TMI Blog2013 (11) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee company. The Ld. Commissioner of Income Tax (A) noted that the said commission was paid by the assessee company to its directors in pursuance of the board resolution dated 31.3.2003, after complying with all the legal requirements including the requirement to deduct tax at source. The Ld. Commissioner of Income Tax (A) also returned a finding that the assessee had paid commission of RS. 320 lacs to its directors in the immediately succeeding assessment year 2004-05, too, which was accepted by the Department and no disallowance on this account was made. Aggrieved by the order of the Ld. Commissioner of Income Tax (A), the department carried the matter in further appeal before the ITAT, Delhi. The ITAT vide order dated 12.3.2010, set aside the order of the Ld. Commissioner of Income Tax (A) and restored the disallowance of commission paid to the directors, as made by the Assessing Officer under section 36(1)(ii) of the Act. On the basis of the order dated 12.3.2010 passed by the Tribunal, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act. 3.2 During the penalty proceedings, it was submitted that the assessee company had neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with law and disallowance thereof in the quantum proceedings is contrary to law (Refer, Written Submissions filed before the Ld. Commissioner of Income Tax (A) in penalty proceedings. 2. Findings in quantum proceedings - not conclusive in penalty proceedings: While passing the penalty order, the assessing officer has simply relied upon the findings arrived at in the quantum proceedings, without appreciating that penalty proceedings and quantum proceedings are independent and that findings in the quantum proceedings, though relevant, are not conclusive or determinative of the penalty proceedings. (Refer, CIT V. Khoday Eswarsa : 83 ITR 369, 376 (SC); Anantharam Veerasinghaiah V. CIT: 123 ITR 457 (SC); CIT v. Arctic Investment (P) Ltd: 190 Taxman 157 (Del.); CIT v. Globe Sales Corporation: 145 Taxman 530 (Del.); CIT v. J. K. Synthetics Limited: 219 ITR 267 (Del); CIT V. H. Abdul Bakshi: 160 ITR 94 (AP) (FB)) 3. True and full disclosure - No concealment or furnishing of inaccurate particulars of income There was no concealment of income or furnishing of inaccurate particulars by the assessee company, rather the factum of payment of commission was categorical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order itself testifies the disclosures made: "As per clause 18 of the Tax Audit Report regarding particulars of statement made to person specified under section 40A(2)(b) and information enclosed in Annexure 4, it is noticed that the assessee company has paid commissions amounting to Rs. 3,20,00,000/- to the Directors of the assessee company. The details of the commission payments made are shown as under: Name of the directors Commission (%) shareholding HV Subramaniam 1,20,00,000 37.5 Sunil Sachdeva 1,20,00,000 37.5 Nitin Narayan Beri 64,00,000 20 Parshu Narayan 16,00,000 5 Total 3,20,00,000 100 As seen from the above, all the four Directors were the shareholders of the assessee company .... " (Emphasis supplied). Since all material facts were truly and fully disclosed by the assessee, no penalty under section 271(I)(c) of the Act was leviable (Refer, Reliance Petroproducts: 322 ITR 158 (SC)) 4. Debatable issue - bonafide claim - full disclosure - no penalty The issue of allow ability of paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the case of Dalal Broacha Stock Broking Pvt. Ltd v. Addl CIT: ITA 5792/Mum/2009. The said Bench, vide order dated 22.06.2011, has interpreted the said expression to mean that "dividend would have declared by any reasonable management on the facts and circumstances of the case", rather than to mean "dividend should be statutorily or legally payable" as understood and contended by the assesses. It is submitted that he constitution of a Special Bench (even though subsequent to the filing of return of income) to examine an issue itself buttresses that such issue is debatable. The Tribunal further proceeded to hold that in such a case, it is irrelevant whether the decision of the Special Bench was in favour or against the assessee, i.e. even if the stand of the assessee is eventually not accepted, still penalty under Section 271(1)(c) of the Act would not apply. (Refer, Hero Honda Motors Put. Ltd: ITA 2698/Del/2010, rendered on 27.05.2011) (d) The CIT(A) in quantum proceedings had deleted the disallowance: In the quantum proceedings, in appeal preferred by the assessee against the assessment order, the CIT(A) deleted the disallowance made by the AO. There being div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Ld. Commissioner of Income Tax (A) in this regard. 8.1 In this regard, we place reliance upon the Hon ble Apex Court decision in the case of CIT vs. Reliance Petro Products Ltd. in Civil Appeal No. 2463 of 2010. In this case vide order dated 17.3.2010 it has been held that the law laid down in the Dilip Sheroff case 291 ITR 519 (SC) as to the meaning of word concealment and inaccurate continues to be a good law because what was overruled in the Dharmender Textile case was only that part in Dilip Sheroff case where it was held that mensrea was a essential requirement of penalty u/s 271(1)(c). The Hon ble Apex Court also observed that if the contention of the revenue is accepted then in case of every return where the claim is not accepted by the Assessing Officer for any reason, the assessee will invite the penalty u/s 271(1)(c). This is clearly not the intendment of legislature. 8.2 We further place reliance from 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 83 ITR 26 wherein it was held that An order imposing penalty for failure to carry out a statutory obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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