PAINTERIOR (INIDA), MUMBAI V. ACIT 13(1), MUMBAI

ITA 3134/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48404 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 22-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARIGOVIND SINGH
• Assessee Lawyers: H N MOTIWALA
• Keywords: Depreciation; Business expenditure; Initiation of penalty proceedings; Wrong claim
• Section: 234B; 37(1); 27; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) PAINTERIOR (INDIA) C/O H N MOTIWALLA AND CO. 508, SHARDA CHAMBER, 33. NEW MARINE LINES MUMBAI-400020 PAN:AAAFP4830F .APPELLANT VS ACIT 13(1) AAYAKAR BHAVAN M K ROAD, MUMBAI-400020 ..RESPONDENT ASSESSEE BY : SHRI H N MOTIWA LA REVENUE BY : SHRI HARI GOVIND SINGH O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) DATED 05.03.2010 OF CIT(A) ARI SING FROM THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT FOR THE ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN THIS APPEAL. HOWEVER THE ONLY ISSUE ARISES FOR OUR CONS IDERATION AND ADJUDICATION IS WHETHER IN THE FACTS AND CIRCUM STANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN CONFIRMING TH E LEVY OF ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 2 PENALTY ON TRAVELING EXPENSES OF RS.11,04,303, ON SALES TAX PENALTY OF RS.1,85,000/- AND DISALLOWANCE OF ELECTR ICITY EXPENSES OF RS.1,11,615/- UNDER SECTION 271(1)( C ) OF THE ACT . 3. FACTS OF THE CASE ARE THAT THE AO IN THE ASSESSM ENT ORDER DATED 26.12.2006 INTERALIA MADE ADDITION IN RESPECT OF TRAVELING EXPENSES OF RS.11,04,303, SALES TAX PEN ALTY OF RS.1,85,000/-, DISALLOWANCE OF ELECTRICITY EXPENSES OF RS.1,11,615, BUSINESS PROMOTION EXPENDITURE, MOTOR CAR EXPENDITURE AND DEPRECIATION, CONVEYANCE EXPENDITU RE AND STAFF WELFARE EXPENDITURE, SUNDRY EXPENSES AND TELE PHONE EXPENSES. ACCORDINGLY, THE AO INITIATED PENALTY IN RESPECT OF ADDITION OF RS.24,69,172 VIDE ORDER DATED 23.3 .2009 PASSED U/S 271(1) (C ). THE AO LEVIED PENALTY OF RS.8,85,815/-. 4. ON APPEAL, THE CIT(A) DELETED THE PENALTY IMPOSE D ON DISALLOWANCE OF BUSINESS PROMOTION EXPENDITURE, MO TOR CAR EXPENDITURE AND DEPRECIATION, CONVEYANCE EXPENDITU RE AND STAFF WELFARE EXPENDITURE, SUNDRY EXPENSES AND TELE PHONE EXPENSES BEING ADHOC IN NATURE. HOWEVER, THE CIT(A ) HAS CONFIRMED THE PENALTY IMPOSED ON DISALLOWANCE OF EX PENSES ON ELECTRICITY, TRAVELING EXPENSES AND SALES TAX P ENALTY. ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 3 5. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE AO HAS NOT INITIATED PENALTY I N RESPECT OF SALES TAX PENALTY DISALLOWANCE AND TRAVELING EXPENS ES, THEREFORE, THE PENALTY IMPOSED BY THE AO IS AGAIN ST THESE TWO DISALLOWANCES IS NOT SUSTAINABLE. THE LEARNED AR HAS REFERRED THE VARIOUS DISALLOWANCES MADE BY THE AO I N THE ASSESSMENT YEAR AND SUBMITTED THAT IN THE CASE OF ELECTRICITY EXPENSES, THE LEARNED AO HAS SPECIFICALLY MENTIONE D THE INITIATION OF PENALTY PROCEEDING U/S 271(1)(C ) WH EREAS IN THE CASE OF OTHER TWO DISALLOWANCES I.E. SALES TAX PENALTY AND TRAVELING EXPENSES, NO SUCH PENALTY WAS INITIAT ED U/S 271(1)( C ) WHILE ADJUDICATING THE ISSUES. HE HAS RELIED UPON THE DECISION OF THE HON. CALCUTTA HIGH COURT IN THE CASE OF V P SOMATANI V/S CIT REPORTED IN 135 ITR 313 (CAL), THE DECISION OF THE HON. M P HIGH COURT, IN THE CASE OF T A LOKHANDWALA V/S CIT REPORTED IN 135 ITR 54 3(MP) AS WELL AS THE ORDER OF THIRD MEMBER DECISION OF THE PATNA BENCH OF THIS TRIBUNAL IN THE CASE ACIT V/S NAGESHW AR PRASAD (LATE) REPORTED IN 244 ITR (AT) 38. 6. THE LEARNED AR EMPHASIZED THAT THE AO HAS NOT INITIATED THE PENALTY SPECIFICALLY ON THE DISALLOWA NCE MADE FOR TRAVELING EXPENDITURE AND SALES TAX PENALTY. THEREFORE, THE PENALTY LEVIED U/S 271(1) ( C ) IS NOT JUSTIFIA BLE. ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 4 ALTERNATIVELY, HE HAS RELIED UPON THE DECISION OF THE HON. SUPREME COURT IN THE CASE OF CIT V/S RELIANCE PET RO PRODUCTS REPORTED IN 322 ITR 158(SC) AND SUBMIT TED THAT MERELY BECAUSE THE CLAIM OF EXPENDITURE HAS BEEN DI SALLOWED BY THE ASSESSING AUTHORITY WOULD NOT JUSTIFY THE L EVY OF PENALTY WHEN THE EXPENDITURE ITSELF HAS NOT BEEN D OUBTED. 7. THE LD. DR HAS SUBMITTED THAT THE AO HAS SPECIF ICALLY MENTIONED ABOUT INITIATION OF PENALTY IN THE LAST P ARAGRAPH OF THE ASSESSMENT ORDER AND THEREFORE, AS PER THE EXP LANATION 2 TO SECTION 271(1)( C ) WHEN THE AO ISSUED NOTICE U/S 271, HE MAKES THE ASSESSEE AWARE THAT THE PROVISIONS OF THE A PENALTY PROVISIONS INCLUDED EXPLANATION ARE TO BE USED AGAINST HIM. HE HAS RELIED UPON THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF K P MADHUSUDHANAN V/ S CIT REPORTED IN 251 ITR 99(SC). HE HAS ALSO RELIED UPO N THE DECISION OF HON.DELHI HIGH COURT IN THE CASE CIT V/ S ZOOM COMMUNICATION (P) LTD REPORTED IN 327 ITR 510(DEL) . ON MERITS THE LD. DR RELIED UPON THE ORDERS OF THE LOW ER AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND R ELEVANT RECORD. AS REGARDS THE CONTENTION OF INITIATION OF PENALTY PROCEEDINGS IN RESPECT OF TRAVELING EXPENSES AND SA LES TAX PENALTY ARE CONCERNED WE NOTE THAT APART FROM INI TIATING THE ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 5 PENALTY PROCEEDINGS U/S 271(1)( C ) SEPARATELY ON THE ISSUE REGARDING THE ELECTRIFY EXPENSES, THE AO AT THE END OF THE ASSESSMENT ORDER HAS DULY MENTIONED ABOUT THE PENA LTY TO BE INITIATED U/S 271(1)( C). THE LAST PARAGRAPH O F THE ASSESSMENT ORDER IS REPRODUCED BELOW : ASSESSED ACCORDINGLY, GIVE CREDIT FOR TAXES PAID, AFTER DUE VERIFICATION. CHARGE INTEREST U/S 234B AN D 234C OF THE IT ACT, ISSUE DEMAND NOTICE ACCORDINGLY . INITIATE PENALTY PROCEEDINGS U/S 271(1)( C ) OF TH E IT ACT, 1961 AS THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME AND COULD NOT SUBSTANTIATE T HE DETAILS FILED WIT THE RETURN OF INCOME AND HAVE CONCEALED THE PARTICULARS OF HIS INCOME. CALCULATIO N OF THE TAXES AND LEVY OF INTEREST IS WORKED OUT IN ITNS 150 ANNEXED HEREWITH 9. THUS, IT IS CLEAR THAT THE AO WAS SATISFIED REG ARDING INITIATION OF THE PROCEEDINGS FOR THE DISALLOWANCE MADE IN THE ASSESSMENT ORDER AS EXPRESSED HIS INTENTION OF INITIATED OF THE PROCEEDINGS IN THE LAST PARA AS REPRODUCED A BOVE. THE REQUIREMENT OF INITIATION OF PENALTY PROCEEDIN GS IS OTHERWISE SATISFIED ONCE, THE AO HAS ISSUED NOTICE U/S 271(1) BEFORE LEVY OF PENALTY. THE HON. SUPREME CO URT IN THE CASE OF K P MADHUSUDHANAN V/S CIT (SUPRA) HAS HELD AS UNDER : THE EXPLANATION TO S 271(1)( C ) IS A PART OF S.2 71. WHEN THE ITO OR THE3 AAC ISSUES TO AN ASSESSEE A NOTICE U/S 271, HE MAKES THE ASSESSEE AWARE THAT TH E PROVISIONS THEREOF ARE TO BE USED AGAINST HIM. THES E PROVISIONS INCLUDE THE EXPLANATION. BY REASON OF TH E ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 6 EXPLANATION, WHERE THE TOTAL INCOME RETURNED BY TH E ASSESSEE IS LESS THAN 80% OF THE TOTAL INCOME ASSESSED UNDER SECTION 143 OR 144 OF 147, REDUCED TO THE EXTENT THEREIN PROVIDED, THE ASSESSEE IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF, UNLESS HE PROVES THAT THE FAILURE TO RETURN THE COR RECT INCOME DID NOT ARISE FROM ANY FRAUD OR NEGLECT ON H IS PART. THE ASSESSEE IS, THEREFORE, BY VIRTUE OF TH E NOTICE UNDER SECTION 271 PUT TO NOTICE THAT IF HE D OES NOT PROVE, IN THE CIRCUMSTANCES STATED IN THE EXPLANATION , THAT HIS FAILURE TO RETURN HIS CORREC T INCOME WAS NOT DUE TO FRAUD OR NEGLECT, HE SHALL B E DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF AND CONSEQUENTLY, BE .LIABLE TO THE PENALTY PROVIDED BY THAT SECTION. NO EXPRESS INVOCATION OF HE EXPLANATI ON TO SECTION 271 IN THE NOTICE U/S 271 IS NECESSARY BEFORE THE PROVISIONS OF THE EXPLANATION THEREIN AR E APPLIED. IT WAS SUBMITTED THAT THE ASSESSEE HAD AGREED TO THE ADDITIONS TO HIS INCOME REFERRED TO HEREINABOVE TO BUY PEACE AND IT DID NOT FOLLOW THE RE FROM THREAT THE AMOUNT THAT WAS AGREE TO BE ADDED WAS CONCEALED INCOME. THAT IT DID NOT FOLLOW THAT THE AMOUNT AGREED TO BE ADDED WAS CONCERNED INCOME IS UNDOUBTEDLY WHAT WAS LAID DOWN BY THIS COURT IN THE CASE OF SIR SHADILAL SUGAR AND GENERAL MILLS LTD AND THAT, THEREFORE, THE REVENUE QWS REQUIRED TO PROVE THE MEANS REA OF A QUASI-CRIMINAL OFFENCE. BUT IT WAS BECAUSE OF THE VIEW TAKEN IN THIS AND OTHER JUDGMENTS THAT THE EXPLANATION TO SECTION 271 WAS ADDED. BY REASON OF THE ADDITION OF THAT EXPLANATIO N, THE VIEW TAKEN IN THIS CASE CAN NO LONGER BE SAID TO BE APPLICABLE CIT V/S K P MADHUSUDHANNAN (2001) 165 CTR(KER) 353 2000) 246 ITR 218(KER) AFFIRMED, CIT V/S P M SHAH (1993) 203 ITR 792 (BOM): TC50.800 AND CIT V/S DHARAMCHAND I SHAL (1993) 113 CTR (BOM) 214 1993) 204 ITR 462(BOM) OVERRULED; SIR SHADILAL SUGAR AND GENERAL MILLS L TD AND ANR. V CIT (1987) 64 CTR (SC) 199 : (1981) 168 ITR 705 (SC) TC 50R.300 HELD NO LONGER GOOD LAW. NO EXPRESS INVOCATION OF THE EXPLANATION TO SECTION 271 IN THE NOTICE U/S 271 IS NECESSARY FOR APPLYIN G THE PROVISIONS OF SAID EXPLANATION: AFTER THE INTRODUCTION OF EXPLANATION, THERE IS NO QUESTION O F PROOF OF MEANS REA ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 7 11. THEREFORE, IN VIEW OF THE DECISION OF THE HON. SUPREME COURT IN THE CASE OF CIT V/S K P MADHUSUDHANNAN (SUPRA) THE SPECIFIC EXPRESSION AS RECORDED BY THE AO IN THE ASSESSMENT ORDER, WE DO NOT FIND ANY SUBSTANCE IN T HE CONTENTION OF THE LEARNED AR OF THE ASSESSEE . AS REGARD THE DECISION OF THE HON. CALCUTTA HIGH COURT IN THE CAS E OF V P SOMATANI V/S CIT (SUPRA) AS WELL AS THE DECISION O F THE HON. MADHYA PRADESH HIGH COURT IN THE CASE OF T A LOKHA NDWALA (SUPRA), THE SAME ARE ON THE ISSUE OF JURISDICTION OF THE TRIBUNAL TO IMPOSE THE PENALTY AND NOT ON THE POIN T OF INITIATION OF THE PENALTY. THEREFORE, THE DECISIO NS RELIED UPON BY THE LEARNED AR ARE NOT APPLICABLE ON THE IS SUE IN THE CASE IN HAND. SIMILARLY, THE THIRD MEMBER DECISIO N OF THE PATNA BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT V /S NAGESHWAR PRASAD (LATE) (SUPRA) IS ALSO ON THE DIFF ERENT FACTS BECAUSE IN THAT CASE THE PENALTY WAS NOT A T ALL INITIATED BY THE AO WHO FRAMED THE ASSESSMENT AND SUBSEQUENTLY PENALTY WAS IMPOSED AND IT WAS HELD THAT THE SUBSEQUENT AO CANNOT LEVY THE PENALTY WHEN THE AO F RAMED THE ASSESSMENT DID NOT INITIATE THE PENALTY. THE SA ID ORDER IS NOT APPLICABLE TO THE PRESENT CASE BECAUSE THE FA CTS ARE ENTIRELY DIFFERENT. MOREOVER THE ISSUE IN THAT CAS E WAS WHETHER THE PENALTY CAN BE LEVIED ON THE LEGAL REPR ESENTATIVE OF THE DECEASED ASSESSEE. ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 8 12. AS REGARDS, THE DISALLOWANCE OF ELECTRICITY CHA RGES OF 1,11,650/- ARE CONCERNED, IT IS UNDISPUTED FACT THA T THESE CHARGES PERTAIN TO THE ELECTRICITY BILL OF THE PART NERS RESIDENT OF THE ASSESSEE FIRM. THEREFORE THE EXPENSES CLAIM ED BY THE ASSESSEE FOR ELECTRICITY CHARGES ARE PURELY PERSON AL IN NATURE AND CANNOT BE SAID TO BE INCURRED WHOLLY AN D EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSES SEE HAS MADE INHERENTLY INCORRECT AND ILLEGAL CLAIM REGAR DING THE ELECTRICITY CHARGES. THEREFORE, THE DECISION OF TH E HON. SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RELIANCE PETRO PRODUCTS PVT. LTD. : (2010) 322 ITR 158 (SC), WOULD NOT RESCUE THE ASSESSEE FROM THE LEVY OF PENALTY AGAINST MAKING ABSOLUTELY WRONG AND ILLEGAL CLAIM. THIS POSITION HAS BEEN EXAMINED BY THE HON. DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATIONS (SUPRA) A S UNDER : 18. IN THE CASE OF RELIANCE PETRO PRODUCTS PRIVAT E LIMITED(SUPRA), THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF THE INTEREST CLAIMED AS A DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT WAS DELETED BY THE COMMISSIONER OF INCOME TAX(APPEALS) THOUGH IT WAS LATER RESTORED, BY THE TRIBUNAL, TO THE ASSESSING OFFICER. THE APPEAL FILE D BY THE ASSESSEE AGAINST THE ORDER OF THE TRIBUNAL WAS ADMITTED BY THE HIGH COURT. IT ITA NO.7/2010 PAGE 13 OF 18 WAS, IN THESE CIRCUMSTANCES, THAT THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE HAD NEITHER CONCEALED THE INCOME NOR FILED INACCURATE PARTICULARS THEREOF. IN RECORDING THIS FINDING, THE TRIBUNAL FELT THAT IF TWO VIEWS OF THE CLAIM OF THE ASSESSEE WERE POSSIBLE, THE EXPLANATIO N OFFERED BY IT COULD NOT BE SAID TO BE FALSE. THIS, HOWEVER, IS NOT THE FACTUAL POSITION IN THE CASE ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 9 BEFORE US. THE FACTS OF THE PRESENT CASE THUS ARE CLEARLY DISTINGUISHABLE. 19. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH I S INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCOME OF THE ASSESSEE, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONAFIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALAFIDE, EXPLANATION 1 TO SECTION 271(1) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE. 20. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALS O WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONAFIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTI ON 271(1)(C) OF THE ACT. ITA NO.7/2010 PAGE 14 OF 18 I F WE TAKE THE VIEW THAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONAFIDE WHILE MAKING A CLAIM OF THIS NATURE , THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP F OR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY C AN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALAFIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CA SES ARE NOT PICKED UP FOR SCRUTINY. THIS WOULD TAKE AWA Y THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISION S IN THE ACT HAVE. 21. WE FIND THAT THE ASSESSEE BEFORE US DID NOT EXPLAIN EITHER TO THE INCOME TAX AUTHORITIES OR TO THE INCOME TAX APPELLATE TRIBUNAL AS TO IN WHAT ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 10 CIRCUMSTANCES AND ON ACCOUNT OF WHOSE MISTAKE, THE AMOUNTS CLAIMED AS DEDUCTIONS IN THIS ITA NO.7/2010 PAGE 15 OF 18 CASE WERE NOT ADDED, WHILE COMPUTING THE INCOME OF THE ASSESSEE COMPANY. WE CANNOT LOSE SIGHT OF THE FACT THAT THE ASSESSEE IS A COMPANY WHICH MUST BE HAVING PROFESSIONAL ASSISTANCE IN COMPUTATION OF ITS INCOME, AND ITS ACCOUNTS ARE COMPULSORILY SUBJECTED TO AUDIT. IN TH E ABSENCE OF ANY DETAILS FROM THE ASSESSEE, WE FAIL T O APPRECIATE HOW SUCH DEDUCTIONS COULD HAVE BEEN LEFT OUT WHILE COMPUTING THE INCOME OF THE ASSESSEE COMPANY AND HOW IT COULD ALSO HAVE ESCAPED THE ATTENTION OF THE AUDITORS OF THE COMPANY. 22. THE EXPLANATION OFFERED BY THE ASSESSEE COMPANY WAS NOT ACCEPTED EITHER BY THE ASSESSING OFFICER OR BY THE COMMISSIONER OF INCOME TAX(APPEALS). THE VIEW OF INCOME TAX APPELLATE TRIBUNAL REGARDING ADMISSIBILITY OF THE DEDUCTION O N ACCOUNT OF WRITTEN OFF OF CERTAIN ASSETS, UNDER SECTION 32(1)(III) OF THE ACT IS WHOLLY ERRONEOUS. THE TRIBUNAL HAS NOT RECORDED A FINDING THAT THE EXPLANATION FURNISHED BY THE ASSESSEE IN RESPECT OF THE DEDUCTION DUE TO CERTAIN ASSETS BEING WRITTEN O FF WAS A BONAFIDE EXPLANATION. THE TRIBUNAL HAS NOWHERE HELD THAT IT WAS DUE TO OVERSIGHT THAT THE AMOUNT OF THIS DEDUCTION COULD NOT BE ADDED WHILE COMPUTING THE INCOME OF THE ASSESSEE COMPANY. THEREFORE, WE CONFIRM THE PENALTY LEVIED IN RESPECT OF ELECTRICITY CHARGES. 13. ON THE DISALLOWANCE OF SALES TAX PENALTY, IT I S TO BE NOTED THAT THERE IS NO DISPUTE THAT THE ASSESSEE P AID SALES TAX PENALTY AND THE SAID EXPENDITURE THOUGH IN THE NATURE OF PENALTY HAS BEEN INCURRED IN RELATION TO THE BUSINE SS OF THE ASSESSEE. THEREFORE, EVEN THOUGH THE SAID EXPENDIT URE IS NOT ALLOWABLE IN VIEW OF THE EXPLANATION TO THE SE CTION 37(1) OF THE ACT, THE SAME CANNOT BE SAID TO BE BOGUS OR INHERENTLY ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 11 WRONG CLAIM BY THE ASSESSEE. SINCE THE CLAIM OF T HE ASSESSEE REGARDING SALE TAX PENALTY IS NOT ALLOWABL E IN VIEW OF THE PROVISIONS OF THE ACT, THEREFORE, THE SAME DOES NOT AMOUNT TO CONCEALMENT OF THE INCOME OR FURNISHING IN ACCURATE PARTICULARS OF THE INCOME. THE DISALLOWAN CE OF CLAIM AS THE SAME IS NOT ALLOWABLE UNDER THE PROVIS IONS OF ACT DOES NOT IPSO FACTO ATTRACTS THE PENALTY U/S 27 1(1)(C ) OF THE ACT. EVEN OTHERWISE THE EXPENDITURE IS NOT FO UND AS INCORRECT OR BOGUS. THEREFORE, IN VIEW OF THE DE CISION OF THE HONORABLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCT V/S CIT (SUPRA), WE DELETE THE PENALT Y LEVIED IN RESPECT OF DISALLOWANCE OF SALES TAX PENALTY. 14. THE LAST ITEM OF PENALTY IS REGARDING TRAVELIN G EXPENSES. THE ASSESSEE CLAIMED FOREIGN TOUR EXP ENSES AS BUSINESS EXPENSES. THE AO RECORDED THE FACTS TH AT THE ASSESSEE HAS ACCOMPANIED BY THE FAMILY OF THE AS SESSEE FOR THE FOREIGN TOUR AND THE ENTIRE EXPENDITURE OF FOREIGN TRAVELING WERE CLAIMED BY THE ASSESSEE AS BUSINESS EXPENDITURE. ACCORDINGLY, THE AO DISALLOWED THE S UM OF RS.11,04,303/- OUT OF TOTAL CLAIM OF RS.11,67,599. THIS DISALLOWANCE MADE BY THE AO IS IN RESPECT OF THE EXPENDITURE INCURRED ON FOREIGN TOUR OF THE FAMILY MEMBER OF THE ASSESSEE. THIS FINDING OF THE AO HAS BEEN CON FIRMED BY THE CIT(A) AS WELL AS BY THIS TRIBUNAL. THEREFORE , THE ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 12 DISALLOWANCE ON ACCOUNT OF TRAVELING EXPENDITURE RE PRESENTS THE PERSONAL EXPENDITURE AND DOES NOT RELATE TO THE BUSINESS OF THE ASSESSEE. ONCE IT IS ESTABLISHED THAT THE CLAIM OF EXPENDITURE INCURRED BY THE ASSESSEE IS INCORRECT AND NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS THEN THE DECISION RELIED UPON BY THE ASSESSEE WOULD NOT HELP THE CASE OF THE ASSESSEE. ACCORDINGLY, IN VIEW OF THE ABOVE DISCUSSION AND DECISION OF HON. DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION (SUPRA), WE CONFIRM THE PENALTY IN RESPECT OF THE FOREIGN TRAVELING EXPENDITURE CLA IMED BY THE ASSESSEE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 13TH APRIL, 2 011 SD SD (J.SUDHAKAR REDDY) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 13TH DAY OF APRIL, 2011 SRL:1411 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO. 3134/MUM/2010 (ASSESSMENT YEAR- 2004-05) 13