1984 (2) TMI 112 - AT - Income Tax

Tribunal adjusts penalty under IT Act, directs re-computation. Disallowance confirmed, penalty adjusted.

The Tribunal partly allowed the appeal, upholding the penalty under section 271(1)(c) of the IT Act, 1961 only in relation to the commission amount of Rs. ... - Issues:- Confirmation of penalty under section 271(1)(c) of the IT Act, 1961 by the AAC of IT.- Disallowance of claimed commission amount and addition of Rs. 6,000 as income from other sources.- Initiation and confirmation of penalty proceedings by the ITO under section 271(1)(c) of the Act.- Assessment of the explanation provided by the assessee regarding the commission payment and the credit in the account of the assessee's mother-in-law.Analysis:1. The appeal primarily contested the penalty imposed by the ITO under section 271(1)(c) of the IT Act, 1961, which was confirmed by the AAC of IT. The penalty amount in question was Rs. 1,860. The assessee, a commission agent, had claimed to have paid a commission of Rs. 5,222 to an individual named Shri K. N. Sharma. However, upon investigation, it was revealed that the assessee had no substantial evidence to prove the payment of commission for services rendered by Shri Sharma. The ITO disallowed the commission as it appeared to be merely an adjustment entry without any actual payment for services. Both the AAC and the Tribunal upheld this disallowance.2. Another issue involved a credit of Rs. 6,000 in the account of the assessee's mother-in-law, Mrs. Raj Chaudhary, which was treated as the assessee's income from other sources. Mrs. Raj Chaudhary, a college principal, could not provide sufficient evidence to correlate the deposit with the assessee's income. The ITO, AAC, and Tribunal all confirmed this addition as income from other sources.3. The ITO initiated penalty proceedings under section 271(1)(c) of the Act due to the lack of response from the assessee to the show cause notice. A penalty of Rs. 1,860 was imposed, which was upheld by the AAC. The assessee contended that no penalty should be levied as Shri Sharma and Mrs. Raj Chaudhary had acknowledged the transactions. The counsel for the assessee cited relevant court decisions, while the Departmental Representative argued that Explanation 1(B) to section 271(1)(c) applied, justifying the penalty.4. The Tribunal analyzed the explanation provided by the assessee concerning the commission payment and the credit in Mrs. Raj Chaudhary's account. The Tribunal referred to the amended section 271(1)(c) applicable to the assessment year in question. It was concluded that the assessee failed to substantiate the commission payment to Shri Sharma, indicating a lack of bona fide explanation. However, regarding the credit in Mrs. Raj Chaudhary's account, the explanation was deemed bona fide due to her position potentially involving undisclosed resources. Consequently, the penalty was upheld only in relation to the commission amount of Rs. 5,222, directing the ITO to recompute the penalty accordingly.5. Ultimately, the appeal was partly allowed, with the Tribunal's decision focusing on the specific aspects of the commission payment and the credit in Mrs. Raj Chaudhary's account, leading to a revised penalty calculation based on the findings.