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TMI Blog2006 (1) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of software. It entered into an agreement on 1-4-2001 with M/s. FIITJEE Limited for introducing parties interested for becoming franchisees of M/s. FIITJEE Limited. Since this was not the main business of the assessee, it entered into another agreement with M/s. Vineet Estates Private Limited and appointed the said company as its sub-agent for rendering professional services for introducing parties interested in becoming franchisees of M/s. FIITJEE Limited. The assessee made payment of Rs. 30 lakhs as commission to M/s. Vineet Estates Private Limited which was credited in its account on 21-4-2001 for professional services rendered by them. No tax was deducted at source from the said payment of Rs. 30 lakhs. The Assessing Officer in a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-company observed that the ld. Jt. CIT has passed impugned order after being satisfied that it was a case of manipulation of books of account with a motive to avoid applicability of provisions of section 194H in consonance with the findings of the Income-tax Officer. He noted that in terms of the engagement letter for professional services dated 1-4-2001 stipulating the payment terms, commission would become payable as soon as the deal was finalized in principal. It was seen that no deal had been finalized before 1-6-2001. In such circumstances, the ld. Jt. CIT has concluded that it was a case of manipulation to books of account with the motive to avoid applicability of provisions of section 194H which was inserted w.e.f. 1-6-2001. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it will be seen from the penalty order passed by the ld. Jt. CIT that the penalty was levied on the assessee on the ground that the assessee had not contested the order of the Assessing Officer before the appellate authorities and has made the payment of TDS of Rs. 3,06,000 and interest of Rs. 57,375 levied under section 201(1) and 201(1A) by the Assessing Officer. He submitted that there may be many reasons for the assessee for not filing an appeal against the order of the Assessing Officer and paying the tax levied in the assessment made. He submitted that penalty proceedings are quasi-criminal proceedings and Assessing Officer has to bring materials on record to show that the default committed by the assessee was intentional. Since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of commission of Rs. 30 lakhs made to M/s. Vineet Estates Private Limited for the reason that the assessee had not challenged the order of the Assessing Officer in appeal before the appellate authorities. In our considered opinion, there may be many reasons for the assessee not to challenge the order of the Assessing Officer in further appeal before the appellate authorities. This alone cannot be the ground for imposition of penalty on the assessee. The penalty proceedings are quasi-criminal proceedings and before levy of penalty the Assessing Officer has to bring on record some material to show that the assessee has done this intentionally. The Hon ble Supreme Court in the case of K.C. Builders v. Asstt. CIT [2004] 265 ITR 562 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. ITO [1984] 10 ITD 348 has held that merely because the assessee does not challenge an addition it cannot be inferred that the assessee was guilty of concealment of income. 13. In the instant case, we find that the provision of section 194H was brought on Statute w.e.f. 1-6-2001. The assessee s contention is that since the commission income of Rs. 30 lakhs was credited in the books of account of the assessee on 21-4-2001 when the provisions of section 194H was not on Statute the assessee did not deduct tax at source at the time of crediting of the income to the account of the assessee. 14. The provisions of section 194H reads as under : Any person, not being an individual or a Hindu undivided family, who is responsible for pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy of penalty could not be sustained. Still further, the assessee s explanation is that the commission income of Rs. 41 lakhs approx. for services rendered by the assessee-company was paid to the assessee-company by M/s. FIITJEE Limited on 15-5-2001 and services for which commission was paid to M/s. Vineet Estates Private Limited by the assessee-company was finalized to the satisfaction of the principal company, i.e., M/s. FIITJEE Limited on or before 15-5-2001 which was prior to 1-6-2001, the date of applicability of the provisions of section 194H of the Income-tax Act, 1961. Further, the assessee-company was required to pay M/s. Vineet Estates Private Limited consolidated commission of 12 per cent of the gross amount received as initial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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