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TMI Blog2015 (3) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under section 143(3) of the Income-tax Act, 1961, vide order dated December 30, 2010, at a total income of Rs. 38,50,91,423. While doing so, the learned Assessing Officer had disallowed commission payment of Rs. 4,65,47,893. During the course of assessment proceedings, the assessee had withdrawn the deduction claimed of Rs. 7,79,96,669 under section 80-IB of the Income-tax Act, 1961. 3. Similarly, the assessee-Sun Minerals in ITA No. 1109/Hyd/2013 is engaged in the business of trading of iron ore. For the assessment year 2008-09, the assessee had filed the return of income on September 25, 2008, returning a total income of Rs. 5,38,58,790. As against the returned income, the assessment was completed under section 143(3) of the Income-tax Act, 1961, vide order dated December 30, 2010, at a total income of Rs. 7,83,36,460. While doing so, the learned Assessing Officer had disallowed commission payment of Rs. 2,44,85,670. 4. The learned Assessing Officer had disallowed the commission payment on the ground that there were no written agreements with the parties and the details as to the parties introduced by the agents, tonnage details of sales were not furnished by the agents duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The facts of the case are that the assessee-firm had paid commission to the following parties during the financial year 2007-08 for the services rendered in connection with the sale of iron ore and for advising on pricing, quality and timing of supply of iron ore, and for arranging trucks for supply of materials and for smooth passage of trucks to their destination and for introducing the customers for purchase of iron ore. In the case of Sun Infraa Party Name Commission in Rs. Smt. B. Bagyalakshmi 2,30,73,945 Sri S. Lava Kumar Reddy 42,83,658 M/s. Vijay Mining P. Ltd. 72,53,316 M/s. R. K. Marketing Services 1,15,36,974 Chandana Parasurampuria 4,00,000 Total 4,65,47,893 In the case of Sun Minerals Party Name Commission in Rs. M/s. R. K. Marketing Services 55,54,205 M/s. Vijay Mining P. Ltd. 55,54,206 M/s. Adani Enterprises 5,00,000 Smt. Bagyalakshmi 1,11,08,411 Chandana Parasurampuria 96,614 Smt. K. Annapurna 16,72,234 Total 2,44,85,670 8. The assessee had furnished during the course of assessment proceedings the names, addresses and PAN Nos. of the aforesaid parties. Based on this information alone, the learned Assessing Officer by exerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 (All) (d) CIT v. Super Metal Re-rollers [2004] 265 ITR 82 (Delhi) (e) Diwan Enterprises v. CIT [2000] 246 ITR 571 (Delhi) (f) CIT v. Shivnarayan Jamnalal and Co. [1998] 232 ITR 311 (MP) (g) CIT v. T. Abdul Majeed [1998] 232 ITR 50 (Ker) The hon'ble apex court in the case of Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) had held vide paras 56 and 57 as follows (page 546) : "The term 'inaccurate particulars' is not defined. Furnishing of all assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the Explanations are taken recourse to, a finding has to be arrived at having regard to clause (a) of Explanation 1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee in the event he offers one, was false. He must be found to have failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent from assessment proceedings. Though the evidence in the assessment proceedings is good evidence but is not a conclusive evidence for penalty proceedings. The fact that certain additions were made in the assessment does not ipso facto hold the assessee liable for penalty. No penalty can be levied solely on the basis of reasons given in the assessment order. Reliance in this regard is placed on the following decisions : (a) CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC) ; (b) CIT v. Bharat Umbrella Manufacturing Company [1987] 167 ITR 683 (AP) ; and (c) Durga Kamal Rice Mills v. CIT [2004] 265 ITR 25 (Cal). (iv) Since the burden of proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitutes good evidence in the penalty proceeding. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle. (See Anantharam Veera singhaiah and Co. v. CIT [1980] 123 ITR 457 (SC). (v) The fact that the explanation furnished d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable to the present case. The Allahabad High Court in the case of Raj Kumar Chaurasia v. CIT [2007] 288 ITR 329 (All) vide para graph 17 of the judgment held as under (page 338) : "We find that it is not in dispute that the cold drinks business car ried on by the applicant in the name of his wife Smt. Vijai Laxmi has been finally held by the Tribunal, which is the last fact-finding authority, to be the business carried on by the applicant and the income earned therefrom had been included in his income. The investments introduced by the applicant remained unexplained by the applicant and were offered by the applicant himself to be added in his income. In the penalty proceeding, apart from the explanation which was given by the applicant in the assessment proceeding, neither any fresh material nor any evidence has been placed before the authorities nor any other plausible explanation had been offered by him to show that there was no gross or wilful neglect on his part nor there was any fraud in not disclosing the correct income. In the circumstances, we are of the considered opinion that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment is reproduced as under (page 363 of 304 ITR) : 'With regard to the existence or otherwise of a written agreement between the parties our attention has been drawn to Lachiminarayan Madan Lal v. CIT [1972] 86 ITR 439 (SC) wherein it has been held by the Supreme Court that even if there is an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment that does not bind the Income-tax Officer to hold that the payment was made exclusively and wholly for the purposes of the assessee's business. The Supreme Court observed as follows (page 446) : "Although there might be such an agreement in existence and the payments might have been made, it is still open to the Income-tax Officer to consider the relevant factors and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under section 37 of the Act.' " 11. In the inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the lower authorities as well as the Tribunal in the quantum proceedings has not given a finding that the claim of the assessee is either bogus or false. The Assessing Officer had drawn the inference that commission payments were not incurred wholly and exclusively for business purposes. 15. The Income-tax Appellate Tribunal has held in quantum appeal that "mere payment of commission through account payee cheque after deduction of TDS does not absolve the assessee from discharging its burden with regard to proving business purpose of the payments. In the absence of any credible evidence for making payments, we are inclined to disallow the same". Holding so the Income-tax Appellate Tribunal drew attention to the decision of the Delhi Income-tax Appellate Tribunal in the case of Roger Enterprises Pvt. Ltd. v. Deputy CIT [2004] 88 ITD 95 (Delhi). We find that it is the case where the assessee had failed to render any evidence in support of the services rendered by the recipients of commission and Department had brought adverse evidence on record and when the same was put to the assessee had not even availed of the opportunity of cross-examining the witnesses. Therefore the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 27, 2013) this Tribunal has held that unless the claim of the assessee was proved to be bogus or that any amount was received back by the assessee, the disallowance of expenditure by itself cannot be reason for levy of penalty. 21. The Delhi High Court in the case of Karan Raghav Exports P. Ltd. v. CIT [2012] 349 ITR 112 (Delhi) has held that claim made by the assessee might have been rejected, but it would not be said that claim was not plausible or legally tenable and therefore it cannot be said that the assessee has furnished inaccurate particulars of income. 22. In the case of CIT v. Balaji Distilleries Ltd. [2013] 1 ITR-OL 339 (Mad) it has been held that when additions were confirmed not for lack of bona fides but for rejecting the explanation of the assessee the penalty cannot be levied under section 271(1)(c). 23. In the case of CIT v. International Audio Visual Co. [2007] 288 ITR 570 (Delhi) it has been held that when all facts relating to claim were disclosed, but claim was not allowed, it does not suggest that particulars of income of the assessee or concealment of his true income has been made. 24. The Delhi High Court in the case of CIT v. DCM Ltd. [2013] 359 I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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