Case Law Details

Case Name : Roger Enterprises Pvt. Ltd. Vs CIT (Delhi High Court)
Appeal Number : ITA 439/2003 & ITA 156/2014
Date of Judgement/Order : 04/02/2016
Related Assessment Year : 1981-82 to 1983-84
Courts : All High Courts (1347) Delhi High Court (463)

Brief of the Case

Delhi High Court held In the case of Roger Enterprises Pvt. Ltd. vs. CIT that the finding of the ITAT that no material was placed on record by the Assessee to demonstrate the nature of service rendered by the three companies to whom the commission was paid has been concurrently upheld by this Court. The Assessee indeed failed to discharge onus on proving the genuineness of commission payments. Here the question is not mere making of a wrong claim but in making a claim that is demonstrably false. The Assessee failed to establish the genuineness to the commission payments, hence the essential conditions for attracting penalty under Section 271 (1) (c) stood fulfilled.

Facts of the Case

This is a penalty appeal where the Revenue aggrieved by the ITAT setting aside the penalty levied on the Assessee under Section 271 (1) (c).

Contention of the Assessee

The ld counsel of the assessee submitted that it was necessary for the AO to offer Mr. Meattle and Mr. Jhunjhunwala for cross-examination even in the penalty proceedings. Further he submitted that the satisfaction arrived at by the AO in the original assessment order regarding initiation of the penalty proceedings was based on the statements of both Mr. Meattle and Mr. Jhunjhunwala. If the statement of Mr. Meattle is kept set aside, then the matter would have to be remanded to the AO for him to record his satisfaction de novo regarding initiation of the penalty proceedings only on the basis of the statement of Mr. Jhunjhunwala. He submitted that in the penalty proceedings a standard of proof higher than preponderance of probabilities was called for. Therefore, even if it were to be held that Mr. Jhunjhunwala’s statement could form the basis of the disallowance of the commission paid by the Assessee, it might not be sufficient to initiate penalty proceedings.

He further submitted that the Assessee had disclosed all facts. There was a distinction to be drawn between making a ‘wrong’ claim and a ‘false’ claim and in the present case the Revenue had been unable to show that a false claim was made.  Reliance was placed on the decisions in CIT v. Somnath Oil Mills (1995) 214 ITR 32 (Guj), MAK Data P. Ltd. v. CIT (2013) 358 ITR 593 (SC), Anantharam Veerasinghaiah v. CIT (1980) 123 ITR 457 (SC), Union of India v. Dharmender Textile Processors (2008) 306 ITR 277 (SC).

Held by the Revenue

The ld counsel of the revenue submitted that after the insertion of Explanation 1 to Section 271 (1), wilful concealment was not an essential ingredient for attracting penalty. She referred to the decision in Chairman, SEBI v. Shriram Mutual Fund 2006 (5) SCC 361 where it is reiterated that the penalty under Section 271 (1) (c) of the Act was in the nature of a civil liability. This was reaffirmed by a larger Bench of the Supreme Court in Union of India vs. Dharmender Textile Processors (2008) 306 ITR 277 (SC).

Held by High Court

 High Court held that on merits, the finding of the ITAT that no material was placed on record by the Assessee to demonstrate the nature of service rendered by the three companies to whom the commission was paid has been concurrently upheld by this Court. The Assessee indeed failed to discharge onus on proving the genuineness of those payments. The conclusion that the payment of commission was bogus has been concurrently held by the CIT (A), by the ITAT and this Court. Consequently, the essential conditions for attracting the penalty under Section 271 (1) (c) stand fulfilled in the present case.

Further the Court rejects the plea of the Assessee that the matter should be remanded to the AO for arriving at a satisfaction de novo regarding initiation of penalty proceedings. In the facts of the present case, where the disallowance of the commission payment has been upheld by this Court, on account of the Assessee failing to furnish the true and correct particulars, the initiation of the penalty proceedings against the Assessee under Section 271 (1) (c) is perfectly justified.

The decision in CIT v. Reliance Petro products Pvt. Ltd. (2010) 322 ITR158 (SC) proceeded on the basis that no information given in the return was found to be incorrect or inaccurate. It was in that context that it was observed that the mere making of an incorrect claim would not tantamount to furnishing inaccurate particulars. Here the question is not mere making of a wrong claim but in making a claim that is demonstrably false. With the Assessee failing to establish the genuineness to the commission payments the essential conditions for attracting penalty under Section 271 (1) (c) stood fulfilled. The impugned orders of the ITAT and the CIT (A) deleting the penalty are hereby set aside. The penalty as ordered by the AO is restored.

Accordingly, appeal disposed of.

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