M/s. Wig Brothers Construction Pvt.Ltd., New Delhi V. DCIT, New Delhi

ITA 629/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4110 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 06-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 10-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: SANJEEV MITTAL ACCOUNTANT
• Section: 271(1)(c); 37; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 629/DEL/2010 ASSESSMENT YEAR : 2006-07 M/S WIG BROTHERS CONSTRUCTION PVT. LTD., 301-302, BHANOT HOUSE, 17, COMMUNITY CENTRE, GULMOHAR ENCLAVE, YUSUF SARAI, NEW DELHI 110 049. PAN : AAACW0926C VS. DY. COMMISSIONER OF INCOME-TAX, CIRCLE 18(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJEEV MITTAL, ACCOUNTANT REVENUE BY : MS ANUSHA KHURANA, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER OF THE CIT (A) DATED 30 TH DECEMBER, 2009 FOR ASSESSMENT YEAR 2006-07. GROUN DS OF APPEAL READ AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER DATED 30.10.2008 PASSED BY THE ASSESSING OFFICER UN DER SECTION 271(1)(C) OF THE INCOME TAX ACT IS BAD IN L AW AND LIABLE TO BE QUASHED. 2. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN AGREEING WITH THE ASSESSING OFFICER THAT OMISSION I N ADDING BACK PRIOR PERIOD EXPENSES OF RS.3,21,139/- ALTHOUG H REPORTED IN FORM 3CD OF TAX AUDIT REPORT, AMOUNTS TO CONCEAL MENT OF INCOME. ITA NO.629/DEL/2010 2 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONCLUDING THAT NON-FILING OF APPEAL AGAINST DISALL OWANCE OF FOREIGN TRAVELING EXPENSES CAN BE INTERPRETED AGAI NST THE APPELLANT LEADING TO THE CONCLUSION THAT IT HAD NO EXPLANATION TO COUNTER THE CONCEALMENT AS MENTIONED IN THE LIGH T OF EXPLANATION TO SECTION 271 (1)(C) OF THE INCOME TAX ACT. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, AMEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE T IME OF HEARING. 2. THE ONLY GRIEVANCE IN THE PRESENT APPEAL IS REGA RDING LEVY OF CONCEALMENT PENALTY OF RS.1,63,074/- IN RESPECT OF TWO FOLLOWIN G DISALLOWANCES:- I) PRIOR PERIOD EXPENSES - RS.3,21,139/- II) DISALLOWANCE ON FOREIGN EXPENSES - RS.1,63,336/ - TOTAL RS.4,84,475/- ========== 3. THE PENALTY ON THESE TWO DISALLOWANCES HAS BEEN LEVIED @ 100% OF TAX SOUGHT TO BE EVADED WHICH IS COMPUTED AT RS.1,63,07 4/-. SO AS IT RELATES TO DISALLOWANCE OF PRIOR PERIOD EXPENSES, THIS ISSUE I S DISCUSSED BY THE ASSESSING OFFICER AT PAGE 2 OF THE ASSESSMENT ORDER. IT WAS NOTICED BY THE ASSESSING OFFICER THAT IN POINT NO.22 (B) OF THE TAX AUDIT RE PORT IN FORM 3 CD IT WAS REPORTED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 3,21,139/- BEING PRIOR PERIOD EXPENSES. THE ASSESSEE VIDE QUESTIONNAIRE DATED 7 TH JANUARY, 2008 WAS REQUIRED TO EXPLAIN THE ALLOWABILITY OR OTHERWISE O F THE SAME AND VIDE LETTER DATED 18 TH MARCH, 2008 IT WAS STATED THAT PRIOR PERIOD EXPENS ES OF RS.3,21,139/- WERE OMITTED TO BE ADDED TO THE INCOME BY MISTAKE AND TH E SAME MAY BE ADDED AS THE MISTAKE IS APPARENT ON RECORD. THEREFORE, THE SAID AMOUNT WAS ADDED BY THE ASSESSING OFFICER AND IT WAS ALSO CONSIDERED THAT T HE SAID DISALLOWANCE WARRANTS THE LEVY OF PENALTY AS THE ASSESSEE HAS CONCEALED T HE PARTICULARS OF INCOME TO THAT EXTENT. 4. SO AS IT RELATES TO DISALLOWANCE RELATING TO FOR EIGN TRAVEL EXPENSES, THE SAME IS ALSO DISCUSSED AT PAGE 2 AND 3 OF THE ASSES SMENT ORDER. THE ASSESSING ITA NO.629/DEL/2010 3 OFFICER REQUIRED THE ASSESSEE TO FILE DETAILS OF FO REIGN EXPENSES PERSON-WISE SEPARATELY FOR AIR TICKET, BOARDING AND LODGING WIT H SUPPORTIVE EVIDENCE ALONG WITH DATES AND EVIDENCE OF THE PURPOSE OF VISIT AND WORK DONE ON FOREIGN TRIP. VIDE LETTER DATED 18 TH MARCH, 2008 THE SUBMISSION OF THE ASSESSEE WITH RE GARD TO THE SAID INQUIRY WAS AS UNDER:- TRAVELING EXP. INCLUDES FOREIGN TRAVELING RS.1,63, 336.75 BY DIRECTORS. SINCE EVIDENCE FOR PURPOSE OF VISIT AND WORK DONE ON THE FOREIGN TRIPS ARE NOT AVAILABLE THE SAME CAN BE ADD ED BACK TO THE INCOME OF THE COMPANY. THIS IS BEING OFFERED FOR A DDITION TO AVOID LITIGATION AND PENALTY PROCEEDINGS. 5. THE ASSESSING OFFICER, RELYING ON THE DECISION I N THE CASE OF RAM BAHADUR THAKUR LTD. VS. CIT 261 ITR 390 HAS OBSERVED THAT SINCE THE ASSESSEE HAS FAILED TO SUBMIT THE REQUIRED EVIDENCE AND HAS AGRE ED TO MAKE THE ADDITION, THE AMOUNT OF RS.1,63,336/- WAS DISALLOWED OUT OF TRAVE LING EXPENSES INCURRED ON FOREIGN TRAVEL AND HE ALSO INITIATED THE CONCEALMEN T PENALTY. 6. IN RESPONSE TO PENALTY PROCEEDINGS IT WAS SUBMIT TED BY THE ASSESSEE THAT PRIOR PERIOD EXPENSES DUE TO MISTAKE COULD NOT BE A DDED TO THE INCOME OF THE ASSESSEE AND THAT IS A CASE OF MISTAKE APPARENT FRO M RECORD ONLY AND THERE WAS NO INTENTION TO CONCEAL SUCH INCOME AS THE SAID FAC T WAS CLEARLY STATED IN THE AUDIT REPORT. 7. WITH REGARD TO FOREIGN TRAVEL EXPENSES, IT WAS S UBMITTED THAT THE SAID EXPENSE WAS INCURRED FOR THE PURPOSE OF BUSINESS AN D AS THE ASSESSEE COULD NOT SUBMIT THE CORRESPONDENCE WITH THE PARTIES, TO WHOM THE DIRECTOR OF THE ASSESSEE VISITED, THE ASSESSEE HAD FURNISHED THE CO PIES OF PASSPORT, VISA AND CREDIT STATEMENTS AND THE REFERENCE WAS MADE TO CER TAIN JUDICIAL PRONOUNCEMENTS TO CONTEND THAT IT WAS NOT A FIT CAS E FOR LEVY OF PENALTY. REFERENCE WAS MADE TO THE DECISIONS:- I) CIT V. AJAIB SINGH & CO. (2002) 203 ITR 630 (PB & HAR) WHEREIN IT HAS BEEN HELD THAT DISALLOWANCE OF EXPENSES WILL NOT PER SE AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. ITA NO.629/DEL/2010 4 II) CIT (CENTRAL) CALCUTTA V ASHOKA MARKETING LTD. (1976) 103 ITR 543 WHEREIN IT HAS BEEN HELD THAT MERE CONSENT TO ASSE SSMENT OF AN AMOUNT DOES NOT MEAN THAT THE SAME IS CONCEALED INCOME. III) NATIONAL TEXTILE V CIT (2004) 114 TAXMAN 203 (GUJ) WHEREIN IT HAS BEEN HELD THAT WHAT IS STATED IN THE ASSESSMENT ORDER MA Y BE RELEVANT BUT NO PENALTY CAN BE LEVIED UNLESS THERE IS SOMETHING MORE IN PEN ALTY PROCEEDINGS. IV) HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (SUPRA ) WHEREIN THE HONBLE APEX HELD THAT LEVY OF PENALTY IS NOT MANDATORY BUT IS DISCRETIONARY. V) IN THE CASE OF SHADILAL SUGAR & GENERAL MILLS LT D. THE APEX COURT HELD THAT MERE FACT OF THE ASSESSEE AGREEING TO ADDITIONS TO HIS INCOME IT DOES NOT FOLLOW THAT THE AMOUNT AGREED TO BE ADDED WAS CONCEALED IN COME. THERE MAY BE HUNDRED ONE REASONS FOR SUCH ADMISSION THAT IS WHEN THE ASSESSEE REALIZES THAT TRUE POSITION DID NOT DISPUTE CERTAIN DISALLOWANCE, BUT THAT DOES NOT ABSOLVE THE REVENUE FROM PROVING THE MENS REA OF A CRIMINAL OFF ENCE. 8. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DID NOT SUBMIT THE COPIES OF AFORESAID DECISIONS, HENCE HE PROCEEDED T O DECIDE THE PENALTY PROCEEDINGS AND CAME TO THE CONCLUSION THAT THE DIS ALLOWANCE OF PRIOR PERIOD EXPENSES IS NOT SIMPLY AN OMISSION. IT IS NOT AN O RDINARY MISTAKE AND THE GOVERNMENT MAY HAVE LOST THE TAX LEVIABLE IF THE CA SE WAS NOT SELECTED FOR SCRUTINY. ACCORDING TO THE PROVISIONS OF SECTION 3 7 PRIOR PERIOD EXPENSES COULD NOT BE ALLOWED AND AS THE ASSESSEES TAX AUDITOR HA D CLEARLY POINTED OUT IN FORM 3CD, THE ASSESSEE HAS CLAIMED NON-PERMISSIBLE EXPEN SES KNOWINGLY. SIMILARLY, FOR TRAVEL EXPENSES LD. ASSESSING OFFICER OBSERVED THAT NON-SUBMISSION OF EVIDENCE WILL BRING THE CASE OF THE ASSESSEE WITHIN THE AMBIT OF EXPLANATION 1 AS THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM. LD. ASSESSING OFFICER HAS DISTINGUISHED THE CASE RELIED UPON BY THE ASSESSEE AND HAS LEVIED THE AFOREMENTIONED PENALTY. LD. CIT (A) HAS ALSO UPHEL D THE PENALTY. THE ASSESSEE IS AGGRIEVED, HENCE, IN APPEAL. ITA NO.629/DEL/2010 5 9. AN ADJOURNMENT APPLICATION HAS BEEN RECEIVED FRO M THE ASSESSEE. SHRI SANJEEV MITTAL, ACCOUNTANT OF THE ASSESSEE ENTITY W AS PRESENT AT THE TIME OF HEARING. IT WAS FOUND THAT THE REASON GIVEN IN THE ADJOURNMENT APPLICATION FOR TAKING ADJOURNMENT WAS THAT SHRI R.K. BANSAL, CA , COUNSEL OF THE ASSESSEE WAS OUT OF STATION. THE REASON STATED FOR TAKING ADJO URNMENT WAS FOUND TO BE INSUFFICIENT, HENCE, THE ADJOURNMENT APPLICATION WA S REJECTED AND WE PROCEEDED TO DECIDE THE APPEAL FILED BY THE ASSESSEE AFTER HE ARING LD. DR AND AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD. 10. LD. DR, RELYING ON THE ORDER OF ASSESSING OFFIC ER AND CIT (A) PLEADED THAT IT IS A CLEAR CASE OF LEVY OF PENALTY AS THE ASSESS EE DESPITE CLEAR OBSERVATION OF AUDITOR DID NOT ADD IT TO THE ASSESSABLE INCOME IN THE COMPUTATION OF INCOME AND HAD THE CASE NOT BEEN SELECTED FOR SCRUTINY THE SAI D INCOME MIGHT HAVE ESCAPED ASSESSMENT. SIMILARLY, SHE PLEADED THAT FOR FOREIG N TRAVEL EXPENSES, THE ASSESSEE DID NOT SUBMIT THE DOCUMENTARY EVIDENCE TO SUPPORT ITS CLAIM. HENCE, DISALLOWANCE ON THAT ACCOUNT WAS ALSO PROPER AND PE NALTY WAS RIGHTLY LEVIED BY THE ASSESSING OFFICER. SHE SUBMITTED THAT LD. CIT (A) HAS ALSO RIGHTLY UPHELD THE SAID PENALTY AND SHE RELIED UPON PARA 3.1 AND 3.2 O F THE ORDER OF THE LD. CIT (A), WHICH, FOR THE SAKE OF CONVENIENCE, IS REPRODUCED B ELOW:- 3.1 THE COMPELLING REASONS FOR IMPOSITION OF PENAL TY U/S 271(1)(C) WERE ALSO DISCUSSED SPECIFICALLY IN THE P ENALTY ORDER. IT WAS EXPLAINED BY THE A.O. THAT BY SAYING THAT THE P RIOR PERIOD EXPENSES WERE OMITTED TO BE ADDED, THE APPELLANT AD MITS THE MISTAKE WHICH IS NOT ORDINARY IN NATURE. IT WAS FU RTHER CONTENDED THAT THE GOVERNMENT MIGHT HAVE LOST THE TAX LEVIABL E, HAD THE CASE NOT BEEN SELECTED FOR SCRUTINY. THE A.O. ARGUED TH AT THE APPELLANT DID NOT COMPLY WITH THE PROVISIONS OF SEC.37 OF THE IT ACT WHICH CLEARLY STATES THAT NO PRIOR PERIOD EXPENSES WILL B E ALLOWED. MOREOVER, THE TAX AUDIT REPORT CLEARLY POINTED OUT THIS IN COLUMN NO.22 (B) OF FORM NO.3CD. 3.2 THE A.O. ALSO ELUCIDATED THE REASONS AS TO WHY FOREIGN TRAVEL EXPENSES ARE LIABLE FOR PENALTY. IT WAS STA TED IN THE PENALTY ORDER THAT THE APPELLANT COULD NOT SUBSTANTIATE ITS CLAIM THAT THE FOREIGN TRAVEL EXPENSE ARE FOR BUSINESS PURPOSE, AS IT FAILED TO PRODUCE DETAILS OF WORK DONE ON THE FOREIGN VISIT W HICH ARE ESSENTIAL FOR THE CLAIM TO PASS THE TEST OF BUSINESS PURPOSE AS INCORPORATED ITA NO.629/DEL/2010 6 U/S 37 OF THE IT ACT. IT WAS ARGUED THAT THE ADMIS SION OF NON- AVAILABILITY OF SUCH EVIDENCE ON PART OF THE APPELL ANT ALSO BRINGS THE CASE WITHIN THE AMBIT OF EXPLANATION 1 AS THE ASSES SEE FAILED TO SUBSTANTIATE THE CLAIM OF EXPENSES. 11. WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT O RDER, THE ORDER PASSED BY THE ASSESSING OFFICER AND THE ORDER PASSED BY TH E CIT (A). THERE IS NO FURNISHING OF INACCURATE PARTICULARS WITH REGARD TO PRIOR PERIOD EXPENSES AS THIS FACT WAS CLEARLY STATED IN THE AUDIT REPORT ITSELF AND AT THE FIRST HAND THE ASSESSEE DID NOT OBJECT TO SUCH ADDITION. THE EXTR ACT OF REPLY OF THE ASSESSEE HAS ALREADY BEEN REPRODUCED IN THE ABOVE PART OF TH IS ORDER IN WHICH IT WAS STATED THAT IT WAS ONLY A CASE OF MISTAKE WHICH WAS APPARENT ON RECORD. 12. SO AS IT RELATES TO FOREIGN TRAVEL EXPENSES, IT IS MENTIONED IN THE ORDER LEVYING PENALTY THAT THE ASSESSEE HAD FURNISHED THE COPIES OF PASSPORT, VISA, CREDIT STATEMENTS, ETC. THUS THERE IS AN EVIDENCE ON RECORD OF VISIT BY THE CONCERNED PERSON IN RESPECT OF WHICH THE FOREIGN TR AVEL EXPENSES WERE CLAIMED, BUT DUE TO THE NON-AVAILABILITY OF PARTICULAR INFOR MATION AS REQUIRED BY THE ASSESSING OFFICER TO BE FURNISHED, THE ASSESSEE AGR EED TO THE SAID ADDITION SIMPLY TO AVOID LITIGATION AND PENALTY PROCEEDINGS. THIS REPLY OF THE ASSESSEE IS ALSO REPRODUCED IN THE PENALTY ORDER. THUS, IT CAN NOT BE SAID THAT IT WAS A JUSTIFIED CASE WHERE CONCEALMENT PENALTY COULD BE L EVIED. THE ASSESSEE COULD NOT PRODUCE THE EVIDENCES WHICH WERE REQUIRED BY TH E ASSESSING OFFICER TO BE FURNISHED. HOWEVER, THE EXPENSES WERE INCURRED AND FOR THAT PASSPORT, VISA, ETC. WERE FURNISHED. MERE ABSENCE OF EVIDENCE TO SUBSTA NTIATE THE CLAIM OF EXPENDITURE CANNOT BE CONSIDERED TO BE SUFFICIENT F OR LEVY OF PENALTY IF THE EXPENSES ARE SHOWN TO HAVE BEEN INCURRED BY THE ASS ESSEE. MOREOVER, THE ASSESSEE ITSELF HAD AGREED FOR THE ADDITION SUBJECT TO NON-LEVY OF PENALTY. THEREFORE, WE SEE NO JUSTIFICATION FOR LEVY OF PENA LTY ON THIS ACCOUNT. 13. IN VIEW OF THE ABOVE DISCUSSION, WE FIND THAT I T IS NOT A FIT CASE WHERE LEVY OF PENALTY CAN BE H ELD TO BE JUSTIFIED. ITA NO.629/DEL/2010 7 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. . THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 07.0 5.2010. SD/- SD/- [R.C. SHARMA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 07.05.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES