TMI Blog2000 (4) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... is amount includes payment of Rs. 2,93,053 paid to M/s. Saurashtra Metal Supplying Co. and M/s. Jayant Trading Corpn. which are proprietary concerns of M/s. Jayant M. Doshi, one of the partners in the firm. The Assessing Officer disallowed the amount of Rs. 2,93,053 treating the same as commission paid to the partners under the provisions of section 40(b) of the Act. This addition has been confirmed by the ld. CIT(A) and also sustained by the ITAT on the ground that inaccurate particulars have been furnished in the return of income. The Assessing Officer levied a penalty of Rs. 2,57,406 under section 27 1 (1)(c) of the Act. 4. The Assessing Officer in his order under section 27 1 (1)(c) of the Act has stated that the f act that the ITAT has confirmed the additions it establishes beyond doubt that the assessee has commuted a default under section 27 1 (1)(c) of the Act for filing inaccurate particulars. During the course of hearing before the Assessing Officer the assessee submitted that it had filed copies of accounts of all the concerns along with return of income. However, the Assessing Officer on examination of the documents filed along with the return found that there was a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been stated that in the profit and loss account filed along with the return of income, there is a heading of commission account where the amount of Rs. 3,08,574 has been shown, but in the statement of income submitted by the assessee, there was no separate clarification of details of commission paid. There was nothing on record regarding the payment made to the partner. He contended that it was only during the course of investigation that the Assessing Officer had come to know that the commission given to various parties included the commission given to M/s. Saurashtra Metal Supplying Co. and M/s. Jayant Trading Corporation, which were the proprietary concerns of Shri Jayant M. Doshi. Thus, according to him, it is quite evident that perusal of the accounts furnished along with the return of income did not give any basis to know that these two concerns were the concerns of the partners in its proprietary capacity and this concealment of fact was detected during the course of assessment proceedings. The Id. D.R. referred to the case of C.A. A'Orahamv. ITO [1961] 41 ITR 425 wherein the Hon'ble Supreme Court has laid down "Penalty becomes payable when it is found that an assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has shown the taxable income only at Rs. 16,296 whereas the assessee-firm has paid: commission to him which amounts to Rs. 2,93,053. Thus, the expenditure claimed in the P L account of the firm is Rs. 2,93,053 whereas this taxable income in the hands of the partner is only Rs. 16,296. Thus according to him, it was a device for the evasion of tax. The Id. DR also pointed out that receipt of Rs. 70,453 dated 27- 1 083 has not been shown by the partner. Shri Jayarit M. Doshi in his commission vatav account and consequently not shown in the profit and loss account whereas the commission account of the firm has shown the amount of Rs. 70,453 as paid to the partner on 27-10-83. He also referred to the case of Mysore Bangle Works v. CIT wherein the Hon'ble Supreme Court dismissed the SLP by stating that commission paid by the firm to a partner in his capacity of a sole proprietor of another concern was clearly covered by section 40(b) of the Act. He further stated that the various eases relied upon by the ld. counsel of the assessee were not relevant to the facts of the present case. 9. The Id. counsel of the assessee contended that there was no concealment of facts from the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had been wrongly mentioned and the facts of the present cast are different from the facts of the cases decided by the various courts, which have been referred to by the deportment. He mainly contended that the issue involved was debatable and, therefore, the cases hale been referred to the Hon'ble Supreme Court for final decision. The ld. counsel referred to the various cases of High Court and contended that there was difference of opinion about the applicability of the provisions of section 10(b) of the Act. According to him, the opinion made vary from Court to Court and the controversy may be let to rest by the final decision of the Hon'ble Supreme Court. Thus, according to him, it clearly shows that where interpretation of law is involved; two views may be possible in connection with the provisions of a particular section, holding a particular view shall not amount to contumacious conduct or a guilty mind. 11. The ld. counsel also pointed out that notice issued by the Assessing Officer did not specify whether the penalty was initiated for concealment or for inaccurate particulars. This, according to him, is bad in law. The ld. counsel ref erred to various decisions given bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in his order that this fact was not even mentioned in the capital account. of Shri J.M. Doshi filed along with the return of the assessee. Even the fact of proprietorship of Shri Jayant M. Doshi of M/s. Saurashtra Metal Supplying Co. and M/s. Jayant Trading Corporation was not revealed in the return of the assessee firm. The assessee did not disclose this fact anywhere in the return that the commission was paid to its partners, who was the proprietor of M/s. Saurashtra Metal Supplying Co. and M/s. Jayant Trading Corporation. All these facts go to prove that the attempt made by the assessee was deliberate for the evasion of tax.. The contention of the ld. counsel that there was no attempt on the part of the assessee to file inaccurate particulars of its income is without any substance. His contention that the proprietary concerns of Shri Jayant M. Doshi have been in existence since 1970 and income of these concerns is being shown every year has no bearing on the f acts of the case of the assessee. The facts of the income of the assessee have not properly been disclosed and this has nothing to do with the assessment of the proprietary concerns. We are unable to understand how it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act on 25-3-1989. This notice has been issued on proper form which is generally used for the violation of the provisions of section 271(1)(c). There is hardly any doubt regarding the issue of notice under section 274 of the Act. The assessee has itself recognised the valiity of issuing of the notice and the reasonable opportunity given for filing the explanation in the fallowing words : 'Please refer to your notice under section 271(l)(c) dated 25-3-1989 and reminder letter dated 10-7-1992 caning on them to show cause as to why penalty under section 271(l)(c) is not imposed on them for concealing the particulars of income or furnishing inaccurate particulars of income for the assessment year 1985-86. We have to submit as under:' Thus, there cannot be any doubt regarding issuance of the notice for filing inaccurate particulars of their income. This also makes it very clear that proper opportunity was given before levying the penalty. In his written submissions, the ld. counsel has stated that the observation of the Id. DR in para 8 of the submission filed by him is not justified. This point has been raised by the Id. DR to support his contention that the assessee firm was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual facts of its income by not filing proper particulars as per its books of account. This inaccuracy of not filing the correct facts of its income in the return has resulted in keeping off or hiding a portion of its income which is also punishable under section 27 1 (1)(c) of the Act as furnishing 'inaccurate particulars of its income. Therefore, as has been laid down by the Hon'ble Orissa High Court in the above case, the punishment is the same whether the assessee has made a direct attempt to conceal the actual facts of its income or the actual facts have not been disclosed by filing inaccurate particulars of its income. Therefore, the contention of the Id. counsel that for the penalty to be levied for concealment of income, further opportunity should have been given to the assessee for explaining is case, is without any force. The penalty has been levied after giving proper opportunity to the assessee and the same has also been acknowledged by the assessee by firing its explanation by various letters. 16. The Id. counsel has also relied upon number of court eases mentioned above. In cur opinion, non6 of the cases relied upon by the Id. counsel is relevant to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of inaccurate particulars of income. In the present case, the penalty proceedings have been initiated for furnishing inaccurate particulars of income by the assessee and the penalty has also been levied on the same ground as has been discussed by the Assessing Officer in his order under section 271(1)(c) of the Act. Therefore, this case is also not relevant to the facts of the present case. The decision of the Hon'ble Gujarat High Court in the case of A.M Shah Co. v. CIT[1999] 238 ITR 415 is also not relevant to the facts of the present case. In that case, the court held that the basis of issuance of notice should remain the same while imposing the penalty. This is what has been done in the present case. The notice under section 274 of the Act was issued for levying the penalty under section 271(l)(c) as the assessee furnished inaccurate particulars of its income arid ultimately, the penalty has been levied on the same ground as has been discussed in detail by the Assessing Officer in his order of levying penalty under section 271(l)(c) of the Act. The case of Asian Agrico Industries (supra) is regarding the bona fide mistake on the part of the assessee and the Hon'ble Gujara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or evading the payment of taxes. Therefore, the provisions of section 40(b) has been correctly applied by the deportment. In the case of Off Sliore India Ltd. (supra), the Hon'ble Calcutta High Court held that there must be deliberateness in not abiding by legal requirements for initiation of penalty proceedings. Bona fide belief as to the non-applicability of provisions precluded the initiation of penalty proceedings. This case is totally irrelevant to the facts of the present case. In the present case, the question of any bona fide belief does not arise. There was a deliberate attempt on the part of the assessee fin-n to evade payment of taxes due to the State. The amount of Rs. 2,93.053 has been diverted to the partner with a view of non-payment of taxes on that amount as the same has been adjusted against the losses incurred by the proprietary concerns of the partner. Therefore, this was a deliberate attempt for evasion of payment of taxes. In view of the above discussion, we are of the opinion that none of the cases relied upon by the assessee's counsel has any application to the facts of the present case. 17. The deportment has clearly established the violation of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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