2015 (10) TMI 1427 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of commission - CIT(A) deleted the penalty - Held that - There is no finding that any details supplied by the assessee in its return of income are incorrect or erroneous or false. That merely because the claim of commission is disallowed by the Assessing Officer and upheld by the appellate authorities will not amount to concealment of income or furnishing of inaccurate particulars of income of the assessee. In view of the above, in our opinion, the CIT(A) rightly cancelled the penalty relying upon the decision of Hon ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd, reported in 2010 (3) TMI 80 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues:
- Appeals filed by Revenue against orders of CIT(A) for Assessment Years 1985-86 and 1986-87.
- Ground raised by Revenue against cancellation of penalties under section 271(1)(c) of the Income-tax Act.
- Disallowance of commission claimed by assessee for both years.
- Justification for penalty levied by Assessing Officer.
- CIT(A) and ITAT's decisions on the penalty.
- Applicability of the decision of Hon'ble Apex Court in similar cases.
- Upholding of CIT(A)'s order and dismissal of Revenue's appeals.

Analysis:
The judgment pertains to appeals by the Revenue against two orders of the Commissioner of Income Tax (Appeals)-VIII, Ahmedabad, for Assessment Years 1985-86 and 1986-87. The sole ground raised in these appeals is the cancellation of penalties amounting to &8377; 3,81,513/- and &8377; 4,23,806/- for the respective years under section 271(1)(c) of the Income-tax Act. The facts reveal that the assessee, engaged in manufacturing and sales of chemicals, claimed commission payments to M/s. Somnath Chemicals for both years, which were disallowed by the Assessing Officer and upheld by the CIT(A) and ITAT, leading to the imposition of penalties.

The Assessing Officer's justification for the penalty was based on the disallowance of commission payments made by the assessee to M/s. Somnath Chemicals due to the inability to prove the services rendered by the latter. However, the CIT(A) canceled the penalties following the decision of the Hon'ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd, emphasizing that a mere unsustainable claim does not constitute furnishing inaccurate particulars regarding income. The judgment highlights that the penalty under section 271(1)(c) cannot be invoked solely based on disallowed claims if there is no evidence of incorrect or false details provided by the assessee.

The Tribunal, after considering the arguments and facts presented, found no justification to deviate from the CIT(A)'s decision. It noted the assessee's history of commission payments to M/s. Somnath Chemicals, the past allowance of such payments by the Revenue, and the lack of evidence to prove the services in the years under consideration. Upholding the CIT(A)'s order, the Tribunal dismissed the Revenue's appeals, citing the applicability of the Hon'ble Apex Court's decision to the current cases. The judgment, pronounced on 5.6.2015, signifies the importance of accurate particulars in income reporting and the necessity for concrete evidence to support disallowed claims to avoid penalties under the Income-tax Act.