M/s Vistar Constructions Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5149/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65717 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 09-10-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 18-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SHUMANA SEN
• Assessee Lawyers: O P SAPRA S
• Keywords: Bonafide belief; Corroborative evidences
• Section: 40A(3)

Judgement Text

ITA NO. 5149/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H, NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5149/DEL/2011 A.Y. : 2004-05 M/S VISTAR CONSTRUCTIONS PVT. LTD., C/O O.P. SAPRA & ASSOCIATES, C-763, NEW FRIENDS COLONY, NEW DELHI 110025 (PAN: AAACV1033H) VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 17(1), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. SANJEEV SAPRA & SH. O.P. SAPRA, ADVOCATES, DEPARTMENT BY : MRS. SHUMANA SEN, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XIX, NEW DEL HI DATED 03.10.2011 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. THE GROUNDS RAISED READ AS UNDER:- I) THAT THE LD. COMMISSIONER OF INCOME TAX (A) WAS NOT JUSTIFIED ON FACTS AND UNDER THE LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN LEVYING PENALTY U/S. 271(1)(C) OF THE I.T. ACT WITH REFERENCE TO DISALLOWANCE ON FOREIGN TRAVEL EXPENSES OF ` 7,31,363/-. ITA NO. 5149/DEL/2011 2 VARIOUS OBSERVATIONS MADE BY THE AUTHORITIES BELOW IN THEIR RESPECTIVE ORDER ON THE ABOVE ISSUE ARE EITHER INCORRECT OR ARE UNTENABLE. FACTS STATED, SUBMISSIONS MADE AND THE EVIDENCE PRODUCED BEFORE THE AUTHORITIES BELOW WERE NOT APPRECIATED PROPERLY. THE CASE LAW RELIED UPON BY THE AUTHORITIES BELOW IN THEIR RESPECTIVE ORDERS WERE DISTINGUISHABLE ON FACTS AND HAD NO APPLICATION TO THE FACTS OF APPELLANTS CASE. II) THAT WITHOUT PREJUDICE TO GROUND NO. (I), THE PENALTY AS SUSTAINED BY THE LD. COMMISSIONER OF INCOME TAX (A) WITH REFERENCE TO DISALLOWANCE ON FOREIGN TRAVEL EXPENSES OF ` 7,31,363/- IS VERY EXCESSIVE. III) THAT THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND/ MODIFY THE GROUNDS OF APPEAL. 3. THE ASSESSEE IN THIS CASE IS ENGAGED IN THE B USINESS OF UNDERTAKING LARGE INTERIOR WORK CONTRACTS EXECUTED FOR DIFFERENT CLIENTS. AGAINST THE RETURNED INCOME OF ` 45,53,750/-, THE AS SESSING OFFICER HAD COMPLETED THE ASSESSMENT ON AN INCOME OF ` 59,81 ,540/- VIDE ASSESSMENT ORDER DATED 7.12.2006 WHICH INCLUDED DI SALLOWANCES OF ` 7,31,363/- BEING 50% OF FOREIGN TRAVEL EXPENSES IN CURRED AT ` 14,62,727/- AND DISALLOWANCE U/S. 40A(3) AMOUNTING TO ` 1,81,654/-. PURSUANT TO THE ABOVE DISALLOWANCES, ASSESSING OFFIC ER ALSO INITIATED PENALTY PROCEEDINGS IN THIS CASE. ASSESSING OFFICE R LEVIED THE PENALTY ON ACCOUNT OF DISALLOWANCE U/S. 40A(3) AS WELL AS D ISALLOWANCE ON ITA NO. 5149/DEL/2011 3 FOREIGN TRAVEL EXPENSES. UPON ASSESSEES APPEAL AS REGARDS DISALLOWANCE U/S. 40A(3), LD. COMMISSIONER OF INCOM E TAX (A) DELETED THE PENALTY. 4. ON THE ISSUE OF DISALLOWANCE ON FOREIGN TRAV ELLING EXPENSES, ASSESSING OFFICER NOTED THAT ASSESSEE HAS CLAIMED A SUM OF ` 14,62,727/- ON FOREIGN TRAVELLING EXPENSES. FROM THE DETAILS IN THIS REGARD, ASSESSING OFFICER NOTED DIRECTORS SHRI S URPREET SINGH SURI AND SH. VIDHUR BHARDWAJ ALONGWITH THEIR WIVES, WHO WERE ALSO DIRECTORS, VISITED VARIOUS SOUTH EAST COUNTRIES. ON PERUSAL OF THE PASSPORT OF DIRECTORS, IT WAS ALSO FOUND THAT THE V ISIT WAS ON TOURIST VISA. AS REGARD SUPPORTING EVIDENCE ONLY THE BI LLS FOR PURCHASE OF AIR TICKETS AND FOREIGN CURRENCY WERE SUBMITTED. TH E ASSESSING OFFICER MENTIONED THAT PURCHASE OF FOREIGN CURRENCY WAS NOT AN EXPENDITURE. NO BILLS OR VOUCHERS FOR ACTUAL TRAVELLING EXPENSES WERE FURNISHED. IN VIEW OF THIS THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY EXPENDITURE ON FOREIGN TRAVEL SHO ULD NOT BE DISALLOWED. ASSESSEE RESPONDED IN THIS REGARD TH AT EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND DIRECT ORS MET SEVERAL PARTIES IN THOSE COUNTRIES FOR BETTERMENT OF BUSINES S. ASSESSING OFFICER WAS NOT SATISFIED BY THIS REPLY, HE PROCE EDED TO DISALLOW 50% OF TRAVELLING EXPENSES AMOUNTING TO ` 7,31,363/-. 4.1 UPON APPEAL IN QUANTUM PROCEEDINGS LD. COMMISSIO NER OF INCOME TAX (A) AND ITAT CONFIRMED THIS DISALLOWANCE . ON THIS ADDITION THE PENALTY WAS ALSO IMPOSED AND THE SAME WAS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (A). 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. ITA NO. 5149/DEL/2011 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE SPENT A SUM OF ` 14,62,727/- FOR THE VISITS OF THE DIRECTORS TO SOUTH ASIAN COUNTRIES. IT HAS FURTHER BEEN SUBMITTED THAT THE RE WAS NOTHING WRONG ON THE PART OF THE FOUR DIRECTORS FOR TRAVELLI NG ON TOURIST VISAS TO SAVE SUBSTANTIAL AMOUNT PAYABLE TO OBTAIN BUSINESS V ISAS. FURTHER, IT HAS BEEN SUBMITTED THAT BOTH THE LADIES WHO WERE WO RKING AS DIRECTORS HAD BEEN PAID SALARY @ ` 96000/- PER ANNUM EACH DURI NG THIS YEAR WHICH STOOD ALLOWED AS IN THE PRECEDING YEAR. I T HAS FURTHER BEEN SUBMITTED THAT IN THE PRECEDING ASSESSMENT YEAR ASS ESSING OFFICER HAS DISALLOWED 50% OF SIMILAR FOREIGN TRAVEL EXPENS ES WHICH WAS REDUCED TO 20% . IN APPEAL THIS DISALLOWANCE W AS CONFIRMED BY THE ITAT. HOWEVER, NO PENALTY IN THIS CASE WAS IMPOSED U/S. 271(1)(C). EVEN THOUGH THE PENALTY NOTICE HAS BEEN ISSUED BY T HE ASSESSING OFFICER. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT DISALLOWANCE IN THIS CASE HAS BEEN MADE TO THE EXTENT OF 50% OF EXPENDITURE INCURRED ON FOREIGN TR AVEL EXPENSES. THE BASIS OF MAKING DISALLOWANCE IN THIS REGARD IS THAT TWO DIRECTORS AND THEIR WIVES WHO WERE ALSO DIRECTORS VISITED FOREIGN COUNTRIES WHICH WAS NOT FULLY FOR BUSINESS PURPOSES. ASSESSEES SUBMIS SIONS IN THIS REGARD IS NOTE WORTHY THAT BOTH THE WIVES, WHO WERE ALSO DI RECTORS OF THE COMPANY WERE RECEIVING CONSIDERABLE SALARY WHICH WAS ACCEPTED YEAR AFTER YEAR. HENCE, THE VISITS CANNOT BE SAID TO B E FOR NON-BUSINESS PURPOSES. IT HAS FURTHER BEEN NOTED THAT DISALLOWA NCE IN THIS REGARD IN THE PRECEDING YEAR WAS ONLY 20% AND ON THAT ADDITIO N PENALTY WAS NOT IMPOSED, EVEN THE PENALTY NOTICE HAS BEEN ISSUED BY THE ASSESSING OFFICER. IN THIS BACKGROUND, WE HAVE TO SEE WHET HER THE PENALTY ITA NO. 5149/DEL/2011 5 PROCEEDINGS U/S. 271(1)(C) IS SUSTAINABLE OR NOT. WE FIND THAT SECTION 271(1)(C) OF THE ACT POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMEN T OF INCOME. IN THIS CASE DISALLOWANCE HAS BEEN MADE ONLY ON ESTIMA TE BASIS. IN THE PRECEDING YEAR THIS DISALLOWANCE WAS ONLY 20% AND NO PENALTY WAS IMPOSED. IN OUR OPINION, ON THE FACTS AND CIRCUMSTA NCES OF THE CASE THE CONDUCT OF THE ASSESSEE CANNOT BE SAID TO BE CO NTUMACIOUS SO AS TO WARRANT LEVY OF PENALTY U/S. 271(1)(C). 8. IN THIS REGARD, WE PLACE RELIANCE FROM THE APE X COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF T HEIR 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-CRIMIN AL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PA RTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY B ECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAI LURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF T HE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL T HE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBE D, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. 9. WE WOULD ALSO LIKE TO REFER TO THE HONBLE APE X COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. ITA NO. 5149/DEL/2011 6 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3.2 010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE C ONTINUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDE R TEXTILE CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WA S HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C ). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CL AIM IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSE SSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INT ENDMENT OF LEGISLATURE. 10. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AN D DELETE THE LEVY OF PENALTY. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/10/212. SD/- SD/- [ [[ [U.B.S. U.B.S. U.B.S. U.B.S. BEDI BEDI BEDI BEDI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 19/10/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES