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TMI Blog2016 (1) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and the Assessing Officer is directed to delete the penalty. - Decided in favour of assessee - I.T.A. No.6815/DEL/2013 - - - Dated:- 23-10-2015 - SHRI J. S. REDDY, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER For The Appellant : Dr. Rakesh Gupta, Adv. Shri Somil Agarwal For The Respondent by Sh. Amarjeet Singh, Sr. DR ORDER PER CHANDRAMOHAN GARG, JUDICIAL MEMBER This appeal by the assessee has been preferred against the order of the CIT(A)-XXVI, New Delhi dated 3.10.2013 in Appeal No. 17/2012-13 for AY 2007-08. However, the assessee has raised as many as six grounds in this appeal but except ground no. 1, other grounds are argumentative and supportive to the main ground which reads as under:- 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in levying penalty of ₹ 13,50,000/- u/s 271(1 )(c) and that too without assuming jurisdiction as per law and without appreciating the facts and circumstances of the case 2. Brief facts as noted by the CIT(A) read as under:- 2. The brief facts of the case relevant for deciding this appeal is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal with the main grounds as reproduced hereinabove. Learned counsel of the assessee submitted that the assessee filed return on 29.10.07 and the Assessing Officer made addition of ₹ 45 lakh u/s 2(22)(e) of the Act by following the deeming provisions of the Act. Learned counsel of the assessee further submitted that as per dicta laid down by Hon'ble Supreme Court in the case of Brij Mohan vs CIT 120 ITR 01(S.C.), if there is any change in law operating at the time of assessment proceedings, then the law applicable and operating on the date when return was filed has to be considered while dealing with the issue of imposition of penalty u/s 271(1)(c) of the Act. Learned counsel of the assessee further submitted that in view of decision of ITAT Mumbai in the case of West Coast Industries vs ACIT in I.T.A. No. 1566/Mumbai/2007 for assessment year 2001-02 dated 7.4.2009 wherein it was held that where the assessee bonafidely believes that a sum is not chargeable to tax and subsequent orders of the appellate authority show that such a stand was a justifiable one, then it cannot be deemed as a case of concealment or furnishing of inaccurate particulars of income just becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 44,00,000/- during F. Y. 2005-06 and ₹ 45,00,000/- during F. Y. 2006-07 have been extended by M/s Beacon Logic Waves to M/s SKVR as unsecured loans which has been deliberately disguised as share application money so as to avoid the application of Section 2(22)(e). The garb of share application money is merely a colorable device to defraud the Revenue. The blank columns against the heading share application money (pending allotment) in the balance sheet of M/s SKVR and the appearance of the said amount under the category of unsecured loans payable is ample indicator of intention of parties vis-a-vis the amount extended and its true nature . it is equally not worthy that while the authorize share capital is only Rs.l lac which is fully subscribed, where is the possibility of any other entity being allotted 8,90,000 shares a fact which was fully in the knowledge of Suit. Rita Chopra in her dual capacity as director of both companies. In view of the above undersigned is satisfied that the assessee has concealed the income and furnished inaccurate particulars of income and it is fit case for levy of penalty u/s 271(1)(c) read with explanation 1 to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(c) of the Act unless and until the facts and circumstances of the case reveal conscious and malafide act of the assessee towards furnishing of inaccurate particulars of income or concealment of income . 10. At this juncture, we respectfully take cognizance of the decision of ITAT Mumbai in the case of West Coast Industries vs ACIT (supra) wherein in the similar set of acts and circumstances, it was held thus:- Thus, there is no doubt that there could have been two opinions regarding taxability of deemed dividend vis-a-vis a firm i.e. whether to be done in the hands of the firm or to be done in the hands of the partners of the firm. In this case, there is no doubt that the shares in M/s. Aagam Design Broderies Pvt. Ltd. were held by the partners and not bythe firm. In fact, the assessment order itself, at para 15 states that it was partner of the firm Smt Saumilya Shah who was having a shareholding in M/s. Aagam Design Broderies Pvt. Ltd. Even if we hold assessee firm to be a beneficial holder it is not admittedly the registered owner of the shares. Hence assessee had reasonable justification for not showing any deemed dividend in it's hands. We cannot say that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u of that assessee received advance of ₹ 80 lacs i.e. commission receivable on the condition that commission payable would be adjusted against this sum. It was explained that when this advance of ₹ 80 lacs was taken it was estimated that the assessee would be entitled to a commission of about ₹ 80 lacs, hence, the company agreed to make advance but with a condition that the said amount would be adjusted with the commission paid. The assessee further explained that as many of the major contracts for which assessee was working on behalf of the company did not materialize and as a result the commission payable was only to the extent of ₹ 23,93,830/- in place of the total advance payable against commission at ₹ 80 lacs. The assessee explained that the net amount of ₹ 56,06,165/- stood to the credit of the company in the books of the assessee on account of advance commission payment. The assessee during the course of penalty proceedings explained that he was soliciting business for the company against which the company paid commission and in fact commission to the extent of ₹ 23,93,830/- was paid during the current assessment year and the said a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it would be a travesty of truth and justice to hold that an assessee ought to have known the correct law and comply therewith, even though he was not aware of the provisions. In the case of Kaushal Diwan vs. ITO (1983) 3 ITD 432 (Del) (TM), the learned AM observed, on an analogous situation, that the tax provisions are so complex that even he was not aware of the provision in question till the matter was placed before the Bench. Similar view was taken in the case of WTO vs S. P. Jayakumar (1983) 3 ITD 221 (Mad). The Bench observed that the plea of ignorance of law can be treated as a proper explanation. Such explanation can be said to have been substantiated when it is shown that: (a) he was assisted by a professional chartered accountant who has not brought to his notice the applicability of provisions of s. 2(22)(e) of the Act and (b) by making a statement that this is the first year in which these provisions came to be applied in assessee s case. It could thus be seen that the assessee tendered an explanation which was substantiated and thus the burden is cast upon the Revenue to prove that the explanation is false so as to invoke Expln. 1 to s. 271 (l)(c) of the Act. Except ..... X X X X Extracts X X X X X X X X Extracts X X X X
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