TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 685
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.... passed by the AO u/s.271(1)(c ) of the I.T. Act, 1961 is incorrect, without appreciating the fact that the assessee had filed inaccurate particulars during the assessment proceedings." 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the fact that the A.O in a detailed order has categorically brought out the fact that income has accrued to the assessee in the relevant assessment year itself and assessee had failed to declare the same. This clearly amounts to willful concealment of income and hence, penalty levied by the A.O is good in law. 3. The appellant prays that the order of the A.O should be restored and order of the CIT(A) should be set aside. " 3. The brief facts of the case are that the assessee is a firm . The assessee firm is in an indenting business of steel products on behalf of the foreign suppliers for the supplies made by the foreign principals directly to Indian Buyers like L & T, BHEL, Essar Steel etc. for their power projects. The assessee firm gets commission income from the foreign principal's. 4. The return of income was filed by the assessee firm with the Revenue declaring total income of R....
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....eipt of such orders, assessee firm shall promptly transmit the orders procured by it to Ascometal in France. d) Upon receipt of the orders transmitted to them by assessee firm as provided in clause (c) above, Ascometal is entitled to accept or refuse orders in France and shall intimate its decision to assessee firm, unless the order is placed within the validity period on the terms and conditions of the offer made by Ascometal. e) It is hereby expressly agreed and declared that assessee firm has no authority to accept or reject any orders from customers in the territory, the right to accept or reject such orders coming exclusively from Ascometal and assessee firm has no authority to enter into any contract for or on behalf of Ascometal, unless otherwise authorised by Ascometal in writing to do so on its behalf. Commission: a) A commission will become due and payable after Ascometal has received the full sale price for the products sold by it to the customers in the territory. b) A commission is 3% (three percent) calculated on the FOB prices, shall be paid by Ascometal to assessee firm for all orders from the territory which have been received either directly or thro....
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....s the income has accrued to the assessee firm the same was brought to tax as per Section 5 of the Act . Consequently, the penalty proceedings were initiated u/s 271(1)(c) of the Act against the assessee firm for concealment of income by the assessee firm. In the quantum proceedings, the CIT(A) upheld the advance commission income receipt of Rs. 1,61,97,030/- as accrued income for the impugned assessment year under the Act as the assessee firm is following mercantile system of accounting vide orders dated 01-02-2010.The assessee firm did not filed any appeal with the Tribunal against the orders dated 01-02-2010 of the CIT(A) with respect to quantum additions and the same attained finality. The assessee firm in the penalty proceedings initiated u/s 271(1)(c) of the Act submitted that the assessee firm has not concealed any income with deliberate intention to deprive the revenue of its legitimate taxes. The contentions of the assessee firm were rejected by the A.O. on the ground that the assessee firm has not proved that the amount shown in the balance sheet is only an advance receipt. As per the agency agreement signed by the assessee firm, the commission income will become due a....
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....tum proceedings directed that advance commission of Rs. 66,91,188/- pertaining to the assessment year 2005-06 recognized during the year be allowed as deduction from the income. The assessee firm submitted that the A.O. has not considered this aspect and after giving effect to the CIT(A)'s order in quantum proceedings, the difference in income was Rs. 95,05,842/- instead of Rs. 1,61,97,030/- considered by the A.O. and this is a mistake in the computation. The assessee firm submitted that the similar additions were made in the subsequent year i.e. assessment year 2007-08 but no penalty has been levied by the Revenue. The penalty proceedings were dropped by the A.O. vide order dated 15.3.2012. The method of accounting was followed consistently on bona fide belief and the same is not exigible to penalty. Full and complete information has been provided to the Revenue during the course of enquiry during assessment proceedings u/s 143(3) read with Section 143(2) of the Act. The material facts have been disclosed in a fair and open manner before the Revenue to judge the case. The assessee firm relied on the decision in the case of ITO v. Veena Estates P. Ltd., 81 ITD 401 and also the deci....
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....e A.O. had totally relied upon the findings given in the assessment order in quantum proceedings while passing the penalty order u/s. 271(1)(c) of the Act and has not brought on record any material to justify that there were concealment of income or furnishing of inaccurate particulars of income by the assessee. The quantum addition does not automatically lead to the concealment of income making it exigible to penalty u/s 271(1)(c) of the Act. The additions have been made due to difference in opinion and perception on the same issue. The assessee firm had disclosed the receipts as advance in the year and treated them as income in the subsequent year. Method of accounting is consistently followed by the assessee firm. The assessee firm has submitted bona fide explanations as to the method of accounting. The CIT(A) held that penalty cannot be levied on mere rejection of an explanation furnished by the assessee firm. The A.O. while framing the penalty order failed to establish that the explanation given by the assessee firm was not bona fide. The mere fact that the assessee firm has not filed appeal with the Tribunal against the orders of the CIT(A) in quantum proceedings will not ren....
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....cluding case laws relied upon by rival parties. We have observed that the assessee firm is in an indenting business of steel products on behalf of the foreign suppliers for supplies by the foreign principals made directly to Indian Buyers like L & T, BHEL, Essar Steel etc. for their power projects. The assessee firm gets commission income from the foreign principal's as per agency agreement. We have observed that the assessee firm has advances from suppliers of Rs. 1.62 crores in its Balance Sheet as at the end of the previous year with respect to commission received from foreign principals. As per the AO , these advances were commission payments for indenting services provided by the assessee firm to the clients. On perusal of the agency agreements signed with the clients, it was observed by the AO that the commission will become due and payable after the clients receives the full sale price for the products sold by it to the customers in the territory. As the commission payments were already received by the assessee firm , it was concluded by the A.O. that the assessee firm has completed its assignments as per agency agreements and the income has already accrued to the assessee f....
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....enue. The assessee firm has in an open and transparent manner disclosed all information connected with the earning of the said commission income. No penalty has been levied by the revenue for the assessment year 2005-06 and 2007-08 while the same method of accounting was consistently followed by the assessee firm. In fact for the assessment year 2007-08, the penalty proceedings were initiated by the Revenue on the similar ground but was later dropped by the AO vide orders dated 15-03-2012 which are placed in paper book page 1. In our considered view, no penalty is leviable in the instant case keeping in view peculiar facts and circumstances of the case as set out above, as there is no deliberate attempt or positive act on the part of the assessee firm to conceal income or furnish in-accurate particulars of income. The bona-fide claim was made by the assessee firm based on the terms and condition of the agency agreement and the method of accounting was consistently followed based on the bona-fide belief that the commission income will become due to the assessee firm and right to receive will be vested in favour of the assessee firm only when the foreign principals have got their pay....