AI Drafter 
TaxTMI 
TaxTMI 
2013 (11) TMI 464
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....of income on 28.11.2003, declaring total income of Rs.3,01,41,268/-, after claiming deduction, inter alia, in respect of commission of Rs.3.20 crores paid to its employee directors. The said claim of the assessee was disallowed by the Assessing Officer vide order u/s. 143(3) of the Act dated 30.1.2006, on the ground that since such commission was not paid to the directors in the earlier years and the assessee company had not distributed dividend during the relevant year in spite of there being handsome profits; the payment of commission to directors during the relevant previous year was in order to reduce the taxable profit so as to minimize the tax liability. Thus, as per the Assessing Officer, the sum paid as commission formed part of profits / dividend payable and, accordingly, the same could not be allowed deduction in terms of section 36(1)(ii) of the Act. 3.1 Aggrieved the aforesaid addition, the assessee company preferred an appeal to the Ld. Commissioner of Income Tax (A) who vide order dated 30.3.2007, deleted the disallowance made by the Assessing Officer on the ground that the directors of the assessee company were assessed to tax at the maximum marginal rate thereby ....
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....conceptual distinction between filing of inaccurate particulars or concealment of income, on the one hand, and making of a claim based on particulars accurately furnished which is subsequently disallowed by the Assessing Officer, on the other. Penalty u/s. 271(1)(c) of the Act, is leviable only in respect of the former and not the latter. In this regard, Ld. Commissioner of Income Tax (A) further placed reliance on the decision of the Hon'ble Apex Court in the case of C.I.T. vs. Reliance Petroproducts Private Limited 322 ITR 158 . 4.1 Ld. Commissioner of Income Tax (A) further observed that the penalty u/s. 271(1)(c) would not be leviable, even, otherwise in this case as alleged of deduction in respect of commission paid was debatable matter. Considering the above, Ld. Commissioner of Income Tax (A) deleted the levy of penalty in this case. 5. Against the above order the Revenue is in appeal before us. 6. We have heard the rival contentions in light of the material produced and precedent relied upon. Assessee's submissions in this regard are as under:- "1. Disallowance in quantum proceedings is unsustainable in law: T....
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....; (2) In Column 2 of Row 16 of Tax audit report in Form 3CD, it was reported as under: ".... 16(a) Any sum paid to an employee as bonus or commission for services rendered, where such sum was otherwise payable to him as profits or dividend Section 26(1)(ii) An amount of Rs.3,20,00,000j- has been paid to Directors, which is based on the net profits of the business. Such commission are not in the nature of profits or dividend, in view of the judgment in Badridas Bansidhar v. CIT 1954 25 ITR 353 Pat and therefore, this amount is not reported under this clause. ...." (3). Further, in column 2 of Row 18 of Form 3CD, it was reported as under:- " 18 Particulars of payments made As per Annexure IV made to persons specified in Section 40A(2)(b) ..." (4) Annexure IV to Form 3CD is reproduced as under: Payments made to persons specified under Section4OA(2)(b) Name of Person Salary Commission Rent Interest on loan HV Subramaniam 24,65,150 1,20,00,000 4,20,000 1,57,958 Sunil Sachdeva ....
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....ction 260A of the Act to the Hon'ble High Court of Delhi. Vide order dated 13.08.2010, the Hon'ble High Court has been pleased to formulate and admit the questions of law concerning the disallowance and the payment of commission. Appeal under Section 260A of the Act, having been admitted against the quantum proceedings and substantial question of law having been formulated by the High Court, establishes that the claim made by the assessee was bonafide and, consequently, no penalty was imposable under section 271(1l(c) of the Act, as held in the following cases: - CIT v. Liquid Investments Ltd.: ITA No.240/2009 (Del HC) - Rahul Mehta in ITA No. 523/2011 (Del HC.) - CIT v HB Leasing and Finance Co Ltd: 334 ITR 367 (Del HC) - CIT v. Basti Sugar Mills Co. Ltd. in ITA No. 232/2005 (Del HC) - Smt. Ramila Ratilal Shah v. ACIT: 60 TTJ 171 (Ahd.) - DCIT v. Roger Enterprises: ITA 567/Del/2006 (dt. 07.09.2012) (Del ITAT) - Rupam Mercantile: 91 ITO 237(Ahd) (TM) - ACIT v. Sh. Vijay Kumar Jindal: ITA No. 4237/Del/2009 (Del.) - Nayan Buil....
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....t from the aforesaid, the submission that the claim of the assessee was bonafide is also noticeable from the fact that the directors, to whom such commission was paid, had paid their full taxes at the maximum marginal rate. Furthermore, at the time of payment of commission, the assessee had also duly deducted tax at source, treating such commission to be part of the salary payable to the directors 7. Ld. Departmental Representative on the other hand relied upon the order of the Assessing Officer. 8. We have carefully considered the submissions and perused the records. We find that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. We find that assessee has made true and full disclosure and hence, there is no concealment of income or furnishing of inaccurate particulars. The factum of payment of commission was categorically disclosed in the Audited Financial Accounts as well as in the Tax Audit Report filed alongwith return of income. We further find that discussion in the assessment order itself testifies that proper and true disclosures were made. We further find that the issue of allowability of the payment....