Case Law Details
Mumbai ITAT held In the case of Shri Hafeez S Contractor vs. ACIT that penalty u/s 271(1) (c) cannot be imposed in those cases where no specific charges are mentioned in penalty notice. In the given case the AO has not specified that as to which limb the notice was issued, i.e., whether it is issued for concealment of particulars of income or furnishing of inaccurate particulars of income.
Facts of the Case
During the course of search proceedings, it was noticed that the assessee has claimed expenditure in respect of commission paid to two parties namely (a) M/s Nischal Corporate Services Private Limited and (b) M/s Twinkle Vanijya Pvt.Ltd. The first party was paid a sum of Rs.2 crores in the year relevant to the assessment year 2007-08 and the second party was paid a sum of Rs.1.5 crores in the year relevant to the assessment year 2008-09. The assessee submitted that the commission payments were made to persons who gave the lead for the contract works obtained by the assessee and such kind of commission payments are normal. He further submitted that he had not received cash against the cheque so given and accordingly contended that the commission payments were genuine. When the assessee was asked to produce the persons, he expressed his inability to produce those parties and accordingly agreed to commission payments as his income. The AO initiated penalty proceedings in both the years under consideration and accordingly levied the penalty u/s 271(1)(c) of the Act on the commission expense surrendered by the assessee, with the reasoning that as the amount recovers under search operations which shows the malafide intention of the assessee to conceal the true and correct income.
Contention of the Assessee
The ld counsel of the assessee submitted that notices issued by the AO u/s 274 read with section 271 of the Act at the time of initiation of penalty proceedings issued for “concealment of particulars of income or furnishing of inaccurate particulars of income”. He submitted that the assessing officer has not specified whether it is issued for concealment of particulars of income or furnishing of inaccurate particulars of income. He contended that the assessing officer should be clear about the charge at the time of issuing the notice and the assessee should be made aware of the charge. He submitted that the penalty order is liable to be quashed, if the AO has not correctly specified the charge.
Held by CIT (A)
The CIT (A) confirmed the penalty u/s 271(1) (c).
Held by ITAT
It is not the case of the assessing officer that the assessee did not get the projects for which the impugned commission payments were made. It is also not the case of the assessing officer that such kind of commission payments are not the trade practice. The professional income declared by the assessee for AY 2007-08 was Rs.47.30 crores and for AY 2008-09 was Rs.69.56 crores. This shows the level of operation of the assessee. We notice that the assessee has been repeatedly claiming before the search officials that the commission payments were genuine and further, if had been accommodation bills, he should have received corresponding amount by way of cash. He has repeatedly submitted that he did not receive any cash and the said submission is also corroborated by the fact that the revenue did not unearth huge amount of cash during the course of search.
Further, the assessee had surrendered the commission expenses at the conclusion of the sworn statement and he has clearly stated therein that he is surrendering in view of his inability to produce the concerned persons at that stage. At the time of penalty proceedings, the assessee has sought the copy of statement given by the director of M/s Nishchal corporate services Pvt Ltd and also the copy of the report of the Inspector who inspected the office of M/s Twinkle Vanijya Pvt Ltd.The assessee has also sought any other materials on the basis of which adverse inference was drawn by the AO. However, we notice that the assessee was not provided with all the above said documents. Accordingly, we are of the view that the surrender of commission expenditure would not automatically lead to the malafides of the assessee as presumed by the assessing officer, since the assessing officer has not afforded an opportunity to the assessee to contradict the documents that were relied upon by the AO. Accordingly, we are of the view that assessment of commission income does not result in concealment of particulars of income, in the facts and circumstances of the case.
It is not the case of the assessing officer that the assessee has failed to furnish all facts and material relating to computation of income. Accordingly, we are of the view the deeming provisions of Explanation-1 shall also not apply to the assessee.
We are agree with the decision of Shri Samson Perinchery in ITA No.4625 to 4630/M/2013, wherein the Tribunal followed the decision rendered by the Hon’ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) (35 Taxmann.com 250) (kar) dated 13.12.2012, relied upon by the assessee in which it was held that in case notice of penalty is not clear about reason of penalty, penalty is not sustainable.
Accordingly, appeal of the assessee allowed.
