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2015 (12) TMI 282 - ITAT MUMBAI

2015 (12) TMI 282 - ITAT MUMBAI - TMI - Penalty u/s 271(1)(c) - failure to substantiate the claim of expenditure on account of commission payment - Held that:- The entire conspectus of facts emerging from record does establish that the assessee fail. So however, in order to hold the assessee guilty of “furnishing inaccurate particulars” within the meaning of section 271(1)(c) of the Act, it is imperative to demonstrate that assessee is found to have made an erroneous or a false claim. Clearly, f .....

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yment of commission expenditure has been made by cheques and the requisite tax has also been deducted at source. The recipient has also confirmed receiving of commission payment from the assessee. The assertion of the appellant–assessee that similar payments made in the past have been allowed, is also not disputed by the Revenue. The aforesaid features of the claim do not establish that the claim made in the return of income was not a bonafide claim. While there may be justifiable reasons for di .....

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the Assessing Officer to levy penalty is based on the disallowance effected during the assessment proceedings, where the only failure of the assessee was non-substantiation of the claim for expenditure. In our view, merely because the expenditure on account of commission payment has been found to be unsubstantiated and disallowed in assessment proceedings, the same ipso facto does not justify levy of penalty under section 271(1)(c) of the Act. - Decided in favour of assessee. - ITA No.6671/MUM/2 .....

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and dated 30/03/2011 for assessment years 2004-05 and 2006-07 respectively. 2. In both appeals, the solitary issue relates to the penalty imposed by the AO under section 271(1)(c) of the Act amounting to ₹ 3,50,528/- for A.Y 2004-05 and ₹ 1,22,400/- for assessment year 2006-07. Since the facts and circumstances leading to the imposition of penalty are identical in both the appeals, the appeal for assessment year 2004-05 is taken as lead case. 3. In this context, the brief facts are .....

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services in connection with goods exported by the assessee. The relevant discussion in the assessment order passed under section 143(3) dated 19/6/2006, reveals that the AO issued summons under section 131 of the Act to Shri Sandeep P. Shah and recorded his statement. The relevant extracts of the deposition made by Shri Sandeep P. Shah have been reproduced by the AO in the assessment order. Notably, the said person appeared before the AO and explained that he had earned commission income from th .....

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id action of the AO has since been affirmed by CIT(A) also. Not being satisfied with the order of CIT(A) on this aspect, assessee is in further appeal before us. 4. Before us, Ld. Representative for the assessee contended that there was no justification for the levy of such penalty under section 271(1)(c) of the Act because assessee had made adequate disclosure and all the material necessary for the assessment was disclosed. The Ld. Representative for the assessee, further, pointed out that simi .....

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dings clearly established that assessee s claim of payment of commission was not genuine, and, therefore, penalty was rightly imposed for such a disallowance. 7. We have carefully considered the rival submissions. In the present case, assessee is engaged in the business of export of stainless steel utensils. The return of income filed by the assessee was accompanied by audited Balance sheet, Profit and loss account as well as the prescribed tax audit report. The Assessing Officer had noticed tha .....

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was not satisfied with the claim of the assessee and he also examined the recipient of commission i.e. Shri Sandeep P. Shah. The deposition made by Shri Sandeep P. Shah was also not found satisfactory by the AO though the said person confirmed having received commission from the assessee. The relevant discussion in the assessment order reveals that the AO was not satisfied with the services rendered by the said person as he could not produce the required details. This has formed the basis for t .....

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meaning of section 271(1)(c) of the Act, it is imperative to demonstrate that assessee is found to have made an erroneous or a false claim. Clearly, failure to substantiate a claim cannot be equated to a case of making of a false or an erroneous claim. In fact, the mere making of a claim, which is not found sustainable by the Assessing Officer does not ipso facto justify furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act, as held by the Hon ble Sup .....

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