TaxTMI 
TaxTMI 
2000 (4) TMI 178
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.... for the finance supplied by the respective parties. This amount includes payment of Rs. 2,93,053 paid to M/s. Saurashtra Metal Supplying Co. and M/s. Jayant Trading Corpn. which are proprietary concerns of M/s. Jayant M. Doshi, one of the partners in the firm. The Assessing Officer disallowed the amount of Rs. 2,93,053 treating the same as commission paid to the partners under the provisions of section 40(b) of the Act. This addition has been confirmed by the ld. CIT(A) and also sustained by the ITAT on the ground that inaccurate particulars have been furnished in the return of income. The Assessing Officer levied a penalty of Rs. 2,57,406 under section 27 1 (1)(c) of the Act. 4. The Assessing Officer in his order under section 27 1 (1)(c) of the Act has stated that the f act that the ITAT has confirmed the additions it establishes beyond doubt that the assessee has commuted a default under section 27 1 (1)(c) of the Act for filing inaccurate particulars. During the course of hearing before the Assessing Officer the assessee submitted that it had filed copies of accounts of all the concerns along with return of income. However, the Assessing Officer on examination of the docume....
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....7. In the written submissions filed by the ld. D.R. it has been stated that in the profit and loss account filed along with the return of income, there is a heading of commission account where the amount of Rs. 3,08,574 has been shown, but in the statement of income submitted by the assessee, there was no separate clarification of details of commission paid. There was nothing on record regarding the payment made to the partner. He contended that it was only during the course of investigation that the Assessing Officer had come to know that the commission given to various parties included the commission given to M/s. Saurashtra Metal Supplying Co. and M/s. Jayant Trading Corporation, which were the proprietary concerns of Shri Jayant M. Doshi. Thus, according to him, it is quite evident that perusal of the accounts furnished along with the return of income did not give any basis to know that these two concerns were the concerns of the partners in its proprietary capacity and this concealment of fact was detected during the course of assessment proceedings. The Id. D.R. referred to the case of C.A. A'Orahamv. ITO [1961] 41 ITR 425 wherein the Hon'ble Supreme Court has laid down "Pena....
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....nbsp; for 1983-84 ------------- ------------ Rs. 57,122.05 Rs. 57,122.05 ------------- ------------- The ld. DR thus, stated that the assessee had not shown any receipt of commission in the capital account of Shri Jayant M. Doshi. He further stated that copy of the commission vatav account attached with the return wherein details of payments arc maintained reveals no fact of proprietorship of M/s. Saurashtra Metal Supplying Co. and M/s. Jayant Trading Corporation. Thus, this fact has been concealed by the assessee from the department. The ld. DR also brought to our notice....
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.... He also brought to our notice that the finance paid by the firm is debited in these two accounts. Regarding the income of Rs. 16,296 shown by the partner Shri Jayant M. Doshi in his return, the ld. counsel contended that the same was on account of loss in M/s. Jaya Trading Corpn. that the income has been reduced to Rs. 16,296. The genuineness of the loss has been verified by the Assessing Officer while finalising the assessment and commutation of these two concerns. He further pointed out that the Assessing Officer has accepted the losses in M/s. Jayant Trading Corporation and M/s. Saurashtra Metal Supplying Co. Regarding the contention of the department that the intention of tax evasion as well as furnishing of inaccurate particulars of income together with concealment of particulars of income were proved on account of less income of the partner, the ld. counsel contended that this point has been raised for the first time for justification of levy of penalty or other ground for concealment of taxable income. According to him, this point cannot be raised for the first time for justification of levy of penalty. He pointed out. that the penalty has not been levied for concealment of....
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....ing Officer made the disallowance of the commission paid to the partner under the provisions of section 40(b) of the Act. This addition has been confirmed by the ld. CIT(A) and also by the ITAT. The Assessing Officer has levied penalty under section 271(1)(c) on the ground that the assessee had filed inaccurate partici4ars of income. According to the ld. DR the assessee firm diverted its income knowingly to evade the payment of tax. Thus, the attempt made by the assessee firm was deliberate and, therefore, the penalty under section 27 1 (1)(c) has correctly been levied, On the other hand, the ld. counsel of the assessee has strongly objected to the levy of penalty on the, ground that there was no deliberate attempt an the part of the assessee to conceal the facts of its income. According to him the assessee firm did not conceal any facts or its income from the department. Now, the main point for consideration is whether there was a deliberate attempt on the part of the assessee to conceal the facts of its correct income or there was a deliberate attempt to file inaccurate particulars of its income. It has been brought out by the Assessing Officer in his order that in the return of ....
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....f Rs. 16,296. This clearly establishes the modus operandi of the assessee. The proprietary concern of Shri J.M. Doshi must be running into losses and to set off the income of the assessee against such losses, the firm has shown the payment of commission to its partners of Rs. 2,93,053, which has actually been adjusted against losses incurred by the proprietary concern of the partner. With this device, the firm has escaped the payment of taxes on its income of Rs. 2,93,053 and the partner has not paid any tax on this income as the same has been adjusted against the loss suffered by the proprietary concerns of the partner. Thus, the income of Rs. 2,93,053 has totally escaped from the payment of taxes. Thus, the mala fide intention of the assessee is proved beyond any doubt and the attempt made for the evasion of tax was deliberate. 14. The contention of the appellant that the notice issued by the Assessing Officer did not specify whether the penalty was initiated for concealment or inaccurate particulars, is also without any substance. In the order under section 271(1)(c), the Assessing Officer has clearly mentioned that the penalty proceedings under section 274 read with section ....
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....e two circumstances are not identical in detail although they may lead Lo be same effect namely - keeping off certain portion of income. The former is direct and the latter may be indirect in its executions The word 'conceal' is derived from the Latin word 'concolate' which implies to 'hide'. Webster's New L-international Dictionary equates its meaning to 'hide or withdraw knowledge of'. The of fence of concealment is thus a direct attempt to hide an item of income of a portion thereof from the knowledge of the Income-tax authorities. In furnishing its return of income, the assessee is required to furnish particulars and accounts on which such returned income has been arrived at. There may be particulars as per its books of account if it has maintained them, or any other basis upon which it has arrived at the returned figure of income. Any inaccuracy made in such books of account or otherwise which results in keeping off or hiding portion of its income is punishable as furnishing inaccurate particulars of its income'. In the present case, the assessee has concealed the actual facts of its income by not disclosing the income of Rs. 2,93,053 which it has diverted to its partner Shri ....
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....rticulars of its income and the same has been discussed by the Assessing Officer in his order under section 27 1 (1)(c) of the Act. In the case of K.M. Bhatia (Quarry) (supra),it was held by the Hon'ble Gujarat High Court that the Tribunal adopted an inconsistent and incongruous stand in upholding the penalty in respect of the year 1971-72. Though the same explanation has been given by the assessee namely, mistake of the accounts clerk which was put forth at the earliest point of time in the letter dated 28th February, 1974 written on behalf of the assessee to the ITO was accepted by the Tribunal for the year 1972-73 and has also found favour with the appellate authority f or the year 1970-7 1, since he had not issued any notice under section 271(l)(c) of the Act, an inconsistent approach has been adopted by the Tribunal in rejecting that explanation for the year 1971-72. We arc unable to understand how this case is relevant to the facts of the present case. The question of any inconsistent approach in the present case does not arise. The penalty has been levied after issuing the proper notice under section 27 1 (1)(c) of the Act and also after giving proper opportunity to the asse....
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....olation of section 40(b) is concerned, the same has been fully proved and the same has also been confirmed by the ITAT. The Hon'ble Supreme Court while dismissing the S.L.P. in the case of Mysore Bangle Works (supra) has clearly held that the commission paid by the firm to a partner in his capacity of a sole proprietor of another concern was clearly covered by section 40(b) of the Act. Thus, this issue has been decided by the Apex Court of the country and the same has to be accepted as law of the land. In the case of AbdulRehman & Sons (supra) the Hon'ble Gujarat High Court held that interest paid to the partners who acted as intermediaries and the loan taken by partners had been for the purpose of business of the firm, the interest paid to partners cannot be allowed under section 40(b) of the Act. We do not find anything common in the facts of this case and the facts of the case under consideration. In the above case, the loan was taken by the partner for the purpose of business of the firm and ultimately, interest has been paid to the institution from whom the loan was taken but through the partners. Thus, ultimately the interest has not been paid to the partners, as such, theref....