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TMI Blog2015 (3) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... SUPREME COURT ] applies squarely to the facts of the case. Further, the disallowance in the claim of the assessee in the quantum proceedings cannot automatically call for the levy of penalty under section 271(1)(c). Hence we are of the opinion that the penalty levied under section 271(1)(c) is to be deleted. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to discharge the onus of proving the services rendered by the agents. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the assessee preferred an appeal before the hon'ble Income-tax Appellate Tribunal, Hyderabad. The hon'ble Tribunal also confirmed the addition in the absence of the details as to the list of customers introduced by the agents and quantity of sales effected through agents. Even the miscellaneous petition filed was dismissed by this hon'ble Tribunal. The assessee had preferred an appeal before the hon'ble High Court of Andhra Pradesh, which is pending disposal. 6. While the matter stood thus, the learned Assessing Officer proceeded with levy of penalty under section 271(1)(c) of the Income-tax Act, 1961, vide order dated January 31, 2013, levying a penalty of ₹ 1,59,00,000 in the case of Sun Infraa and ₹ 84,00,000 in the case of Sun Minerals holding the assessee guilty of furnishing of inaccurate information resulting in the disallowance of the commission payment placing reliance on the decision of the hon'ble Supreme Court in the case of Lachminarayan Madan Lal v. CIT [1972] 86 ITR 439 (SC) and the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gents. (e) The assessee claims that all its customers were introduced by all the agents whereas the list of customers furnished by Smt. Bhagya Lakshmi is inconsistent with this claim. (f) In a nutshell the assessee could not produce any documentary evi dence in support of the services rendered and also it could not furnish the basis for payment of commission. 10. On appeal, the learned authorised representative submitted that (i) the learned Assessing Officer had not given finding in the penalty order as to how and in what manner the assessee had furnished inaccurate particulars of income resulting in additions to the returned income, except making a bald charge against the assessee that it had furnished the inaccurate particulars, which is an essential requisite of section 271(1)(c) of the Act. In the absence of such finding, the penally order is liable to be quashed. Reliance in this regard is placed on the following judicial precedents : (a) CIT v. Balbir Singh [2008] 304 ITR 125 (P&H) (b) National Textiles v. CIT [2001] 249 ITR 125 (Guj) (c) Nainu Mal Het Chand v. CIT [2007] 294 ITR 185 (All) (d) CIT v. Super Metal Re-rollers [2004] 265 ITR 82 (Delhi) (e) Diwan En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income." Even the hon'ble Karnataka High Court in the case of CIT v. San dur Manganese and Iron Ores Ltd. [2010] 327 ITR 242 (Karn) has laid down the same proposition of law. (iii) The learned Assessing Officer had solely relied on the assessment proceedings without examining the matter independently in the penalty proceedings. It is a trite law that the penally proceedings are different from assessment proceedings. Though the evidence in the assessment proceedings is good evidence but is not a conclusive evidence for penalty proceedings. The fact that certain additions were made in the assessment does not ipso facto hold the assessee liable for penalty. No penalty can be levied solely on the basis of reasons given in the assessment order. Reliance in this regard is placed on the following decisions : (a) CIT v. Khoday Eswarsa and Sons [1972] 83 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a v. CIT [2007] 288 ITR 329 (All). It is respectfully submitted that the case laws relied upon by the Assessing Officer cannot be applied to the facts of the present case. The hon'ble Rajasthan High Court in the case cited supra had held that where the assessee had failed to offer an explanation in the penalty proceedings, based on the evidence gathered during the course of assessment proceedings penalty can be levied. Whereas in the present case, the assessee had offered an explanation in response to the show-cause notice for levy of penalty, which was either not found to be false or not found to be bona fide by the Assessing Officer and, therefore, the ratio laid down by the Rajasthan High Court is not applicable to the present case. The Allahabad High Court in the case of Raj Kumar Chaurasia v. CIT [2007] 288 ITR 329 (All) vide para graph 17 of the judgment held as under (page 338) : "We find that it is not in dispute that the cold drinks business car ried on by the applicant in the name of his wife Smt. Vijai Laxmi has been finally held by the Tribunal, which is the last fact-finding authority, to be the business carried on by the applicant and the income earned ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments made to the agents should not be treated as expenditure not laid out or expended wholly and exclusively for the purpose of the business. The learned Departmental representative further relied on the order of the Assessing Officer and observed that the Assessing Officer had held at paragraph 10 of his order as follows : "10. In the case of Schneider Electric India Ltd. v. CIT [2008] 304 ITR 360 (Delhi), the Delhi High Court followed the apex court's decision in the case of Lachminarayan Madan Lal v. CIT [1972] 86 ITR 439 (SC). The relevant portion of the judgment is reproduced as under (page 363 of 304 ITR) : 'With regard to the existence or otherwise of a written agreement between the parties our attention has been drawn to Lachiminarayan Madan Lal v. CIT [1972] 86 ITR 439 (SC) wherein it has been held by the Supreme Court that even if there is an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment that does not bind the Income-tax Officer to hold that the payment was made exclusively and wholly for the purposes of the assessee's business. The Supreme Court observed as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the full details of the claim made in the return of income as well as during the course of assessment proceedings. The information furnished was not found to be false or bogus by the assessing authority as well as the appellate authorities. The Assessing Officer has not disapproved the claim of the assessee. Therefore the reasonable inference is that the assessee's claim is not false since the lower authorities as well as the Tribunal in the quantum proceedings has not given a finding that the claim of the assessee is either bogus or false. The Assessing Officer had drawn the inference that commission payments were not incurred wholly and exclusively for business purposes. 15. The Income-tax Appellate Tribunal has held in quantum appeal that "mere payment of commission through account payee cheque after deduction of TDS does not absolve the assessee from discharging its burden with regard to proving business purpose of the payments. In the absence of any credible evidence for making payments, we are inclined to disallow the same". Holding so the Income-tax Appellate Tribunal drew attention to the decision of the Delhi Income-tax Appellate Tribunal in the case of Roge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions of the proposition that mere additions to the returned income would not per se tantamount to furnishing of inaccurate particulars so as to attract under section 271(1)(c). 20. In the case of Transport Corporation of India Ltd. v. Asst CIT [2013] 10 TMI 870 (ITA No. 195/Hyd/2013 dated September 27, 2013) this Tribunal has held that unless the claim of the assessee was proved to be bogus or that any amount was received back by the assessee, the disallowance of expenditure by itself cannot be reason for levy of penalty. 21. The Delhi High Court in the case of Karan Raghav Exports P. Ltd. v. CIT [2012] 349 ITR 112 (Delhi) has held that claim made by the assessee might have been rejected, but it would not be said that claim was not plausible or legally tenable and therefore it cannot be said that the assessee has furnished inaccurate particulars of income. 22. In the case of CIT v. Balaji Distilleries Ltd. [2013] 1 ITR-OL 339 (Mad) it has been held that when additions were confirmed not for lack of bona fides but for rejecting the explanation of the assessee the penalty cannot be levied under section 271(1)(c). 23. In the case of CIT v. International Audio Visual Co. [200 ..... 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