s 271(1)(c) of the Act, hence we hereby delete the penalty by allowing the appeal filed by the assessee. - Decided in favour of assessee.

Summary

Issues:
Penalty imposition under section 271(1)(c) of the Income-tax Act, 1961 for inaccurate particulars of income.

Detailed Analysis:

1. Background and Initiation of Penalty Proceedings:
The appeal was filed by M/s. Perfect Homfin Pvt. Ltd. to set aside the penalty order imposed under section 271(1)(c) for the assessment year 2010-11. The appellant contested the penalty on various grounds, including the alleged inaccuracy in the imposition of the penalty.

2. Assessment and Penalty Proceedings:
During the assessment, it was observed that the appellant had debited an amount for professional and management charges, leading to the initiation of penalty proceedings under section 271(1)(c). The Assessing Officer concluded that the expenses were inadmissible and inaccurate, justifying the penalty imposition.

3. Challenge and Tribunal's Examination:
The appellant challenged the penalty order before the Commissioner of Income-tax (Appeals), who upheld the penalty. Subsequently, the matter was brought before the Tribunal for further review.

4. Tribunal's Decision and Legal Analysis:
The Tribunal analyzed the facts and circumstances, noting that the appellant was engaged in derivatives, jobbing, and investment business. The key issue for determination was whether the penalty was justified for debiting inadmissible expenses related to commission payments.

5. Legal Interpretation and Precedent:
The Tribunal referred to the decision of the Hon'ble Supreme Court in CIT vs. Reliance Petro Products Pvt. Ltd., emphasizing that penalty under section 271(1)(c) requires concealment or furnishing inaccurate particulars of income. The Tribunal highlighted that incorrect claims do not necessarily constitute inaccurate particulars.

6. Conclusion and Judgment:
The Tribunal found that the Assessing Officer did not dispute the particulars of income or the commission payment amount. The subjective findings regarding the capabilities of the recipient of the commission were deemed unsustainable. As a result, the Tribunal concluded that the penalty imposition was not justified, and the appeal was allowed, leading to the deletion of the penalty amount.

In the final judgment pronounced on August 8, 2017, the Tribunal ruled in favor of the appellant, M/s. Perfect Homfin Pvt. Ltd., by deleting the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.