2016 (8) TMI 1390 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - disallowance of commission - Non response to summons - assessee s authorized representative accepted the disallowance of 25% of the commission so as to buy peace and to avoid long drawn litigation - Held that - The assessee has furnished confirmation of all the parties to whom the commission was paid. TDS was duly deducted from all the persons. That summon issued u/s 133(6) was duly complied with and six persons confirmed having received the commission. Merely because four persons did not furnish reply to the AO in response to summons, it cannot be said that the claim of the commission by the assessee was not genuine. That merely because the assessee agreed for the addition, it, in no way, saddle the assessee with the penalty u/s 271(1)(c) of the Act. It is not a fit case for levy of penalty u/s 271(1)(c). While doing so, we draw support from the decision of Hon ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt.Ltd. - (2010 (3) TMI 80 - SUPREME COURT) as held merely because the assessee s claim for any deduction is not accepted by the Revenue, penalty u/s 271(1)(c) of the Act is not attracted. - Decided in favour of assessee.

Summary

Issues: Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The Appellate Tribunal ITAT DELHI heard an appeal against the order of the CIT(A)-VI regarding the assessment year 2009-10. The only ground raised in the appeal was against the penalty imposed under section 271(1)(c) of the Income-tax Act. The penalty was levied on the disallowance of commission claimed by the assessee. The Assessing Officer disallowed 25% of the total commission expenses after issuing notices to parties and receiving confirmations from some. The assessee's representative agreed to the disallowance to avoid prolonged litigation. The assessee contended that all parties had confirmed receiving the commission, TDS was deducted, and compliance with summons was done. The Tribunal agreed with the assessee's contention, citing the decision of the Hon'ble Apex Court in CIT Vs. Reliance Petroproducts Pvt.Ltd., where it was held that the mere non-acceptance of a deduction claim does not attract penalty under section 271(1)(c) of the Act. Therefore, the Tribunal canceled the penalty, deeming it not applicable in this case. The appeal of the assessee was allowed, and the decision was pronounced on 05.08.2016.