2015 (3) TMI 877 - AT - Income Tax

Penalty u/s 271(1)(c) - Disallowance of commission payment - Held that - The assessee has furnished the full details of the claim made in the return of income as well as during the course of assessment proceedings. The information furnished was not found to be false or bogus by the assessing authority as well as the appellate authorities. The Assessing Officer has not disapproved the claim of the assessee. Therefore the reasonable inference is that the assessee's claim is not false since the lower authorities as well as the Tribunal in the quantum proceedings has not given a finding that the claim of the assessee is either bogus or false. The Assessing Officer had drawn the inference that commission payments were not incurred wholly and exclusively for business purposes. The assessee has disclosed full particulars in the return of income and hence the decision of CIT v. Reliance Petroproducts P. Ltd. 2010 (3) TMI 80 - SUPREME COURT applies squarely to the facts of the case. Further, the disallowance in the claim of the assessee in the quantum proceedings cannot automatically call for the levy of penalty under section 271(1)(c). Hence we are of the opinion that the penalty levied under section 271(1)(c) is to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of commission payments.
2. Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961.
3. Furnishing of inaccurate particulars of income.
4. Validity of the assessee's explanation and evidence regarding commission payments.

Detailed Analysis:

1. Disallowance of Commission Payments:
The assessee, engaged in iron ore mining and trading, filed returns for the assessment year 2008-09. The Assessing Officer disallowed commission payments due to lack of written agreements and detailed evidence from agents. The Tribunal confirmed the disallowance, citing insufficient evidence of services rendered by agents.

2. Levy of Penalty under Section 271(1)(c) of the Income-tax Act, 1961:
The Assessing Officer levied penalties on the grounds of furnishing inaccurate particulars of income, relying on precedents like Lachminarayan Madan Lal v. CIT and Schneider Electric India Ltd. v. CIT. The penalties were Rs. 1,59,00,000 for Sun Infraa and Rs. 84,00,000 for Sun Minerals.

3. Furnishing of Inaccurate Particulars of Income:
The assessee argued that the Assessing Officer did not specify how the particulars were inaccurate. The Tribunal noted that the assessee disclosed full details during assessment and that the information was not found to be false or bogus. The Tribunal emphasized that mere disallowance of claims does not equate to furnishing inaccurate particulars.

4. Validity of the Assessee's Explanation and Evidence Regarding Commission Payments:
The assessee provided names, addresses, and PAN numbers of agents, who confirmed services and receipt of payments. The Assessing Officer's adverse inference was based on the absence of written agreements and specific details of services. The Tribunal found that the assessee's claim was not false and that the disallowance was due to a different interpretation of evidence, not due to inaccurate particulars.

Conclusion:
The Tribunal concluded that the penalty under section 271(1)(c) was not justified as the assessee had disclosed all relevant details, and the disallowance was based on differing views of evidence, not on false claims. The appeals by Sun Infraa and Sun Minerals were allowed, and the penalties were deleted. The Tribunal's decision aligns with the precedent set by CIT v. Reliance Petroproducts P. Ltd., emphasizing that a mere disallowance does not constitute furnishing inaccurate particulars.