ACIT 15(1), MUMBAI V. BRIGHT ENGINEERING WORKS, MUMBAI

ITA 2258/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3146 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-04-2014
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI RAJENDRA , ACCOUNTATN MEMBER AND SHRI RAJENDRA, JUDICIAL MEMBER . / ITA NO . 2258 / MUM./ 2014 ( / ASSESSMENT YEAR : 200 6 07 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 15(1), MATRU MANDIR TARDEO ROAD, MUMBAI 400 007 .. / APPELLANT V/S M/S. BRIGHT ENGINEERING WORKS 5/32, , PANJRAPOLE LANE C.P. TANK ROIAD, MUMBAI 400 004 PAN AAAFB2823Q .... / RESPONDENT / REVENUE BY : SHRI VIVEK BATRA / ASSESSEE BY : NONE / DATE OF HEARING 2 4 .0 9.2015 / DATE OF ORDER 30.09.2015 / ORDER , / PER SAKTIJIT DEY, J.M. THE DEPARTMENT HAS PREFERRED THE AFORESAID APPEAL BEING AGGRIEVED BY THE ORDER DATED 9 TH JANUARY 2014, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 26, MUMBAI, DELETING THE PENALTY IMPOSED M/S. BRIGHT ENGINEERING WORKS 2 UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 2006 07. 2. WHEN THE APPEAL WAS CALLED FOR HEARING, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSE E. WE, THEREFORE, PROCEED TO DISPOSE OF THE APPEAL EX PARTE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A PARTNERSHIP FIRM FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 26 TH OCT OBER 2006, DECLARING TOTAL INCOME OF ` 3,90,22,040. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS INCURRED FOREIGN TRAVEL EXPENDITURE OF ` 15,08,586, CALLED UPON THE ASSESSEE TO FURNISH DETAILS OF SUCH EXPENDITURE WITH NAME OF PERSON, PLACE VISITED, AMOUNT INCURRED AND THE PURPOSE FOR WHICH IT WAS INCURRED. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER, THE ASSESSEE, IN ITS REPLY DATED 12 TH DECEMBER 2008, FURNISHED CERTAIN INFORMATION WITH REGARD TO THE E XPENDITURE CLAIMED. HOWEVER, AS OBSERVED BY THE ASSESSING OFFICER, THE ASSESSEE DID NOT FURNISH ANY DETAILS TO SUBSTANTIATE ITS CLAIM THAT FOREIGN TRAVEL WAS UNDERTAKEN TO MARKET THE PRODUCT FOR EXPORT AND ACHIEVE THE TARGET. ACCORDINGLY, HE DISALLOWED THE FOREIGN EXPENDITURE OF ` 15,08,586. AS A RESULT OF ENHANCEMENT OF ASSESSEES INCOME DUE TO ADDITION SO MADE, THE ASSESSING OFFICER INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT BY ISSUANCE OF SHOW CAUSE NOTICE TO THE M/S. BRIGHT ENGINEERING WORKS 3 A SSESSEE. IN REPLY TO THE SHOW CAUSE NOTICE, THE ASSESSEE, THOUGH SUBMITTED AN EXPLANATION BUT THE ASSESSING OFFICER DID NOT FIND MERIT IN THE SAME. HE WAS OF THE VIEW THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE FIRST APPELLATE AUTHORITY. BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE SUBMITTED THAT IT HAS STARTED ITS OWN EXPORT FROM ASSESSMENT YEAR 2007 08 AND THE EXPORT TURNOVER INCREASED STRONGLY OVER THE YEARS AND IN THE ASSESSMENT YEAR 2009 10, THE ASSESSEES EXPOR TS WERE TO THE TUNE OF ` 26 CRORE. IT WAS SUBMITTED, SIMILAR FOREIGN TRAVEL EXPENDITURE THOUGH WERE CLAIMED IN OTHER ASSESSMENT YEARS, BUT NO DISALLOWANCES HAVE BEEN MADE EVEN IN SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT AS THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION ON CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE IMPOSITION OF PENALTY IS NOT VALID. THE LEARNED COMMISSIONER (APPEALS), AFTER CONSIDERING THE S UBMISSION OF THE ASSESSEE, IN THE LIGHT OF THE FACTS AND MATERIAL ON RECORDS AS WELL AS PRINCIPLES LAID DOWN IN JUDICIAL PRECEDENTS, DELETED THE PENALTY BY HOLDING AS UNDER: 3.2.10 IN THIS CASE THE DISALLOWANCE HAS BEEN MADE ON ESTIMATE AND THE APPELLA NT HAS SUBMITTED A BONAFIDE EXPLANATION AS TO WHY PENALTY SHOULD NOT BE L EVIED AND THE EXPLANATION HAS NOT BEEN FOUND TO BE FALSE. PENALTY IN A CASE CAN BE LEVIED IF THE ASSESSEE FILES NO EXPLANATION, OR THE EXPLANATION FILED IS NOT SUBSTANTIATED OR THE EX PLANATION IS FOUND TO BE FALSE. HOWEVER, IT IS NOT SUCH A CASE. THE ONLY ISSUE INVOLVED IS WHETHER DEDUCTION FOR FOREIGN TRAVELLING M/S. BRIGHT ENGINEERING WORKS 4 EXPENSE IS ALLOWABLE AS BUSINESS EXPENSE OR NOT. IT IS NOT A CASE THAT EXPENSE HAS NEVER BEEN INCURRED OR THAT THE CLAIM IS FALSE. RATHER THE ALLOWABILITY OF THE DEDUCTION OF EXPENSE IS THE ISSUE AND IT IS A DEBATABLE ISSUE THOUGH THE DISALLOWANCE HAS BEEN UPHELD IN APPEAL. THEREFORE, IN SUCH A CASE PENALTY U/S.271(1)(C) CANNOT BE LEVIED. HENCE, PENALTY LEVIED IN THIS CASE IS D IRECTED TO BE DELETED . 4. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE ASSESSMENT ORDER, IT IS EVIDENT THAT THE ASSESSING OFFICER DISALLOWED THE FOREIGN TRAVEL EXPENSES MAINLY FOR TH E REASON THAT THE ASSESSEE HAS NOT EXPORTED ANY GOODS, THEREFORE, THERE IS NO NECESSITY FOR INCURRING FOREIGN TRAVEL EXPENSES. HOWEVER, AS CAN BE SEEN BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE HAD BROUGHT FACTS ON RECORD TO INDICATE THAT IT HAS MA DE SUBSTANTIAL EXPORTS DURING THE SUBSEQUENT ASSESSMENT YEARS. THEREFORE, THE ASSESSEES CLAIM THAT IT HAD INCURRED SUCH EXPENDITURE FOR MARKETING ITS PRODUCTS CANNOT BE IGNORED OR BRUSHED ASIDE. MOREOVER, DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSESSE E MAY BE FOR VARIOUS REASONS BUT THAT DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. ONLY BECAUSE THE DISALLOWANCE HAS BEEN CONFIRMED BY THE APPELLATE AUTHORITY, WILL NOT AUTOMATICALLY LEAD TO IMPOSITION OF PENALTY UNDER SECTION 271(1)( C) OF THE ACT, AS THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE TWO SEPARATE PROCEEDINGS. AFTER CONSIDERING THE FACTS OF THE PRESENT CASE, WE AGREE WITH THE LEARNED COMMISSIONER M/S. BRIGHT ENGINEERING WORKS 5 (APPEALS) THAT THERE BEING NO OCCASION TO BEL IEVE THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME, IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) IS NOT JUSTIFIED. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) WHILE DISMISSING THE GROUND RAISED BY THE REVENUE. 5. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 30.09.2015 SD/ - RAJENDRA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DAT ED : 30.09.2015 / 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 / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI M/S. BRIGHT ENGINEERING WORKS 6 DATE INITIAL ORIGINAL DICTATION PA D IS ENCLOSED AT THE END OF FILE 1. DRAFT DICTATED ON 23 . 9 .2015 SR.PS 2. D RAFT PLACED BEFORE AUTHOR 24 .9 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 30 . 9 .2015 SR.PS 6. DATE OF PRONOUNCEMENT 30 . 9 .2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 3 30 . 9 .2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER , / / 19997 98 2000 01 / / / / / / / / / /