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TMI Blog2012 (7) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-2000 thus respectfully following the same, the order passed by ld. CIT(A) deleting the penalty is hereby confirmed - decided in favour of assessee. - I.T.A. No.1006, 1007, 1008, 1009 & 1010/Ahd/2010 & I.T.A. No.114/Ahd/2012 - - - Dated:- 29-6-2012 - Shri D.K. Tyagi, and Shri T.R. Meena, JJ. Department by : Dr. Jayant Jhaweri, Sr. D.R. Assessee by : Shri M.G. Pute, A.R. ORDER PER BENCH: Appeal Nos.1006 to 1010 of 2010 have been filed by the Revenue and appeal No.114 of 2012 has been preferred by the assessee against separate orders of the ld. CIT(A). Since all the appeals belong to the same assessee and were heard together, for the sake of convenience, we are disposing of them by passing a consolidated order. 2. Revenue has taken following grounds of appeal:- l(a). On the facts and in the circumstances of the case, the Ld. CIT.(A) erred in deleting the penalty of Rs.50,66,584/- levied u/s. 271(1)(c) of the Act on the following additions confirmed by the CIT(A) i) Commission Payment Rs. 19,35,500 ii) Salary Payment Rs. 10,39,594 iii) Marketing expenses u/s.40A(2)(b) of the Act Rs.91,04,865 iv) ERP Software expenses Rs. 10,80,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Payment Rs.45,69,565/- ii) Marketing expenses u/s.40A(2)(b) of the Act Rs.2,45,92,286/- (b) The CIT(A) failed to appreciate that the assessee company has clearly furnished inaccurate particulars of income, thereby attracting explanation 1 to section 271(l)(c) of the Act, 1961. Merely claiming that it had not concealed particulars of income or not furnished inaccurate particulars of income is not sufficient to prove that the assessee's case does not fall under the provisions of section 271(l)(c). Further, in the recent judgment in the case of Union of India and others vs. Dharmendra Textiles Processors and others - 306 ITR 277 (SC) the Hon. Apex Court has held that the Explanations appended to section 271(l)(c) of the Income-tax Act, 1961, indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return." The penalty u/s. 271(l)(c) was, therefore, rightly levied by the Assessing Officer. l(a). On the facts and in the circumstances of the case, the Ld. CIT.(A) erred in deleting the penalty of Rs.53,06,150/- levied u/s. 271(l)(c) of the Act on the following additions and excess claim of deduction u/s. 80HHC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in law and on facts of the case by confirming penalty levied u/s 271(i)(c) by the A.O. in respect of disallowance of commission of Rs.19,17,652/-. 4. Ground No.1 (a) (i) in ITA No.1006, 1007, 1008, 1009, 1010 of 2010 and ITA No.114 of 2012 relating to penalty levied on commission paid to M/s Nipupn Finvest Pvt. Ltd. and other parties is common in all the appeals. Similarly ground NO.1(a)(iii) in ITA No.1006/2010 and ground No.1 (a)(ii) in ITA No.1007, 1008, 1009 1010 of 2010, relating to penalty levied on marketing expenses u/s 40A(2)(b) are common. So, we proceeded to decide these grounds along with other two grounds of ITA No.1006 of 2010 by taking the facts of ITA No.1006 of 2010. 5. Brief facts of the case are that in this case assessment u/s 143(3) of the Act was finalized determining total income of Rs.4,56,16,090/- against total income returned by the assessee of Rs.19,75,260/-. In the assessment various additions/disallowances were made and penalty u/s 271(1)(c) were initiated. Subsequently, assessee was given fresh opportunity as to why penalty u/s 271(1)(c) be not imposed on addition confirmed by ld. CIT(A). The assessee filed its reply which was not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission payment to the aforesaid parties along with sales effected through them, the Assessing Officer disallowed the same merely on the basis of presumption and surmises without bringing out any adverse evidence to the fact that the commission expenditure has not been incurred by the Appellant at all or the same is non-genuine. As the complete addresses from the parties were furnished by the Appellant, if the Assessing Officer has any doubt regarding the genuineness of the payment of commission to the aforesaid parties, he could have directly inquired from the concerned party which has not been done by him. Thus, the claim of commission expenditure was the genuine claim of the Appellant and on such disallowance, no penalty u/s 271(l)(c) can be levied. 3.1.3 Regarding other disallowances, it is submitted that during the year the Appellant Company in addition to other payments, has made following payments to Gharda Chemicals Ltd., which is a holding company. (i) payment Rs.10,39,594/- (ii) Reimbursement of expenditure Rs.91,04,865/- (iii) ERP Software Rs.10,80,000/- In respect of payment of salary to Gharda Chemicals Ltd. and has stated that the reimbursement of salary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emicals Ltd. Thus the assessing officer is not justified in disallowing entire marketing expenditure paid to Gharda Chemicals Ltd., which in fact is most reasonable and commensurate with business expediency as explained in the Note submitted by appellant to the assessing officer. It is submitted that in Tax Audit Report all payments made to holding company are duly reported and accordingly due disclosure has been made. The same has been disallowed merely considering unreasonable. Thus, the genuine expenditure has been disallowed u/s 40A(2)(b) of the IT. Act, 1961 for which no penalty u/s 271(l)(c) can be levied. Reliance is placed on Mumbai ITAT decision in case of Jhavar Properties (P) Ltd. [28 DTR (Mumbai) Trib.26]. The Appellant, vide letter dated 31-01-2003, explained to the Assessing Officer that ERP expenditure of Rs.50,00,000/- has been paid to by the Appellant to Gharda Chemicals Ltd., who in turn have entered into agreement with RAMCO SYSTEM LTD. As per the said agreement the appellant company was required to pay Rs,25,20,000/- by way of licence fee for the use of said software. In addition to this the appellant has reimbursed a sum of Rs.14,00,000/- for implementation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, payment of Rs.10,00,000/- to Mercury Enterprises was made as per credit note dated 31.03.2000. The complete details including address of the parties were given to the A.O. who could have verified the genuineness of this payment. As far as penalty levied on ERP Software expenses of Rs.10,80,000/- was concerned, the submission of the assessee was that this payment was made to Gharda Chemicals for implementation of ERP developed by Ramco Systems. The A.O., without making any enquiries has made these disallowances. Merely because disallowances/additions have been made by the A.O., penalty for concealment of income cannot be imposed automatically unless something is brought on record to show that assessee has concealed his income or has filed inaccurate particulars of income. For making this submission he relied on the following case laws:- i) CIT v. Hotel Sabar P. Ltd. [264 ITR 381 (Guj)] ii) CIT v. Harshvardhan Chemicals Minerals Ltd. [259 (Guj)] iii) CIT v. Skyline Auto Products P. Ltd. [271 ITR 335 (MP)] iv) CIT v. Anand Water Meter Mfg. Co. [117 ITR 866 (P H) v) CIT v M.P.Narayanan [244 ITR 528 (Mad)] vi) CIT v. Union Electric Corporation [281 ITR 266 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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