Case Law Details
Deepak Kumar Patel Vs ITO (ITAT Raipur)
Facts- The assessee has e-filed the ROI on 31-08-2010 declaring total income of Rs. 12,85,579/-. The assessee is doing business of MFG of HDP Pipes & Assembly of Sprinkler System. The scrutiny assessment completed u/s. 143(3) on 01-03-2013 determining total income of Rs. 67,14,940/-.
During the course of assessment proceedings it was noticed that the assessee has made payment of commission of Rs. 11,92,062/- on sales to 6 persons who all residing in Kolkata. The AO further observed that the commission agent travels from Kolkata to Raipur 830 kms. and from Raipur, he travels to Kanker, which is 130 km from Raipur and Raigarh which is 250 km from Raipur. They have not worked as commission agent for anyone else except the assessee during the year as evidenced from Income & Expenditure account and computation of income of the agent. The agents have offered entire commission income to tax and there is no expenditure incurred against it. All the agents have very low income and still lesser withdrawals to support their livelihood. All the agents have their bank account in the same branch in Kolkata. All these facts prove that this is a device to reduce the profits of the assessee and no such person has ever worked as a commission agent for the assessee. In such a circumstance it is beyond human probability to think that they would come to Chhattisgarh State to sell pipes. It is thus, clear that the assessee has shown the commission expenses to decrease the profit and has caused loss of the revenue. Hence the commission expenses of Rs. 11,92,062/- was disallowed and added back to the total income of the assessee and penalty proceedings u/s. 271(1)(c) was initiated for furnishing inaccurate particulars of income.
Conclusion- Respectfully, following decision of the co-ordinate bench of this bench on the very legal issue that the assessing officer is under obligation to specify the appropriate limb of section 271(1)(c) of the Act at the time of initiation as well as at the time of levy of penalty notice. In this case it has been drawn our attention that while issuing the notice at two occasion ld. AO failed to specify the charge under which the assessee is liable for penalty and therefore, without going into the merits of the case, we set-a side the order of CIT(A) and direct the Assessing Officer to delete the levy of penalty imposed upon the assessee.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
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