TMI Blog2015 (3) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the quantum proceedings cannot automatically call for the levy of penalty under section 271(1)(c). Hence we are of the opinion that the penalty levied under section 271(1)(c) is to be deleted. - Decided in favour of assessee. - I. T. A. Nos 1108 and 1109 /Hyd/ 2013 - - - Dated:- 16-1-2014 - CHANDRA POOJARI AND SMT. ASHA VIJAYARAGHAVAN, JJ. For the Appellant : I. Rama Rao For the Respondent : B. Yadagiri ORDER Smt. Asha Vijayaraghavan (Judicial Member).- These appeals are filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-IV, dated 2008-09 for the assessment year 2008-09. Since, common issues are involved in these appeals, the appeals are clubbed and heard together and are being disposed of by the single consolidated order for the sake of convenience. 2. First we will take up ITA. No. 1108/Hyd/2013 in the case of Sun Infraa, Hyderabad. The brief facts of the case are that the assessee is engaged in the business of iron ore mining, processing and trading of iron ore. For the assessment year 2008-09, the assessee had filed the return of income on September 28, 2008, returning a total income of ₹ 26,05,46,86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the onus of proving the services rendered by the agents. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the assessee preferred an appeal before the hon'ble Income-tax Appellate Tribunal, Hyderabad. The hon'ble Tribunal also confirmed the addition in the absence of the details as to the list of customers introduced by the agents and quantity of sales effected through agents. Even the miscellaneous petition filed was dismissed by this hon'ble Tribunal. The assessee had preferred an appeal before the hon'ble High Court of Andhra Pradesh, which is pending disposal. 6. While the matter stood thus, the learned Assessing Officer proceeded with levy of penalty under section 271(1)(c) of the Income-tax Act, 1961, vide order dated January 31, 2013, levying a penalty of ₹ 1,59,00,000 in the case of Sun Infraa and ₹ 84,00,000 in the case of Sun Minerals holding the assessee guilty of furnishing of inaccurate information resulting in the disallowance of the commission payment placing reliance on the decision of the hon'ble Supreme Court in the case of Lachminarayan Madan Lal v. CIT [1972] 86 ITR 439 (SC) and the decision of the hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred wholly and exclusively for business purpose on the following grounds : (a) There are no written agreements with the parties to whom commission was paid. (b) There is no written correspondence with those parties regarding the customers introduced by them and sales effected. (c) The assessee cannot identify party wise list of customers introduced by the said parties. It is giving a vague reply that all the customers were collectively introduced. (d) The assessee could not specify tonnage details of sales effected through each of the commission agents. (e) The assessee claims that all its customers were introduced by all the agents whereas the list of customers furnished by Smt. Bhagya Lakshmi is inconsistent with this claim. (f) In a nutshell the assessee could not produce any documentary evi dence in support of the services rendered and also it could not furnish the basis for payment of commission. 10. On appeal, the learned authorised representative submitted that (i) the learned Assessing Officer had not given finding in the penalty order as to how and in what manner the assessee had furnished inaccurate particulars of income resulting in addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de. Therefore, the Explanation (i) to section 271(1)(c) of the Act is not attracted and, therefore, provisions of section 271(1)(c) of the Act are not applicable as held by the hon'ble apex court in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) and also in the case of T. Ashok Pai v. CIT [2007] 292 ITR 11 (SC), vide para 18 held as follows (page 18) : 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 prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income. Even the hon'ble Karnataka High Court in the case of CIT v. San dur Manganese and Iron Ores Ltd. [2010] 327 ITR 242 (Karn) has laid down the same proposition of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the penalty order, it is patently clear that that the assessment order was the sole basis for levy of pen alty and reiterated that the decisions of the hon'ble Supreme Court in the case of Lachminarayan Madan Lal [1972] 86 ITR 439 (SC) and Schneider Electric India Ltd. v. CIT [2008] 304 ITR 360 (Delhi) sup ports the addition of commission payments. As submitted supra, those decisions are clearly distinguishable and cannot be applied to the facts of the present case. Further for the purpose of levy of pen alty, he relied on the decisions of hon'ble Rajasthan High Court in the case of Yashwant Singh v. CIT [1995] 212 ITR 207 and the Allahabad High Court in the case of Raj Kumar Chaurasia v. CIT [2007] 288 ITR 329 (All). It is respectfully submitted that the case laws relied upon by the Assessing Officer cannot be applied to the facts of the present case. The hon'ble Rajasthan High Court in the case cited supra had held that where the assessee had failed to offer an explanation in the penalty proceedings, based on the evidence gathered during the course of assessment proceedings penalty can be levied. Whereas in the present case, the assessee had offered an explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Deputy CIT v. Boston Consulting Group (India) P. Ltd. [2011] 7 ITR (Trib) 417 (Mumbai) that when the legality of quantum disallowance itself is not beyond doubt inasmuch as the other view is also possible the disallowance per se cannot be a sound basis of imposition of penalty. The claim in the assessment proceedings cannot lead to circumstances that there was concealment of income or furnishing of inaccurate particulars of income. 12. The learned Departmental representative on the other hand submitted that in the absence of any documentary evidence furnished by the assessee or the commission agents in support of services rendered, the assessee was asked to show cause as to why the payments made to the agents should not be treated as expenditure not laid out or expended wholly and exclusively for the purpose of the business. The learned Departmental representative further relied on the order of the Assessing Officer and observed that the Assessing Officer had held at paragraph 10 of his order as follows : 10. In the case of Schneider Electric India Ltd. v. CIT [2008] 304 ITR 360 (Delhi), the Delhi High Court followed the apex court's decision in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olve the assessee from discharging its burden with regard to proving business purpose of the payments. Therefore, the commission payments made by the assessee are dis allowed and added back to the income under section 37, as expenditure not incurred wholly and exclusively for the purposes of the business. Penalty proceedings under section 271(1)(c) are initiated for furnishing inaccurate particulars of income. 13. The learned Departmental representative also relied on the quantum order passed by the Income-tax Appellate Tribunal and stated that the commission payments had been disallowed after detailed examination and hence, penalty is rightly leviable. 14. We have heard both parties. In our opinion, the assessee has furnished the full details of the claim made in the return of income as well as during the course of assessment proceedings. The information furnished was not found to be false or bogus by the assessing authority as well as the appellate authorities. The Assessing Officer has not disapproved the claim of the assessee. Therefore the reasonable inference is that the assessee's claim is not false since the lower authorities as well as the Tribunal in the quantu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of furnishing of inaccurate particulars of income by the assessee. The Assessing Officer as well as the appellate authorities have not found any information furnished by the assessee to be false or bogus thereby entitling addition. 18. We are of the opinion that the case of the assessee is squarely covered by the decision of CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158 (SC) wherein it has been held that (headnote) : A mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. 19. Further we find that there are a plethora of decisions of the proposition that mere additions to the returned income would not per se tantamount to furnishing of inaccurate particulars so as to attract under section 271(1)(c). 20. In the case of Transport Corporation of India Ltd. v. Asst CIT [2013] 10 TMI 870 (ITA No. 195/Hyd/2013 dated September 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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