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Commissioner of Income Tax, Chennai Versus M/s Balaha Chemicals Agencies

2016 (1) TMI 181 - MADRAS HIGH COURT

Penalty u/s 271(1)(c) - Held that:- Revenue has not been in a position to show that the payments of commission made by the assessee, which is said to have been assessed to tax, were bogus in nature. Further, there is nothing on record to show that the assessee had concealed the particulars of its income or had furnished inaccurate particulars of such income. In such circumstances, we do not find any merit in the appeals filed by the Revenue. As such, the question of law raised in the present app .....

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and 310 of 2012, relating to the assessment years, 1997-1998, 1998-1999 and 2001 and 2002. 2. The brief facts of the case are as follows: 2.1) The respondent in the present appeals, (hereinafter referred to as "the assessee") had been engaged in the dealership and distribution of various industrial chemicals, which are being used in the textile industry. The assessment of the assessee, for the assessment years 1997-1998, 1998-1999 and 2001-2002, had been completed, disallowing the clai .....

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d by the Income Tax Appellate Tribunal, in I.T.A.Nos.1236, to 1239/Mds/2006, dated 15.6.2007. On being satisfied that the assessee firm had concealed the particulars of its income and had furnished inaccurate particulars of such income, by claiming false expenditure, the Assessing Officer had levied penalty, under Section 271(1) (c) of the Income Tax Act, 1961. 2.3) Aggrieved by the said order, the assessee had preferred appeals before the Commissioner of Income Tax (Appeals). The Commissioner o .....

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ad also been held that no material was brought on record before the Tribunal, by the Revenue, to show that the decision of the Supreme Court, in C.I.T. Vs. Reliance Petroproducts Private Limited (322 ITR 158 SC) and the decisions of the Madras High Court, in C.I.T. Vs. S.Sankaran [241 ITR 822 (MAD)] and C.I.T. Vs. Cafco Syndicate Shipping Company [294 ITR 134 (Mad)], would not be applicable to the facts and circumstances arising in the appeals. Thus, the Tribunal had dismissed the appeals filed .....

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e penalty levied by the assessing officer under Section 271(1)(c) of the Income Tax Act, 1961?" 3. The learned counsel appearing on behalf of the appellant had submitted that the Income Tax Appellate Tribunal had erred in dismissing the appeals preferred by the appellant, against the order of the Commissioner of Income Tax (Appeals), directing the Assessing Officer to delete the penalty levied under Section 271 (1)(c) of the Income Tax Act, 1961. He had further submitted that the Income Tax .....

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bmitted that the Tribunal had failed to note that the assessee firm had concealed the particulars of income, by claiming bogus payments of commission. 5. It had been further submitted that the Tribunal had erred in holding that it is not the case of the Revenue that the payments claimed by the assessee were found to be bogus and that the assessee had not concealed particulars of income or furnished inaccurate particulars of income, as laid down in Section 271(1)(c) of the Income Tax Act, 1961. 6 .....

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had also been stated that the cheques deposited in the name of the commission agents had been withdrawn, immediately, thereafter. It had also been stated that, in spite of sufficient particulars having been given, the assessee had not furnished sufficient materials to show the bona fide nature of the transactions carried on by the commission agents. No books of accounts had been maintained to prove that the transactions were bona fide in nature. As such, the Tribunal had erred in dismissing the .....

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t when a difference is noticed by the assessing officer, between reported and assessed income. 9. The learned counsel appearing for the respondent/assessee had submitted that Section 271(1)(c) of the Income Tax Act would not apply to the facts and circumstances of the case, to levy a penalty on the assessee, alleging that it had concealed the particulars of its income or had furnished inaccurate particulars of such income. The learned counsel had further submitted that there is no error in the f .....

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penalty under Section 271(1)(c) is not attracted. Mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. 10.2 In Tax Case Nos.1 and 2 of 1980, dated 29.6.1995, COMMISSIONER OF INCOME TAX Vs. CHANDRAKANT M.TOLIA, the Division Bench of this Court had held that the assessee, having produced the discharged hundis displaying the names and addresses of the creditors and the relevant books in resp .....

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ings, under Section 271(1)(c), the Revenue should prove that the claim made was not sustainable in law and the assessee had made a concealment of the particulars of income. 10.4 In Tax Case (Appeal) No.504 of 2009, dated 12.11.2013, COMMISSIONER OF INCOME TAX Vs. GEM GRANITES, the Division Bench of this Court had held that, the Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer between the reported and the assessed income. The .....

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d supra, we do not find any cause or reason to interfere with the order passed by the Income Tax Appellate Tribunal, dated 14.2.2013. 12. It could be noted, from the order of the Commissioner of Income Tax (Appeals), dated 25.11.2011, that the assessee had been dealing in distribution of various industrial chemicals during the relevant financial years. The manpower employed by the assessee was too small to handle the distribution work, when compared to the total volume of the business and the ar .....

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eipts of commission from the assessee, by D.D.Vyas and his sons, had not been examined. The disallowance of commission payments to the concerns of D.D.Vyas and his sons had been made only on the presumption that the amounts paid to the sub agents were not genuine in nature. The receipts of commission in the hands of D.D.Vyas and sons had not been questioned. In fact, the receipts of commission by D.D.Vyas and his sons, from the assessee, had been assessed to tax. From the ledger extract, it coul .....

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had not incurred expenses, by way of payments of commission to D.D.Vyas and his sons. The disallowance was only on the ground that the sub-commissions claimed to have been paid by D.D.Vyas and his sons, to their sub-agents, were not genuine in nature. Based on the decision of the Supreme Court, in CIT Vs. Reliance Petroproducts Private Limited 322 ITR 158 (SC), it had been held that mere claim of deduction will not automatically attract a penalty, under Section 271(1) (c) of the Act. 15. It had .....

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of opening of bank accounts, cannot be put against the assessee. The assessee cannot be held to be liable for the sub agents, if any, nominated by the Commission agents, who had received the payments of commission. The department had failed to discharge the onus of proving that the assessee had made false claims, wilfully, or had furnished inaccurate particulars, while claiming deductions on the payment of commission. 17. We find that the Tribunal had given proper reasons for dismissing the app .....

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owever, it had been found, on a perusal of the order of the Tribunal passed in the quantum appeal, that the disallowance of commission payments was made by the Tribunal, by observing that the assessee shall show that the service was actually rendered and the expenditure is exclusively and wholly incurred for the purpose of the business. The Tribunal had also observed that the payment of commission in question had been made, by way of cheques and the recipient of the commission had been assessed .....

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