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TMI Blog2013 (9) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 by the Commissioner of Income-tax has been duly considered and adjudicated by the Assessing Officer. There is no assumption of incorrect application of law by the Assessing Officer in the matter. The Assessing Officer had made requisite enquiry and applied his mind, before recording the findings in the said assessment order in the matter in question. Therefore, having regard to the legislative intent, contained in the provisions of section 263 of the Act and plethora of judicial verdicts in the matter, we are of the considered opinion that this is not a fit case for invocation of the provisions of section 263 of the Act. Therefore, the Commissioner of Income-tax acted beyond his jurisdiction, as contemplated under section 263 of the Act - Decided in favour of assessee. - ITA No. 1259/CHD/2009 & ITA No. 721/Chd/2010 - - - Dated:- 9-4-2012 - Order The order of the Bench was delivered by Mehar Singh (Accountant Member).-The appeal in I. T. A. No. 1259/ Chd/2009 filed by the assessee is directed against the order dated October 30, 2009 passed by the learned Commissioner of Income-tax-III, Ludhiana under section 263 of the Income-tax Act, 1961 (in short the Act ). The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee proves that the discount was directly paid to the sub-dealer, namely, G.S.C. by the Principal, then no addition is called for. Accordingly, this issue was remanded back by the Tribunal, for the said limited purpose, to the file of the Assessing Officer. The learned Commissioner of Income-tax invoked the provisions of section 263 of the Act and vide order dated, October 30, 2009, enhanced the income of the assessee by the said amount of discount of ₹ 7,15,772. The learned Commissioner of Income-tax also initiated penalty proceed ings under section 271(1)(c) of the Act, in the matter. The learned autho rised representative contended that the invocation of the provisions of section 263 of the Act is bad in law and falls beyond the purview of section 263 of the Act. The learned authorised representative also filed written sub missions in the mater, which are reproduced hereunder : 3. For effecting the sales, and also that the appellant had been engaged in the trading of other items, he had appointed a dealer in the name of M/s. Gopal Sales Corporation, who was making all the sales on behalf of the appellant and was being paid one percent commission, out of 5 perc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to the file of the Assessing Officer for fresh adju dication. If the assessee proves that the discount was directly paid to the sub-dealer, namely, G.S.C. by the principal, then no addition is called for. Accordingly, this issue is remanded back for the aforesaid limited purpose to the Assessing Officer.' 7. The Assessing Officer has discussed the sequence of above issue in his order and in order to verify the fact that whether the discount was passed on to Gopal Sales Corporation, the Assessing Officer had made the necessary queries from Principal, i.e., M/s. United Ink Varnish Co. Ltd., Subhash Road, Village Parle, Mumbai and the prin cipal had confirmed the same to the Assessing Officer and on the basis of such confirmation, the Assessing Officer had duly applied his mind with regard to the fact that the appellant was only a consignee and a conduit pipe for transferring the discount to Gopal Sales Cor poration, who had been effecting all the sales. The payment of dis count had to be routed through him only and it was just a mode of passing the entries, which have been passed through the books of consignee agent and accounted for by M/s Gopal Sales Corpn. 8. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income-tax is that since the discount had not been passed directly and, therefore, the directions of the Income-tax Appellate Tribunal have not been fol lowed and, as such, the assessment is erroneous and prejudicial to the interests of the Revenue. 12. This finding of the Commissioner of Income-tax is not correct because all the payments had to be remitted through the consignee agent, i.e., appellant and the fact that the discount had been passed on to Gopal Sales Corporation by way of transfer entries out of the discount received from Principal, i.e., M/s. United Ink Varnish Co. P. Ltd., and which fact has thoroughly been verified by the Assessing Officer during the course of assessment proceedings and even the Commissioner of Income-tax has not doubted about payment of discount to Gopal Sales Corporation and, therefore, the finding of the Commissioner of Income-tax for enhancing the income on the plea that the directions have not been followed and interpreting the word directly in absolute strict manner is not correct. 13. But the fact remains that the discount had ultimately been received by Gopal Sales Corporation as per past practice, this has also been me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 in I.T.A. No.966/Chandi/2004 remanded the issue of addition of ₹ 7,15,772 to the file of the Assessing Officer for fresh adjudication and held that if the assessee proves that the discount was directly paid to the sub-dealer, namely, G.S.C. by the principal, then no addition is called for. Fresh notice under section 143(2) was issued on July 9, 2007, fixing the case for hearing on July 17, 2006. In response to this notice, Sh. Sudhir Sehgal, advocate and Sh. Saurabh Sehgal, chartered accountant attended the assessment proceedings, with whom the case was discussed. A letter was sent to M/s. United Ink Varnish Co. P. Ltd., Subhash Road, Vile Parle (East), Mumbai on September 27, 2007 through fax requesting it to send confirmation regarding discount of ₹ 7,15,772 given to M/s. Surindra Enterprises, Ludhiana. Confirmation letter in this regard was submitted through fax by M/s. United Ink Varnish Co. P. Ltd., Mumbai on Sep tember 18, 2007. The claim made by the assessee is correct. After discus sion, income of the assessee is recomputed as under : Income as per return ₹ 2,47,380 Add : (i) Disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 263 of the Act deserves to be set aside and, hence, the same is set aside. In the result, the appeal of the assessee is allowed. I. T. A. No. 721/Chd/2010 This is an appeal against the order passed by the Commissioner of Income-tax under section 271(1)(c) of the Act on April 22, 2010 imposing penalty of ₹ 2,40,483. Having regard to the findings given by us in I. T. A. No. 1259/Chd/2009, whereby the order passed by the Commissioner of Income-tax under section 263 was quashed, the levy of penalty under section 271(1)(c) of the Act in respect of addition made in pursuance of the order passed under section 263 of the Act, cannot survive. As the foundation of the levy of penalty ceases to exist, the said penalty order cannot be sustained. In view of this, as there does not exist the very ground of levy of penalty under section 271(1)(c) of the Act, the order passed by the Commissioner of Income-tax whereby the impugned penalty was levied on the assessee, becomes non est. Accordingly, the appeal of the assessee is allowed. In the result, both appeals of the assessee are allowed. The order pronounced in the open court on April 9, 2012. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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