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TMI Blog2012 (12) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... May 2010, the Appellant has formulated the following questions of law for consideration of this Court: A) Whether on the facts and in the circumstance of the case the Tribunal was right in law and on facts to confirm the penalty for the assessment year 1989-1990 under the provisions of Section 271(1)(c) of the Act by merely relying on the Tribunal's order in the quantum proceedings, wherein there has been no evidence or finding adduced that the Appellant had furnished inaccurate or wrong particulars of income to warrant the levy of penalty? B) Whether on the facts and in the circumstances of the case, the Tribunal was right in law and on facts to confirm the penalty for the assessment year 1989-1990 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the appellant Group. Thereafter on 27th March, 1992 an Assessment Order under section 143 (3) of the Act was passed assessing the appellant to an Income of Rs.4.75 crores as against the returned loss of Rs.48.78 lacs. In the course of the assessment year, an amount of Rs.10.81lacs paid by the appellant to its sister concern M/s. Primco Private Ltd. as service charges (reimbursement of salary and wages) was disallowed as unproved expenses. This was inter alia on the basis that M/s Primco Pvt. Ltd. had filed a 'Nil' Return of Income for the Assessment Year 1989-90 and the activity of M/s Primco Private Ltd. was only at Nasik while the appellant's activities was in Mumbai and therefore the expenditure of service charges viz. salary and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant to show cause why penalty under section 271(1)(c) of the Act should not be imposed inter alia in respect of service charges i.e. reimbursement of salaries and wages of Rs.10.81lacs paid by the appellant to M/s Primco Pvt. Ltd. By an order dated 29th December, 2006 the Assessing Officer held that the amount of Rs.10.81lacs had not been paid as service charges to M/s Primco Pvt. Ltd. and that the appellant had deliberately filed inaccurate particulars so as to avoid payment of taxes and defraud the revenue. Consequently, a penalty under section 271(1)(c) of the Act was inter alia imposed in respect of Rs.10.81lacs being the service charges paid to M/s. Primco Pvt. Ltd. (e) Being aggrieved, the appellant carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ern so as to reduce its taxable income. In view of the above, penalty under section 271(1)(c) of the Act with regard to Rs.10.81lacs was upheld. 4) Mr. Arun Sathe, Senior Counsel in support of the appeal submits as under: (a) Penalty not imposable as in quantum proceeding, the Commissioner of Income Tax (Appeals) by order dated 28th. December 1992 has allowed the expenditure of Rs.10.81lacs being service charges (salary and wages) paid to M/s Primco Pvt. Ltd. Therefore as there could be two possible views on the allowability of the expenditure, no penalty is imposable; and (b) In view of the decision of the Apex Court in the matter of Commissioner of Income Tax Vs. Reliance Petroproducts Pvt. Ltd., r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion/investment allowance. Consequently, the payment of Rs.10.81lacs to M/s Primco Pvt. Ltd. was shown in the accounts of the appellant only with a view to reduce its taxable income. In the circumstances, Mr. Suresh Kumar submits that the appellant had filed inaccurate particulars, warranting penalty under section 271 (1) (c) of the Act. 6) We have considered the submissions. We find that an amount of Rs.10.81lacs paid to M/s Primco Pvt.Ltd. was appellant's sister concern. Further these payments were made through a debit note raised at the close of the year. This was done only with a view to reduce the taxable profits of the appellant. It has been further recorded by the Assessing Officer that the manufacturing activity of M/s Primco Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause why penalty should not be imposed upon the appellant was issued to the appellant on 8th. December 2006 i.e. after the order of the Tribunal dated 4th May, 2006 in quantum proceeding setting aside the order dated 28h. December 1992 of the Commissioner of Income Tax(Appeals). Therefore, an order which has been set aside is an order which does not exist and cannot be relied upon to establish that the payment of Rs.10.81lacs made by the appellant to M/s Primco Pvt. Ltd. is genuine. The explanation with regard to the payment of Rs.10.81lacs made to M/s Primco Pvt. Ltd. was found to be unacceptable by the Tribunal. Further the Tribunal in the penalty proceedings has by its order dated 14th. May 2010 independent of the findings in quan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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