M/s Mazda Agency, Baroda V. The ACIT, Circle -5, Baroda

ITA 1609/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0330 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHANSHU S JHA
• Assessee Lawyers: P M MEHTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI, , , , ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING :6-8-2010 DRAFTED ON:6- 8-2010 ITA NO. 1609 /AHD/ 2010 ASSESSMENT YEAR :2003-04 M/S. MAZDA AGENCY, SHRI HARI NIWAS, GHANTIADA, GHADIALI POLE, BARODA. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5, AAYAKAR BHAVAN, RACE COURSE CIRCLE,BARODA. PAN/GIR NO. : AACFM 9096L (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI P.M. MEHTA. RESPONDENT BY: SHRI SUDHANSHU S. JHA, D.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-V, BARODA DATED 2-3-2010. 2. THE SOLE GROUND OF APPEAL OF THE ASSESSEE IS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN CONFIRMING THE PENALTY OF `.42, 000/- IMPOSED ON FO REIGN TRAVELLING EXPENDITURE OF `.1, 14,267/- INCURRED FO R THE PURPOSE OF BUSINESS OF YOUR APPELLANT. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN RESPECT OF FOREIGN TRIP EXPENSES OF `.1, 14,267/-, IT WAS STATED BY THE ASSESSEE THAT THE FO REIGN TRIPS WERE IN CONNECTION WITH BUSINESS. HOWEVER, THE ASSESSING OFFICER REQUESTED FOR DETAILS OF FOREIGN TRAVEL SUCH AS AIR TICKETS, HOTEL BILLS, BUSINESS CORRESPONDENCE AND IN THE ABSENCE OF ANY S UCH DETAILS THE CLAIM OF `.1,14,267/- WAS DISALLOWED AND PENALT Y PROCEEDINGS WERE ALSO INITIATED. - 2 - 4. ON APPEAL, LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- V, BARODA CONFIRMED THE ADDITIONS ON ACCOUNT OF FOR EIGN TRIP EXPENSES, CAPITALIZATION OF SOFTWARE EXPENSES, INTE REST PAID TO RELATIVES. NO APPEAL WAS FILED BY THE ASSESSEE AGAI NST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 5. DURING PENALTY PROCEEDINGS, IT WAS STATED BY THE ASSESSEE THAT THE PARTNER M. K. DESAI MADE A VISIT TO USA DU RING 18-6-2002 TO 3-7-2002 FOR BUSINESS PURPOSES FOR DISCUSSION WI TH HAND SHY INDUSTRIES. THE COPY OF THE CORRESPONDENCE WITH THE CLIENT AND THE COPY OF THE PASSPORT WERE ALSO PRODUCED. THE ASSESS ING OFFICER HAS MENTIONED THAT THE TRAVELLING RECEIPT ISSUED DOES N OT CONTAIN ANY REFERENCE OF NAME OF AIRLINES, DESTINATION OF JOURN EY AND DATE OF JOURNEY AND ON THE TOP OF THE RECEIPT IT IS MENTION ED TEMPORARY DEPOSIT RECEIPT. FURTHER, THE INVITATION FROM HAND SHY INDUSTRIES DATED 18-3-2000 WHEREAS THE MATTER PERTAINS TO ASSE SSMENT YEAR 2003-04 AND THEREFORE, THE PRIMARY ONUS OF PROVING THE GENUINENESS OF THE EXPENDITURE HAS NOT BEEN DISCHAR GED AND THUS PENALTY OF `. 42,000/- WAS LEVIED. 6. IN APPEAL, IT IS ARGUED THAT BANK ACCOUNT STATEM ENTS, COPY OF PASSPORT WERE SUBMITTED TO THE ASSESSING OFFICER AN D THAT A SIMILARLY DISALLOWANCE IN ASSESSMENT YEAR 2001-02 F OR `.63,675/- WAS RESTRICTED BY `.25,000/- BY LEARNED COMMISSION ER OF INCOME TAX (APPEALS) WHICH WAS DELETED BY HON'BLE ITAT. I T IS FURTHER STATED THAT THERE WAS NO INTENTION TO CONCEAL ANY I NCOME AND THE DEPARTMENT HAS NOT ESTABLISHED MEANS READ WHILE LEV YING PENALTY. THE DECISION IN THE CASE OF NATIONAL TEXTILE VS. CI T 249 ITR 125 (GUM.) AND HINDUSTAN STEEL LTD. VS. STATE OF ORISSA 83 ITR 26 (SC) WAS RELIED UPON. 7. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE OBSERVED AS UNDER:- - 3 - I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSMENT ORDER A ND THE PENALTY ORDER. IT IS AN ADMITTED FACT THAT NO DOCUM ENTS SUCH AS INVITATION FROM FOREIGN CLIENT, TRAVEL DOCUMENTS , TOUR DIARY WERE PRODUCED BEFORE THE ASSESSING OFFICER. THE ADD ITION WAS ALSO NOT CONTESTED IN FIRST APPEAL. FURTHER, IN PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS REFERRED TO CERTAIN DEFICIENCIES IN TRAVEL RECEIPTS. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IT IS ARGUED T HAT THE PASSPORT REVEALS THAT THE JOURNEYS WERE PERFORMED A ND THE EXPENDITURE WAS INCURRED. STRONG RELIANCE WAS PLACE D ON THE DECISION OF HON'BLE ITAT IN THE CASE OF THE ASSESSE E FOR ASSESSMENT YEAR 2001-02. I HAVE EXAMINED THE VARIOUS PLEAS OF THE ASSESSEE. THE THRUST OF THE ARGUMENT OF THE ASSESSEE MAINLY CHALL ENGES THE QUANTUM ADDITION WHICH IS NOT THE MATTER BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HOWEVER, IT IS NOTICED THAT THE DOCUMENTS FURNISHED STILL DO NOT ESTABLISH THE BUSINESS PURPOSE IN INCURRING SUCH EXPENDITURE. IN ASSESSMENT YEAR 2001-02 SHRI M.K. DESAI, PARTNER VI SITED USA AT THE INVITATION OF HAND SHY INDUSTRIES LETTER DATED 18- 3-2000 AND UK AT THE INVITATION OF AURA INDUSTRIES AND INCURRED EXPENDITURE OF `. 63,675/-. THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DID NOT FIND B USINESS PURPOSE IN THE USA VISIT AND RESTRICTED THE DISALLO WANCE TO `. 25,000/-. HON'BLE ITAT WAS OF THE VIEW THAT THE ASS ESSING OFFICER HAS NOT BROUGHT OUT ANY MATERIAL TO SHOW TH AT THE FOREIGN TRIP WAS FOR PURPOSE OTHER THAN BUSINESS AN D DELETED THE DISALLOWANCE. IT IS STRANGE THAT THE SAME INVIT ATION LETTER DATED 18-3-2000 WAS PRODUCED BEFORE ASSESSING OFFIC ER TO JUSTIFY THE VISIT FOR ASSESSMENT YEAR 2003-04. THIS FACT COUPLED WITH THE DISCREPANCIES POINTED OUT IN TRAVE L RECEIPTS BY ASSESSING OFFICER LEAVE THE CLAIM OF BUSINESS EX PENDITURE UNPROVED. IT WOULD ALSO BE NOT OUT OF PLACE TO MENT ION HERE THAT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA T EXTILE PROCESSORS 212 CTR 432 (SC), HONBLE APEX COURT HAS HELD THAT THE PENALTY UNDER SECTION 271(1) (C) HAS BEEN ENACTED TO PROVIDE FOR LOSS OF REVENUE AND IS IN THE NATURE OF CIVIL LIABILITY AND THAT WILLFUL CONCEALMENT IS NOT AN ES SENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. IN MY HU MBLE VIEW THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN L EVYING PENALTY OF `.42, 000/--. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE BRIEF FACTS ARE THAT THE ASSESSEE CLAIMED `.1, 14,267/- AS FOREIGN TRIP EXPENSES. THE LEARNED ASSESSING OFFICER REQUIRED THE ASSESSEE TO FILE FUL L DETAILS OF FOREIGN TRAVELLING ALONG WITH ITS PURPOSE AND DOCUMENTARY E VIDENCES. THE - 4 - ASSESSEE COULD NOT PRODUCE THE DETAILS SUCH AS PLAC ES VISITED BY THE PARTNER, AIR-TICKETS, HOTEL BILLS, CORRESPONDEN CE WITH PARTIES WITH WHOM PARTNERS ENTERED INTO NEGOTIATIONS ETC., THERE FORE, HE LEARNED ASSESSING OFFICER DISALLOWED THE EXPENSES O N FOREIGN TRIP TO USA CLAIMED BY THE ASSESSEE. IN APPEAL, THE ADDI TION WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUNAL. THEREAFTER THE LEARNED ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1) (C) OF THE ACT OF `. 4 2,000/- BEING 100% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE BY FURNISHING INACCURATE PARTICULARS OF INCOME WHICH WAS CONFIRME D IN APPEAL BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 9. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE POINTED OUT THAT IN SUPPORT OF GENUINENESS OF FOREIGN TRAVELLING EXPENSES COPY OF BANK STATEMENT AND PASS PORT OF THE PARTNERS WERE PRODUCED BEFORE THE LOWER AUTHORITIES . HE ALSO SUBMITTED THAT SIMILAR FOREIGN TRAVELLING EXPENSES WERE ALSO DISALLOWED BY THE LEARNED ASSESSING OFFICER IN THE ASSESSMENT YEAR 2001-02 WHICH WAS FULLY DELETED BY THE TRIBUNA L ON AN APPEAL. IN THE ABOVE CIRCUMSTANCES, HE ARGUED THAT NO PENAL TY UNDER SECTION 271(1) (C) CANNOT BE LEVIED IN THE INSTANT CASE MERELY BECAUSE THE DISALLOWANCE MADE BY THE LEARNED ASSESS ING OFFICER WAS CONFIRMED BY THE TRIBUNAL. 10. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPR ESENTATIVE RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 11. WE FIND THAT IN THE INSTANT CASE THE DISALLOWAN CE OF TRAVELLING EXPENSES WAS MADE BECAUSE OF THE INABILITY OF THE A SSESSEE TO SUBSTANTIATE WITH EVIDENCES THE PURPOSE OF SUCH FOR EIGN TRAVEL EXPENSES. THUS, IT IS OBSERVED THAT THE GENUINENES S OF FOREIGN TRAVEL EXPENSES IS NOT IN DOUBT BUT ALLOWABILITY OF FOREIGN TRAVEL EXPENSES WAS NOT ACCEPTED IN THE ASSESSMENT ON THE GROUND THAT ASSESSEE COULD NOT SUBSTANTIATE THAT THE SAID EXPEN DITURE WAS INCURRED FOR BUSINESS PURPOSES AND THEREFORE, WAS D EDUCTIBLE. - 5 - 12. IN OUR CONSIDERED OPINION THE CONSIDERATION WHI CH APPLIES IN A PENALTY PROCEEDING IS DIFFERENT FROM THE CONSIDER ATION WHICH APPLIES IN ASSESSMENT PROCEEDINGS. IN THE INSTANT C ASE, NO MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT T HE FOREIGN TRAVEL EXPENSES CLAIMED BY THE ASSESSEE WAS BOGUS A ND THE ASSESSEE HAS NOT ACTUALLY INCURRED ANY FOREIGN TRAV EL EXPENSES. THUS THE PARTICULARS WHICH WERE FURNISHED IN THE RE TURN OF INCOME WERE NOT FOUND TO BE INACCURATE BUT MERELY THE DEDU CTIBILITY OF SUCH EXPENDITURE WAS FOUND TO BE NOT ADMISSIBLE. I N OUR CONSIDERED VIEW IN THE ABOVE CIRCUMSTANCES, IT CANN OT BE HELD THAT THE ASSESSEE IS GUILTY OF FURNISHING OF INACCURATE PARTICULARS OF INCOME SO THAT THE ASSESSEE CAN BE VISITED WITH PEN ALTY UNDER SECTION 271(1) (C) OF THE ACT. OUR ABOVE VIEW FINDS SUPPORT FROM THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF C. I.T. VS. RELIANCE PETRO PRODUCTS PVT. LTD., WHEREIN IT WAS HELD THAT BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUN T TO FURNISHING INACCURATE PARTICULARS. A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOU NT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISH ING INACCURATE PARTICULARS. WE THEREFORE, DELETE THE PENALTY OF `. 42, 000/- LEVIED UNDER SECTION 271(1) (C) OF THE ACT AND ALLOW THE G ROUND OF APPEAL OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 13 TH AUGUST, 2010 SD/- SD/- (MAHAVIR SINGH) (N.S. SAINI ) JUDICIAL MEMBER ACCOUNT ANT MEMBER AHMEDABAD: ON THIS 13TH DAY OF AUGUST, 2010 PATKI - 6 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-V,BARODA. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 6-8-2010 ---------------- --- 2. DRAFT PLACED BEFORE AUTHORITY 11-8-2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 11-8-2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 11-8-2010 ------------------- JM 5. APPROVED DRAFT COMES TO P.S 13-8-2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 13-8-2010 ---- ---------------- 7. FILE SENT TO THE BENCH CLERK 13-8-2010 ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------