20 years aged person capable enough to give tips for purchasing shares. ITAT deletes penalty u/s 271(1)(c) for subjective disallowance of commission paid for tips given to customers- ITAT
ABCAUS Case Law Citation:
ABCAUS 2030 (2017) (08) ITAT
Assessment Year : 2010-11
Brief Facts of the Case:
During the assessment proceedings, Assessing Officer (AO) noticed that the appellant assessee had debited professional and management charges/commission paid to two persons. Out of the two one female recipient failed to be present before the AO for cross examination. Therefore, the AO proceeded to conclude that the assessee booked these expenses just to reduce his income as the said female recipient was only a 20 years old student, was not having any active participation in the business of the share market and moreover, there was no other transaction in her bank account other than the amount of alleged commission by the assessee under the head professional fees.
Consequently, the AO sought to initiate penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income. During the penalty proceedings, the AO came to the conclusion that the assessee had debited inadmissible expenses and thereby furnished inaccurate particulars of income in respect of addition / disallowance and thereby imposed penalty @ 100% of the tax sought to be evaded by the assessee.
CIT(A) dismissed the appeal. Feeling aggrieved, the assessee came up before the Tribunal by challenging the penalty order passed u/s 271(1)(c).
Observations made by the Tribunal:
The ITAT noted that a bare perusal of the penalty order apparently proved that there was no finding whatsoever on the part of the revenue authorities that any details supplied by assessee in his return was found to be incorrect or erroneous or false.
According to the Tribunal, in case the assessee had claimed any deduction or exemption, it is for the tax authorities to examine if the same is sustainable or not. Placing reliance on the landmark judgment of the Hon’ble Supreme Court, the in the case of Reliance Petro Products Pvt. Ltd. ITAT opined that the penalty proceedings were not sustainable.
The Tribunal went on to observe that when the AO had not disputed the particulars of income furnished by the assessee nor he has disputed the amount on which commission is claimed to have been paid by the assessee, the disallowance on the ground of challenging the capabilities of the the recipient to provide tips for purchasing shares etc. was merely a subjective findings which was not sustainable.
According to the ITAT, these days it is a matter of common knowledge that persons of 20 years of age are capable enough to advice and carry on such business even on their own.
The ITAT stated that merely disallowing the commission payment on the basis of subjective satisfaction without calling upon the assessee as to what type of advice and know-how has been provided to earn the business income on which tax has already been paid, the penalty cannot be imposed nor does it amount to furnishing of inaccurate particulars.
Held:
The assessee had not furnished inaccurate particulars of income for making payment of commission for providing tips to customers so as to attract the penalty u/s 271(1)(c) of the Act
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