ITO, BHIWADI vs. SADEM INDIA LTD., ALWAR

PER SHRI KUL BHARAT, JM.

This appeal by the revenue is directed against the order of ld. Commissioner of Income Tax (Appeals) dated 1st December 2015, pertaining to assessment year

2004-05. The revenue has raised the following grounds of appeal :-

therefore dismissed.

Briefly stated the facts are that in the quantum proceeding while assessing the

2 ITA No. 196/JP/2016 M/s Sadem India Ltd.

income, the Assessing Officer initiated penalty proceedings in respect of commission

income claimed by the assessee. Subsequently, penalty was imposed while passing

order dated 23/7/2014. Aggrieved by this, assessee preferred an appeal before Ld.

CIT (appeals), who after considering the submissions allowed the appeal and

deleted the penalty.An application seeking the adjournment is filed on behalf of the

assessee through his authorized representative on the ground that the authorized

representative has been recently engaged in this case. We do not see that the

ground seeking adjournment is based on a reasonable cause. Therefore, same is

rejected.

submitted that the ld. CIT (appeal) was not justified in deleting the addition. On the

contrary, ld. Authorized Representative on behalf of the Assessee supported the

order of the ld. CIT (Appeals) and submitted that the penalty has been rightly

deleted. There is not income or furnishing of inaccurate income which is consider

preceding for initiated the penalty proceedings.

and gone through the orders of the authorities below. The ld. CIT (appeal) after

considering the submissions has given findings of facts by observing as under in

para 4.3 to 4.7 of his order.

“4.3 I have gone through the penalty order as well as submissions made by the appellant including judicial citations given therein and find that a penalty of Rs. 27,00,000 has been imposed u/s 271 (1) (c) of the IT Act by the AO. The penalty was imposed on the ground that commission income of Rs. 74,63,431 declared by the appellant under the head income from business was treated by the AO in the course of assessment proceedings as income from other sources. In the course of assessment proceedings it was found that appellant has declared commission income of Rs. 46,46,867 from M/s Mehru Electricals and

3 ITA No. 196/JP/2016 M/s Sadem India Ltd.

Engineers Pvt. Ltd. and of Rs. 28,16,564 from M/s Lenser Communication Pvt. Ltd., which total to Rs. 74,63,431 for the period under consideration. This commission income was treated as income from other sources by the AO on the ground that no services were rendered by the appellant company for earning of such income. Accordingly, penalty proceedings u/s 271 (1) (c) of the IT Act were initiated for furnishing o inaccurate particular of income and a penalty of Rs. 27 lacs has been imposed by the AO on his ground.

4.4 The appellant has stated that there is not concealment of income on its part and therefore penalty proceedings have been wrongly initiated by the AO. The income declared by the appellant in the return of income as income from business has been changed by the AO to income from other sources, without having any tax impact. The appellant has filed a copy of the computation of income and assessment order to substantiate its contentions. It is further stated that the said commission income received by the appellant has also been held to be allowable business expenditure under the head commission payment in the case of the payees i.e. M/s Mehru Electricals and Engineers Pvt. Ltd, and M/s Lenser Communication Pvt. Ltd. The appellant has also filed a copy of the appellate orders passed in the case of M/s M/s Mehru Electricals and Engineers Pvt. Ltd. to substantiate its contentions.

4.5 The appellant has placed reliance on the order of the Hon’ble Supreme Court passed in the case of CIT vs Nalwa Sons Investment Ltd. and in the case of Gold Coin Health Food Pvt. Ltd. as reported in 304 ITR 308, to substantiate the contention that tax sought to be evaded will mean the tax chargeable not as if it was the total income. Therefore, in the case of the appellant, this condition is not satisfied and thus no penalty is leviable in such circumstances. The appellant has also placed reliance on the judgement of Hon’ble Supreme Court in the case of Reliance Petro Products Ltd., where it was held that –

‘’Section 271 (1) (c) applies where the assessee ‘has concealed the particulars of hi income or furnished inaccurate particulars o such income’. The present was not a case of concealment of the income. As regards the furnishing of inaccurate particulars, no information given in the return was found to be incorrect or inaccurate. The words ‘inaccurate particulars’ means that the details supplied in the return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the Assessing Officer that any details supplied by the assessee in its return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271 (1) (c).”

4 ITA No. 196/JP/2016 M/s Sadem India Ltd.

4.6 Having considered the detailed submissions made on this issue and judicial decisions cited on this subject, I find that AO has ailed to bring on Record any material in the course of penalty proceedings to the effect that inaccurate particulars of income have been furnished by the appellant. Various Court have held that AO has to arrive at a satisfaction in the course of penalty proceedings that assessee has furnished inaccurate particular of income or has concealed his income, before imposing the penalty. Further, there is not change in the quantum of total income assessed and declared by the appellant. AO has only relied upon the quantum order where the nature of income declared by the appellant was changed by the AO in the course of assessment proceedings and later on has been confirmed by the CIT (A). However, the same income declared by the payee companies as commission expense have been held by the Hon’ble ITAT, Jaipur Bench as allowable expenditure under the head commission expenses. Therefore, there is no rational or logic in holding that appellant has declared wrong/inaccurate particulars of commission income.

4.7 The appellant has also relied upon the order of Hon’ble Supreme Court in the case of CIT vs Reliance Petro Products Pvt. Ltd. 322 ITR 158, where it was held that “ where there is no finding that any details supplied by the assessee in its return are found to incorrect or erroneous or false there is not question of inviting the penalty under section 271 (1) (c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars’’.

We do not see any reason to interfere into the above findings of the ld. CIT

(appeals) as no contrary material is placed on record by the revenue. There is no

dispute with regard to the fact that the assessee had disclosed the amount on which

penalty was imposed. Merely, on the ground that same ought to have been treated

as income from other sources. It is mere change of head of income there is no

concealment as such or furnishing of inaccurate particulars. Hence, this ground of

the Revenue appeal is rejected.

In the result, appeal of the revenue is dismissed.

5 ITA No. 196/JP/2016 M/s Sadem India Ltd.

Order is pronounced in the open court on 10/02/2017.

Sd/- Sd/- ( HkkxpUn ½ ( dqy Hkkjr) ( BHAGCHAND) ( KUL BHARAT ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Jaipur Dated:- 10/02/2017. POOJA/

आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत

6 ITA No. 196/JP/2016 M/s Sadem India Ltd.