2016 (7) TMI 1672 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - non admission of additional evidences - deduction on account of commission paid to several persons who have procured new LIC policies from different persons - addition was made because the assessee could not adduce complete details and list of the persons to whom commission was paid - assessee has now filed application for admission of additional evidence, in which it is stated that the list of sub-agents and their affidavits alongwith names of the parties who had been introduced by each sub-agents alongwith list was filed as additional evidence - CIT (A) did not consider these nine affidavits of the persons in support of claim of payment of commission because no request under Rule 46A of the Income Tax Rules was made - HELD THAT - Though the findings given in the quantum proceedings are relevant and have probative value but these are not conclusive for levy of penalty against the assessee under section 271(1)(c) - It is well settled that the quantum and penalty proceedings are distinct and independent proceedings. Assessee in the penalty proceedings still could have explained that it is not a case of levy of penalty based on the evidence on record. Hon'ble Supreme Court in the case of Tek Ram Vs. CIT 2013 (8) TMI 459 - SC ORDER and case of CIT Vs. Mukta Metal Works 2011 (2) TMI 250 - PUNJAB AND HARYANA HIGH COURT admitted the additional evidence being relevant and required to be looked into. We admit these additional evidences for the purpose of hearing - contention of the D.R. that same additional evidences were not admitted by the CIT (Appeals), has no merit because the assessee did not make any request under Rule 46A of the Income Tax Rules for admission of the additional evidence. These additional evidences so admitted would have bearing on the issue and could explain the matter in issue with reference to the penalty matter We set aside the orders of the authorities below and restore the issue of levy of penalty to the file of the Assessing Officer with direction to redecide the issue in the light of additional evidence so admitted above - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Challenge against penalty under section 271(1)(c) of the Income Tax Act, 1961 based on disallowance of commission paid by the assessee.

Analysis:
1. The appeal was filed against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2008-09, related to the disallowance of commission paid by the assessee.

2. The disallowance of Rs.6,42,870/- from the claimed commission was confirmed by both the CIT (Appeals) and the ITAT, leading to the levy of penalty, which was also upheld by the CIT (Appeals).

3. During the proceedings, it was revealed that the assessee, a LIC agent, claimed deductions for commission paid to individuals who procured new LIC policies. The addition was made due to incomplete details and a lack of a complete list of recipients. The assessee later submitted an application for additional evidence, including a list of sub-agents, their affidavits, and the names of parties introduced by the sub-agents. The assessee argued that these documents were previously submitted to the CIT (Appeals) and should be considered. However, the D.R. contended that these documents were not admitted by the CIT (Appeals) due to non-compliance with Rule 46A of the Income Tax Rules.

4. The Tribunal emphasized the distinction between quantum and penalty proceedings, stating that findings in quantum proceedings are not conclusive for penalty imposition. Citing relevant case law, the Tribunal admitted the additional evidence submitted by the assessee, highlighting its relevance in determining the penalty levy. The Tribunal noted that the failure to produce the complete list of recipients led to the disallowance, but the newly submitted affidavits could potentially explain the situation. As a result, the Tribunal admitted the additional evidence and directed the matter to be reconsidered by the Assessing Officer.

5. Consequently, the Tribunal set aside the previous orders and remanded the issue of penalty levy back to the Assessing Officer for reevaluation in light of the newly admitted evidence. The assessee was instructed to present these evidences for consideration, and the Assessing Officer was directed to provide a fair hearing opportunity to the assessee.

6. Ultimately, the appeal of the assessee was allowed for statistical purposes, indicating a successful challenge against the penalty under section 271(1)(c) based on the additional evidence presented during the proceedings.