TaxTMI 
TaxTMI 
TaxTMI 
1999 (8) TMI 105
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....ntive commission was provided for in the year under consideration and paid in the next year. The revenue authorities and the Tribunal held the claim to be non-genuine and disallowed the same in the quantum proceedings. The learned CIT(A) in assessment proceedings found that sum of Rs. 75,000 was paid in cash and the balance Rs. 27,475 through cheque. While confirming the disallowance of Rs. 75,000 he restored the matter to the file of the AO to re-examine the case in respect of amount of Rs. 27,475. 3. The AO also initiated penalty proceedings under s. 271(1)(c) for the ingenuine claim in return by the assessee. Subsequently, he levied penalty in respect of amount of Rs. 75,000 the disallowance made and confirmed in appeal. The assessee impugned the above levy in appeal before the learned CIT(A) who found that disallowance in respect of balance amount of Rs. 27,475 was reconfirmed by the AO subsequently. While considering the issue of penalty in respect of Rs. 75,000, the learned CIT(A) enhanced the quantum of penalty by directing the AO to levy penalty in respect of sum of Rs. 27,475 paid through cheque. 4. The assessee is aggrieved and has come up in appeal. The particulars of ....
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....ccurate particulars of income. Simultaneously, it was held that the assessee concealed income by claiming false deduction. 8. The assessee is aggrieved and has come up in appeal. We have heard both the parties in this appeal and with their help considered the relevant material available on record. In respect of penalty enhancement made by learned CIT(A), Shri K.C. Patel, the learned counsel for the assessee, submitted that no enhancement notice was issued by learned CIT(A) and, therefore, his order without a show-cause notice is bad in law and unmaintainable. We agree with above submissions. The Revenue authorities could not show us any notice issued by the learned CIT(A). In above circumstances, the directions of learned CIT(A) to levy penalty on amount of Rs. 27,473 are held to be without jurisdiction and are hereby vacated. We would examine the issue in respect of penalty of Rs. 51,190 imposed in respect of disallowance of Rs. 75,000 claimed as incentive commission. The final finding would also be applicable to this sum of Rs. 27,473. 9. Shri K.C. Patel, the learned counsel for the assessee read out in detail various directions issued by the Revenue authorities during the cour....
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....as not genuine. Shri Singh read out certain portions of Tribunal's order to highlight the above point. Thus, when the Tribunal has held that the claim of commission was false, the Revenue was not required to prove anything further for establishing default under s. 271(1)(c). Shri Singh accordingly, justified levy of penalty. 11. We have given careful thought to the rival submissions of the parties. The Tribunal upheld disallowance of Rs. 75,000 mainly relying upon the finding of IAC under s. 144B of the IT Act. The learned CIT(A) had concurred with the view taken by IAC and relied upon the facts found by him. It would, therefore, be in the fitness of things to take into account the reasoning given by the IAC under s. 144B for disallowing the claim of incentive commission. These reasonings along with brief criticism of the counsel of the assessee are as under:- Reasonings Criticism (1). These employees/sales Not material. representatives did not join the assessee-company in response to any advertisement in newspaper. 2). Original application forms for These points are all recruitment were produced by two irrelevant when salary and persons. The remaining four bonus paid to t....
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.... Therefore, particularly in the first the assessee could not part with year of business. commission at the flat rate of 3 per cent to petty employees. (12) There was no specific contract Conclusion of non-payment to pay incentive commission. Even cannot be derived from non- assuming that commission was deduction of tax at source. payable the assessee did not No nexus between the two. deduct tax at source from the The advance-tax paid by payment. Assessee's plea that employees in the year of employees directly paid the receipt of commission. advance-tax is not acceptable as the same is an after-thought, Estimate was filed only on 15th Dec, 1976. (13) The employees did not show the No adverse inference is commission under the head possible from lack of "salaries" or "income from other knowledge on the part of sources" in their return for the employees, if any. asst. yr. 1977-78. (14) Receipt of commission produced The auditor did not see the did not bear audit mark. receipts at the time of audit although commission is duly provided in audited accounts. (15) The incentive commission was paid The commission paid on sales only on Rs. 34.20 lakhs out of effected by e....
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....5), an entry for payment of Rs. 15,000 was made at the end of other entries in different ink and different hand writing showing that the amount was paid by cash to Shri Gumanbhai J. Patel against account. As already brought out, the voucher was not shown to the auditors during the course of audit. (iv) On pp 24 (22nd July, 1975), an entry was made at the end of the day in different ink and different handwriting showing that cash of Rs. 25,000 was brought by Shri Prafulbhai L. Nayak, director as a deposit. Details in regard to the person from whom the deposit was brought have not been mentioned. (vi) On pp 42 (1st Aug., 1975), an entry was made at the end of the day in different ink and different handwriting stating that a sum of Rs. 15,000 was paid by cash to Shri Virendrabhai M. Nayak against account. The voucher for payment has not been seen by the auditor. (vii) On pp 46 (5th Aug., 1975), an entry was made at the end of the day in different ink and different handwriting stating that a sum of Rs. 10,000 was paid by cash to Shri Ramanbhai C. Bhatt against account. Here again, the voucher was never seen by the auditors. (viii) On pp 51 (9th Aug., 1975), a sum of Rs. 25,000 was ....
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....T(A). We have already pointed out that order of learned CIT(A) is based on directions of IAC under s. 144B. The material portions of above orders have already been referred to earlier. 11.2. Having considered the case made out against the assessee it would be only appropriate to refer to the case pleaded by the assessee. The assessee has mainly relied upon the statements of the recipients recorded by the AO in proceedings under S.144A of the Act. The first statements were recorded on 7th Sept., 1978. The relevant portion of these statements is as under: 1. Shri Virendra Maganlal Nayak In his statement he gave his age and address and in response to question about the source of income stated as under: "I am working in M/s Janak Distributors, I get Rs. 500 as salary and I am a partner in M/s Gulmohar Co., Surat." The witness was then asked about the other partners. The witness gave names of other partners. He was further asked: "Q. How did you joint Gulmohar Agro (P) Ltd.? A. I was working in M/s Janak Distributors and my work was to contact various licence holders such as societies, dealers and to collect orders and to collect outstanding amounts. Q. Do you pay income-tax? A....
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....Shri Bachugiri Khandugiri Goswami He gave his source of income as business of insecticide carried on since June, 1978 under name of Sharad Co., Katargaon, Surat. He stated that he was to get salary @ Rs. 425 besides commission. He further admitted that he received commission through cheque and in cash. He stated that he was paying income-tax. The pertinent question on orders booked by him and his reply are as under. "Q. Is there any note of your sale and the orders you got? A. No. I Informed the orders from farmers. Mainly they were Co-op. Societies such as: (1). Puna Seva Sahakari. (2). Navsari Bagayat Co-op. Society. (3). Ganat Vividh Karyakari Sahakari Mandli, Tal. Gandevi, (4). Pioneer Agro Co. Valsad. Q. Do you have any proof of getting orders? A. No." (4) Shri Govanbhai Jayrambhai Patel This witness gave his address and further stated that he was working as a Field Supervisor in M/s Gulmohar Agro (P) Ltd. He was to get salary of Rs. 200 per month besides commission and daily allowance of Rs. 3 plus bus fare. He earned commission of approximately Rs. 20,000 on sale at the rate of 3 per cent. Some commission was received in cash and some through cheque. He stated tha....
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....Multipurpose Society Samrod, Vividh Karyakari Sahakari Mandali, etc. Q. What is the proof of the order you send? A. Order was sent through order book and were informing orders orally in the office also. Q. How much commission you got? A. I got commission of Rs. 15,000 approximately. Q. How much have you studied? A. Passed S.S.C." These witnesses were again summoned and examined on 5th Jan., 1980. They reconfirmed the receipt of commission from the assessee-company. 11.3. The IAC again examined four of the above said witnesses on 5th Sept., 1981 in proceedings under s. 144B. The four persons examined were as under: (1). Shri Fredrik G. Moses. (2). Shri Jaswantsing Motising Suratia. (3). Shri Virendra Maganlal Naik. (4). Shri Bachugiri Kandugiri Goswami. The above persons again confirmed that they had received commission from the assessee company besides salary and bonus. The questions asked suggest that commission was paid on the basis of some written arguments. For example Shri Jaswantsinh Motisinh Suratia answered the following question: "Q.30. I hereby show to you xerox copy of the letter of appointment dt. 20th July, 1974, which purports to have been acknowledged b....
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.... the statutory changes, fully discussed by the Supreme Court in the case of CIT vs. Mussadilal Ram Bharose (1987) 60 CTR (SC) 34 : (1987) 165 ITR 14 (SC). Now the question is whether in a given case burden of proof has been discharged or not would depend upon the facts and circumstances of the case. No uniform rule can be laid down which would apply to all cases. 7.2. It is well accepted that penalty proceedings are distinct and separate from the assessment proceedings. The assessee and the Revenue can lead evidence which they did not file in the assessment proceedings. The mere fact that addition has been made does not mean that the assessee is to be penalised under s. 271(1)(c). At the same time, it is not necessary that Revenue should lead some additional evidence over and above what is available in the assessment proceedings to establish the charge under s. 271(1)(c) of the Act. The evidence in the assessment order and the assessment order itself may contain sufficient material to establish the charge of concealment or furnishing of inaccurate particulars of income under s. 271(1)(c) of the IT Act. It again depends upon the facts and circumstances of the case. As penalty proce....
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....observations are there is respect of amount brought by Shri Prafulbhai Nayak. We are not aware of any rule under which the narration of source of each credit is to be given in books of accounts. The AO should have questioned the depositors before drawing an adverse conclusion. This was not done and, therefore, from overwriting or writing in different ink it was concluded that entries relating to the payment of commission are not genuine. We, however, found force in criticism advanced on behalf of the assessee and noted above. 12.4. The assessee, on the other hand, has placed voluminous evidence to show that commission was paid to these employees for rendering services to the assessee and the commission was worked out on the sale effected by the above named persons. In the first place, it is clear that these persons were either agriculturists or closely connected with agricultural operations. They had good knowledge of pesticides and had worked in this line of business. It is further clear from their cross-examination that some photostat copies of agreement between the assessee and these persons were available on record and commission was paid to them under such agreements. These p....