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TMI Blog2016 (5) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... D SHRI SANDEEP GOSAIN, JM For The Appellant by : Shri Mukundraj M. Chate For The Respondent : None ORDER Per Sandeep Gosain, J. M.: The Present Appeal has been filed by the Revenue against the order of Commissioner of Income Tax (Appeals)- 31, dated 05.09.2013 for A.Y. 2007-08 whereby the CIT(A) has partly allowed the appeal filed by the assessee and deleted part of the penalty. The grounds raised by revenue before us are as under: 1. The Learned CIT(A) has erred on facts and in law and in the circumstances of the case in not considering decision of Delhi High Court in the case of CIT Vs. Zoom Communication (P) Ltd. to levy penalty u/s 271(1)(c) of the Income Tax Act, 1961. 2. The Appellant prays that the order of the CIT(Appeals) on the above grounds be set aside and that of the AO be restored. 3. The Appellant craves leave to amend or alter any ground or to submit additional new ground which may be necessary. 5. At the very outset, it is noticed that even in spite of several notices, none has appeared on behalf of assessee and on the perusal of order sheet we have noticed that nobody was appearing on behalf of assessee for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (P) Ltd. to levy penalty u/s 271(1)(c) of Income Tax Act. 7. Before we come on to the merits of the case it is necessary to analyse the orders passed by the CIT(A) and the operative portion of CIT(A) are reproduced below: 4. In appeal it has been submitted as follows: During A. Y. 2007-08 the assessee declared income of ₹ 23,90,030/- the assessing officer assessed a income of ₹ 6,70,78,150/- on passing order U/s. 143(3) of the Income Tax Act 1961 (ITA). The addition to the returned income was on the following 3 grounds:- U/s. 40(a) (ia) ₹ 5,60,38,120/- 2. Commission disallowed ₹ 31,21,669/- 3. Software Expenses considered as capital ₹ 55,00,000/- Aggrieved by the order of the assessing officer the appellant filed an appeal to the CIT(A) who deleted the addition U/s. 40(a)(ia), allowed depreciation on software expenses and confirmed the addition on account of commission paid. The assessing officer passed an order u/s. 271 (l)(c) of the ITA confirming penalty on the disallowance of commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. At the outset we draw your kind attention to the fact that the assessing officer erred in not understanding the basic details like the fact that Mr. Ajay Modgil, partner in the appellant firm had known of Mr. Umeshenker Prasad Proprietor of M/s. Calyx who in turn knew M/s. Diageo from whom the appellant had procured a contract for advertising during the financial year relevant to A. Y. 2007-08. The commission due to Mr. Umashankar Prasad @ 4% on the total value of ₹ 6,64,50,432/- (contract from Diageo) amounting to ₹ 26,58,017/- alongwith reimbursement of expenses of ₹ 1,23,228/- and service tax of ₹ 3,40,424/-, aggregating to ₹ 31,21,669/- were payable as agreed upon. The assessing officer instead understood that Mr. Ajay was partner of Calyx. Further as M/s. Diageo submitted that they did know of Mr. Urhashankar Prasad, the assessing officer held the commission as not incurred for business purposes. The CIT(A) has placed reliance on venous decisions as discussed below :- Bombay High Court in case of Chemaux Private Ltd. vs. CIT (109 ITR 705) The CIT(A) has reproduced the order of the Bombay High Court in his order. The basic f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the sole selling agent was wholly or exclusively for the purposes of its business. And has not considered the finding of the Calcutta High Court in Para 28, 29, 30 with respect to another commission agent Sampat Co. The same is reproduced below:- 28. The categoric evidence of Bhikamchand was that Sampat Co. had negotiated the tender that the said firm had personal acquaintance with the officers of the Government, that Sampat Co. had duly instructed the factory staff of the assessee regarding specification and that they had attended loading and unloading of goods manufactured and supplied. The authorities below seem to have proceeded on the basis that such statements do not constitute any evidence and that the assessee had to establish its case only by documentary evidence. The oral evidence was not considered at all. The Tribunal did not apply its mind or advert to the various risks and responsibilities undertaken as assumed by Sampat Co. under its agreement with the assessee. Clauses of the agreement, apart from those connected with the acceptance of the said tender, are relevant for the purpose of determining whether Sampat Co. was lawfully entitled to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 ITR 439) In this case the selling agency agreement was only a make-believe arrangement and device to minimize tax liability of the assessee firm and not genuine. In the present case before your honour there is no such finding that the arrangement is to avoid tax since Mr. Umashankar Prasad has reflected the same in his turnover. From the above your honours will appreciate that the appellant has furnished all oral evidence I documentary evidence to substantiate its claim of commission expenditure. The assessing officer has disallowed it stating that there was no nexus between the expense and the appellant's business. He did not appreciate the fact that contract from M/s. Diageo was a live nexus with the expense incurred. The CIT (A) placed reliance on the afore stated decisions which are clearly distinguishable on facts and confirmed disallowance. The Disallowance of a claim of expense made by the assessee can certainly not be basis for levy of penalty. 2. Software Expenses considered as capital ₹ 55,00,000/- The assessing officer was furnished with the documentary evidence with respect to the purchase of software from Mr. Satish Pujari of Microbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him], then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause( c) of this sub section, be deemed to represent the income in respect of which particulars have been concealed . Your goodselves will appreciate that Sec 271 (l)(c) deals with two situations namely: a)concealment of particulars of income or (b)furnishing of inaccurate particulars of income . Penalty can be levied only if either of these two conditions is satisfied as held by the Supreme Court in CIT v/s Reliance Petroproducts Pvt Ltd. [(2010)230 CTR 320 (SC)J [Civil Appeal no. 2463 of 201 OJ. It is submitted that the assessee has neither concealed the income from being offered to tax nor has it furnished inaccurate particulars of such income either in the return of income or during the course of assessment proceeding u/s 143(3) of ITA. We draw your kind attention to the decision of Dilip N. Shroff v/s. JCIT AN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under s. 271 (l)(c). If the contention of the Revenue is accepted then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty under s. 271 (1)(c). That is clearly not the intendment of the legislature. The Tribunal, as well as, the CIT(A) and the High Court have correctly reached this conclusion. Thus we pray that no penalty be imposed as there is neither concealment nor furnishing of inaccurate particulars. We submit that the assessing officer has only proceeded on surmises as the appellant had actually incurred the said expenditures and full details were furnished to him. Under these circumstances we request your honors to kindly drop the penalty levied and oblige. /I 5. I have carefully considered the facts relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows: A glance at the provision of s.271 (1)(c) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. As per Law Lexicon, the meaning of the word particular is a detail or details (in plural sense); the details of a claim, or the separate items of an account.' Therefore, the word particulars used in the s.ec.271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The words are plain and simple. In order to expose the assessee to the penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision of section 271(1)(c) of the Income Tax Act, there has to be concealment of particulars of the income of the assessee secondly, the assessee must have furnish inaccurate particulars of his income, in the present case both the elements are missing as no information given by the assessee in the return was found to be incorrect or inaccurate. It is submitted that mere making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. As per the facts of the present case the disallowance made by CIT(A) is on account of difference of opinion between the assessee and the revenue as to the category in which the concerned expenses fall which certainly is a debatable in nature . It is settled law that when the disallowance made by AO/ CIT(A) itself is debateable in nature, no penalty of concealment for such debatable issue can be levied. And in this respect we rely upon judgment rendered by Hon ble Punjab and Haryana High Court in the cases of Ajaib Singh Co. 253 ITR 630. We have also considered the judgement rendered by ld. DR titled CIT Vs. Zoom Communication (P) Ltd. the facts contained in the said judgement are entirely different and distingui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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