ACIT - 2(3), MUMBAI V. M/s. STOCK TRADERS P. LTD., MUMBAI

ITA 1576/MUM/2006

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3317 (ITAT-MUMBAI)
• Duration Of Justice: 12 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 06-07-2017
• Assessment Year: 2000-2001
• Appeal Filed On: 07-03-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Earning of tax free income; Tax effect
• Section: 271(1)(c); 143(3); 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 1576 / MUM . /2006 ( ASSESSMENT YEAR : 20 00 01 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 2(3), MUMBAI . APPELLANT V/S M/S. STOCK TRADERS PVT. LTD. 63, BOMBAY SAMACHAR MARG FOR, MUMBAI 400 001 PAN AAACS7235A . RESPONDENT ITA NO. 2136 /MUM. /2007 ( ASSESSMENT YEAR :20 01 02 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 2(3), MUMBAI . APPELLANT V/S M/S. STOCK TRADERS PVT. LTD. 63, BOMBAY SAMACHAR MARG FOR, MUMBAI 400 001 PAN AAACS7235A . RESPONDENT ITA NO. 3297 /MUM. /2009 ( ASSESSMENT YEAR :20 03 04 ) M/S. STOCK TRADERS PVT. LTD. 63, BOMBAY SAMACHAR MARG FOR, MUMBAI 400 001 PAN AAACS7235A . APPELLANT V/S INCOME TAX OFFICER WARD 2(3)(3), MUMBAI . RESPONDENT REVENUE BY : SHRI S.H. USMAN I ASSESSEE BY : SHRI P.J. PARDIWALA 2 M/S. STOCK TRADERS PVT. LTD. DATE OF HEARING 05 . 0 2 .201 9 DATE OF ORDER 15.02.2019 O R D E R PER SAKTIJIT DEY, J.M. T HE AFORESAID APPEALS, TWO BY THE REVENUE AND ONE BY THE ASSESSEE, ARE AGAINST SEPARATE ORDERS PASSED BY THE LEARNED COMMISSIONER (APPEALS), MUMBAI, DELETING / CONFIRMING PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT') FOR THE ASSESSMENT YEAR S 2000 01, 2001 02 AND 2003 04. ITA NO.1576/MUM./2006 REVENUES APPEAL A.Y. 2001 02 2 . IN THIS APPEAL, THE REVENUE HAS CHALLENGED DELETION OF PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT AMOUNTING TO ` 39,91,144. 3 . BRIEF FACTS ARE, THE ASSESSEE , AN INDIAN COMPANY , IS ENGAGED IN THE BUSINESS OF LICENSING AND INVESTING IN PROJECTS AND EQUITY AND DEBT PARTICIPATION. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 TH DECEMBER 2000, DECLARING TOTAL INCOME OF ` 24,81,98,200. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSING OFFICER MADE VARIOUS DISALLOWANCES OUT OF THE EXPENDITURE CLAIMED BY THE ASSESSEE , ONE AMONGST THEM BEING PROFESSIONAL FEES 3 M/S. STOCK TRADERS PVT. LTD. PAID TO ARTHUR ANDERSEN AMOUNTING TO ` 6,03,64,600. IT IS RELEVANT TO OBSERVE THAT IN THE YEAR UNDER DISPUTE, THE ASSESSEE HAD PAID AN AMOUNT OF ` 1,08,85,470, TO ARTHUR ANDERSEN. THE ASSESSING OFFICER, AFTER VERIFYING THE NATURE OF EXPENDITURE AND CLAIM OF THE ASSESSEE HELD THAT ONLY AN AMOUNT OF ` 5,18,870, PAID TOWARDS HANDLING OF INCOME TAX MATTERS IS ALLOWABLE UNDER SECTION 37(1) OF THE ACT. ACCORDINGLY, HE DISALLOWED THE BALANCE AMOUNT OF ` 1,03,66,600, AS NOT ALL OWABLE UNDER SECTION 37(1) OF THE ACT. BEING AGGRIEVED WITH SUCH DISALLOWANCE, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LEARNED COMMISSIONER (APPEALS) WHILE DECIDING THE APPEAL OF THE ASSESSEE MODIFIED THE ORDER OF THE ASSESS ING OFFICER BY HOLDING THAT DISALLOWANCE, IF ANY, OUT OF THE EXPENDITURE CLAIMED BY THE ASSESSEE HAS TO BE CONSIDERED UNDER SECTION 14A OF THE ACT. AGAINST THE SAID ORDER OF THE LEARNED COMMISSIONER (APPEALS), BOTH, THE ASSESSEE AND THE REVENUE WENT IN APP EAL BEFORE THE TRIBUNAL. DURING THE PENDENCY OF THE AFORESAID APPEALS BEFORE THE TRIBUNAL, THE ASSESSING OFFICER INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND ULTIMATELY PASSED AN ORDER ON 30 TH MARCH 2005, IMPOSING PENALTY OF ` 39,91,144. THE ASSESSEE CHALLENGED THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER BY FILING AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 M/S. STOCK TRADERS PVT. LTD. 4 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF THE FACTS AND MATERIALS ON RECORD HELD THAT SINCE THE ASSESSEE HAS FURNISHED ALL PARTICULARS OF THE PAYMENT MADE TO ARTHUR ANDERSEN, IT CANNOT BE SAID THAT THE ASSESSEE HAS EITHER CONCEALED THE PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICUL ARS OF INCOME. HE OBSERVED THAT THE ASSESSEE HAD MERELY CLAIMED A DEDUCTION WHICH WAS DISALLOWED BY THE ASSESSING OFFICER. THEREFORE, ACCORDING TO HIM , FOR THAT REASON ALONE PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE IMPOSED. ON THE BASIS OF THE AFORESAID REASONING, HE DELETED THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING UPON THE OBSERVATIONS OF THE ASSESSING OFFICER SUBMITTED , SINCE THE ASSESSEE HAS CLAIMED THE DEDUCTION WRONGLY, IMPOSIT ION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS JUSTIFIED. 6 . SHRI P.J. PARDIWALA, LEARNED SR. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED , THOUGH THE ASSESSING OFFICER HAD DISALLOWED A PART OF THE EXPENDITURE CLAIMED BY THE ASSESSEE BY HOLDING THAT I T IS NOT ALLOWABLE UNDER SECTION 37(1) OF THE ACT, HOWEVER, THE LEARNED COMMISSIONER (APPEALS) REVERSED THE SAID DECISION OF THE ASSESSING OFFICER. HE SUBMITTED , LEARNED COMMISSIONER (APPEALS) HAS ONLY 5 M/S. STOCK TRADERS PVT. LTD. DIRECTED THE ASSESSING OFFICER TO CONSIDER THE DISALLOWANCE UNDER SECTION 14A OF THE ACT IN CASE THE ASSESSEE HAD ANY INVESTMENT YIELDING EXEMPT INCOME DURING THE RELEVANT PREVIOUS YEAR. HE SUBMITTED , THE AFORESAID DECISION OF THE LEARNED COMMISSIONER (APPEALS) WAS ALSO UPHELD BY THE TRIBUNAL WHILE DEC IDING THE APPEAL S FILED BY THE ASSESSEE AND THE DEPARTMENT IN ITA NO.1501/MUM./2004 AND ITA NO.1820/MUM./2004, DATED 31 ST OCTOBER 2018. HE SUBMITTED , SINCE AS PER ASSESSING OFFICERS OWN OBSERVATION IN THE ASSESSMENT ORDER THE ASSESSEE HAD NOT EARNED ANY E XEMPT INCOME , NO DISALLOWANCE IS CALLED FOR EVEN UNDER SECTION 14A OF THE ACT. THEREFORE, THERE IS NO QUESTION OF IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. FURTHER, HE SUBMITTED , THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE UNDER SECTION 37(1) OF THE ACT ON THE BASIS OF WHICH PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WAS INITIATED AND ULTIMATELY PENALTY UNDER THE SAID PROVISION WAS IMPOSED. HOWEVER, HE SUBMITTED , THE SAID DISALLOWANCE WAS DELETED BY THE LEARNED COMMISSIONER ( APPEALS) , THOUGH, HE DIRECTED THE ASSESSING OFFICER TO CONSIDER THE EXPENDITURE FOR DISALLOWANCE UNDER SECTION 14A OF THE ACT. HE SUBMIT , SINCE THE DISALLOWANCE ON THE BASIS OF WHICH PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS IMPOSED IS NO LONGER VALID IN VIEW OF THE DECISION OF THE FIRST APPELLATE AUTHORITY AND THE TRIBUNAL, THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT 6 M/S. STOCK TRADERS PVT. LTD. CANNOT SURVIVE. FINALLY, HE SUBMITTED , SINCE THE ASSESSEE HAS CLAIMED DEDUCTION OF A CERTAIN EXPENDITURE AND HAS FURNIS HED FULL PARTICULARS RELATING TO SUCH EXPENDITURE BEFORE THE ASSESSING OFFICER , MERELY BECAUSE A PART OF THE EXPENDITURE WAS DISALLOWED ON ACCOUNT OF BUSINESS EXPEDIENCY, NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT CAN BE IMPOSED. 7 . WE HAVE CONSIDERED RI VAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. UNDISPUTEDLY,A PART OF THE PROFESSIONAL FEES PAID TO ARTHUR ANDERSEN WAS DISALLOWED BY THE ASSESSING OFFICER UNDER SECTION 37(1) OF THE ACT ON THE REASONING THAT SUCH EXPENDITURE WAS NOT INCURRED FOR THE PURP OSE OF BUSINESS. IT IS A FACT ON RECORD THAT THE AFORESAID DECISION OF THE ASSESSING OFFICER WAS REVERSED BY THE FIRST APPELLATE AUTHORITY , THOUGH , HE DIRECTED THE ASSESSING OFFICER TO CONSIDER DISALLOWANCE OF THE AFORESAID EXPENDITURE UNDER SECTION 14A OF THE ACT IN CASE THE INVESTMENT HAS YIELDED EXEMPT INCOME DURING THE YEAR. THE AFORESAID DECISION OF THE LEARNED COMMISSIONER (APPEALS) HAS ALSO BEEN UPHELD BY THE TRIBUNAL. IT IS THE SUBMISSION OF LEARNED SR. COUNSEL THAT SINCE T HE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME , NO DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE MADE. WE FIND SUBSTANTIAL MERIT IN THE AFORESAID SUBMISSIONS OF THE LEARNED SR. COUNSEL FOR THE ASSESSEE. IN ANY CASE OF THE MATTER, THE VERY BASIS ON WHICH THE ASSESSING OFFICER HAS I MPOSED PENALTY UNDER SECTION 7 M/S. STOCK TRADERS PVT. LTD. 271(1)(C) OF THE ACT STANDS OBLITERATED IN VIEW OF THE DECISION OF THE FIRST APPELLATE AUTHORITY AND THE TRIBUNAL HELD THAT NO DISALLOWANCE UNDER SECTION 37(1) OF THE ACT CAN BE MADE. THAT BEING THE CASE, THE PENALTY IMPOSED UN DER SECTION 271(1)(C) OF THE ACT CANNOT SURVIVE. IN ANY CASE OF THE MATTER, AS RIGHTLY OBSERVED BY THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE HAS CLAIMED DEDUCTION OF CERTAIN PAYMENTS WHICH WAS DISALLOWED BY THE ASSESSING OFFICER. HOWEVER, MERE DISAL LOWANCE OF AN EXPENDITURE CLAIMED BY THE ASSESSEE DOES NOT AUTOMATICALLY LEAD TO EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME TO ATTRACT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. IN VIEW OF THE AFORESAID, WE UPHOLD T HE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN DELETING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. GROUND RAISED BY ARE DISMISSED. 8 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.2136/MUM./2007 REVENUES APPEAL A.Y. 2001 02 9 . IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE DELETION OF PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT TO ` 17,81,312. 10 . AT THE OUTSET, THE LEARNED COUNSEL S APPEARING FOR THE PARTIES FAIRLY CONCEDED BEFORE US THAT THE TAX EFFECT ON THE DISPUTED ISSUE IS 8 M/S. STOCK TRADERS PVT. LTD. BELOW THE MONETARY LIMIT OF ` 20 LAKH FIXED FOR FILING OF APPEAL BEFORE THE TRIBUNAL AS PER CENTRAL BOARD OF DIRECT TAXES (CBDT) IN CIRCULAR NO.3/2018, DATED 11 TH JULY 2018. IN VIEW OF THE AFORESAID SUBMISSIONS OF THE LEARNED COUNSEL APPEARING FOR THE PARTIES WE ARE INCLINED TO DISMISS THE APPEAL ON THE GROUND OF LOW TAX EFFECT. 11 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.3297/MUM./2009 12 . IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN CONFIRMING PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT FOR ` 1,60,50,655. 13 . BRIEF FACTS ARE, FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED ITS R ETURN OF INCOME ON 28 TH NOVEMBER 2003, DECLARING LOSS OF ` 2,38,16,483. WHILE COMPLETING THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSING OFFICER MADE THE FOLLOWING DISALLOWANCES: 1. PROFESSIONAL FEES PAID TO PREROY A.G. JURIC (PAG) ` 3,24,06,639 2. BUSINESS SERVICE CENTRE FEES ` 1,00,532 3. TELEPHONE EXPENDITURE ` 12,72,655 4. FOREIGN TRAVEL EXPENDITURE ` 12,72,655 5. PRIOR PERIOD EXPENSES ` 1,38,318 TOTAL: ` 4,36,75,260 9 M/S. STOCK TRADERS PVT. LTD. 14 . ON THE BASIS OF THE AFORESAID DISALLOWANCE S MADE, THE ASSESSING OFFICER INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ALLEGING FURNISHING OF INACCURATE PARTICULARS OF INCOME AND ULTIMATELY PASSED AN ORDER ON 27 TH MARCH 2008, IMPOSING PENALTY OF ` 1,60,50,655, UN DER SECTION 271(1)(C) OF THE ACT. THOUGH, THE ASSESSEE CONTESTED THE PENALTY ORDER PASSED BY FILING APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS), HOWEVER, IT WAS UNSUCCESSFUL. 15 . THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , WHILE DECIDING THE APPEAL F ILED BY THE ASSESSEE IN THE QUANTUM PROCEEDINGS, THE TRIBUNAL HAS RESTORED THE DISALLOWANCE OF BUSINESS SERVICE CENTER FEES, TELEPHONE EXPENSES TO THE ASSESSING OFFICER FOR DENOVO ADJUDICATION. THEREFORE, PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT ON THESE TWO DISALLOWANCES WILL NOT SURVIVE. FURTHER, HE SUBMITTED , SINCE THE PRIOR PERIOD EXPENSES IS SUBSUMED IN THE PROFESSIONAL FEES PAID TOPAG , PENALTY UNDER SECTION 271(1)(C) OF THE ACT OF THE ACT SURVIVES ONLY ON THE DISALLOWANCE MADE ON ACCOUNT OF PROFESSIONAL FEES PAID TO PAG AND FOREIGN TRAVEL EXPENSES. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT IS INVALID SINCE THE ASSESSING OFFICER WHILE INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IN THE ASSESSMENT 10 M/S. STOCK TRADERS PVT. LTD. ORDER, HAS LEVELED THE CHARGE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME , WHEREAS , THE ASSESSING OFFICER HAS ULTIMATEL Y IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ALLEGING CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE SUBMITTED , IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 274 R/W 271(1)(C) OF THE ACT, THE ASSESSING OFFICER HAS NOT SPECIFIED THE SPECIFIC CHARGE ON WHICH HE INTENDS TO IMPOSE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THEREFORE, HE SUBMITTED , THE PENALTY ORDER PASSED IS INVALID. FOR SUCH PROPOSITION, HE RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF SAMSON PERINCHERY, [2017] 392 ITR 004 (BOM.) .W ITHOUT PREJUDICE TO THE AFORESAID SUBMISSIONS, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , THOUGH DISALLOWANCE OF PROFESSIONAL FEES PAID TO PAG HAS BEEN SUSTAINED BY THE TRIBUNAL, RELYING UPON T HE ORDERS PASSED FOR THE PRECEDING ASSESSMENT YEAR S , HOWEVER, IT IS A FACT ON RECORD THAT RENDERING OF SERVICES BY PAG HAS NOT BEEN DISPUTED. HE SUBMITTED , THE AFORESAID FACT HAS BEEN ACCEPTED BY THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT IN CASE O F PAG. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE RELEVANT OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED IN CASE OF PAG. HE SUBMITTED , ONCE IN THE CASE OF PAYEE IT IS HELD THAT THE PAYMENT MADE WAS TOWARDS RENDERING OF TECHNICAL S ERVICE , THENIT CANNOT LEAD TO IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IR RESPECT IVE OF 11 M/S. STOCK TRADERS PVT. LTD. THE FACT THAT THE DISALLOWANCE OF PAYMENT HAS BEEN MADE AT THE HANDS OF THE ASSESSEE ON DIFFERENT REASONING. HE SUBMITTED , ONCE THE GENUINENESS OF THE PAY MENT MADE HAS BEEN ACCEPTED AT THE HANDS OF THE PAYEE, THE ASSESSEE CANNOT BE ALLEGED OF FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. FOR SUCH PROPOSITION, HE RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN TRI BHUVANDAS BHIMJI JHAVERI V/S ACIT, [20101] 247 ITR 727 (BOM.). AS REGARDS DISALLOWANCE OF FOREIGN TRAVEL EXPENSES INCURRED TOWARDS THE FOREIGN TRAVEL OF WIFE OF THE DIRECTOR, HE SUBMITTED, IT IS A DEBATABLE ISSUE SINCE THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S ALFA L AVAL INDIA LTD., [2006] 282 ITR 445 (BOM.) , HAS HELD THAT EXPENDITURE INCURRED ON A FOREIGN TRIP OF THE WIFE OF COMPANYS PRESIDENT IS ALLOWABLE AS BUSINESS EXPENDITURE. THUS, HE SUBMITTED , SINCE THERE IS DI VERGENT JUDICIAL OPINION ON THE ISSUE OF ALLOWABILITY OF FOREIGN TRAVEL EXPENDITURE INCURRED IN RESPECT OF WIFE OF DIRECTOR NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT CAN BE IMPOSED. HE SUBMITTED , ON BOTH THESE DISALLOWANCES THE ASSESSING OFFICER HAS NEITHER INITIATED NOR IMPOSED ANY PENALTY UNDER SECTION 271(1)(C) OF THE ACT IN THE PRECEDING ASSESSMENT YEARS. THUS, HE SUBMITTED , PENALTY IMPOSED SHOULD BE DELETED. 12 M/S. STOCK TRADERS PVT. LTD. 16 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSI NG OFFICER. 17 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AT THE OUTSET, WE PROPOSE TO DEAL WITH THE ISSUE RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE. ON A CAREFUL PERUSAL OF THE ASSESSMENT ORDER FOR THE IMPUGNED ASSESSMENT YEAR, IT IS VERY MUCH CLEAR THAT TH E ASSESSING OFFICER HAS INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ALLEGING FILING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. HOWEVER, IN THE PENALTY ORDER PASSED, THE ASSESSING OFFICER HAS IMPOSED PENALTY U NDER SECTION 271(1)(C) OF THE ACT UNDER BOTH THE LIMBS I.E., CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME .E VEN IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 271(1)(C) R/W SECTION 274 OF THE ACT, THE ASSESSING OFFICER HAS NOT SPE CIFIED THE SPECIFIC LIMB UNDER WHICH HE INTENDS TO IMPOSE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THUS, FROM THE AFORESAID FACTUAL POSITION, IT IS VERY MUCH CLEAR THAT THE ASSESSING OFFICER HIMSELF WAS NOT SURE ABOUT THE NATURE OF OFFENCE/VIOLATION COM MITTED BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER HAS IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON A GROUND OTHER THAN THE GROUND ON WHICH HE HAD INITIATED PROCEEDING FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THAT BEING 13 M/S. STOCK TRADERS PVT. LTD. THE CASE, AS PER THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF SAMSON PERINCHERY (SUPRA), THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT IS INVALID. 18 . EVEN OTHERWISE ALSO, THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT IS UNSUSTAINABLE. AS DISCUSSED EARLIER, OUT OF THE FOUR DISALLOWANCES MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ON THE BASIS OF WHICH PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS IMPOSED, DISALLOWANCE S RELATING TO BUSINESS SERVICE CE NTRE AND TELEPHONE EXPENSES HA VE BEEN SET ASIDE BY THE TRIBUNAL TO THE ASSESSING OFFICER FOR DENOVO ADJUDICATION. THAT BEING THE CASE, PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT ON THE AFORESAID TWO ADDITIONS WOULD NOT SURVIVE. AS REGARDS DISALLOWA NCE OF PROFESSIONAL FEES PAID TO PAG, IT IS EVIDENT THAT SUCH DISALLOWANCE WAS SUSTAINED BY THE TRIBUNAL RELYING UPON ITS OWN DECISION FOR THE PRECEDING ASSESSMENT YEARS. HOWEVER, IT IS WORTH MENTIONING THAT IN THE ASSESSMENT ORDER PASSED IN CASE OF PAG FO R THE IMPUGNED ASSESSMENT YEAR, THE ASSESSING OFFICER HAS NOT ONLY ASSESSED THE PAYMENT RECEIVED BY IT FROM THE ASSESSEE BUT HAS ALSO OBSERVED THAT PAG HAS RENDERED TECHNICAL SERVICE TO THE ASSESSEE. THEREFORE, MERELY BECAUSE THE DEDUCTION CLAIMED BY THE A SSESSEE ON ACCOUNT OF FEES PAID TO PAG WAS DISALLOWED ON CERTAIN REASONING S, IT CANNOT BE SAID THAT THE ASSESSEE HAS EITHER FURNISHED INACCURATE PARTICULARS OF INCOME OR 14 M/S. STOCK TRADERS PVT. LTD. CONCEALED ITS INCOME. MORE SO, WHEN THE FACT OF PAYMENT MADE TO PAG HAS NOT BEEN DISPU TED . IN THE AFORESAID VIEW OF THE MATTER, IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF DISALLOWANCE ARISING FROM PAYMENT OF PROFESSIONAL FEES TO PAG WOULD NOT SURVIVE. IT IS ALSO RELEVANT TO OBSERVE , TH OUGH, SIMILAR DISALLOWANCE W AS MADE IN THE ASSESSMENT YEAR S 1997 98 TO 2001 02 AND WAS SUSTAINED BY THE TRIBUNAL, HOWEVER, THE ASSESSING OFFICER HAS NEVER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ON SUCH DISALLOWANCE S WHICH GIVES CREDENCE TO THE FACT THAT WHIL E CLAIMING SUCH EXPENDITURE, THE ASSESSEE HAS NEITHER CONCEALED ITS INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME. AS REGARDS PENALTY IMPOSED ON THE DISALLOWANCE OF FOREIGN TRAVEL EXPENDITURE , THERE IS NO DISPUTE THAT SUCH EXPENDITURE WAS INCURRED TOWARDS THE FOREIGN TRAVEL OF THE WIFE OF DIRECTOR. THOUGH, IT MAY BE A FACT THAT IN ASSESSEES OWN CASE, THE TRIBUNAL HAS SUSTAINED THE DISALLOWANCE BY HOLDING THAT THE EXPENDITURE INCURRED IS NOT FOR THE PURPOSE OF BUSINESS, HOWEVER, IN CASE OF ALFA LAVA L INDIA LTD. (SUPRA) , THE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD SUCH EXPENDITURE TO BE FOR THE PURPOSE OF BUSINESS, HENCE, ALLOWABLE FOR DEDUCTION. THUS, AS COULD BE SEEN, THERE ARE DIVERGENT VIEWS ON THIS ISSUE. THAT BEING THE CASE, THE ASSESSEE CANN OT BE ALLEGED OF FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING ITS INCOME WHILE CLAIMING SUCH DEDUCTION. IN VIEW OF THE AFORESAID, WE DELETE THE 15 M/S. STOCK TRADERS PVT. LTD. PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR. 19 . I N THE RESULT, ASSESS EES APPEAL IS ALLOWED. 20 . TO SUM UP, REVENUES APPEALS ARE DISMISSED AND ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.02.2019 SD/ N.K. PRADHAN ACCOUNTANT MEMBER SD/ SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 15.02.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI