DCIT, Faridabad V. M/s. Kamal Family Trust, Faridabad

ITA 3652/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8168 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-02-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 27-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GARIMA BHAGAT
• Keywords: Bonafide belief; Wrong claim

Judgement Text

ITA NO. 3652/DEL/2009 A.Y. 2001-02 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 3652/DEL/2009 A.Y. : 2001-02 DEPUTY COMMISSIONER OF INCOME TAX, VS. M/S KAMAL FAMILY TRUST CIRCLE-I, BLOCK-I-B, CGO COMPLEX, PROP. M/S KARM ENGG. WORKS NH-4, FARIDABAD PLOT NO. 5, SECTOR-5, FARIDAB AD [PAN: AAATK2814L] (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. GARIMA BHAGAT, SR,. DR DEPARTMENT BY : SHRI VED JAIN, CA O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDERS OF THE LD. CIT(A) DATED 18.6.2009 PERTAINING TO ASSESSMENT YEAR 2001- 02. 2. THE ISSUE RAISED IS THAT LD. CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS. 3.50 LACS MADE UNDER SECTION 271(1)(C) OF THE I T ACT. 3. IN THIS CASE THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF MANUFACTURING AND SALE OF COMPONENT/ TRACTOR PARTS. IN THE COURS E OF ASSESSMENT AO NOTED THAT TOTAL TRAVELLING EXPENSES DEBITED IN PROFIT AN D LOSS ACCOUNT WAS RS. 18,26,630/- INCLUDING FOREIGN TRAVELLING EXPENSES O F RS. 17,56,694/- BY SHRI KAMLA KHANNA, CHAIRMAN OF THE COMPANY AND HIS WIFE. AO WAS OF THE OPINION THAT ASESSEE HAD GONE ON PLEASURE TRIP AND NOT ON A BUSINESS TRIP. HENCE THE AMOUNT RS. 17,56,694/- CLAIMED ON FOREIGN TOUR AS B USINESS EXPENDITURE WAS TREATED NON-BUSINESS AND WAS DISALLOWED. ITA NO. 3652/DEL/2009 A.Y. 2001-02 2 4. UPON ASSESSEES APPEAL LD. CIT(A) ALLOWED THE RE LIEF TO THE EXTENT OF RS. 8,78,347/- AND CONFIRMED THE DISALLOWANCE OF 50 % OF THE TOTAL TRAVELLING EXPENSES. 5. IN THIS BACKGROUND, PENALTY PROCEEDINGS WERE IN ITIATED AND PENALTY OF RS. 3,50,000/- WAS IMPOSED UPON ASSESSEE. 6. UPON ASSESSES APPEAL THE LD. CIT(A) NOTED THAT THE MATTER WAS DEBATABLE. THERE WAS NO CONCEALMENT OF THE PARTICU LARS AND INACCURATE FURNISHING OF FOREIGN TRAVELLING EXPENSES. HE FUR THER FOUND ON THE SAME FACTS THAT 50% OF THE EXPENDITURE WAS ALLOWED BY THE CIT( A), WHICH HAS BEEN CONFIRMED BY THE ITAT. THE CIT(A) CONCLUDED THAT PENALTY PROVISION UNDER SECTION 271(1)(C) ARE NOT INVOKEABLE ON THE FACTS OF THE CASE AND HENCE HE DELETED THE PENALTY. 7. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEF ORE US. 8. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. LD. DR IN THIS REGARD REFERRED TO THE HONBLE APEX COURT DECI SION IN THE CASE OF DHARMENDRA TEXTILE AND ARGUED THAT THE PENALTY UNDE R SECTION 271(1)(C) IS LIABLE TO BE SUSTAINED IN THIS CASE. LD. COUNSE L OF THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT IN THIS CASE THERE IS NO DISP UTE THAT EXPENDITURE HAS ACTUALLY BEEN INCURRED. IT IS ALSO NOT DISPUTED THA T FOREIGN COUNTRY HAS NOT BEEN VISITED. IT IS ONLY PARTIAL DISALLOWANCE ON ESTIMATE BASIS FOR PERSONAL EXPENDITURE. AS SUCH IT IS ARGUED THAT THE ASSESS EES CLAIM WAS NOT FALSE. ON IDENTICAL SITUATION MUMBAI BENCH OF THE ITAT IN THE CASE OF AMERSEY DAMODAR VS. DCIT 91 TTJ 335 HAS DELETED THE LEVY OF PENALTY . LD. COUNSEL FURTHER REFERRED TO SEVERAL CASE LAWS FOR THE PROPOSITION T HAT DISALLOWANCE OF EXPENDITURE ON ESTIMATE BASIS CANNOT GIVE RISE LEVY OF PENALTY. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. S ECTION 271(1)(C) OF THE ACT POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. IN THIS CASE, WE FIND T HAT ALL THE DETAILS AND ITA NO. 3652/DEL/2009 A.Y. 2001-02 3 PARTICULARS OF THE EXPENDITURE WERE FILED BY THE AS SESSEE. AO HAS DISBELIEVED THE SAME AND OPINED THAT THE SAME WERE PERSONAL IN NATURE. HOWEVER, CIT(A) DISALLOWED ONLY 50% OF THE SAME ON ESTIMATE BASIS. THIS ACTION WAS CONFIRMED BY THE TRIBUNAL ALSO. HENCE WE FIND IN THIS CASE THERE IS NO FURNISHING OF INACCURATE PARTICULARS OR FALSE CLAIM ENTAILING LE VY OF PENALTY UNDER SECTION 271(1)(C). THE CONDUCT OF THE ASSESSEE CAN ALSO NO T TO BE CONTUMACIOUS TO WARRANT LEVY OF PENALTY. IN THIS REGARD, WE DRAW S UPPORT FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEE DINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITH ER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIO US OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WIL L NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHO ULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCR ETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHOR ITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PEN ALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR W HERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 10. AS REGARDS THE RELIANCE PLACED UPON LD. DR ON THE DECISION OF DHARMENDRA TEXTILE (SUPRA), WE FIND THAT THE SAME IS NOT APPLI CABLE. THE HONBLE APEX COURT IN 317 ITR 1 HAS ITSELF EXPLAINED THE RATIO O F THE DECISION AS UNDER:- 23. THE DECISION IN DHARMENDRA TEXTILE MUST, THERE FORE, BE UNDERSTOOD TO MEAN THAT THOUGH THE APPLICATION OF SECTION 11AC WOULD DEPEND UPON THE EXISTENCE OR OTHERWISE OF THE CONDITIONS E XPRESSLY STATED IN THE SECTION, ONCE THE SECTION IS APPLICABLE IN A CASE THE CONCERNED AUTHORITY WOULD HAVE NOT DISCRETION IN QU ANTIFYING THE ITA NO. 3652/DEL/2009 A.Y. 2001-02 4 AMOUNT AND PENALTY MUST BE IMPOSED EQUAL TO THE DUT Y DETERMINED UNDER SUB-SECTION (2) OF SECTION 11A. T HAT IS WHAT DHARMENDRA TEXTILE DECIDES. 11. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/02/2010 UPON CONCLUSION OF THE HEARING. SD/- SD/- [C.L. SETHI) [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 01/02/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES