Penalty us 271(1)(c) if assessee agreed disallowance to buy peace. Merely because assessee agreed addition, he can not be saddled with penalty-ITAT

Penalty us 271(1)(c) if assessee agreed disallowance to buy peace. Merely because assessee agreed addition, he can not be saddled with penalty-ITAT

ABCAUS Case Law Citation:

989 2016 (08) ITAT
Assessment Year: 2009-10
Date/Month of Judgment/Order: August, 2016

Brief Facts of the Case:

The assessee in his return of income had claimed the commission expenses. During the course of assessment proceedings, the Assessing Officer (AO), in order to verify the claim of the assessee, issued notice u/s 133(6) to ten parties, out of which, only six parties sent the confirmation letter. However, with respect to remainng four parties no reply was received. When these facts were brought to the assessee’s notice, he agreed for the adhoc disallowance of 25% of total commission claimed in the return of income. Accordingly 25% of the total commission expenses claimed was disallowed.

However, the AO initiated proceedings for penalty u/s 271(1)(c) for concealment of income/furnishing inaccurate particulars of income and imposed penalty of Rs. 4,34,230/-  

CIT(A) also confirmed the penalty.

Contentions of the Assessee:
It was contended that the assessee’s authorized representative accepted the disallowance of 25% of the commission so as to buy peace and to avoid long drawn litigation.

That the assessee had furnished confirmation of all the parties to whom the commission was paid.

That TDS was duly deducted from all the persons.

That summon issued u/s 133(6) was duly complied with and six persons confirmed having received the commission.

That merely because four persons did not furnish reply to the Assessing Officer in response to summons, it could not be said that the claim of the commission by the assessee was not genuine.

That merely because the assessee agreed for the addition, penalty us 271(1)(c) can not be levied.

Observations made by the Tribunal:

The ITAT entirely agreed with the contention of the assessee and opined that it was not a fit case for levy of penalty us 271(1)(c). Placing reliance on Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt.Ltd. – (2010) 322 ITR 158 (SC) that merely because the assessee’s claim for any deduction is not accepted by the Revenue, penalty u/s 271(1)(c) of the Act is not attracted, the Tribunal deleted the penalty.