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2014 (1) TMI 1429 - AT - Income TaxPenalty u/s 271(1)(c) of the Act Held that - Two situations provided in Explanation 1 appended to section 271(1)(c) makes it clear that that when this deeming fiction comes into play in the above two situations then the related addition or disallowance in computing the total income of the assessee, for the purpose of section 271(1)(c) would be deemed to be representing the income in respect of which inaccurate particulars have been furnished. It is not a case where the assessee had not furnished explanation or had not substantiated the explanation - The assessee had produced even Director of the payee company who had agreed to have received the payment - The Tribunal had reversed the order of CIT(A) on the basis that there was no evidence in the paper book about the complaints received by the assessee and communicated to the payee company - If assessee could produce such evidence, the findings of the Tribunal might have been different - The CIT(A) had given relief by not considering this aspect - it is a case where two appellate authorities has taken different view on the same subject by relying upon different evidences where there are two views possible penalty u/s 271(1)(c ) cannot be invoked - penalty u/s 271(1)( c) was mot imposable Decided in favour of Assessee.
Issues:
Appeal against penalty order under section 271(1)(c) for concealing income or furnishing inaccurate particulars. Detailed Analysis: Issue 1: Background and Assessment Proceedings The appellant, a partnership firm engaged in consultancy, appealed against the penalty order under section 271(1)(c) imposed by the Assessing Officer for concealing income. The Assessing Officer observed discrepancies in the appellant's income declaration related to commission payments made to another company for after-sale services. The appellant's explanations were scrutinized, leading to the penalty imposition. Issue 2: Appeal and Tribunal's Decision The appellant appealed before the Ld CIT(A) against the penalty order, arguing that the expenses were genuine business expenditures supported by regular payments to the payee company over three years. The Ld CIT(A) had initially given relief, but the Tribunal reversed this decision, upholding the penalty. The appellant's contention of two possible views on the matter was based on the Amritsar Bench's decision that in such cases, penalty under section 271(1)(c) cannot be imposed. Issue 3: Arguments and Counter-Arguments The appellant's representative highlighted the genuine nature of the expenses, supported by past payments and account transactions. On the other hand, the Departmental Representative argued that the appellant failed to substantiate the expenses' genuineness, leading to inflated claims over the years. The Departmental Representative emphasized that the payee company lacked the expertise to provide the services claimed by the appellant. Issue 4: Legal Provisions and Deeming Fiction Section 271(1)(c) of the Income Tax Act deals with penalties for concealing income or furnishing inaccurate particulars. The section allows penalties ranging from 100% to 300% of the tax sought to be evaded. The deeming provisions under Explanation 1 of the section trigger penalties when the assessee fails to offer a genuine explanation or substantiate the explanation provided, leading to a presumption of concealed income. Issue 5: Tribunal's Decision and Rationale The Tribunal's decision was based on the lack of evidence in the appellant's submissions regarding the services provided by the payee company. The Tribunal emphasized the absence of records supporting the claimed expenses, leading to the reversal of the Ld CIT(A)'s decision. The Tribunal's ruling highlighted the importance of evidence in determining the legitimacy of expenses. Conclusion: The Tribunal allowed the appellant's appeal, citing the possibility of different views by two appellate authorities on the same subject based on varying evidence. Following the precedent set by the Amritsar Bench, the Tribunal held that penalty under section 271(1)(c) was not applicable in this case, ultimately ruling in favor of the appellant against the penalty order.
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