TMI Blog2008 (1) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... erial collected and referred by the Assessing Officer which would show that either the assessee has concealed the particulars of income or furnished inaccurate particulars. There has to be something for comparison to prove that what was claimed by the assessee was false or inaccurate. Mere disbelieving on the claim made by the assessee is not sufficient. The Assessing Officer could have in the present case enquired and shown that the addresses of the artisans are not correct, or they have not received the payment or that they have denied to have rendered any services, or money on bearer cheques have not gone to the artisans/mechanics or has been received back by the assessee or things similar to this highlighting the inaccuracy in the story or explanation furnished by the assessee. In the absence of such finding and material relating to these, it is not possible to hold that the assessee had concealed particulars of his income by way of claiming expenses on commission or has filed inaccurate particulars relating thereto. As a result, penalty so confirmed by the learned CIT(A) cannot be upheld. It is accordingly cancelled. In the result, the appeal filed by the assessee is all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried out some enquiries from the bank and found that some cheques which were claimed to have been issued to these persons were withdrawn in cash. He also inferred that there is no evidence of services being rendered by these persons. Accordingly, the Assessing Officer issued a show-cause notice in response to which the assessee surrendered the sum of Rs. 7,22,740 as his income with the following request: "These mechanics are uneducated but technically skilled and command good respect in their field and are also afraid to come to income-tax office for interrogation but are ready to confirm for having paid commission. We are ready to produce to any of these or all the artisans before your goodself for confirmation of payment of commission. During the proceedings we called all the artisans for confirming having paid commission. This exercise is very tedious and costly and time consuming and cannot be done again and again hence to buy peace of mind and to avoid these hassles, we are offering to put these expenses to tax provided that no penal action under the law whatsoever be taken against us." The Assessing Officer, however, initiated the penalty proceedings as according to him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount by the assessee for taxation had no meaning. Further after establishing the expenses as bogus, the request for non-initiation of penalty proceeding by the assessee was meaningless. As regards, case laws as relied upon by learned AR, I find that these cases are not helpful to the appellant because these cases are distinguishable on facts. Thus, considering the whole facts together and legal provision, I hold that the appellant has furnished inaccurate particulars by showing the bogus commission amounting to Rs. 7,22,740 against which the penalty under section 271(1)(c) is attracted. Thus, the action of the Assessing Officer for levying penalty to the extent of Rs. 2,53,000 which is almost minimum penalty, is justified and the same is upheld." 5. The main thrust of the learned CIT(A) is that the Assessing Officer has concluded that expenditure by way of commission was non-genuine/bogus. 6. Against this the learned A.R. for the assessee submitted that the artisans are uneducated. They are working in various factories. They are recommending our machines to the factory owners. Since machines are sold through these artisans On their recommendations, commission is paid to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show that we have concealed any income or filed inaccurate particulars. We had surrendered the money and paid the taxes on account of our inability to produce the artisans as they were scared to come to income-tax office. We did not want to annoy them or cause harassment to them by repeatedly calling to income-tax office as it would have hurt our business interest and affect our sales which were mostly done through them. Thus mere disallowance of expenditure in the form of commission would not make the assessee liable for penalty under section 271 (1)(c). The learned A.R. of the assessee relied on the decision in the cases of National Textiles v. CIT [2001] 249 ITR 125 (Guj.), CIT v. Janakiram Mills Ltd. [2005] 275 ITR 403 (Mad.), CIT v. Cafco Syndicate Shipping Co. [2007] 294 ITR 134 (Mad.), Dy. CIT v. Rajan H. Shinde [2005] 93 ITD 1 (Pune) (T.M.). He also referred to the decision in the cases of Bharat Rice Mill v. CIT [2005] 278 ITR 599 (All.) and CIT v. D. H Secheron Electrodes Ltd. [2008] 296 ITR 193 (M.P.). The main thrust in these decisions as per learned A.R. is that mere disallowance on expenditure penalty for concealment cannot be levied. There is no finding by Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons advanced by the assessee are satisfactory, we, therefore, condone the delay and admit the appeal. 11. On merit, we find that by payment of commission, the sales of the assessee are regularly increasing. The percentage of commission in respect of sales is also getting down. In earlier years, the department had accepted the fact of payment of commission. In subsequent year also this fact has been accepted. No materials are brought on record by the revenue to show that the Assessing Officer has disputed the claim of payment of commission in subsequent years. Further we notice that in the current year itself the Assessing Officer has not disputed the payment of commission in respect of Delhi Office. Therefore, it cannot be denied that payment of commission to artisans or to other persons is a regular feature in this line of trade. The fact that addresses were supplied by the assessee and the inspector had visited those addresses and had found them correct which also shows that the claim of the assessee could not be prima facie bogus. So far as the addition in the total income is concerned, inability to file evidence or to produce the recipient the commission is sufficient. But f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee were found correct and there is no finding by the Assessing Officer that those are not the addresses of artisans claimed or that those persons did not receive any commission from the assessee. Payment of commission to villagers/artisans/uneducated persons through bearer cheques is a common phenomenon. Unless it is found that money of bearer cheques did not really go to the payee, it cannot be presumed that payment as claimed was actually not so made. Once, the Assessing Officer had examined bearer cheques, he ought to have considered and given a finding that money did not really go to the claimants, i.e., artisans. The extent and level of enquiries cannot result in a finding that explanation furnished by the assessee was not bona fide. So far as substantiating the explanation is concerned in our view furnishing of names and addresses of the artisans along with the amount so paid to them, a regular feature about payment of commission from year to year as borne out from the details given above, is prima facie sufficient to show that the assessee is paying commission for furthering its sales. The learned Assessing Officer has not pointed out as to what other material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of concealment. In the present case, we do not find any such finding by the authorities. On the other hand, we notice that the case of the assessee does not fall clearly in Explanation 1 of section 271(1)(c). 15. The learned D.R. then referred to the decision of the Hon'ble Gujarat High Court in A.M. Shah Co.'s case. The learned D.R. has drawn our attention to page 432 of the report wherein Hon'ble Allahabad High Court had discussed the concept of filing inaccurate particulars of income as under: "If a person obliged to furnish the particulars of his income, omits to furnish them, he thereby conceals the particulars. This concealment may take various forms. A glaring illustration of concealment would be where the assessee does not disclose or fully disclose in the return, the income derived by him which would fall in a particular head, e.g., "Income from other sources" while disclosing his income falling under other heads of Income prescribed by section 14 of the Act. To the extent he does not disclose that income, he conceals the particulars of income. The obligation is not only to disclose particulars of income but to disclose them correctly and completely. If while discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the return are incorrectly stated by any machination. It is to be shown by the Assessing Officer that the assessee had shown false results and such falsity can be in any constitution items in the return. In our considered view the Hon'ble Gujarat High Court has said that there should be something with the Assessing Officer which would show that what is filed by the assessee was inaccurate or not correct. Merely disbelieving on the claim would not be sufficient. Once it is to be held that the particulars furnished by the assessee are inaccurate, it would simply require the Assessing Officer to show as to what in fact should be the accurate particulars. Thus there are two things to be compared. One what is furnished by the assessee and other by the Assessing Officer either from the assessee or from the third party which he considers to be accurate. Further this inaccuracy should have material bearing on the computation of income. If inaccuracy is of such a nature which does not affect the computation of income then that inaccuracy will not attract the levy of penalty. Thus a positive act on the part of the Assessing Officer to prove that the particulars furnished by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under a statute has been clothed or set at naught the working of an Act by becoming a hindrance in its interpretation. The assessee, engaged in the business of clearing and forwarding of import and export cargo, filed its return of income. During the course of survey at the business premises of the assessee, it was noticed that some of the vouchers of expenses were self-vouchers and they were not supported by third party receipts, vouchers, etc. The assessee filed a revised return. The Assessing Officer held that since the expenditure was not supported by proper vouchers, the assessee should not have claimed the expenditure for deduction, especially when the amount involved was huge. Therefore, he held that the assessee had concealed income and imposed penalty under section 271(1)(c) of the Income-tax Act, 1961. On appeal the Commissioner (Appeals) held that the Assessing Officer had not proved that such expenses were not incurred by the assessee. The Tribunal on further appeal by the revenue held that mere addition of income by disallowing expenses would not be regarded as concealment of income and therefore levy of penalty under section 271(1)(c) was not justified in such ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e inter parties until it is successfully avoided or challenged in a higher forum. Where a reassessment had become final between the parties unless and until it is specifically challenged in appropriate proceedings, either by way of an appeal, revision or by way of writ petition under article 226 of the Constitution of India, no advantage can be taken by the assessee regarding invalidity of the reassessment proceedings in the collateral proceedings arising out of the penalty proceedings. The assessee-firm filed a return of income for the assessment year 1981-82 showing an income of Rs. 6,390. The assessment was originally completed on April 5, 1982, on a total income of Rs. 12,390. Subsequently, while completing the assessment proceedings for the assessment year 1982-83, the Income-tax Officer noticed that the assessee had sold 209 quintals of G. rice in the first week of April, 1981, whereas till the date of the sale, there had been no hulling of paddy, nor was there any opening stock of G. rice. On being asked to explain this discrepancy, the assessee submitted that it had 309 quintals of G. rice as its closing stock of the previous year relevant to the assessment year 1981-82 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had been bona tide disclosed by the assessee in the subsequent assessment year, i.e., 1982-83, and had also been subjected to tax in that year apart from being subjected to tax in the assessment year 1981-82 by the reassessment order. Penalty could therefore not be imposed." It is thus clear that no penalty for concealment of income can be levied by merely disbelieving on explanation by the assessee. There has to be some positive material collected and referred by the Assessing Officer which would show that either the assessee has concealed the particulars of income or furnished inaccurate particulars. There has to be something for comparison to prove that what was claimed by the assessee was false or inaccurate. Mere disbelieving on the claim made by the assessee is not sufficient. The Assessing Officer could have in the present case enquired and shown that the addresses of the artisans are not correct, or they have not received the payment or that they have denied to have rendered any services, or money on bearer cheques have not gone to the artisans/mechanics or has been received back by the assessee or things similar to this highlighting the inaccuracy in the story or expla ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
