DCIT, New Delhi V. M/s. Khanna Jewellers (P.) Ltd., New Delhi

ITA 3649/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8669 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-07-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 11-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Section: 271(1)(c); 143(3)

Judgement Text

I.T.A. NO.3649./DEL/2008 1 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH D BEFORE SHRI K.G.BANSAL, ACCOUTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO.3649 /DEL/2008 (ASSESSMENT YEAR 2004-05) DCIT, COY. CIRCLE 5(1), VS. M/S. KHANNA JEWELLERS NEW DELHI (P) LTD., KHANNA BHAWAN, BANK STREET, KAROL BAGH, NEW DELHI. (APPELLANTS) (RESPONDENTS) APPELLANT BY: SHRI B. K. GUPTA, SR. DR RESPONDENT BY: NONE ORDER PER GEORGE MATHAN, JM: 1. THIS APPEAL BY THE REVENUE HAS BEEN PREFERRED AG AINST THE ORDER OF LD. CIT(A)-VIII, NEW DELHI IN APPEAL NO.54/06-07 DATED 24.09.2008 FOR THE ASSESSMENT YEA R 2004-05 AGAINST THE LEVY OF PENALTY U/S 271(1)(C). 2. IT WAS THE SUBMISSION BY THE LD. D.R. THAT THE A SSESSEE HAD FILED ITS RETURN OF INCOME DECLARING AN INCOME OF RS.1,21,71,330/- AND THE ASSESSMENT HAD BEEN COMPLETED U/S 143(3) OF THE ACT ON A TOTAL INCOME O F RS.1,27,93,010/- AFTER MAKING A DISALLOWANCE ON I.T.A. NO.3649./DEL/2008 2 ACCOUNT OF FOREIGN TRAVEL AND LOCAL TRAVEL EXPENSES TO AN EXTENT OF RS.6,21,682/-. IT WAS THE SUBMISSION THA T THE ASSESSEE, HIS WIFE AND MINOR CHILDREN HAVE ALSO TRAVELLED ON THE FOREIGN TOUR AS ALSO THE LOCAL TRA VEL. IT WAS THE SUBMISSION THAT THE ASSESSING AUTHORITY HAD IN THE COURSE OF ASSESSMENT, DISALLOWED 3/4 TH OF LOCAL TRAVEL EXPENSES AND 50% OF THE FOREIGN TRAVEL EXPENSES ON ACCOUNT OF THE WIFE AND CHILDREN HOLDING THE SAME T O BE PERSONAL IN NATURE AND NOT SPENT WHOLLY AND EXCLUSI VELY FOR THE PURPOSE OF BUSINESS. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD REPLIED THAT THE EXPENDITURE HAD B EEN INCURRED TO EXPLORE FOREIGN MARKET AND TO STUDY THE LATEST DESIGN IN THE JEWELLERY AND THE WIVES HAD ACCOMPANIED THE DIRECTORS AS THEY WERE FLUENT IN ENGLISH AND WERE ABREAST OF LATEST DESIGNS IN JEWEL LERY. IT WAS THE SUBMISSION THAT THE DISALLOWANCE MADE BY THE ASSESSING AUTHORITY HAD NOT BEEN CONTESTED IN APPEA L BY THE ASSESSEE. IT WAS THE SUBMISSION THAT LD. CI T(A) ERRED IN DELETING THE PENALTY LEVIED. 3. WE HAVE CONSIDERED THE SUBMISSIONS. AT THE OUTSE T IT IS NOTICED THAT THE DISALLOWANCE MADE BY THE ASSESSING AUTHORITY WHICH HAS RESULTED IN THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT HAS ALSO BEEN MADE IN THE EARL IER ASSESSMENT YEARS AND IN THE SUBSEQUENT ASSESSMENT I.T.A. NO.3649./DEL/2008 3 YEARS. IT IS FURTHER NOTICED THAT LD. CIT(A) HAS IN PARA 5 OF HIS ORDER CONSIDERED THE FACT THAT FOR THE ASSES SMENT YEAR 1997-98 IN THE ASSESSEES OWN CASE ON THE ALMO ST SIMILAR ISSUE OF DISALLOWANCE OF FOREIGN TRAVEL EXP ENSES OF THE DIRECTOR AND THEIR FAMILY MEMBERS, THE ISSUE OF LEVY OF PENALTY U/S 271(1)(C) HAD ACHIEVED FINALITY BY THE ORDER OF THE ITAT AND THE REJECTION OF THE DEPARTMENTAL APPEAL BY THE HON'BLE HIGH COURT OF DELHI. IT IS ALSO NOTICED THAT THE LD. CIT(A) HAS CONSIDERED THE FINDING OF THIS TRIBUNAL IN THE ASSE SSEES OWN CASE FOR THE ASSESSMENT YEAR 1997-98 WHEREIN TH IS TRIBUNAL HAS HELD AS FOLLOWS: THOUGH THIS DECISION OF CIT(A) WAS REVERSED BY THE TRIBUNAL, IT SHOWS THAT THE QUESTION OF ALLOWANCE O F THE FOREIGN TRAVEL EXPENSES WAS SOMEWHAT DEBATABLE ON WHICH TWO APPELLATE AUTHORITIES TOOK DIFFERENT VIEWS. EVEN THE TRIBUNAL HAS NOT FOUND ANY FALSITY IN THE FACT OR EXPLANATION LACE BEFORE THE INCOME TAX AUTHORITIES BUT ONLY STATED THAT IT WAS NOT SUPPORT ED BY ANY MATERIAL OR EVIDENCE AND HAD ALSO OBSERVED THAT THE FACT THAT THE MEMBERS OF THE FAMILY WHO CONTROLLED THE COMPANY TRAVELED TO U.K. WAS A CIRCUMSTANCES WHICH DID NOT LEND WEIGHT TO THE CONTENTION OF THE ASSESSEE THAT IT WAS A SERIOUS BUSINESS TRIP. THESE ARE NOT TO BE CONSIDERED AS FINDINGS, WHICH COULD BE RELIED UPON BY THE ASSESSI NG AUTHORITY TO SAY THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME. AS REGARDS EXPLANATION 1 BELOW SECTION 271(1)(C), THE ASSESSEE I.T.A. NO.3649./DEL/2008 4 DID FURNISH EXPLANATION, WHICH WAS NOT FOUND TO BE FALSE. LEARNING OF NEW DESIGN OF JEWELLERY MIGHT HAVE BEEN ACQUIRED BY THE DIRECTORS OF THE COMPANY BY VISUAL METHODS THAT IS TO SAY BY OBSERVING THE DIFFERENT TYPES AND DESIGNS OF JEWELLERY MANUFACTUR ED IN U.K. FOR WHICH NO PHYSICAL EVIDENCE WOULD BE FORTHCOMING. THE COMPANY UNDENIABLY ALSO HAD ISO CERTIFICATION. IN THESE CIRCUMSTANCES, WE ARE OF TH E VIEW THAT EXPLANATION 1 IS NOT APPLICABLE TO THE CA SE. THE FINDINGS IN THE ASSESSMENTS PROCEEDINGS CAN NO DOUBT CONSTITUTE GOOD EVIDENCE BUT THEY DO NOT CONSTITUTE CLINCHING EVIDENCE FOR THE PURPOSE OF LEVYING PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF AS HELD B Y SUPREME COURT IN THE CASES OF CIT VS KHODAY ESWARSA & SONS (1972) 83 ITR 369 AND IN CIT V. ANANTHARAM VEERASINGHAIAH AND CO. V. CIT (1980) 123 ITR 457. 4. THE LD. CIT(A) HAS ALSO TAKEN NOTE OF THE FACT T HAT THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 1997-98 HAS ATTAINED FINALITY IN SO FAR AS THE APPEAL FILED BY THE REVENUE AGAINST THE SAID ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1997-98 HAD ALSO BEEN REJECTED BY THE HON'BLE HIGH COURT OF DEL HI. THE LD/ CIT(A) HAS ALSO CONSIDERED THE FACT THAT TH OUGH SIMILAR DISALLOWANCE HAD BEEN MADE FOR THE ASSESSME NT YEAR 2005-06, THE ASSESSING AUTHORITY HAD INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) AND AFTER CONSIDE RING THE ASSESSEES REPLY, HAD DROPPED THE SAID PENALTY I.T.A. NO.3649./DEL/2008 5 PROCEEDINGS. FURTHER, IT IS ALSO NOTICED THAT THE ASSESSEE HAS FURNISHED THE EXPLANATION, WHICH HAS NOT BEEN F OUND TO BE FALSE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF LD. CIT(A) FOR THE PURPOSE OF CANCELLING THE PENALTY LEVIED U/S 271(1(C) IS ON RI GHT FOOTING AND CALL FOR NO INTERFERENCE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 6. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 17 TH JULY 2009. (K.G.BANSAL) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:17 TH JULY, 2009 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI