M/s. Chetan Builders, Baroda V. The ACIT.,Cent.Circle-1, Baroda

ITA 2632/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6626 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Business expenditure

Judgement Text

ITA NO.2632/ AHD/2009 . ASSESSMENT YEAR 20 06-07. 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AH MEDABAD. ( BEFORE SHRI BHAVNESH SAINI AND SHRI A. K. GARODIA) I.T .A. NO. 2632/AHD/2009. (ASSESSMENT YEAR: 2006 -2007) M/S. CHETAN BUILDERS, 100 K.P SHOPPING CENTRE, KARELIBAUG, BARODA. . (APPELLANT) VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, AAYAKAR BHAVAN, NEAR RACE COURSE CIRCLE, BARODA. (RESPONDENT) PAN: AABFC 1173 D APPELLANT BY : SHRI VIJAY RANJAN RESPONDENT BY : SHRI BHUVNESH KULSHRESTHA, SR. D.R. ( )/ ORDER PER: SHRI A.K. GARODIA , A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LD. CIT(A)- IV, AHMEDABAD DATED 19-3-2009 FOR ASSESSMENT YEAR 2 006-07. 2. ONLY ONE EFFECTIVE GROUND HAS BEEN RAISED BY THE ASSESSEE WHICH IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN INVOKING THE PROVISIONS O F SECTION 271(1) (C) IN THIS CASE AND HAVE FURTHER ERRED IN LEVYING/CONF IRMING A PENALTY IN A SUM OF RS. 46,040/-. 3. BRIEF FACTS ARE THAT IT IS NOTED BY THE A.O. ON PAGE-2 OF THE ASSESSMENT ORDER THAT ON PERUSAL OF PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, IT IS REVEALED ITA NO.2632/ AHD/2009 . ASSESSMENT YEAR 20 06-07. 2 THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 1,36 ,770/- ON ACCOUNT OF FOREIGN TRAVEL EXPENDITURE OF SHRI MANISHBHAI AND SHRI SITESH, THE PARTNERS OF THE ASSESSEE FIRM. AS PER THE ORDER SHEET ENTRY DATED 4-12-2007, THE ASSESSEE WAS ASKED BY THE A.O. TO JUSTIFY THIS EXPE NDITURE. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT THE EX PENDITURE WAS INCURRED FOR PROMOTION OF BUSINESS ABROAD TO EUROPE AND LOND ON AND WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS. THE A.O. WAS NOT SATISFIED AND IT IS NOTED BY THE A.O. IN THE ASSESS MENT ORDER THAT THE ASSESSEE IS A CIVIL CONTRACTOR WHO MAINLY UNDERTAKES WORK FR OM ITS SISTER CONCERNS ONLY, MAJOR BEING M/S. MANGLA PROPERTIES PVT. LTD. IT IS ALSO NOTED BY THE A.O. THAT NONE OF THE BUSINESS OF THE ASSESSEE PERT AINS TO FOREIGN CLIENTS, NATURE OF THE BUSINESS BEING SUCH. IT IS ALSO NOTE D BY THE A.O. THAT ASSESSEE HAS NEVER SHOWN ANY INCOME RECEIVED FROM ITS CLIENT S ABROAD. BY MAKING THESE OBSERVATIONS, THE AO MADE DISALLOWANCE OF THI S EXPENDITURE ON FOREIGN TRAVEL. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD. CIT (A) BUT WITHOUT SUCCESS ALTHOUGH THE COPY O F THE ORDER OF THE LD. CIT (A) IN QUANTUM PROCEEDINGS HAS NOT BEEN MADE AV AILABLE TO US. THERE IS NO MENTION THAT THE ASSESSEE HAS PREFERRED ANY APPE AL BEFORE THE TRIBUNAL ON THIS ISSUE. THE A.O. IN THE MEAN TIME INITIATED PEN ALTY PROCEEDINGS. IN PENALTY PROCEEDINGS, NO EXPLANATION WAS FURNISHED B Y THE ASSESSEE AND IT WAS THE ONLY SUBMISSION OF THE ASSESSEE BEFORE THE A.O. THAT THE ISSUE HAS BEEN AGITATED IN APPEAL WHICH IS PENDING BEFORE THE LD. CIT (A) AND HENCE, PROCEEDINGS U/S. 271(1)(C ) SHOULD BE KEPT IN ABEYA NCE TILL THE DECISION OF THE LD. CIT (A) BUT THE A.O. PASSED A PENALTY ORDER ON 30-6-2008 AND IMPOSED A PENALTY OF RS 46,040/-. AGAINST THE PENALTY ORDE R SO PASSED BY THE A.O., ITA NO.2632/ AHD/2009 . ASSESSMENT YEAR 20 06-07. 3 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) . AS PER THE IMPUGNED ORDER, THE LD. CIT (A) HAS CONFIRMED THE PENALTY IM POSED. IT WAS A SUBMISSION OF THE ASSESSEE BEFORE THE LD. CIT (A) I N PENALTY PROCEEDINGS THAT THE PARTNERS OF THE ASSESSEE SHRI SITESH PARIK H AND HIS WIFE SMT. NEHA PARIKH, MANAGER OF THE FIRM VISITED EUROPE AND LOND ON FOR THE PURPOSE OF RESEARCH AND ADOPTING NEW INNOVATIVE TECHNIQUES IN ITS BUSINESS AND ALSO FOR EXPLORING BUSINESS OPPORTUNITIES. IT IS OBSERVED BY LD. CIT(A) IN PARA 3.1 OF HIS ORDER THAT THE ASSESSEE HAS NOT BROUGHT ON RECO RD ANY THING ABOUT SUCH CLAIM OF RESEARCH. THE LD. CIT (A) CONFIRMED THE PE NALTY AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5 . IT HAS BEEN SUBMITTED BY THE LD. A.R. OF THE ASSESS EE THAT ALTHOUGH DISALLOWANCE HAS BEEN CONFIRMED BY THE CIT (A) BUT THE PENALTY IS NOT JUSTIFIED BECAUSE THE A.O. COULD NOT ESTABLISH THE FACT OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. IT WAS ALSO HIS SUBMISSION THAT IN ASSESSMENT YEAR 2001-02, ALSO TH ERE WAS A CLAIM OF THE ASSESSEE REGARDING FOREIGN TRAVELING EXPENSES OF RS .3,96,662/- OUT OF WHICH THE AO MADE DISALLOWANCE OF RS. 3,08,036/- AND THE LD. C.IT (A) HAS CONFIRMED THE DISALLOWANCE OF ONLY RS.2,31,491/- IN THAT YEAR. IT IS SUBMITTED THAT IN THAT YEAR, PART OF THE FOREIGN TRAVEL EXPEN SES INCURRED HAD BEEN ALLOWED AND HENCE IT CANNOT BE SAID THAT IN THE PRE SENT YEAR, THE ENTIRE FOREIGN TRAVELING EXPENSES INCURRED BY THE ASSESSEE IS FOR NON BUSINESS PURPOSE AND THEREFORE, PENALTY IS NOT JUSTIFIED. 6. AS AGAINST THIS, THE LD. D.R. OF THE REVENUE SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.2632/ AHD/2009 . ASSESSMENT YEAR 20 06-07. 4 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. IN THE PRESENT YEAR, IT WAS A SUBMISSION OF THE ASSESSEE BEFORE TH E A.O. THAT FOREIGN TRAVELING EXPENDITURE WAS INCURRED FOR PROMOTION OF BUSINESS ABROAD WITHOUT GIVING ANY DETAILS WHATSOEVER IN ASSESSMENT PROCEEDINGS OR IN COURSE OF PENALTY PROCEEDINGS BEFORE THE A.O. IN CO URSE OF APPEAL AGAINST THE PENALTY ORDER BEFORE THE LD. CIT (A), A NEW SUB MISSION WAS MADE BY THE ASSESSEE THAT THE IMPUGNED FOREIGN TRAVEL EXPENDITU RE WAS INCURRED FOR THE PURPOSE OF RESEARCH AND ADOPTING NEW INNOVATIVE TEC HNIQUES IN ITS BUSINESS AND ALSO FOR EXPLORING BUSINESS OPPORTUNITIES. NO D ETAILS WHATSOEVER HAVE BEEN FURNISHED BEFORE THE LD. CIT (A) OR BEFORE US IN THIS REGARD AS TO WHAT TYPE OF RESEARCH WAS UNDERTAKEN IN COURSE OF THIS F OREIGN VISIT. THIS IS ALSO NOT BROUGHT ON RECORD AS TO WHOM, PARTNER OF THE AS SESSEE FIRM SHRI SITESH PARIKH AND HIS WIFE NEHA PARIKH MET FOR THE PURPOSE OF BUSINESS OPPORTUNITY DURING THIS FOREIGN VISIT. IF SOME DETAILS OR EVIDE NCES COULD HAVE BEEN FURNISHED BY THE ASSESSEE IN SUPPORT OF ITS CONTENT ION THAT THE PRESENT VISIT TO ABROAD WAS FOR THE PURPOSE OF BUSINESS BY BRINGING SOME CORRESPONDENCE WITH PARTIES IN THIS REGARD, IT WOULD HAVE BEEN A D IFFERENT CASE AT LEAST FOR THE PURPOSE OF PENALTY MATTER BUT IN THE ABSENCE OF ANY DETAILS OR EVIDENCE WHATSOEVER, ON THE BASIS OF THIS SUBMISSION ALONE, IT CANNOT BE ACCEPTED THAT THE ASSESSEE HAS DISCHARGED ITS ONUS OF EXPLAINING THE BUSINESS PURPOSE OF THIS EXPENDITURE. IN OUR CONSIDERED OPINION, UNDER THIS FACTUAL POSITION WHEN THE ASSESSEE COULD NOT BRING ON RECORD AN IOTA OF E VIDENCE REGARDING ITS CONTENTION THAT THE VISIT IN QUESTION TO EUROPE AND LONDON BY THE PARTNER OF THE ASSESSEE FIRM AND HIS WIFE WERE FOR BUSINESS PU RPOSE, IT HAS TO BE ACCEPTED THAT THE PROVISIONS OF EXPLANATION-1 TO SE CTION 271(1)(C ) ARE ITA NO.2632/ AHD/2009 . ASSESSMENT YEAR 20 06-07. 5 APPLICABLE BECAUSE THE ASSESSEE COULD NOT SUBSTANTI ATE ITS EXPLANATION AND THE ASSESSEE HAS ALSO FAILED TO PROVE THAT THIS EXPLANA TION IS BONAFIDE BECAUSE THE ASSESSEE HAS FAILED TO DISCHARGE THE PRIMARY ONUS O F ESTABLISHING THAT THE EXPENDITURE IN QUESTION IS FOR BUSINESS PURPOSE AND THEREFORE, IN OUR CONSIDERED OPINION, PENALTY IS JUSTIFIED UNDER THES E FACTS. 8. REGARDING THE ASSESSMENT ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02, WE FIND THAT IN THAT YEAR, THE EXPENDITURE WAS INCURRED ON THE VISIT OF SHRI MANISH K. PATEL, PART NER, SITESH G. PARIKH, PARTNER AND NEHA PARIKH, MANAGER TO SINGAPORE OF RS .1,32,940/-, AND EXPENDITURE INCURRED ON ACCOUNT OF RELATIVES OF THE PARTNERS OF THE ASSESSEE- FIRM AND THEIR VISIT TO SINGAPORE, BANGKOK AND PHUK ET WAS TO THE EXTENT OF RS.1,87,177/- AND EXPENDITURE WAS INCURRED BY PARTN ERS AT BANGKOK AND PHUKET TO THE EXTENT OF RS. 76,545/- TOTALING TO RS .3,96,662/-. REGARDING THE EXPENDITURE INCURRED FOR THE MANAGER, WIFE OF A PAR TNER, IT WAS HELD BY THE A.O. THAT HER VISIT IS PERSONAL AND HENCE 1/3 RD OF THE EXPENDITURE FOR VISIT TO SINGAPORE WAS DISALLOWED ON THIS BASIS. IN THAT YE AR, IT IS NOTED BY THE A,.O. IN PARAGRAPH 5 OF THE ASSESSMENT ORDER OF THAT YEAR , THAT THE PARTIES WITH WHICH NEGOTIATIONS REGARDING PROMOTION OF BUSINESS AND JOINT VENTURE WERE UNDERTAKEN BELONGS ONLY TO SINGAPORE AS DETAILED IN REPLY DATED 23-10-2003, WHILE ASSESSEE HAS SHOWN THE VISITS TO OTHER PLACE S ALSO LIKE BANGKOK AND PHUKET. HENCE, IT IS SEEN THAT, IN THAT YEAR, THE A SSESSEE COULD BRING ON RECORD EVIDENCE REGARDING BUSINESS PURPOSE OF VISIT TO SIN GAPORE. HENCE, IN THAT YEAR EXPENDITURE INCURRED BY THE PARTNER OF THE ASS ESSEE FIRM FOR VISIT TO SINGAPORE WAS ALLOWED BY THE A.O. WHEN THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT (A), THE CIT (A) ALSO ALLOWED EX PENDITURE OF RS. 76,545/- ALSO REGARDING EXPENDITURE INCURRED BY THE PARTNERS AT BANGKOK AND PHUKET, ITA NO.2632/ AHD/2009 . ASSESSMENT YEAR 20 06-07. 6 ON THIS BASIS THAT SINCE THE EXPENDITURE INCURRED B Y THE PARTNERS ON FOREIGN TOUR EXPENSES FOR VISIT TO SINGAPORE HAS BEEN ALLOW ED BY THE A.O. CONSIDERING THE SAME AS BUSINESS EXPENDITURE, EXPEN DITURE INCURRED BY THE PARTNER FOR THEIR TOUR TO BANGKOK AND PHUKET ARE AL SO ALLOWABLE EXPENDITURE. IN THE PRESENT YEAR, WE HAVE NOTED THAT NO IOTA OF EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW ANY BUSINESS PURPOSE FOR VISITING EUROPE AND LONDON. IN FACT, NOT EVEN THE NAME OF ANY PARTY OF EUROPE AND LONDON HAS BEEN BROUGHT ON RECORD WITH WHOM THERE WAS ANY DISCUSSION OR MEE TING BY THE PARTNER OF THE ASSESSEE FIRM OR HIS WIFE DURING THEIR VISIT TO EUROPE AND LONDON AND THEREFORE, ON THE BASIS OF THIS ASSESSMENT ORDER IN ASSESSMENT YEAR 2001-02, IT CANNOT BE ACCEPTED THAT THE DISALLOWANCE IN THE PRESENT YEAR IS ONLY ON SUSPICION AND THEREFORE, PENALTY IS NOT JUSTIFIED. IN OUR CONSIDERED OPINION, THIS ASSESSMENT ORDER FOR ASSESSMENT YEAR 2001-02 I S OF NO HELP TO THE ASSESSEE IN THE PRESENT YEAR REGARDING PENALTY BECA USE THE FACTS ARE ENTIRELY DIFFERENT. IN THAT YEAR, ONLY THAT EXPENDITURE WAS ALLOWED FOR WHICH THE ASSESSEE COULD BRING ON RECORD EVIDENCE REGARDING B USINESS PURPOSE OF THE VISIT. IN THE ABSENCE OF ANY EXPLANATION WITH EVIDE NCE REGARDING BUSINESS PURPOSE OF FOREIGN VISIT IN THE PRESENT YEAR, IT I S A CLEAR CASE OF CONCEALMENT OF INCOME AND HENCE, WE DO NOT FIND ANY REASON TO I NTERFERE IN THE ORDER OF THE LD. CIT (A). 9. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 05 - 2011. SD/- SD/- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER. ACCOUNTANT MEMBER. ITA NO.2632/ AHD/2009 . ASSESSMENT YEAR 20 06-07. 7 AHMEDABAD. DATED: 13 - 05- 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IV, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 10 - 5 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 11 / 5 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..