9911796707
TMI Blog1999 (8) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... ear under consideration and paid in the next year. The revenue authorities and the Tribunal held the claim to be non-genuine and disallowed the same in the quantum proceedings. The learned CIT(A) in assessment proceedings found that sum of Rs. 75,000 was paid in cash and the balance Rs. 27,475 through cheque. While confirming the disallowance of Rs. 75,000 he restored the matter to the file of the AO to re-examine the case in respect of amount of Rs. 27,475. 3. The AO also initiated penalty proceedings under s. 271(1)(c) for the ingenuine claim in return by the assessee. Subsequently, he levied penalty in respect of amount of Rs. 75,000 the disallowance made and confirmed in appeal. The assessee impugned the above levy in appeal before the learned CIT(A) who found that disallowance in respect of balance amount of Rs. 27,475 was reconfirmed by the AO subsequently. While considering the issue of penalty in respect of Rs. 75,000, the learned CIT(A) enhanced the quantum of penalty by directing the AO to levy penalty in respect of sum of Rs. 27,475 paid through cheque. 4. The assessee is aggrieved and has come up in appeal. The particulars of incentive commission claimed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities including the learned CIT(A) mainly relied on facts found in the assessment proceedings particularly in proceedings under s. 144B of IT Act. As the deduction claimed was held to be ingenuine, the assessee was held to have furnished inaccurate particulars of income. Simultaneously, it was held that the assessee concealed income by claiming false deduction. 8. The assessee is aggrieved and has come up in appeal. We have heard both the parties in this appeal and with their help considered the relevant material available on record. In respect of penalty enhancement made by learned CIT(A), Shri K.C. Patel, the learned counsel for the assessee, submitted that no enhancement notice was issued by learned CIT(A) and, therefore, his order without a show-cause notice is bad in law and unmaintainable. We agree with above submissions. The Revenue authorities could not show us any notice issued by the learned CIT(A). In above circumstances, the directions of learned CIT(A) to levy penalty on amount of Rs. 27,473 are held to be without jurisdiction and are hereby vacated. We would examine the issue in respect of penalty of Rs. 51,190 imposed in respect of disallowance of Rs. 75,000 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os. 411 412/Ahd/1990 order dt. 30th April, 1997). 10. Shri A.K. Singh, the learned Departmental Representative strongly supported the impugned order of learned CIT(A). He argued that highest fact finding body, the Tribunal also held that claim of commission was not genuine. Shri Singh read out certain portions of Tribunal's order to highlight the above point. Thus, when the Tribunal has held that the claim of commission was false, the Revenue was not required to prove anything further for establishing default under s. 271(1)(c). Shri Singh accordingly, justified levy of penalty. 11. We have given careful thought to the rival submissions of the parties. The Tribunal upheld disallowance of Rs. 75,000 mainly relying upon the finding of IAC under s. 144B of the IT Act. The learned CIT(A) had concurred with the view taken by IAC and relied upon the facts found by him. It would, therefore, be in the fitness of things to take into account the reasoning given by the IAC under s. 144B for disallowing the claim of incentive commission. These reasonings along with brief criticism of the counsel of the assessee are as under:- Reasonings Criticism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le admittedly debited in the daily allowance and traveling accounts. Other persons were expenses They hardly undertook not to be paid travelling any tour. The employees also expenses apart from the did not keep any details commission. regarding tour undertaken by them for getting order. (10) The assessee had seven directors It is not the job of and they were actually directors to go to villages responsible for getting orders. and promote sale of presticides. (11) The product traded by the assessee The sale was to be carried by was of standard quality and the employees and as a assessee was entitled to receive business measure commission from manufacturer fixed commission was offered to boost sale of 5 per cent on sale. Therefore, particularly in the first the assessee could not part with year of business. commission at the flat rate of 3 per cent to petty employees. (12) There was no specific contract Conclusion of non-payment to pay incentive commission. Even can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He rejected the cash book and ledger of the assessee as ingenuine on account of the following reasons: "....... A glance at the entries in the cash book for the accounting year 1975-76 shows a few entries which have been erased and rewritten and some of them present a very curious and interesting, if not mysterious, picture. A few examples may be cited: (i) On pp 4 of the cash book (3rd July, 1975), a sum of Rs. 9,500 allegedly received from Shri Amratlal L. Desai, one of the directors, was first entered as receipt by cash and then, changed under the head "bank". According to the narration, the amount was received by cash and deposited into the bank. The source from which Shri Amratlal brought the said money was not mentioned. It is seen from his account in the books that the amount was brought by cash. The totals at the end of the page are made after erasers and in different ink and different handwriting. (ii) On pp 19 (18th July, 1975), a receipt, by cash, of Rs. 25,000 was shown at the end of other entries in different handwriting with a narration: "Credit to the account of Shri Amratlal L. Desai on account of deposit brought by him." The details about the person from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incentive bonus were eliminated from the accounts." The learned Departmental Representative laid great stress on order of the Tribunal in quantum appeal and, therefore, in order to complete the record, we may extract certain observations of the Tribunal. At p. 3 of its order the Tribunal observed as under: "......... The order of the IAC under s. 144B is a very detailed order in which the statements of the persons produced have been duly considered and their statements have been disbelieved. The CIT(A) has adopted the reasons given by the IAC and has given additional reasons which, according to him, were of clinching nature. Consequently, it cannot be said that the order of the CIT(A) was vitiated." 11.1. After referring to the observations of the IAC and CIT(A), the Tribunal held as follows: "........ After taking into account the entire circumstances we agree with the conclusion reached by the IAC as well as by the CIT(A) to the effect that incentive commission was not really payable and Had not really been paid to the employees and that the provisions in the relevant accounting year and made in order to reduce the tax liability. Consequently, the disallowance was justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (9) Chigda Group Co-op. Ta. Dediapada. (10) Dedvan Group Co-op. Multi-purpose. (11) Ambavadi Group Co-op. Multi-purpose Ta. Dediapada, (12) Rama Traders, Valia. (13) Olpad Groups Co-op. Cotton Society Tal Olpad. (14) Sanad Group Co-op. Society. (15) Shoshath Group Co-op. Society. Tal Olpad. Q. Which medicines did you get the orders for? A. Dimacron 100, Nuacrom 40 Numan 100, D.D.T. 50. Q. You were made to work so what were your duty regarding the service? A. To make farmers understand who grew cotton Sankar 4 about insects and crop disease and which medicines should be sprayed on which type of insects and to make these medicines used was my work." (2) Shri Jashvantsinh Motisinh Solatia This witness also gave details of business carried on by him. He further stated that he was to get commission at 3 per cent besides the salary and that he earned commission of 20 per cent which was paid to him through cheque and in cash in April/May, 1975. He also explained as to where he utilised this money by buying agricultural land, and by buying seeds and fertilizer to carry on agricultural operations. At pp 3 of the statement he was asked a pertinent question. The que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses. He confirmed having received Rs. 15,000 as commission from the assessee-company through cheque and in cash. He also explained the utilisation of commission. In respect of sale effect by him he made the following statement. "Q. Where have you been for sale? A. (1). Sodgaon Co-op. Multi-purpose Society Tal. Valia Dist. Broach. (2). Kabra Co-op. Multi-purpose Society. (3). Samlod Co-op. Multi-purpose Society. (4). Patel Traders, Broach. Received the orders from the above sources and did the sale. Q. How did you get the orders? and did you write to the company? A. Whenever anybody gave orders we used to take it, and informed the company. Q. When you went out for sale who spent the money? A. Company gave it, we used to go by ST and used to come back by ST. Q. How did you give the bills? A. Used to give the ST tickets to the company. Q. How much is in saving out of Rs. 15,000? A. Nothing is in saving." (6) Shri Fredrik G. Moses He stated that his source of income was service. He did not pay income-tax. He stated that he received commission besides salary of Rs. 600 per month. He did not maintain any bank account but explained how he got the cheque of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed was on the opposite party and was not discharged. In fact, in all penalty proceedings considerable time is taken by the parties in canvassing that the Revenue has failed to establish conscious and deliberate concealment on the part of the assessee and that it has failed to prove that addition made was in fact income of the assessee. The decisions of the Hon'ble Supreme Court in Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC) and in the case of CIT vs. Anwar Ali (1970) 76 ITR 696 (SC) are still pressed into service. There is hardly any need to trace the history of penalty provisions under s. 271(1)(c) suffice it to say that word "deliberately" was deleted and an Explanation which is known as 80-20 Explanation was added. If the returned income was less than 80 per cent of the assessed income, onus was shifted on the assessee to prove that it is not a case of fraud or gross or wilful neglect on his part. These amendments were made w.e.f. 1st April, 1964. The later amendment made w.e.f. 1st April, 1976 took into account the conduct of the assessee to see whether any explanation was offered by the assessee; whether the same was substantiated or such explanation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion claimed. Having considered the reasoning of LAC under s. 144B reproduced at pp. 6-7 of this order, we find that reasons (1) to (4) are irrelevant when position of recipients as employees has been accepted and salary and bonus claimed duly allowed. Likewise, as far as reasons Nos. (6) and (7) relating to resolution of directors and academic background of the employees, these are not material for determining the issue. No adverse inference can be drawn against the assessee from the fact that the company had seven directors and receipts of commission did not bear audit marks when the audited accounts duly recorded provision of incentive bonus in the assessment year under appeal. 12.3. We have also considered very carefully the observation of IAC relating to entries in the books of accounts. About the books of accounts, the overwriting and writing in different ink has been emphasised. This fact may lead to the conclusion that books are not written in the regular course and should be rejected. But we do not know how on account of overwriting an inference can be drawn that Shri Amratlal L. Desai did not deposit any cash when amount was credited in his account on 18th July, 1995. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion, the statements on oath of employees was a material evidence which was not given full weight during the course of assessment proceedings. As stated earlier, we do not find sufficient ground to reject the statements when other documentary evidence duly support and corroborate the statements. 12.5. The fact that commission was credited and not paid cannot lead to the conclusion that liability to pay commission was not there, particularly when the Revenue has accepted that part of it was actually withdrawn by the employees. The major portion was utilised in payment of taxes which the employees paid on receipt basis in the next year as per evidence placed on record. The commission received has also been taxed in the hands of the employees. The payment of income-tax for and on behalf of the employees cannot be doubted and at least to the above extent. Direct evidence of receipt has to be accepted. The question whether in the return the amount was shown under the wrong head or that it was shown in wrong assessment year could not make any difference to the question of genuineness of claim made by the assessee. Having regard to the standing of the employees, it is difficult to acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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