M/s. Jindal Dycehem Industries Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 3528/DEL/2010

• Counselvise Citation: 352820114 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 21-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y S KAKKAR
• Keywords: Business expenditure
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `D: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER I.T. A. NO.3528/DEL/2010 ASSESSMENT YEAR : 2004-05 M/S. JINDAL DYCEHEM INDUSTRIES DY. COMMISSIONER O F INCOME-TAX, PVT. LTD., 110, BABAR ROAD, VS. CENTRAL CIRCLE-4( 1), NEW DELHI. OPP. WORLD TRADE CENTRE, NEW DELHI. PAN: AAACJ0719Q (APPELLANT) (RESPONDENT ) APPELLANT BY : SHRI SALIL AGGARWAL, ADVOCATE RESPONDENT BY : MS. Y.S. KAKKAR, SR. DR. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 1 6.06.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) CO NFIRMING THE PENALTY AMOUNTING TO RS.3,12,475/- LEVIED BY THE ASSESSING OFFICER UNDER SEC. 271(1)(C) OF THE INCOME-TAX ACT, 1961 (THE ACT) FOR THE ASSESSMENT YEAR 2004-05. 2. IN THIS CASE, VARIOUS ADDITIONS WERE MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT MADE UNDER SEC. 143(3) OF THE ACT. O NE OF THE ADDITION MADE BY THE AO IS OF RS.7,04,440/- ON ACCOUNT OF DISALLO WANCE OUT OF BUSINESS 2 PROMOTION AND OTHER EXPENSES. IN THE ASSESSMENT OR DER, IT HAS BEEN NOTED BY THE AO THAT THE ASSESSEE HAD CLAIMED CERTAIN BUSINE SS PROMOTION AND OTHER EXPENSES. THE DETAILS OF BUSINESS PROMOTION AND OT HER EXPENSES WERE FILED. THE ASSESSEE WAS REQUIRED TO PRODUCE VOUCHERS AND S UBSTANTIATE REASONABLENESS AND GENUINENESS OF THE EXPENSES. CO PIES OF THE VOUCHERS WERE FILED. IT WAS THEN STATED BY THE AO THAT CERT AIN EXPENSES ARE INADMISSIBLE FOR THE REASONS INDICATED IN THE ORDER . THE REASONS GIVEN BY THE AO IN THE ORDER WERE THAT THE EXPENSES ON VARIOUS I TEMS AGGREGATING TO RS.7,40,440/- WERE NOT INCURRED FOR THE BUSINESS P URPOSES, BUT WERE INCURRED ON SOME PERSONAL BILLS OF SHRI S.K. JINDAL, SHRI J. P. JINDAL AND OTHERS AND WERE NOT ADMISSIBLE UNDER SEC. 37(1) OF THE ACT. T HE AO STATED THAT VARIOUS BILLS WERE RELATED TO PERSONAL EXPENSES, VARIOUS HO TELS FOR DINING ETC. AND NO SATISFACTORY EXPLANATION WAS FILED BY THE ASSESSEE COMPANY, AND THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE REASONABLENESS AND G ENUINENESS OF THE EXPENSES. HE, THEREFORE, AFTER EXAMINING THE DETAI LS, DISALLOWED THE SUM OF RS.7,04,440/- BEING EXPENSES OF PERSONAL IN NATURE AND NOT RELATED TO THE BUSINESS OF THE ASSESSEE COMPANY. THE AFORESAID AD DITION WAS FURTHER CONFIRMED IN THE APPEAL FILED BY THE ASSESSEE. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO INITIATED PENALTY PROCEEDINGS UNDER SEC. 271(1)(C) OF THE ACT. A SHO W CAUSE NOTICE WAS 3 ISSUED BY THE AO TO THE ASSESSEE. THE AO STATED TH AT A SATISFACTION WAS RECORDED THAT THE ASSESSEE HAD DELIBERATELY FILED I NACCURATE PARTICULARS OF BUSINESS PROMOTION EXPENSES SO AS TO CONCEAL INCOME AND EVADE TAX THEREUPON. THE SHOW CAUSE NOTICE DATED 17.09.2009 WAS ISSUED BY THE AO AND WAS SERVED UPON THE ASSESSEE BUT NO CONTENTION IN SUPPORT OF THE ASSESSEES CLAIM WAS OFFERED. THE AO, THEREFORE, O BSERVED THAT THE ASSESSEE HAD NO EXPLANATION TO OFFER. THE AO, THEREFORE, LE VIED PENALTY UNDER SEC. 271(1)(C) OF THE ACT IN RESPECT OF THE AFORESAID DI SALLOWANCE OF RS.7,04,440/- AS WELL AS IN RESPECT OF SOME OTHER DISALLOWANCE, W ITH WHICH WE ARE NOT CONCERNED. 4. ON AN APPEAL, THE LEANED CIT(A) CONFIRMED THE AO S ORDER IN SO FAR AS PENALTY IS LEVIED WITH REGARD TO THE ADDITION OF RS.7,04,440/-. IT IS STATED BY THE LEARNED CIT(A) THAT IT WAS THE BURDEN OF THE ASSESSEE TO SUPPORT THE CLAIM MADE IN THE RETURN AND TO SHOW THAT THE ASSES SEES CLAIM WAS BONA FIDE WITHIN THE MEANING OF EXPLANATION 1 TO SEC. 271(1)( C) WHICH HAS BEEN INSERTED WITH EFFECT FROM 1.4.1976. THE LEARNED CI T(A) FURTHER OBSERVED THAT THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE IT S BURDEN THAT LAY UPON IT UNDER EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT BY ESTABLISHING THAT THE EXPLANATION OF THE ASSESSEE WAS BONA FIDE AND ALL T HE RELEVANT FACTS WERE DISCLOSED. 4 5. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE, THE ASSESSEE HAD CLAIMED BUSINESS PROMOTION AND OTHER EXPENSES, OUT OF WHICH SUM OF RS.7,04,440/- WAS DISALLOWED BY THE AO ON THE GROUND THAT THE ASS ESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE GENUINENESS AND REASONABLENESS OF THE EXPENSES. THE AO FURTHER STATED THAT THESE EXPENSES ARE FOUND TO BE PERSONAL IN NATURE AND NOT RELATED TO THE BUSINESS OF THE ASSESSEE COMPANY. T HE EXPENDITURES WERE INCURRED IN RESPECT OF CERTAIN HOTEL BILLS AND EXPE NSES INCURRED BY SHRI S.K. JINDAL, SHRI J.P. JINDAL, ONE SHRI DEEPAK AND CERTA IN FAMILY MEMBERS OF SHRI S.K. JINDAL. IT WAS STATED BY THE AO THAT THESE EX PENSES WERE PERSONAL IN NATURE AS THEY WERE RELATED TO PERSONAL EXPENSES OF SHRI J.P. JINDAL AND SHRI S.K. JINDAL. IT IS NOT IN DISPUTE THAT SHRI J.P. J INDAL AND SHRI S.K. JINDAL ARE DIRECTORS OF THE ASSESSEE COMPANY. CERTAIN EXPENSE S WERE INCURRED BY THEM ON THEIR TRAVELLING TO CERTAIN DESTINATION IN THE C OURSE OF WHICH, THEY HAD INCURRED TRAVELLING EXPENSES AS WELL AS SOME HOTEL EXPENSES. THE EXPENSES, SOME OF WHICH ARE VERY NOMINAL, RUN INTO 20 ITEMS A GGREGATING TO RS.7,04,440/-. ON EXAMINING THE AOS AND CIT(A)S ORDERS, WE FIND THAT THESE EXPENSES WERE DISALLOWED FOR WANT OF EVIDENCE S TO SHOW AND ESTABLISH THAT THEY WERE RELATED TO THE BUSINESS ACTIVITY OF THE ASSESSEE COMPANY. IT WAS THE CASE OF THE ASSESSEE THAT EXPENDITURE INCUR RED BY SHRI S.K. JINDAL AND SHRI J.P. JINDAL AND THEIR FAMILY MEMBERS CAN B E CONSIDERED TO BE THE BUSINESS EXPENSES INASMUCH AS THEY WERE INCURRED BY THE COMPANY FOR BUSINESS EXIGENCIES. IT WAS FURTHER SUBMITTED THAT THE VISITS OF SHRI S.K. JINDAL AND SHRI J.P. JINDAL TO VARIOUS DESTINATIONS ALONG WITH THEIR FAMILY MEMBERS WAS NECESSARY FOR BUSINESS EXIGENCIES OF TH E ASSESSEES BUSINESS. 5 THERE COULD BE TWO VIEWS ON THE QUESTION, WHETHER T HE EXPENSES INCURRED BY THE DIRECTORS ON THEIR VISITS ALONG WITH THEIR FAMI LY MEMBERS ARE TO BE ALLOWED AS BUSINESS EXPENSES OR NOT. IN THIS CASE, THE DETAILS OF EXPENSES AND VOUCHERS HAVE BEEN PRODUCED BY THE ASSESSEE BEFORE THE AO. IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE FAILED TO PRODUCE THE VOUCHERS OF EXPENSES CLAIMED IN THE RETURN OF INCOME. THE PRESENT CASE IS A CASE OF A COMPANY WHERE THE AMOUNT HAS BEEN ACTUALLY INCURRED BY THE COMPANY. ANY AMOUNT INCURRED BY THE COMPANY FOR DIRECTOR CAN BE SAID TO BE FOR THE BUSINESS PURPOSES INASMUCH AS THE AMOUNT HAS BEEN PAID TO TH E DIRECTOR. THEREFORE, MERE BECAUSE CERTAIN CLAIM OF THE EXPENSES INCURRED BY THE ASSESSEE COMPANY HAS BEEN DISALLOWED FOR WANT OF EVIDENCE AN D IN ABSENCE OF THE PROOF THAT THEY WERE INCURRED FOR THE PURPOSE OF BU SINESS, NO PENALTY UNDER SEC. 271(1)(C) OF THE ACT CAN BE LEVIED. IN THIS R ESPECT, A RELIANCE HAS BEEN PLACED BY THE ASSESSEE ON THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC), WHERE IT HAS BEEN HELD THAT A MERE MAKING OF A CLAIM, WHI CH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE, AND WHERE THERE IS NO F INDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE IS NO QUESTION OF INVITING THE PENA LTY UNDER SEC. 271(1)(C ) OF THE ACT. AT THIS STAGE, WE DO AGREE WITH THE CONTE NTION OF THE LEARNED DR SUPPORTED BY SEVERAL DECISIONS THAT IT IS THE BURDE N OF THE ASSESSEE TO GIVE A BONA FIDE EXPLANATION WITH REGARD TO THE CLAIM MADE IN THE RETURN OF INCOME WITH A VIEW TO ABSOLVE IT FROM THE PENALTY LEVIABLE UNDER SEC. 271(1)(C). HOWEVER, IN THIS CASE, IN THE LIGHT OF THE CLAIM BE ING DEBATABLE, WE ARE OF THE VIEW THAT THE EXPLANATION FURNISHED BY THE ASSESSEE WAS BONA FIDE THOUGH MIGHT NOT HAVE BEEN ACCEPTED IN THE ASSESSMENT. TH E ASSESSEE HAS ALSO 6 FURNISHED DETAILS OF THE EXPENSES INCURRED. IN THE LIGHT OF THE DISCUSSIONS MADE ABOVE, WE, THEREFORE, DELETE THE PENALTY LEVIE D UNDER SEC. 271(1)(C ) OF THE ACT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 8. THIS DECISION IS PRONOUNCED IN THE OPEN COURT ON 7 TH OCTOBER, 2011. SD/- SD/- (A.N. PAHUJA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH OCTOBER, 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.