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Income Tax Appellate Tribunal, DELHI BENCHES : A : NEW DELHI
Before: SHRI R.S. SYAL, AM & SHRI K.N. CHARY, JM
This appeal by the assessee is directed against the order dt. 29.11.2013 passed by the CIT(A) confirming the penalty of Rs.3,09,822/-imposed by the AO u/s 271(1)(c) of the Income- tax Act, 1961 (hereinafter also called `the Act’) relating to the A.Y. 2006-07.
Briefly stated, the facts of the case are that the assessee is in the business of consultancy. A sum of Rs.9,20,445/- was claimed as commission expense. On being called upon to give the details of such commission, the assessee furnished a reply stating that he had hired the services of professionals, consultants and some other individuals to help improvement in rendering services. Vide letter dated 18.12.2008, the assessee submitted that he was to provide funds to Shri Ram Group of Companies through M/s Cyrus Capital, USA, which was the lender company. The said lender company appointed some monitoring agents for monitoring these funds provided to Shri Ram Group of Companies and the assessee made payment of commission to these monitoring agents. The assessee furnished a list of such five monitoring agents which has been reproduced in the assessment order as under :-
“1. Ms Suman Gupta, Add:-265/21B, Kannel Farm, Tigri Extn. New Delhi – 110062. INR 1,83,500.00 2. Mr. Navdeep Gupta, Add:-AL-130, Shalimar Bagh, New Delhi. INR 2,04,910.00 3. Rakesh Gupta, Add:- RZ-26P/32A, Indra Park, Palam Colony, New Delhi. INR 2,04,910.00 4. Kapil Gupta, Add:- C-530, Sector-1, Rohini Avantika, New Delhi. INR 2,26,200.00 5. I.K. Aggarwal, Add:- G-1/168, Uttam Nagar, New Delhi INR 1,00,925.00”
Not convinced with the assessee’s submissions, the AO made the addition by holding that there was no logic for payment of any commission to persons claimed to be appointed as agents of third party to monitor the funds belonging to such third party. Thereafter, penalty was imposed with reference to this addition, which came to be confirmed in the first appeal.
We have heard the rival submissions and perused the relevant material on record. It is observed that the assessee submitted the details of commission amounting to Rs.9,20,445/- before the AO giving particulars of the monitoring agents to whom commission was paid at the instance of lender company. Not only their names, but, complete addresses were also given. Without embarking on any enquiry to examine the genuineness of the commission payment, the AO simply went on his own logic and rationale in disallowing the amount. This is a case in which the assessee furnished necessary details and the AO made addition by simply rejecting the assessee’s contention without verifying the veracity of the assessee’s explanation. Notwithstanding the fact that the addition was not challenged by the assessee, this cannot be a case calling for imposition of penalty u/s 271(1)(c) of the Act. The Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC) has held that simply for the reason that the Assessing Officer did not find the claim of the assessee to be sustainable in law up to a certain extent, cannot be a case for penalty u/s.271(1)(c) more so when the particulars furnished by the assessee were not inaccurate.
At the most, the assessee’s claim of deduction can be considered as unproved claim and not a disproved claim of expenditure. The Hon’ble Gujarat High Court in National Textiles vs. CIT (2001) 249 ITR 125 (Guj.), has held that in order to justify levy of penalty for addition of cash credits, the explanation tendered by the assessee must be disproved. Deleting the penalty so imposed, the Hon’ble High court held that it was not a case of imposition of penalty.
The Hon’ble Calcutta High Court in Durga Kamal Rice Mills vs. CIT (2004) 265 ITR 25 (Cal), relying on National Textiles 249 ITR 125 (Guj), has held that there is a difference in `Facts not proved' and `Facts disproved'. It further held that penalty can be levied only for the latter.
Similar view has been taken in CIT vs. Vidyagauri Natvarlal & Ors (1999) 153 CTR (Guj) 546.
In the light of the foregoing precedents, we are satisfied that it is not a case warranting any imposition of penalty u/s 271(1)(c). We, therefore, set aside the impugned order and order for the deletion of penalty.
In the result, the appeal is allowed.
Order Pronounced in the open Court on 21.12.2016.