2017 (9) TMI 1288 - AT - Income Tax

Addition being the deduction for commission - assessee is in appeal against the confirmation of addition on the ground that no adequate opportunity was given by the ld. CIT(A) for placing the evidence - Held that - I am satisfied that the ends of justice would meet adequately if the impugned order is set aside and the matter is restored to the file of the Assessing Officer. I order accordingly and direct him to decide this issue afresh as per law, after allowing a reasonable opportunity of being heard to the assessee. Penalty u/s 271(1)(c) on account of commission - Held that - Since the issue in quantum has been restored to the Assessing Officer for fresh adjudication, the penalty is also restored accordingly. My view in restoring the penalty to the AO is fortified by the judgment of the Hon ble Supreme Court in the case of Mohd. Mohatram Farooqui vs. CIT (2010 (2) TMI 1122 - SUPREME COURT) in which it has been held that if addition is restored to the AO, then penalty should also be restored.

Summary

Issues: Appeal against quantum assessment and penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2012-13.

Quantum Assessment Issue Analysis:
The quantum appeal pertained to the addition of ?22,49,000 claimed as commission paid by the assessee for supply of medical equipments. The Assessing Officer disallowed the deduction as no evidence of commission payment was provided. The assessee contended before the ld. CIT(A) that evidence existed but was not presented to the Assessing Officer. The ld. CIT(A) upheld the addition due to lack of evidence. The assessee sought another opportunity to submit evidence, requesting the matter to be remanded to the Assessing Officer. The ITAT, considering the circumstances, set aside the order and directed the Assessing Officer to re-decide the issue after allowing the assessee a reasonable opportunity to be heard.

Penalty Issue Analysis:
The penalty appeal challenged the imposition of ?10,50,000 penalty under section 271(1)(c) following the addition of ?22.49 lakh as commission. As the quantum issue was remanded to the Assessing Officer, the penalty was also remitted accordingly. The ITAT cited the Supreme Court judgment in Mohd. Mohatram Farooqui vs. CIT and the jurisdictional High Court ruling in Sanjay Gupta vs. CIT to support the decision to remand the penalty issue. Consequently, the ITAT set aside the penalty order and referred the matter back to the Assessing Officer for fresh assessment on the penalty aspect. Both appeals were allowed for statistical purposes.

This judgment emphasizes the importance of providing adequate evidence to support claims during assessments and penalties under the Income Tax Act. It also underscores the principle that if the quantum assessment is remanded, the penalty aspect should also be reconsidered by the Assessing Officer.