9911796707
TMI Blog2016 (9) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 (in short the Act) of Rs. 28,80,261/-. The assessee company filed return on 27/11/2006 declaring total income or Rs. 20,77,790/-. Scrutiny assessment U/s 143(3) of the Act was completed on 24/12/2008. The assessee company received fees from its members for imparting computer education. The ld Assessing Officer made various additions and assessed income at Rs. 1,32,40,996/-. The penalty proceedings U/s 271(1)(c) of the Act was initiated by issuing notice separately without assigning any specific fault of the assessee whether it is for concealment of income or furnishing inaccurate particulars of income. The quantum addition was challenged by the assessee before the ld CIT(A). The ld Assessing Officer considered following addition for imposing penalty U/s 271(1)(c) of the Act. Sl. No. Description Amount 1. Disallowance U/s 40(a)(ia) Rs. 70,48,481/- 2. Disallowance out of car hire charges Rs. 1,00,370/- 3. Disallowance of contingent liability Rs. 11,77,500/- Total Rs. 83,26,351/- The ld Assessing Officer gave findings in penalty order that penalty proceedings U/s 271(1)(c) of the Act was initiated for furnishing inaccurate particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to Rs. 4402000/- on account contingent liability. As regards this addition the appellant has furnished an explanation that commission is claimed in P&L account and shown payable on regular basis as and when a new member is introduced however the amount is paid to such member only when the new member further introduced two members. The AO rejected the claim of the appellant on the reasoning that the liability of commission payment did not crystallize inasmuch as it will become payable only when two new members are introduced. In this connection it will be noted that as regards this issue the appellant has furnished all particulars correctly and it is not a case where it can be said that inaccurate particulars have been furnished. The assessee has made a legal claim as per consistent business practice however such claim is rejected by the AO. The appellant has also referred certain case laws as discussed on page 12 and 13 of this order which as per appellant supported his claim. The essential issue to be noted that this is an issue where definitely there can be more than one opinion/ option regarding allowability of such claim. The appellant opted for an option relying upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed the penalty amount on it and given the relief of Rs. 28,43,649/-. 4. Now the revenue is in appeal before us. The ld DR has vehemently supported the order of the Assessing Officer and argued that the addition has been confirmed by the appellate authority and the assessee had concealed the particulars of income and also furnished inaccurate particulars of income. Therefore, order of the ld CIT(A) deserves to be reversed. 5. At the outset, the ld AR of the assessee has reiterated the arguments made before the ld CIT(A). There was a TDS survey conducted on 08/3/2007. TDS was deducted out of total commission expenditure of Rs. 70,48,481/- on Rs. 20,48,500/-. Finally remaining amount of Rs. 49,99,981/- was found final for violation of provisions of Section 40(a)(ia) of the Act. The appellant company was in business of imparting education to its members. The company was following multi level marketing model, wherein, every members was getting commission on introducing new members at predetermine rate. Every member getting upgraded in level according to the persons joining, company under his/her leg. It is undisputed fact that every member who joins the company, upon joining, imme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee approached to the settlement commission and ultimately case has been settled under the facts and circumstances, no adverse inference can be drawn in non-contesting of the certain additions in quantum appeal. The penalty proceedings and quantum proceedings are separate and the ld Assessing Officer had to give the findings at the time of imposing penalty by considering the evidences. He further relied on the decision in the case of CIT Vs. Reliance Petroproducts Limited (2010) 322 ITR 158 (SC) wherein it has been held that 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, in our opinion, attract the penalty U/s 271(1)(c) of the Act. Moreover, it is a fact that disallowances made in assessment proceedings are by invoking Section 40(a)(ia) which is a deeming provision and creates legal friction. The said legal friction cannot be extended from disallowing the expenditure and cannot be considered for provisions of Section 271(1)(c) of the Act. The various courts have held that legal friction cannot be extended and has to be limited to the purposes for which it is created. No deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings at the time of assessment as well as in imposing penalty U/s 271(1)(c) of the Act. Thus, he prayed to uphold the order of the ld CIT(A). 6. We have heard the rival contentions of both the parties and perused the material available on the record. It is a fact that the ld Assessing Officer in assessment proceedings had not mentioned any particular limb of penalty whether it is for concealment of income or for furnishing inaccurate particulars of income. He also had not given any finding in the penalty order that this penalty was on account of a particular limb. The ld DCIT at the time of imposing penalty, has also not taken approval from the ld JCIT U/s 274(2)(b) of the Act. It is also undisputed fact that the assessee has not deducted TDS on commission expenses claimed during the year under consideration but it has been explained that this provision was inserted w.e.f. 01/4/2005 which was amended from time to time. There was an ambiguity and doubts in application of this provision. The auditor of the assessee had also not pointed out this defect in the audit report whether TDS was liable to be deducted or not on commission expenses claimed by the assessee. Non-deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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