M/s. Panchsheel Intermediates, Surat V. The DCIT, Circle-2(3), Surat

ITA 133/SRT/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2353 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-03-2022
• Assessment Year: 2004-2005
• Appeal Filed On: 04-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: SAPNESH SETH
• Keywords: Wrong claim; TDS
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 133/SRT/2019 (AY: 2004-05) (Hearing in Virtual Court) M/s Panchsheel Intermediates Plot No. 8101, Industrial Estate, Sachin, Surat PAN : AADFP1002C Vs. Deputy Commissioner of Income Tax, Circle-2(3) Surat APPELLANT RESPONDEDNT Appellant by Shri Sapnesh Seth, CA Respondent by MS. Anupama Singla, (Sr.DR) Date of hearing 29/03/2022 Date of pronouncement 29/03/2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals-1), [in short ‘ld. CIT(A)], Surat, dated 20.12.2018, for the Assessment Year (AY) 2004-05. The assessee has raised the following grounds of appeal: “1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals) has erred confirming the action of assessing officer in imposing penalty of Rs. 2,63,342/- u/s 271(1)(c) of the I.T. Act, 1961. 2. It is therefore prayed that penalty imposed by assessing officer and confirmed by Commissioner of Income-tax (Appeals) may please be deleted. 3.Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” ITA No. 133/SRT/2019 (A.Y. 2004-05) M/s Panchseel Intermediates, Surat 2 2. Brief facts of the case are that the assessee filed its return of income for Assessment Year 2004-05 declaring total income of Rs. 23,42,830/- on 31.10.2004. The case was selected for scrutiny and the assessment was completed under section 143(3) of the Act on 13.11.2006 determined total income at Rs. 30,76,888/-. The Assessing Officer while making assessment disallowed the commission expenses of Rs. 7,34,054/-.3. Aggrieved by the additions in the assessment order, the assessee filed before ld. CIT(A) wherein the disallowance was deleted vide order dated 10.08.2007. On the appeal of revenue before Tribunal, the order of Ld. CIT(A) was reverse in order dated 11.10.2010 in ITA No. 4095/Ahd/2007. And the appeal was restored the matter back to the ld. CIT(A) for deciding issue afresh to decide with the finding as to whether or not the commission agents had rendered services to the assessee. In setting aside proceedings, the ld. CIT(A) confirmed/disallowance of commissions expenses in order dated 30.03.2017. On further appeal before the Tribunal, the addition was upheld in ITA No. 1176/AHD/2014 dated 06.04.2017. 3. In the meantime, the Assessing Officer levied the penalty under section 271(1)(c) of the Act vide order dated 15.03.2016. Before passing the order of penalty, the assessee was issued show cause ITA No. 133/SRT/2019 (A.Y. 2004-05) M/s Panchseel Intermediates, Surat 3 notice dated 17.02.2016. The notice duly served upon the assessee. The Assessing Officer recorded that the assessee filed reply on 09.03.2016, which was not accepted by him. The Assessing Officer recorded that the Assessing Officer failed to establish exact services provided by commission agent and claim of expenses was in connection with the business. It was held that it is proved beyond doubt that the assessee has willfully attempted to evade the tax to the extent of Rs. 7,34,054/- by furnishing inaccurate particulars of income. The Assessing Officer levied penalty @ 100% of tax bill audit. The Assessing Officer worked out penalty of Rs. 2,36,342/- in his order dated 15.03.2016. 4. Aggrieved by the order of the Assessing Officer levying penalty, the assessee filed before CIT(A). Before the ld. CIT(A), the assessee filed detail written submission. In the submission, the assessee submitted that during the assessment proceedings, the assessee furnished the ledger account, bank statement and copy of income tax return of parties to whom commission was paid. The assessee deducted tax from the commission paid and was deposited in Government treasury. TDS certificate was also furnished. It was contended that mere reason for addition of commission was that the sale commission paid, as compared to previous year was higher ITA No. 133/SRT/2019 (A.Y. 2004-05) M/s Panchseel Intermediates, Surat 4 87%. The turnover of assessee was also increased by 10.25% as compared to previous year. The Assessing Officer never asked to establish services rendered by commission recipient. The ground of disallowance is wrong. The commission is paid for raising the sales. Every payment of commission does not always mean that the sales will rise in same proportion. Rise in sales depends on many factors such as Goodwill of the supplier, market conditions etc. There rise in sales due to payment of commission in the year of payment of commission may differ from industry to industry and customer to customer. Sometime, commission paid in current year yield result in next year also. There is no set parameters for the same. The businessman is in best persons to judge the need and rate of commission. The assessee also relied on various case laws. 5. On merit against the levy of penalty the assessee submitted that mere the disallowance of expenses would not lead levy of penalty. The Assessing Officer was not justified in levying the penalty as all the details were placed before the Assessing Officer. The assessee neither concealed the particular of income nor furnished inaccurate particulars. To support of its submissions, the assessee specifically besides other decision, relied upon the decision of Supreme Court in CIT vs. Reliance Petroproducts (P) Ltd. reported at (2010) 322 ITA No. 133/SRT/2019 (A.Y. 2004-05) M/s Panchseel Intermediates, Surat 5 ITR 158 (SC) and National Textiles vs. CIT reported at (2001) 249 ITR 125 (Guj.). 6. The ld. CIT(A) after considering, the submission of assessee held that assessee could not establish that the services were rendered even when afforded multiple opportunities. It was also held that this is not a case of bonafide or wrong claim of deductions but a case of furnishing inaccurate particulars in order to inflate commission expenses and that the case laws relied by the assessee are not applicable on the facts of represent case. Further, aggrieved, the assessee has filed present appeal before this Tribunal. 7. We have heard both the submissions of Learned Authorized Representative (ld. AR) for the assessee and Learned Senior Departmental Representative (ld. Sr -DR) for the Revenue and have gone through the order of lower authorities. The ld. AR of the assessee submits that during the relevant financial year, the assessee paid commission to eight parties. The assessee deducted tax at source (TDS) at the time of making payment. During the assessment proceedings, the assessee furnished complete details of the parties from including name of parties, PAN, amount of commission paid, TDS amount and @ TDS. The assessee furnished ITA No. 133/SRT/2019 (A.Y. 2004-05) M/s Panchseel Intermediates, Surat 6 the confirmation of parties, the Assessing Officer not made any independent investigation from the parties. The Assessing Officer disallowed only on the ground that commission paid during the year is raised to the extent of 87% compare to preceding year. In the preceding year, the assessee paid commission of Rs. 3,91,865/- . During the year, the assessee has paid commission of Rs. 7,34,054/-. The assessee has declared income of Rs. 23,42,830/-. The sale of the assessee was increased by 10.25% compare to earlier year. The assessee paid commission to the party to increase the sale. Initially, on the first appeal, the entire addition was deleted. However, on appeal by revenue before Tribunal, the matter restored to the file of ld. CIT(A). The ld. CIT(A) confirmed the addition in second round by taking view that the assessee has not proved the services rendered by the commission recipient. The ld. AR for the assessee submits on further appeal before the Tribunal, the addition was upheld with the observations that assessee could not establish the actual services rendered by the commission agent. 8. The ld. AR of the assessee submits that the payment of commission was not disputed by the lower authorities. It was disallowed only by taking view that it was in excess compared to earlier year as the assessee could not prove the actual service rendered by ITA No. 133/SRT/2019 (A.Y. 2004-05) M/s Panchseel Intermediates, Surat 7 commission agent. No independent investigation was carried out by the lower authorities. The assessee deducted tax before making payment of commission. Mere the assessee could the prove the actual services rendered by the commission recipient, disallowance would not attract levy of penalty u/s 271(1)(c) of the Act. The assessee has neither concealed any particular of income nor furnished any inaccurate particulars of income. Mere disallowance of the expenses claimed, would not lead to levy of penalty. 9. The ld. AR submits that the Hon'ble Supreme Court in CIT vs. Reliance Petroproducts (P) Ltd. (supra) held that mere filing in incorrect claim which is not acceptable to Assessing Officer would not lead to levy of penalty. Further, AR for the assessee reiterated that the Assessing Officer has not disputed the payment of commission nor brought any evidence on record that commission was not paid to the parties. 10. On the other hand, ld. Sr DR for the revenue DR submits that during the assessment proceedings, the Assessing Officer find that in the earlier year, the assessee paid commission of Rs. 3,91,865/- and there was the rapid rise to extent of 87% in commission payment for the year under consideration. The assessee has shown commission payment of Rs. 7,34,054/-. The assessee could not ITA No. 133/SRT/2019 (A.Y. 2004-05) M/s Panchseel Intermediates, Surat 8 prove the actual services rendered by the commission’s recipient. The case was relied by AR for the assessee is not applicable on the facts of the present case. The assessee failed to prove the real service rendered by commission payment genuineness of the expenses has to be proved by the assessee. The assessee failed to discharge its onus. 11. In the Rejoinder submission the Ld. AR for the assessee submitted that on commission payment, the assessee deducted tax, TDS certificate is also placed on record and such payment has not been disputed. Thus, no penalty is levieable against the assessee. 12. We have considered the submission of both the parties and have gone through the order of lower authorities. There is no dispute about the commission payment. The assessee deducted tax at source. During the assessment proceedings, the assessee provided the name of the parties, their PAN, details of commission payment of TDS deducted. We find that no investigation was carried out by the Assessing Officer on the evidences furnished by the assessee to disprove the same. There is no dispute that initially, on appeal before ld. CIT(A), the assessee was allowed relief. However, on further appeal by revenue before Tribunal, the matter was restored back to the file of ld. CIT(A) to examine the service rendered by ITA No. 133/SRT/2019 (A.Y. 2004-05) M/s Panchseel Intermediates, Surat 9 commission recipient. In the second round of appeal before ld. CIT(A), the addition was upheld, which was ultimately confirmed by Tribunal in his order dated 06.04.2017 in ITA No. 1176/AHd/2014. 13. Before us, the ld. AR of the assessee vehemently argued with commission payment is not disputed and that no evidence was brought by Assessing Officer on record that commission payment was not genuine. The basis of disallowance was only that it was 87% higher than the commission paid in earlier years. 14. It is settled law that penalty proceedings under section 271(1)(c) of the Act is separate and independent. We are conscious of facts that in the quantum assessment, the addition has been upheld up to the stage of Tribunal. However, facts remained the same that initial basis of disallowance of commissions payment is that it was on higher side comparative to the earlier year. Before the assessing officer the assessee filed details of the commission’s recipient, their PAN and the details of TDS deducted on payments of such commissions. No separate and independent investigation was carried out by the assessing officer. So far as objections ld. DR for revenue that assessee failed to prove the services rendered by commission recipient, in our view those facts may be relevant for ITA No. 133/SRT/2019 (A.Y. 2004-05) M/s Panchseel Intermediates, Surat 10 allowing/disallowing the commission payment, however, same is not relevant as far as levy of penalty under section 271(1)(c) of the Act is concerned. The Hon'ble Supreme Court in CIT vs. Reliance Petroproducts (P) Ltd. (supra) held that mere filing in incorrect claim which is not acceptable to Assessing Officer would not lead to levy of penalty. Thus, in view of the above discussions, the grounds of appeal raised by the assessee is allowed. 15. In the result, appeal of the assessee is allowed. Order pronounced on 29/03/2022, in open court and result was placed on notice board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 29/03/2022 Ganesh Kumar Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File True copy/ By order Assistant Registrar, ITAT, Surat ITA No. 133/SRT/2019 (A.Y. 2004-05) M/s Panchseel Intermediates, Surat 11 Date Initial Draft order was prepared by author himself Draft placed before author Draft proposed & placed before the second member Draft discussed/approved by Second Member. Approved Draft comes to the Sr.PS/PS Kept for pronouncement on File sent to the Bench Clerk Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order. Draft dictation sheets are attached