2013 (6) TMI 277 - HC - Income Tax

Computation of brokerage expenses - ITAT directed to AO to compute the amount of brokerage at 8.5% on Rs.23,80,000/- and this amount should be deducted from the gross commission receipt - Levy of penalty u/s 271(1)(c) - Held that - There is no dispute in the present case that the assessee would have incurred expenditure for earning the gross commission, that is the reason why, the Assessing Officer granted only Rs.5,000/-, but the Tribunal fixed it at 8.5%. Therefore, we do not find any error in the order warranting interference - Decided in favor of assessee. Regarding penalty - Held that - following the Supreme Court judgment in Commissioner of Income-Tax v. Gold Coin Health Food P. Ltd., 2008 (8) TMI 5 - SUPREME COURT , we hold that penalty can be levied even, when the assessee s return of income is shown as loss . In the present case, the Income Tax Appellate Tribunal merely deleted the penalty as there is no positive income. The Tribunal had not considered the case on merits whether there is violation of provision of Section 271(1)(c) of the Act. Since this Court is of the considered view that penalty can be levied even when the assessee s income of return is shown as loss, we set aside the order of the Income Tax Appellate Tribunal with a direction to the Tribunal to reconsider the matter after giving opportunity to the assesee to enable them to file explanation, whether there is violation of provision of Section 271(1)(c) of the Act and pass orders in accordance with law. - Decided in favor of revenue.

Summary

Issues:
1. Whether the direction given by the Income Tax Appellate Tribunal to compute brokerage at 8.5% on a specific amount and grant deduction from gross commission receipt is valid?
2. Whether the deletion of penalty under Section 271(1)(c) of the Income Tax Act by the Income Tax Appellate Tribunal is valid?

Analysis:
1. The case involved an appeal by the Revenue challenging the orders of the Income Tax Appellate Tribunal regarding the assessment year 1997-1998. The Tribunal directed the Assessing Officer to compute brokerage at 8.5% on Rs.23,80,000 and grant deduction from the Gross Commission Received. The Tribunal's decision was based on the fact that the assessee would have incurred expenditure in earning the commission, which justified the deduction. The High Court found no error in the Tribunal's decision, stating that the direction was supported by material evidence and in accordance with the law. The Court dismissed the appeal in favor of the assessee, as the Tribunal's order was deemed lawful and justified.

2. The second issue pertained to the deletion of a penalty of Rs.10,21,250 under Section 271(1)(c) of the Act by the Tribunal. The Tribunal's decision was based on the premise that the penalty can only be levied on positive income and not on a loss, citing relevant judgments. However, the Revenue contended that recent judgments allowed for the penalty even in cases of income loss. The High Court agreed with the Revenue, stating that penalties can be levied even when the return of income shows a loss. The Court set aside the Tribunal's order and directed a reconsideration of the penalty matter, emphasizing the need to assess if there was a violation of Section 271(1)(c) and to pass orders in accordance with the law.

In conclusion, the High Court upheld the Tribunal's decision regarding the computation of brokerage but overturned the deletion of penalty, directing a reassessment based on the recent legal interpretations.