TMI Blog2017 (8) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... ear under appeal and confirmed by the appellate authority, by itself is no ground to levy the penalty under section 271(1)(c) of the Act against the assessee. - Decided in favour of assessee. - I. T. A. No. 123/Chd/2015 - - - Dated:- 30-12-2016 - Bhavnesh Saini (Judicial Member) And Annapurna Gupta (Accountant Member) For the Appellant : S. K. Mittal, Departmental Representative For the Respondent : Sudhir Sehgal and Ashok Goyal, Chartered Accountant ORDER Bhavnesh Saini (Judicial Member) 1. This appeal by the Revenue has been directed against the order of the learned Commissioner of Income-tax (Appeals) Patiala dated December 15, 2014 for the assessment year 2006- 07 challenging the cancellation of penalty under section 271(1)(c) of the Income-tax Act. 2. We have heard learned representatives of both the parties and perused the material on record. 3. The facts of the case are that in this case, the Assessing Officer made an addition of ₹ 41,14,518 on account of the disallowance of liasoning commission. The learned Commissioner of Income-tax (Appeals) deleted the addition, however, the Income-tax Appellate Tribunal Chandigarh Bench confirmed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earliest and ensure the timely release of payments in favour of the company. They were further responsible for getting sorted out any kind of dispute that might arise during the execution of those supply orders by the company. These service providers had been assigned different areas. 4(i) The assessee was to get the service commission at ₹ 25 per tonne of cement so supplied and had agreed with the service providers to pay ₹ 20 per tonne against the services to be provided by them on the basis of the quantity supplied during the financial year in the area so assigned to a particular service provider. This arrangement needs to be appreciated from the point of a prudent businessman as it was not possible for the assessee being individual to have his own office at different places in the State of Haryana and to control a large number of employees required for looking after about 200 such consignees of different organisations at those places. The assessee produced all the books of account and other records to substantiate the explanation before the authorities below. The assessee incurred the expenses for business purposes only. 4.(ii) The assessee preferred an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the appellant was engaged by M/s. Sarvashaktiman Traders Pvt. Ltd. (The Chief Sale Promoters for J. K. Cement Work) as service agent for the State of Haryana. As contended the services in the State of Haryana were managed through other service providers/sub-agents. The Assessing Officer however disallowed the expenditure claimed by the appellant as incurred on the service providers for providing services in the State of Haryana to the tune of ₹ 41,14,518. During the course of assessment proceeding, the appellant submitted complete details of sub-agents. The Assessing Officer thereafter, recorded the statements of the sub-agents who confirmed having received the payment after deduction of TDS, service tax etc. However, the Assessing Officer disallowed the expenses on the grounds that the sub-agents have not collected the payments from the parties on behalf of the appellant. Rather, it was contended that the purchasing agents directly issued drafts to J. K. Cement. Further during the year, these parties have also not settled any dispute claiming that no dispute arose during the year. Moreover, it was noted that the payments to the sub-agents were cleared only in the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, cancelled. 5. In the result, the appeal is allowed. 6. The learned Departmental representative relied upon the order of the Assessing Officer and submitted that the assessee failed to substantiate the liasoning commission expenses. The claim of the assessee is not bona fide, therefore, Explanation 1 to section 271(1)(c) of the Act is clearly attracted. The learned Departmental representative submitted that the hon'ble High Court has also confirmed the order of the Tribunal in confirming the addition on the merits vide the judgment dated July 18, 2013 in the case of Raj Kumar Wadhwa v. CIT (Income-tax Appeal No. 117 of 2012). Copy of the judgment of the High Court is placed on record. The learned Departmental representative submitted that penalty is strictly a civil liability and relied upon the decisions of the hon'ble Supreme Court in the case of Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 and CIT v. Atul Mohan Bindal [2009] 317 ITR 1 (SC). The learned Departmental representative also relied upon the decision of the hon'ble Punjab and Haryana High Court in the case of Shiv Narain Khanna v. CIT [1977] 107 ITR 542 (P H) on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion paid in the ten assessment years under appeal as well as in the preceding assessment years 2002-03 to 2005-06 supported by the trading and profit and loss account for all these years in which the assessee has shown the net income by liasoning. He has submitted that in the financial years 2002-03 and 2003-04, the returned income have been accepted under section 143(1) and in the financial year 2004-05 the returned income have been accepted, later on disallowance has been made under section 148 of the Act. The learned counsel for the assessee, therefore, submitted that the learned Commissioner of Income-tax (Appeals) on proper appreciation of the facts and the material on record rightly deleted the penalty. 7. We have considered the rival submissions. It is not in dispute that the Assessing Officer disallowed the liasoning commission for the amount in question but the learned Commissioner of Income-tax (Appeals) deleted the addition by accepting the explanation of the assessee. The Revenue preferred an appeal before the Tribunal and the Tribunal vide order dated February 23, 2010 allowed the Departmental appeal by upholding the order of the Assessing Officer in making the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t conclusive to attract the levy of the penalty. The levy of penalty is not automatic in each and every case and it depends upon the facts and circumstances of each case. It is well-settled law that quantum and penalty proceedings are independent and distinct proceedings and the assessee in the penalty proceedings still could explain that levy of the penalty is not justified even if the quantum addition have been confirmed by the authorities below. The hon'ble Supreme Court in the case of Rajasthan Spinning and Weaving Mills [2009]-TIOL-63-SC held that On every demand, penalty is not automatic . The hon'ble Delhi High Court in the case of CIT v. Nath Bros. Exim International Ltd. [2007] 288 ITR 670 (Delhi) held as under (headnote) : The assessee had claimed dividend income as his business income and according to the assessee it was entitled to a deduction under clause (baa) of the Explanation to section 80HHC(4C) of the Income- tax Act, 1961. The Assessing Officer disallowed the claim and imposed penalty. The Tribunal came to the conclusion that the asses see had disclosed all the facts, and therefore even though it had made an erroneous claim which could not be justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State of Haryana. Their statements were recorded in which they have confirmed having received the payment after deduction of TDS and service tax. The assessee, thus, has disclosed all the material facts to the Revenue authorities. In the assessment year 2005-06, in the original scrutiny proceedings, the Assessing Officer allowed a similar claim of the assessee on the same set of facts. Therefore, there is no finding by the authorities below that any details or explanations given by the assessee in his return are found to be incorrect or erroneous or false. A mere making of claim which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding income of the assessee. The assessee also produced complete details to show that even in the preceding assessment years, the assessee was engaged in the similar business activities and has shown the liasoning income on net basis. Therefore, the claim of the assessee could not be said to be incorrect or false so as to invite the levy of penalty in the matter. It may also be noted here that the Assessing Officer in the assessment order as well the penalty under section 271(1)(c) of the Act for concealm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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