M/S. NOMUS COMMUNICATION SYSTEM,BARODA vs. THE ACIT, CIRCLE-2(2), BARODA

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ITA 2551/AHD/2014Status: DisposedITAT Ahmedabad01 December 2017AY 2006-075 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal deleted the penalty. It relied on co-ordinate bench orders which had deleted the disallowance related to Section 40A(2) and also deleted penalty on commission payments.

What were the facts?

The assessee's income was assessed at a higher amount than declared due to disallowances on legal/professional charges, salary to a partner's wife, and commission. Penalty proceedings were initiated under Section 271(1)(c) for furnishing inaccurate particulars.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the additions leading to penalty have been deleted by higher authorities or co-ordinate benches. The genuineness of commission payments and disallowance under Section 40A(2).

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 40A(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “ D ” BENCH, AHMEDABAD

Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD

For Respondent: Shri V. K. Singh, Sr. D.R
Hearing: 01/12/2017

आदेश / O R D E R

PER MAHAVIR PRASAD, JUDICIAL MEMBER : This is an appeal by the assessee against the order of the Commissioner of Income Tax(Appeals)-II, Baroda, Appeal No. CAB/II- 43/13-14 dated 20/06/2014 for the Assessment Year (AY) 2006-07, on the following Grounds: “The ld. CIT(A)-II, Baroda erred in fact and in law in confirming the action of the Assistant Commissioner of Income Tax, Circle 2(2), Baroda in levying penalty amounting to Rs.3,27,590/- u/s.271(1)(c) of the Income Tax Act, 1961 on the following additions: i. Disallowance made invoking section 40A(2).

ITA No.2551/Ahd/2014 M/s. Nomus Comm Systems vs. ACIT Asst.Year –2006-07 - 2 - ii. Disallowance of commission.” 2. The relevant facts as culled out from the materials on record are as under:- In this case, the order u/s.143(3) of the I.T. Act was passed on 30.12.2008 assessing the total income at Rs.75,70,170/- as against Rs.64,92,120/- declared by the assessee in its return of income filed on 27.12.2006 in the assessment order, penalty proceedings were initiated u/s.271(i)(c) on the following additions/disallowance:-

a) Addition on a/c of legal and professional charges amounting to Rs.3,60,000/-. b) Disallowance of salary paid to wife of partner amounting to Rs.1,05,320/-. c) Addition on account of commission amounting to Rs.6,13,232/-

3.

Being aggrieved with the order, the assesses preferred an appeal before ld.CIT(A). Vide his order dated 17.10.2011, the ld.CIT(A) decided the above three issues, the details of which are as under:

Sr. No. Nature of addition/disallowance Amount As per CIT(A) 1. Legal & professional charges 3,60,000 Dismissed 2. Salary paid to wife of partner 1,05,320 Relief granted 3. Commission 6,13,232 Dismissed

4.

As assessee has furnished inaccurate particulars of income, penalty proceedings u/s.271(1)(c) were initiated. A show-cause notice was served to the assessee and assessee’s reply as follows: “5. As records the issue of legal & professional charges the assessee has claimed legal and professional charge of Rs.3,60,000/- paid to

ITA No.2551/Ahd/2014 M/s. Nomus Comm Systems vs. ACIT Asst.Year –2006-07 - 3 - IFTC and it was mentioned in the audit report in respect of particulars of payment made to persons specified in section 40A(2)(b) of the I.T Ace. During the course of assessment proceedings, the assessee was required to justify the above payment and to explain as to what services were rendered by the above party to whom an amount of Rs.3,60,000/- was paid. In this regard, assessee stated that International Finance and Technical Consultant is a proprietary concern of Shri Vinodkant Sanghani, father of Shri Jignesh Sanghani, one of the partners of the firm. It is also stated that the said payment has been made towards retainer ship services. During the course of assessment as well as appellate proceedings, the assessee has failed to establish the services rendered by Shri Vinodkant Sanghani for which a fee of Rs.3,60,000/- was required to paid and accordingly Assessing Officer disallowed Rs.3,60,000/- on account of legal and professional charges, It is therefore., crystal clear that the assessee has furnished inaccurate particulars of income. 6. With regard to the issue of disallowance made on account of commission payment of Rs,6,13,232/- to various parties, the assesses has not been able to prove either in the assessment proceedings or at the appellate stage that any services were rendered by the parties warranting payment of commission. Since the assessee failed to prove the genuineness of the commission payment, the A.O made an addition of Rs.6,13,232/- It is therefore, crystal clear that the assessee has furnished inaccurate particulars of income.”

5.

But assessee could not satisfy the ld. AO hence, he levied the penalty of Rs.3,27,590/-.

6.

Against the said order assessee preferred first statutory appeal before the ld. CIT(A) who dismissed the appeal of the assessee.

7.

Now appellant’s appeal is before us.

ITA No.2551/Ahd/2014 M/s. Nomus Comm Systems vs. ACIT Asst.Year –2006-07 - 4 - 8. We have gone through the relevant record and impugned order. In this case, assessee is engaged in the business of manufacturing and trading of electronic products. The return of income was filed on 27/12/2006 declaring total income of Rs.64,92,120/-. The assessment was finalized on 30/08/2008 determining total income of Rs.75,70,170/- after making addition of Rs.3,60,000/- on account of legal and professional charges and disallowance of Rs.1,05,320/- on account of salary paid to one Mrs. Neha J. Sanghani and Rs.6,13,232/- on account of commission. Penalty u/s.271(1)(c) were initiated with respect to these addition/disallowance and were levied by order dated 13/03/2013 for Rs.3,27,590/-. Ld.AR submitted an order of co-ordinate bench in ITA No.3123/Ahd/2011 for assessment year 2006-07 in assessee’s own case with regard to disallowance made invoking Section 40A(2) has been deleted.

9.

So far as ground with regard to disallowance of commission is concerned. Ld.AR cited an order of co-ordinate bench in ITA No.1272/Ahd/2014 for assessment year 2005-06 at Page 9, Para 10.1. On identical issue penalty has been deleted by the ITAT.

10.

Therefore, in view of the above two orders of the co-ordinate bench, we delete the penalty against the appellant.

ITA No.2551/Ahd/2014 M/s. Nomus Comm Systems vs. ACIT Asst.Year –2006-07 - 5 - 11. In the result, appeal filed by the assessee is allowed. This Order pronounced in Open Court on 01/12/2017

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Priti Yadav, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-II, Baroda 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy 1. Date of dictation 24/11/2017 (dictation-pad 2 pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member … 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………

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