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Power Build Ltd. Versus The Asst. Commissioner of Income Tax

2015 (11) TMI 1366 - ITAT AHMEDABAD

Penalty u/s 271(1)(c) - Held that:- The company of this stature can have a mensrea of concealing the particulars of income for a meager sum of ₹ 3 lacs even when all the conditions required for a genuine transaction of commission payments have been brought on record by the assessee company except the agency contract agreement stamp paper, which was purchased on 8th July, 2012 and the clause mentioning the existence of oral agreement between the principal and agent was missing, which could .....

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n by banking channel and deducted tax at source and out of the total commission expenditure of ₹ 64,77,790/-, Assessing Officer has already allowed the claim of commission of ₹ 61,77,790/- and nothing contrary to the type of services and payment to the agent has been brought before us and therefore, in these circumstances, we do not find any reason to sustain the penalty imposed u/s.271(1)(c) of the Act at ₹ 1,07,100/- on the assessee and therefore, we delete the same and allow .....

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) for the A.Y. 2002-03 was framed by ACIT, Anand on 09.02.2011. The assessee has raised following grounds :- 1. The order passed by the Hon ble CIT(A), Baroda is bad in law, contrary to legal pronouncements and same be quashed. 2. The Hon ble CIT(A), Baroda has erred in not accepting technical ground raised by your appellant as to stipulating whether penalty imposed for concealment of income or furnishing inaccurate particulars of income. Your appellant submits that mere addition to income canno .....

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concealed the income nor filed inaccurate particulars of income and hence levy of penalty is incorrect, unjust and unwarranted and same be deleted now. It be held so now. 2. Briefly stated facts are that the original assessment was finalized u/s.143(3) of the Act on 28.03.2005 assessing total income of the assessee at ₹ 61,59,610/-. The first appeal against this assessment order was decided by CIT(A)-II, Baroda on 12.01.2005. Aggrieved with the order of ld. CIT(A), assessee preferred appea .....

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bserved that agreement was effective from 24.11.2001 whereas the stamp paper used for making the agreement was purchased on 08.07.2002 and there was no clause regarding any oral agreement between both the parties and as such, disallowed the claim of commission payment of ₹ 3 lacs to M/s. Arihant Metal Corporation and initiated penalty proceedings u/s.271(1)(c) of the Act and accordingly imposed the penalty of ₹ 1,07,100/- u/s.271(1)(c) of the Act by passing the order on 09.02.2011. 4 .....

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cts, it can be safely presumed that the agreement was not existing during the year under consideration and it was fabricated subsequently i.e. on 08.07.2002 with attempt to give effect to such agreement from 24-11-2001. In view of this it cannot be said that any services were actually rendered by M/s. Arihant Metal Corporation to the appellant during the year under consideration as the documentary evidence as produced by the appellant in respect of its claim of being services rendered itself is .....

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F.Y. 2001-02 is ₹ 13.06 crore and income declared in return of income was ₹ 33,72,667/- and during F.Y. 2001-02 total commission expenses claimed in Audited P & L account is ₹ 64,77,790/- which includes the alleged commission payment of ₹ 3lacs to M/s. Arihant Metal Corporation. 5.1 Ld. A.R. further submitted that the commission was paid to M/s. Arihant Metal Corporation for booking the order for the company from M/s. Promac Engineering Industries Ltd., Bangalore as w .....

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by M/s. Arihant Metal Corporation to the assessee. The commission payment of ₹ 3lacs has been paid after deducting income tax at ITA No. 1582/Ahd/ 12 A.Y. 02-03 (Power Bui ld Ltd. v s . ACIT) Page 4 source at ₹ 15,450/- and the difference amount at ₹ 2,84,250/- (gross ₹ 3,00,000/- less TDS ₹ 15,450/-) was paid by account payee cheque to the account of M/s. Arihant Metal Corporation towards sales commission for F.Y.2001-02. Ld. A.R. further referred to the paper boo .....

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IT(A) is based on the fact that the stamp paper on which this agreement has been entered into w.e.f. 24.11.2001 was purchased from the Stamp Vendor on 8th July, 2012 and there was absence of clause to cover up oral contract between the assessee company and M/s. Arihant Metal Corporation. For this technical mistake, disallowance of commission of ₹ 3lacs has been done by the Assessing Officer and confirmed by the CIT(A). 5.2 Ld. A.R. further submitted that out of total commission expenses of .....

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ers of lower authorities. 6. We have heard the rival contentions, gone through the facts and circumstances of the case and perused the material on record. The only issue involved is in relation to imposition of penalty u/s.271(1)(c) of the IT Act, for furnishing of inaccurate particulars in the shape of wrong claim of commission ITA No. 1582/Ahd/ 12 A.Y. 02-03 (Power Bui ld Ltd. v s . ACIT) Page 5 expenses with intention to reduce tax incidence. From the available records, we find that assessee .....

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of ₹ 64,77,790/-, Assessing Officer has only disallowed commission of ₹ 3 lacs. 6.1 In order to justify the commission expenditure the basic ingredients are that there should be a relationship of principal and agent which in this case is established by agreement between the two parties. Type of agency services to be defined which in this case, is very well clear from the agreement that the agent M/s. Arihant Metal Corporation shall provide its services in relation to order booking o .....

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uarantees in time. The duration of the agreement is put in writing in the agreement to be valid for a period of 1 year or till the completion of and execution of the order and receipt of old dues, whichever, is earlier and the consideration to be paid to the agent. 6.2 This makes clear that the relationship and services to be provided by the commission agent along with the quantum of commission to be paid was well established on record and not confronted by the Assessing Officer. The alleged com .....

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on by the Assessing Officer is that assessee has claimed expenses commission of ₹ 3lacs by planning the commission expenditure after the close of financial year. 6.3 This issue of disallowance of ₹ 3lacs of commission payment came before the co-ordinate Bench during course of appeal against the order of CIT(A) relating to quantum proceedings wherein co-ordinate Bench did not strike of the claim of commission paid by assessee and rather restored this issue to the file of Assessing Off .....

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of rendering services has come subsequently it requires verification and opportunity to the assessee and accordingly re-examination. As a result, this ground of assessee is allowed but for statistical purposes. 6.4 In our view, looking to the total facts of the case, it is very hard to believe that the company of this stature can have a mensrea of concealing the particulars of income for a meager sum of ₹ 3lacs even when all the conditions required for a genuine transaction of commission p .....

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