TMI Blog2012 (5) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Ld. CIT (A)-32, Mumbai dated 23.07.2009 for the A.Y. 2003-04. The issue which arises from grounds taken from the assessee is whether the Ld. CIT (A) is justified in confirming the penalty levied by the A.O. u/s.271(1)(c). 2. The facts pertaining to the issue are as under. The assesseecompany is engaged in the manufacturing and trading of chemicals / insecticides. The assessee filed the return of income declaring the total income at Rs. 12,47,24,505/-. The return filed by the assessee was selected for scrutiny and assessment was completed u/s.143(3) of the Act. 3. It was noticed by the A.O. that the assessee has claimed the commission payment of Rs. 51,70,764/- to M/s. Karamchand Appliances Pvt. Ltd. (In short M/s. KAP Ltd.). The assessee stated before the A.O. that the said commission was paid to M/s. KAP Ltd. for sales of the company's products to Icon Household Products Ltd. (in short Icon), Knight Queen Industrial Pvt. Ltd and Fumakilla. The commission was said to have been paid @ 4.55% of the sales of the specified products. As M/s. KAP Ltd. was at New Delhi, the A.O. issued the commission u/s.131(1)(d) of the I.T. Act by appointing DDI (Inv.), Unit-III, New Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the matter was investigated by the DDI(Investigation), New Delhi. 4. The A.O. initiated penalty proceedings u/s.271(1)(c) on the said amount. It was further noticed by the A.O. that the assessee has claimed the deduction towards bad debts written off of Rs. 31,09,032/-. The A.O. sought the explanation of the assessee. The assessee filed the reply to the A.O. stating that it had taken over Sun-Up Botanics Pvt. Ltd. from Aventis Crop Science India Ltd. in May 2001. The assessee sold the goods to the customers regularly and made payments till 1st February 2002 till when the customers clears the old dues and part of the balance due towards subsequent sales made by the assessee from customer did not make the payment after 1st February 2002 when the assessee written off the balance amount outstanding. The A.O. was of the view that burden was on the assessee to prove that they had no expectations of the recovery and it was the responsibility of the assessee to get the proper information of the debtor whereby debt would not be bad. The A.O., therefore, disallowed the amount of Rs. 31,09,022/- made the addition into the total income and simultaneously initiated the penalty proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of orders processed in respect of these parties as well as discounts offered by the appellant etc. iii) In response to above letter of the A.O., the appellant furnished letter dated 14/02/06 giving details in respect of Sumitomo Corporation India Pvt. Ltd. However no reply in respect of M/s KAPL was furnished. Neither the wrong claim of commission was withdrawn. iv) Yet another letter dated 24/02/06 was filed by the appellant before the A.O. in which various clarifications were given and details were furnished. However in respect of wrong claim of commission to KAPL, neither any details were given nor the claim was withdrawn. v) An enquiry was carried out by DDIT (Inv.) Unit-III, New Delhi on a reference made by the A.O. to enquire about the commission received by M/s KAPL from the appellant. M/s KAPL, vide their letter dated 09/03/06 addressed to DDIT(Inv.), Unit-III, Delhi denied that they have received any commission from the appellant. vi) Immediately thereafter vide letter dated 14/03/06, the appellant stated that credit note was issued by the assessee during the current year to M/s KAPL. However this credit note was adjusted from the payments due to the siste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al raising the grievance in respect of the penalty sustained by the Ld. CIT (A) on the wrong claim of commission/discount. 6. We have heard the rival submissions of the parties and perused the records. We have also took into consideration all the precedents relied on by the Ld. Counsel. The assessee has filed the reply to the show cause notice issued by the A.O. u/s.271(1)(c) of the Act on 17.3.2008 (Annexure-18). In the said reply, the assessee tried to justify that the claim of the deduction/commission made was under bona fide mistake and as soon as the assessee realised the situation, the mistake was corrected and claim was withdrawn. The assessee has filed the copy of the reply filed by M/s. KAP Ltd. dated 9.3.2006 (Annexure-17) to the Director Income-tax (Inv.), Unit-III, New Delhi in response to the summons issued u/s.131 of the Act. On perusal of the reply filed by M/s. KAP Ltd. we find that the said company is in the manufacturing of mosquito repellent and liquid refills and apparatus under the brand name ("All Out"). They also trade in mats and coils, which are manufactured for them by the third party manufacturers, namely Icon Household Product Private Limited. M/s. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore us we find that M/s. KAP Ltd. was purchasing the raw material i.e. chemicals and other material for the assessee as well as SC Enviro. We further find that material is sold by SC Enviro to M/s. KAP Ltd. We further find that the third party manufacturer of M/s. KAP Ltd. were also purchasing the chemicals for the manufacturing of the mats and coils from the assessee and SC Enviro and on the saleS made to the third party manufacturers, additional discount was agreed by assessee and M/S. SC Enviro as both the companies are having close business connections. It appears that the even if the material is supplied by SC Enviro, the credit note was issued by the assessee to M/s. KAP Ltd. 8. As per the copy of the statement of account filed by M/s. KAP Ltd. to the DDI (Inv.), New Delhi; (Annex-17) we find that the credit note was issued by the assessee in the financial year 2001-02 (A.Y. 2002-03) for the purchase of the chemicals by M/s. Icon, third party manufacturer of M/s. KAP Ltd. We further find that the assessee requested M/s. KAP Ltd. to adjust the amount of Rs. 51,70,763/- against M/S. SC Enviro, Xerox copy of the letter DT 02.01.03 being Annexure -B furnished by M/s. KAP Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT - 255 ITR 649 (Bom) iii) CIT vs. Pardeep Kumar - 246 ITR 94 (J and K) iv) CIT vs. Ask Enterprises - 230 ITR 48 (Bom) v) CIT vs. Santhosh Textiles - 228 ITR 221 (Ker.) vi) CIT vs. Shaikh Hassan Hotels - 178 Taxman 313 vii) CIT vs. Sidhartha Enterprises - 322 ITR 80 11. We have given our anxious consideration to the precedents relied upon by assessee. There should not be any quarrel on the proposition that if there is a bona fide mistake and if the same is corrected subsequently that cannot said to be a conscious act on the part of the assessee as an attempt to evade the tax. In the case of Reliance Petroproducts Pvt. Ltd. (supra) the Hon'ble Supreme Court, concurring with the interpretation given in the case of Dilip N. Sharoff vs. Jt. CIT 291 ITR 519 (SC) to the terms - "concealed" and "inaccurate"; held that inaccurate means not according to the truth. In the case of Dilip N. Sharoff (supra) it is held that there should be deliberate act or omission on the part of the assessee and such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars. As per the evidence before us in this case, we have to dr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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