J.P. Bengra, Judicial Member - (1.) THIS is an appeal by the revenue against an order of the CIT (A) -1, Bombay, pertaining to the Assessment year 1974-75.
(2.) The grievance of the Revenue is that the CIT (A) erred in cancelling the penalty of Rs. 98,860 levied by the ITO under Section 271(1)(c) of the Income-tax Act, 1961. The business of the assessee is to represent the agriculturists before the defence authorities or authorised officers with regard to the acquisition of their land and if necessary to represent the case before the Court of Law. For the services rendered, he used to charge a commission of 10% of the compensation payable to the land owners. The case of the assessee was that in order to get clients, he has engaged persons to whom he has in turn paid commission to the extent of 50% of the commission received by him from the clients brought in by such persons. The assessment of the assessee for Assessment Year 1974-75 was completed by the ITO, wherein the assessee was allowed a deduction in respect of commission payment of Rs. 1,11,565 to one Bachubhai Jamnadas & Co. for introducing to assessee three parties, viz. (1) Bilasrai Joharmal and others, (2) Smt. Gaimain Cawasji Trombaywalla and (3) Smt. Dhanbai R. Trombaywalla for representing in High Court matters pertaining to acquisition proceedings in respect of their lands for Military Projects at Mandala and Trombay Villages. These parties paid commission to the assessee at the rate of 10% of the compensation received by them. The case of the assessee was that 50% of the commission received from these parties was paid in turn as commission to M/s. Bachubhai Jamnadas & Co. vide stamped receipt dated 13-4-1973. It is the case of the assessee that a search had taken place in the premises of M/s Bachubhai Jamnadas and during the search, Shri Bachubhai Jamnadas made a statement denying the receipt of the commission from the assessee. On the basis of this statement made by Jamnadas in the proceedings under Section 132 of the IT Act, ITO of the assessee reopened the assessment of assessee under Section 147A of the IT Act. Since the said Jamnadas denied the receipt of commission from the assessee, the assessee instead of going into litigation, in order to buy peace with the Department, offered this amount of Rs. 1,11,565 for taxation as the income of his firm. Since the assessee had agreement for levying tax on this amount of Rs. 1,11,565 by inclusion as his income, the ITO initiated proceedings under Section 271(1)(c) read with Section 274 of the IT Act. As he was not satisfied with the reply received from the assessee against the proposal for the levy of penalty, he levied a penalty of Rs. 98,860 under Section 271(1)(c) of the Act. In his reply, the assessee submitted that he has agreed to the disallowance of the commission only to buy peace with the department and there was no element of income to the assessee and there was no inaccurate furnishing of particulars of income by the assessee, and therefore, provisions of Section 271(1)(c) 'are not attracted. Rejecting the contentions of the assessee, ITO, as stated above, levied a penalty of Rs. 98,860.
(3.) BEFORE the CIT(A) on appeal it was contended for the assessee that the assessee has not concealed any particulars of income and has not furnished any inaccurate particulars of such income. He has paid commission to M/s. Bachubhai Jamnadas by cheque and under stamped receipt and the assessee received even a letter of acknowledgement of the cheque, besides other correspondence. However, Shri Jamnadas in the course of proceedings in his premises under Section 132 of the Act, gave a statement that he has not received any commission. In view of this fact, in order to avoid litigation and with a view to buy peace with the Department, assessee had agreed to the disallowance to this commission and offered this amount for taxation, though the fact remains that commission was paid all and the particulars relating to the commission were furnished to the ITO at the time of the original assessment proceedings and considering the same ITO allowed this commission. However, this original decision of ITO was reversed by the successor ITO merely on the confessional statement of Shri Bachubhai Jamnadas during the proceedings under Section 132, and the assessee under several compulsions, as stated above, thought it expedient to offer the amount for taxation. But, it does not mean that this amount represents concealed income of the assessee. According to the counsel for the assessee, the ITO has not examined the land owners and did not make any investigations with the land owners whose names, the assessee had given to verify whether they were introduced to the assessee by Shri Bachubhai Jamnadas or not. It was submitted that since the assessee agreed for disallowance of this commission and offered the same for taxation though commission was in fact paid to Bachubhai Jamnadas, since Jamnadas denied having received it in the course of proceedings under Section 132, only to avoid litigation and to buy peace the assessee has not concealed any income, nor has he furnished any inaccurate particulars of the income and therefore, provisions of Section 271 (1)(a) are not attracted. Considering these submissions of the assessee and the fact that the assessee had not sought to capitalise this amount as the payment had actually been made to Shri Bachubhai Jamnadas, the CIT(A) following the decision of Supreme Court in the case of Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457, and the Calcutta High Court decision in the case of Bhagwanji Bhawanbhai & Co. v. CIT [1983] 141 ITR 640, deleted the penalty levied by the ITO. Revenue is aggrieved and has come in appeal before us.;