TMI Blog1972 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts. During the relevant period the firm had four partners and the managing partner was one Mrs. Achamma Sebastian. For the assessment year 1966-67, the firm filed a return showing an income of Rs. 34,480. The profit and loss account submitted by the firm disclosed, among other items debited, payment of commission of an amount of Rs. 39,121 to another firm by name "Koolfoam Agencies", referred to hereunder as the agent-firm. The assessment was completed on the basis that the payment of the aforesaid commission was genuine. When the agent-firm in its turn filed its income-tax return and claimed registration, the Income-tax Officer enquired in greater detail about its affairs. It was detected that the only partners of the agent-firm were th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to reduce its tax liability and in consideration of the fact that the assessee agreed to the reassessment in writing and accepted the Income-tax Officer's finding that the agent-firm was only a bogus firm, he levied a penalty of Rs. 10,000 which was far below the maximum penalty leviable under the law. The assessee filed an appeal before the Income-tax Appellate Tribunal. The Tribunal cancelled the penalty levied by the I.A.C. ; and the grounds relied on in support of its conclusion as summarised in paragraph 12 of the statement of the case are as follows : " The Tribunal held that there were no materials to show that the payment to Koolfoam Agencies was bogus and merely because the assessee agreed to the inclusion of the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccurate particulars of such income, he may direct that such person shall pay by way of penalty ...... Explanation.- Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne, for the simple reason that no evidence was tendered at all in that respect. On the other hand, there is sufficient material in the case to show that "fraud" was perpetrated by the assessee. The assessee debited in the profit and loss account for the relevant period an amount of Rs. 39,120 as commission paid to the agent-firm. When the accounts of the agent-firm was examined the Income-tax Officer detected that in the accounts of that firm the disputed amount was shown as debt due and that the debtor was none other than the assessee-firm. There was thus no payment by the assessee and no receipt by the agent-firm of any commission. In the absence of the debit of the commission in the profit and loss account of the assessee- firm, that amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxing authorities as to the nature of the agent-firm. If the agent-firm was a bogus concern, the alleged payment to such a firm cannot stand on a better footing. The taxing authorities held further that the agent-firm did not do any work for the assessee and that actually there was no payment of any commission by the assessee to the agent-firm. It cannot be held that such a conclusion was not warranted by the facts of the case. According to the Tribunal, as the assessee had shown the commission payment in the statement of accounts filed before the Income-tax Officer, it has not kept anything back from the Income-tax Officer. We are unable to subscribe to the view that non-disclosure alone can constitute concealment of income for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceptance of the Income-tax Officer a bogus debit as genuine, will constitute the furnishing of inaccurate particulars of the assessee's income so as to attract section 271(1)(c). The Tribunal's view that the reasons given by the Income-tax Officer for coming to the conclusion that no commission payment had really been made to the agent-firm and that the alleged payments were bogus were of little significance to the point in issue, is hardly acceptable. If the alleged payment was untrue, the amount so debited will have to be deleted and when the balance is struck afresh, the income will stand augmented to that extent. As already pointed out, real income can be suppressed by spurious items of expenditure or deductions and to attract section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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