Decided on September 28,1994



R.M. Mehta, Accountant Member - (1.) THESE are penalty appeals pertaining to the provisions of Sections 271(1)(c) and 273(2)(a). Taking up for consideration the appeal pertaining to Section 271(1)(c) the relevant facts are that the assessee is a private limited company deriving income from the manufacture of carpets and durries and export of the same to the United States. In the return of income, the assessee had claimed a deduction of Rs. 1,06,583 on account of commission to one Smt. Sushil Umrao Singh. Vide order sheet entry dated 14-11-1985, the assessee-company was requested to file a confirmation from the lady. Even subsequently, on 10-12-1985 and 16-12-1985, the same directions were given to the assessee but there was no compliance and finally on 6-1-1986, the assessee's counsel was asked either to file confirmation or surrender the amount of commission for taxation by filing a revised return or in the alternative to produce the lady for cross-examination. The assessee expressed its inability to produce the lady but agreed to revise the return and said revised return was filed on 17-1-1986 by adding to the earlier returned figure the amount of commission. The ITO initiated penalty proceedings under Section 271(1)(c) in respect of the aforesaid amount.
(2.) In the course of the penalty proceedings subsequently the assessee stated that the revised return was filed voluntarily with a view to avoid litigation and to buy peace. It was further stated that the lady had refused to cooperate with the assessee. The further submission was in the direction of contending that the payment of commission represented genuine expenditure for business purposes and did not represent the undisclosed income of the assessee. The Assessing Officer, however, rejected the aforesaid submissions and took note of the assessment records as also the notings on the order sheet whereby the company had been directed to file the confirmation of the lady. A note was also taken to the effect that there was no compliance with the aforesaid directions although numerous opportunities had been allowed. The Assessing Officer further observed that the assessee claimed deduction although it knew all along that the said commission was not payable to the lady. The last fact which was noted was that the return was not filed voluntarily but only after the ITO had detected the relevant facts. In the final analysis, the Assessing Officer imposed a penalty of Rs. 72,743 representing 100% of the tax sought to be evaded.
(3.) BEFORE the CIT(A) it was contended that deduction on account of commission had been allowed in the preceding assessment year and even the claim in the assessment year under consideration under appeal was bona fide and genuine. The further submission was that the lady refused to cooperate with the assessee and it was, in fact, forced to surrender the amount due to the non-availability of a confirmation from the lady. The final submission was that surrendering an amount did not lead to the conclusion that the claim was false or incorrect.;

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