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2013 (11) TMI 464 - ITAT DELHIPenalty u/s 271(1)(c) - Disallowance of commission expense u/s 36(1)(ii) of the Income Tax Act - commission paid to its employee directors – The said claim of the assessee was disallowed on the ground that since such commission was not paid to the directors in the earlier years and the assessee company had not distributed dividend during the relevant year in spite of there being handsome profits; the payment of commission to directors during the relevant previous year was in order to reduce the taxable profit so as to minimize the tax liability - Held that:- Assessee has made true and full disclosure and hence, there is no concealment of income or furnishing of inaccurate particulars - The factum of payment of commission was categorically disclosed in the Audited Financial Accounts as well as in the Tax Audit Report filed alongwith return of income - Issue of allowability of the payment of commission to assessee company to its directors was a debatable matter - The Special Bench was constituted to interpret the provisions of section 36(1)(ii) of the Act. This goes to prove that the issue involved was debatable – Further, in the immediately following year, similar payment of commission was allowed. Reliance is placed upon the Apex Court decision rendered by a larger Bench comprising of three of their Lordships in the case of Hindustan Steel vs. State of Orissa in [1969 (8) TMI 31 - SUPREME Court], wherein it was held that “An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute” – Decided against the Revenue.
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