SHABRO INTERNATIONAL, MUMBAI V. DCIT 23(3), MUMBAI

ITA 7698/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3977 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 18-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 27-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SARAVANAN
• Assessee Lawyers: PRADEEP N KAPASI
• Keywords: Business income; Business expenditure; Bonafide belief; Question of law; Difference of opinion; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI RAJESH KUMAR, AM ./I.T.A. NO.7698/MUM/2012 ( / ASSESSMENT YEAR: 2005-06) M/S. SHABRO INTERNATIONAL G-2, RIDDHI SIDDHI APARTMENT, MITHANAGAR X ROAD, MULUND-EAST, MUMBAI-400081. / VS. DCIT 23(3) PRATYAKSHKAR BHAWAN, MUMBAI. ./ ./PAN/GIR NO. AALFS 6310G ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI PRADEEP N. KAPASI / RESPONDENT BY : SHRI J.SARAVANAN / DATE OF HEARING : 15/12/2015 ! / DATE OF PRONOUNCEMENT : 16/02/2016 '# / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17/10/2012 OF COMMISSIONER OF INCOME TAX (APPEALS)-34, MUMBAI (HE REINAFTER CALLED AS THE CIT(A) ) FOR ASSESSMENT YEAR 2005-06 .THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPEAL: 2 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT GROUNDS OF APPEAL AGAINST ORDER U/S.250 PASSED BY C IT(A) IN AN APPEAL AGAINST OF ORDER U/S 271(1)(C) PASSED BY AO GROUND NO.01 PENALTY U/S271(1)(C) IN RESPECT OF DIS ALLOWANCES OF CERTAIN EXPENSES. A. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS; I. IN CONFIRMING THE ACTION OF THE LD. AO AND LEVYI NG THE PENALTY U/S 271(1)(C) OF RS.6,92,330/-. II. IN LEVYING THE PENALTY WITHOUT APPRECIATING THE FAC T THAT THAT ALL THE FACTS IN RESPECT OF THE CLAIM WERE DISCLOSED IN THE RETUR N OF INCOME. III. IN LEVYING THE PENALTY WITHOUT IDENTIFYING THE OFFE NCE FOR WHICH THE PENALTY U/S U/S 271(1)(C) WAS LEVIED. IV. IN LEVYING THE PENALTY IGNORING THE FACT THAT THE M ATERIAL PARTICULARS WERE ACCURATELY DISCLOSED BEFORE THE CIT(A). V. IN IGNORING THE FACT THAT THE CLAIM OF THE FIRM FOR ALLOWANCE OF THE SAID CLAIM WAS MADE UNDER THE BONAFIDE BELIEF THAT IT WA S ALLOWABLE AND THAT THE ADDITIONS FOR THE CLAIM WAS PARTLY DELETED BY T HE HON. ITAT VIDE ITS ORDER DT.28.03.2009. VI. IN LEVYING PENALTY UNDER AN ORDER DT.29/03/2010 THA T WAS BARRED BY TIME U/S 275 OF THE ACT. VII. IN IGNORING THE FACT THAT THE REMUNERATION DISALLOW ED IN THE HANDS OF THE APPELLANT FIRM WAS OFFERED FOR TAXATION IN THE HAND S OF PARTNER WHILE FILING THE RETURN OF INCOME OF RESPECTIVE PARTNERS. VIII. IN IGNORING THE FACT THAT THE PAYMENT OF REMUNERATI ON FOR THE FULL YEAR WAS AUTHORIZED BY THE DEED OF THE PARTNERSHIP. IX. IN LEVYING THE PENALTY WITHOUT APPRECIATING THE FAC T THAT THE CLAIM OF THE APPELLANT FOR FOREIGN TOUR EXPENSES AND MEMBERSHIP AND SUBSCRIPTION EXPENSES WERE GENUINE BUSINESS EXPENDITURES. 3 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT B) YOUR APPELLANT PRAYS THAT PENALTY LEVIED U/S 271 (1)(C) OF THE ACT OF RS.6,92,330/- BE DELETED. 2. THE ONLY ISSUE RAISED IN GROUNDS OF APPEAL IS IN RESPECT OF CONFIRMATION OF PENALTY OF RS.6,92,330/- IMPOSED U/S 271(1)(C) OF THE ACT . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME ON 31.10.2005 DECLARING INCOME OF RS.2,45,04,230/-. TH E ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXPORT OF AGARBATTIS AND OTHER GOODS TO VARIOUS COUNTRIES ALL OVER THE WORLD. THE CASE OF THE ASSESSEE WAS SELECTED UNDER SCRUTINY AND THE AO WHILE FRAMING THE ASSESSMENT U/S 143(3) MADE ADDITIONS IN RESPECT OF REMUNERATION TO PARTNERS AT RS.1,35,00,000/- , FOREIGN TOUR EXPENSE S OF RS.2,59,550/- AND CLUB MEMBERSHIP AND SUBSCRIPTION OF RS.32,460/- VIDE ORD ER DATED 27.11.2007 U/S 143(3) AT RS.3,85,61,999/-. THE MATTER WAS TAKEN BE FORE THE CIT(A) WHO ALSO CONFIRMED THE ADDITIONS AS MADE BY THE AO HOWEVER I N THE APPEAL BEFORE THE TRIBUNAL, THE ASSESSEE WAS ALLOWED RELIEF TO A GREA T EXTENT AND ADDITIONS SUSTAINED BY THE TRIBUNAL WERE RS.16,00,000/- IN RESPECT OF P ARTNERS REMUNERATION, WHEREAS THE GROUND IN RESPECT OF FOREIGN EXPENSES OF RS.2,5 9,550/- WAS NOT PRESSED BEFORE THE TRIBUNAL AND THE ISSUE OF DISALLOWANCE OF MEMBE RSHIP EXPENSES OF RS.32,460/- WAS NOT RAISED BEFORE THE TRIBUNAL. THE LD. AO ISSU ED NOTICES U/S. 274 4 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT R.W.S.271(1)(C) DATED 27.11.2007 WAS SERVED UPON TH E ASSESSEE AND ALSO ISSUED SHOW CAUSE NOTICE DATED 29.03.2010 . THE ASSESSEE F ILED ITS REPLY TO ITS SHOW CAUSE NOTICE VIDE LETTER DATED 25.3.2010 BY SUBMITTING TH AT THE REMUNERATION PAYABLE TO THE PARTNERS WAS APPORTIONMENT OF BUSINESS INCOME O F THE FIRM AND THERE WOULD BE NO CHANGE IN THE TOTAL INCOME OF THE FIRM AND ITS P ARTNERS TAKEN TOGETHER AND CONSEQUENTLY THERE IS NO LOSS TO THE REVENUE, FULL DETAILS OF REMUNERATION WERE FILED BEFORE THE AO. THE ASSESSEE ALSO SUBMITTED THAT IT HAD NEITHER FILED INACCURATE PARTICULARS NOR CONCEALED PARTICULARS OF INCOME AND ALL THE SUPPORTING EVIDENCES/DOCUMENTS WERE FILED IN RESPECT OF PARTNE RS REMUNERATION, FOREIGN TOUR EXPENSES AND CLUB MEMBERSHIP AND SUBSCRIPTION FEE A ND MERE FACT THAT CERTAIN EXPENSES CLAIMED BY THE ASSESSEE WERE DISALLOWED WH ICH DID NOT MEAN THAT THE ASSESSEES GUILTY OF CONCEALMENT OR FILING INACCURA TE PARTICULARS OF INCOME. THE LD. AO REJECTED SUBMISSION OF THE ASSESSEE AND HELD THA T THE ASSESSE FILED INACCURATE PARTICULARS OF INCOME AND PROVISIONS TO EXPLANATION 271 WAS CLEARLY APPLICABLE TO THE ASSESSEES CASE AND CONSEQUENTLY LIABLE FOR PEN ALTY OF RS.6,92,330/- BEING 100% TAX SOUGHT TO BE EVADED VIDE ORDER DATED 29.03 .2010. THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY CONFIRMING THE PENALTY OF RS.6,92,330/- BY HOLDING AS UNDER:- 1.6 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. THE CONTENTION THAT APPELLANT FIRM HAD FULLY AND TRULY DISCLOSED ALL THE FACTS 5 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT RELATING TO PAYMENT OF REMUNERATION OF RS.1.35 CROR ES CANNOT BE ACCEPTED IN VIEW OF THE CLEAR FINDING GIVEN BY THE HON'BLE ITA T. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE FI NDING IS REPRODUCED HEREUNDER: 'WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE WAS NOT CLAIMING THE REMUNERATION TO PARTNERS IN THE EARLIE R PARTNERSHIP DEED EXECUTED PRIOR TO THE INSTANT DEED DATED 20.6.2004. SECTION 40(B)(V) PROVIDES THAT ANY PAYMENT OF REMUNERATION TO ANY WO RKING PARTNER, WHICH IS AUTHORIZED BY, AND IS IN ACCORDANCE WITH T HE TERMS OF THE PARTNERSHIP DEED AND RELATES TO ANY PERIOD FALLING AFTER THE DATE OF SUCH PARTNERSHIP DEED SHALL NOT BE DEDUCTED INSOFAR AS T HE AMOUNT OF SUCH PAYMENT OF ALL THE PARTNERS DURING THE PREVIOUS YEA R EXCEEDS THE AGGREGATE AMOUNT COMPUTED AS PER SUB-CLAUSES (1) AN D (2). FROM HERE IT CLEARLY TRANSPIRES THAT THE DEDUCTIBLE PART OF REMU NERATION TO THE PARTNERS SHOULD RELATE TO ANY PERIOD FALLING AFTER THE DATE OF SUCH PARTNERSHIP DEED SUBJECT TO THE FULFILLMENT OF OTHER CONDITIONS. AS THE PARTNERSHIP DEED PROVIDING FOR REMUNERATION TO PARTNERS IS DATED 20. 6.2004, THE ASSESSEE CANNOT CLAIM DEDUCTION FOR SUCH REMUNERATION FOR TH E PERIOD ANTERIOR TO THIS DATE. PAGE-25 OF THE PAPER BOOK IS THE CALCULA TION OF REMUNERATION CLAIMED AS DEDUCTION AT RS.1.35 CRORES AS AGAINST T HE ALLOWABLE REMUNERATION AT RS.1.52 CRORES FOR THE YEAR. IT HAS BEEN CONTENDED THAT THE ALLOWABLE REMUNERATION FOR THE YEAR AS PER THE WORKING GIVEN IN SUB- CLAUSES (1) & (2) OF SECTION 40(B)(V) COMES TO RS.1 .52 CRORES WHEREAS THE ASSESSEE HAD CLAIMED REMUNERATION FOR THE PROPORTIO NATE PART AFTER 20.6.2004 T031.3.2005 AT RS.1.35 CRORES. WE NOTE TH AT THIS CALCULATION IS 6 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT NOT CORRECT. ON THE CONTRARY, THE ELIGIBLE PROPORTI ONATE REMUNERATION FOR 285 DAYS (THAT IS FROM 20.6.2004 TO 31.03.2005) WIL L WORK OUT TO RS.1.19 CRORES. WE, THEREFORE, HOLD THAT THE EXCESS CLAIM O F RS.16 LAKHS (1.35 CRORES CLAIMED BY THE ASSESSEE MINUS RS.1.19 CRORES ) CANNOT BE ALLOWED AS DEDUCTION AT THE THRESHOLD. IN VIEW OF OUR DISCUSSION SUPRA THAT THE PARTNERSHI P DEED WAS EXECUTED ON 20.6.2004, THE REMUNERATION TO THE WORKING PARTN ERS FOR THE PERIOD PRIOR TO THAT CANNOT BE ALLOWED AS DEDUCTION. WE, T HEREFORE, RESTRICT THE DISALLOWANCE TO RS.16 LAKHS (FOR THE PERIOD 1.4.200 4 TO 19.6.2004) AND ALLOW THE RELIEF OF RS.1.19 CRORES. THIS GROUND IS PARTLY ALLOWED.' 1.7 THE HON'BLE ITAT HAD GIVEN A FACTUAL FINDING TH AT THE APPELLANT IS ENTITLED TO CLAIM THE REMUNERATION ONLY FOR 285 DAY S DURING THE ASSESSMENT YEAR I.E., SUBSEQUENT TO THE SUPPLEMENTA RY DEED OF PARTNERSHIP DATED 20/06/2006. FOR THE PERIOD 1/04/2 004 TO 19/06/2004, THE APPELLANT CANNOT CLAIM THE PAYMENT OF REMUNERAT ION WHICH IS ANTERIOR TO THE DATE OF SUPPLEMENTARY DEED OF PARTN ERSHIP. IT IS WITHIN THE KNOWLEDGE OF THE APPELLANT THAT THE SUPPLEMENTARY P ARTNERSHIP DEED WAS EXECUTED BY ALL' THE PARTNERS ONLY ON 20/06/2004 BE FORE WHICH THERE IS NO SPECIFIC MENTION AS TO WHAT EXACTLY WAS THE QUANTUM OF REMUNERATION TO BE PAID TO THE PARTNERS IN THE PARTNERSHIP DEED AND THERE WAS NO SCOPE LEFT TO THE PARTNERS TO DETERMINE THE PAYMENT OF RE MUNERATION FOR THE ENTIRE YEAR. HENCE, THE CLAIM OF PAYMENT U/S 40(B)( V) IS NOT ADMISSIBLE TO THE EXTENT OF RS.16,00,000/- SINCE THE PARTNERSHIP DEED NEITHER SPECIFIED THE AMOUNT OF REMUNERATION PAYABLE TO EACH WORKING PARTNER NOR LAYS DOWN THE MANNER OF QUANTIFYING SUCH REMUNERATION. A FTER THOROUGH 7 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT ANALYSIS OF SEC.40(B )(V) AND THE CIRCULAR NO.739 D ATED 25/03/1996, THE HON'BLE ITAT HAD SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS.16,00,000/-. KNOWING FULLY WELL THAT THE PARTNER SHIP DEED HAS NO PROVISION FOR CLAIM OF REMUNERATION FOR THE PERIOD 1/04/2004 TO 19/06/2004, BUT STILL CONSCIOUSLY THE CLAIM OF REMU NERATION PAYMENT WAS MADE BY THE APPELLANT IN THE RETURN OF INCOME. HENC E, THIS IS A CLEAR CASE OF NOT ONLY CONCEALMENT OF INCOME BUT ALSO FUR NISHING OF INACCURATE PARTICULARS OF INCOME. HENCE, THE ASSESSING OFFICER HAD RIGHTLY LEVIED THE PENALTY IN RESPECT OF REMUNERATION PAID AND THE ACTION OF THE ASSESSING OFFICER IS UPHELD. 1.8 AS FAR AS THE CLAIM OF FOREIGN TRAVEL EXPENSES ARE CONCERNED, THE ADDITION OF THE ASSESSING OFFICER WAS CONFIRMED BY THE CIT(A) BUT SUBSEQUENTLY THE APPELLANT DID NOT PRESS THIS GROUN D BEFORE THE ITAT AND HENCE, THE SAME WAS DISMISSED. SINCE THE APPELLANT WAS NOT IN A POSITION TO SUBSTANTIATE WITH EVIDENCES THAT THE EXPENSES IN CURRED TOWARDS FOREIGN TOUR ARE WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF BUSINESS, IT HAS TO BE CONSTRUED THAT THE APPELLANT HAD FILED IN ACCURATE PARTICULARS AS WELL AS CONCEALED THE INCOME. AS FAR AS THE MEMBERS HIP AND SUBSCRIPTION ARE CONCERNED, THE CIT(A) HAD CONFIRMED THE ADDITIO N MADE BY THE ASSESSING OFFICER WHICH WAS NOT AGITATED BY THE APP ELLANT BEFORE THE ITA T. HENCE IT HAS TO BE CONSTRUED THAT THE APPELLANT HAD FILED INACCURATE PARTICULARS AS WELL AS CONCEALED THE INCOME. IN VIE W OF THE ABOVE DISCUSSION, THE ACTION OF THE ASSESSING OFFICER IN LEVYING THE MINIMUM PENALTY OF RS.6,92,330/- IS HEREBY CONFIRMED AND TH E APPEAL OF THE APPELLANT IS DISMISSED. 8 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT 4. LD. AR SUBMITTED BEFORE US THAT THE LD. AO AND T HE LD. CIT(A) HAD WRONGLY OBSERVED THAT CLAIM IN RESPECT OF PARTNERS REMUNERA TION WAS PAID FOR 365 DAYS INCLUDING THE CLAIM FOR THE PERIOD COMMENCING FROM 1.04.2004 TO 19.06.2004. IN FACT THE SAID CLAIM WAS NEVER MADE BUT AS MATTER OF FACT THE CLAIM WAS MADE FOR 285 DAYS COMMENCING FROM THE PERIOD 20.06.2004 TO 3 1.03.2005 AND DISALLOWANCE OF RS.16,00,000/- WAS SUSTAINED BY ITAT OUT OF TOTA L RS.1,35,00,000/- CLAIMED. LD. AR FURTHER SUBMITTED THAT THE TRIBUNAL EVEN HEL D THAT CLAIM FOR 285 DAYS WAS NOT PROPERLY CALCULATED AND IT WAS NEVER HELD BY TH E TRIBUNAL THAT THE CLAIM WAS MADE OF 365 DAYS. AS SUCH THE COUNSEL SUBMITTED THA T NO CLAIM WAS MADE FOR 80 DAYS AND HENCE THE PENALTY LEVIED WAS NOT SUSTAINAB LE UNDER LAW AS ALL THE MATERIAL FACTS WERE DULY DISCLOSED AND THIS WAS A BONAFIDE C LAIM MADE AND WAS THE FIRST YEAR OF THE CLAIM WHICH WAS BASED UPON THE EXPERT OPINIO N OF THE PROFESSIONALS AND DISALLOWANCE OF BONAFIDE AND OF GENUINE CLAIM WAS N OT LIABLE FOR PENALTY AS HAS BEEN HELD IN (I) RELIANCE PETROPRODUCTS (P.) LTD. 3 22 ITR 158 (SC) (II) LARSEN & TOUBRO 366 ITR 502 (BOM.). THE COUNSEL ALSO REFERR ED TO CIRCULAR NO.739 DATED 23.03.1996 WHICH PROVIDES THAT LIBERAL APPROACH IN INTERPRETATION OF SECTION 40(B). THE COUNSEL FURTHER SUBMITTED THE PENALTY WAS INITI ATED IN RESPECT OF ENTIRE REMUNERATION OF RS. 1,35,00,000/- BUT LEVIED FOR DI FFERENT REASONS ON A DIFFERENT AMOUNT OF RS.16,00,000/- AND AS HAS BEEN HELD IN T HE CASE OF TRIVENI ENGINEERING & INDUSTRIES LTD. IN RESPECT OF MEMBERSHIP SUBSCRIP TION, THE LD. AR SUBMITTED THAT 9 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT AMOUNT CLAIMED WAS RS.51,635/- AND OUT OF WHICH RS. 19,175/- WAS ALLOWED RESULTING INTO DISALLOWANCE TO THE TUNE OF RS.32,46 0/- CONSISTING OF PERSONAL EXPENSES OF PARTNERS OF RS.23,385/- AND PREPAID EXP ENSES OF RS.975/-. THE LD. CIT(A) CONFIRMED THE PENALTY ON THIS AMOUNT FOR THE REASON THAT NO APPEAL WAS FILED ON MERIT HOWEVER THE SAME WERE GENUINE BUSINE SS EXPENSES INCURRED IN CONNECTION WITH MEETING SUPPLIERS, FOREIGN GUESTS A ND WERE INCURRED BY WAY OF ANNUAL MEMBERSHIP AND OTHER EXPENSES. THE TURNOVER OF THE ASSESSEE WAS RS.20 CRORES AND IN VIEW THE TURNOVER OF RS.23,385/- WERE VERY MEAGRE AMOUNT. MOREOVER THE ASSESSEE WAS UNDER BONAFIDE BELIEF THA T THESE WERE GENUINE BUSINESS EXPENSES AND THEREFORE ON THIS ACCOUNT ALSO PENALTY WAS NOT LEVIABLE. THE APPEAL WAS NOT FILED RAISING THIS GROUND IN VIEW OF THE PE TTY AMOUNT INVOLVED. REGARDING FOREIGN TOUR EXPENSES, THE LD. AR SUBMITTED THAT TH E AMOUNT CLAIMED WAS RS.4,24,000/- WHEREAS THE CLAIM ALLOWED WAS RS.1,64 ,451/- RESULTING INTO DISALLOWANCE TO THE TUNE OF RS.2,59,550/- WHICH INC LUDED THE EXPENSES ON THE CREDIT CARD, FOOD, LOCAL CONVEYANCE AND STAY. THE LD. COUN SEL SUBMITTED THAT THE CIT(A) HAD FAILED TO APPRECIATE THAT ALL THESE EXPENSES WE RE INCURRED FOR GENUINE BUSINESS NEEDS. IN VIEW OF THE NATURE OF THE BUSINESS OF THE ASSESSEE THAT THE TRIBUNAL REDUCED THE DISALLOWANCE ON ACCOUNT OF FOREIGN TRAV ELLING EXPENSES OF THE PARTNERS. THE LD. COUNSEL FINALLY SUBMITTED THAT NO PENALTY W AS LEVIED FOR THE IDENTICAL EXPENSES IN AY 2002-03 AND 2004-05 AS ALL THESE ABO VE EXPENSES WERE INCURRED 10 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT FOR GENUINE BUSINESS NEEDS. ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THE CLAIM WAS GENUINE AND ADMISSIBLE UNDER THE ACT. FINALLY, THE LD. AR VEHEMENTLY RELIED ON THE DECISION OF THE RELIANCE PETROPRODUCTS (P.) LTD. 32 2 ITR 158 (SC) (II) LARSEN & TOUBRO 366 ITR 502 (BOM.) (SUPRA) IN DEFENCE OF HIS ARGUMENTS AND PRAYED THAT THE ORDER OF THE CIT(A) BE ANNULLED AND APPEAL OF T HE ASSESSEE BE ALLOWED IN THE INTEREST OF THE JUSTICE. PER CONTRA THE LD. DR ON T HE OTHER HAND RELIED ON THE ORDERS OF THE AUTHORITIES BELOW BY SUBMITTING THAT THE EXP ENSES WERE INCURRED BY THE ASSESSEE WITH A VIEW TO EVADE TAX AND THUS, THE AO HAD RIGHTLY IMPOSED THE PENALTY U/S 271(1)(C) WHICH WERE RIGHTLY UPHELD BY THE CIT( A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND FROM THE ORDER OF THE AUTHORITIES BELOW AND OT HER RECORDS AVAILABLE BEFORE US THAT THE ASSESSEE HAD CHARGED THE SUM OF RS.1,35,00 ,000/- BY WAY OF PARTNERS REMUNERATION WHICH WAS DULY EVIDENCED BY THE DEED OF PARTNERSHIP AND WHICH WAS ULTIMATELY SUSTAINED TO THE EXTENT OF RS.16,00,000/ - BY THE TRIBUNAL BY HOLDING THAT THE CLAIM OF PARTNERS REMUNERATION WAS INCORRECTLY CALCULATED IN RESPECT OF 285 DAYS WHEREAS THE AO AND THE CIT(A) HAD OBSERVED THA T THE ASSESSEE HAD CLAIM REMUNERATION FOR 365 DAYS. IN RESPECT OF FOREIGN TO UR EXPENSES CLAIM OF THE ASSESEE WAS REDUCED FROM RS.4,24,000/- TO RS.1,64,451/- AND THUS SUSTAINED RS.2,59,550/- AND THE OTHER ITEMS OF DISALLOWANCE WAS MEMBERSHIP AND SUBSCRIPTION WHICH WAS 11 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT CLAIM AT RS.51,635/- AND ALLOWED BY THE AO AT RS.19 ,175/- AND THUS, THE ADDITION TO THE EXTENT OF RS.34,450/-. WE ALSO NOTE THAT THE AS SESSEE DID NOT RAISED GROUND IN RESPECT OF MEMBERSHIP AND SUBSCRIPTION FEE BEING PE TTY IN NATURE. NOW, THE ISSUE BEFORE US WHETHER PENALTY U/S 271(1)(C) OF THE ACT WAS RIGHTLY CONFIRMED BY THE CIT(A). AFTER HEARING COUNSELS FROM BOTH THE SIDES AND CONSIDERING THE NATURE OF EXPENSES DISALLOWED BY THE AO WHICH SUBSTANTIALLY A LLOWED IN THE QUANTUM APPEAL BY THE TRIBUNAL. WE ARE OF THE VIEW THAT THESE WERE BONAFIDE CLAIM OF THE ASSESSEE AND WERE INCURRED OR PROVIDED BY CONSIDERING THE SA ME TO BE ADMISSIBLE UNDER THE LAW. THE SALARY OF THE PARTNERS WAS PROVIDED UNDER THE EXPERT VIEWS HOWEVER WRONGLY CALCULATED WHEREAS THE AMOUNT INCURRED IN R ESPECT OF FOREIGN TOUR EXPENSES AND SUBSCRIPTION AND MEMBERSHIP WERE FULLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS AND IS SUPPORTED BY BILLS AND VOUCHERS . THIS CAN AT THE MOST BE REGARDED A CASE OF DIFFERENCE OF OPINIONS WHERE OUT OF HUGE DISALLOWANCE A SMALL FRACTION HAD SURVIVED TILL THE FINAL DISPOSAL OF TH E QUANTUM APPEAL. THE CASE OF THE ASSESEE FIND STRONG SUPPORT FROM THE DECISION OF TH E APEX COURT IN THE CASE OF (I) RELIANCE PETROPRODUCTS (P.) LTD. 322 ITR 158 (SC) T HE HONBLE SUPREME COURT HAS HELD, WHERE THERE IS NO FINDING THAT ANY DETAILS SU PPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THE RE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO F URNISHING INACCURATE PARTICULARS 12 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS.(II) IN THE CASE OF LARSEN & TOUBRO 366 ITR 502 (BOM.), THE JURISDICTION HIGH COURT HAS HEL D, DISMISSING THE APPEALS, THAT THE TRIBUNAL, RELYING ON THE DECISION OF THE SUPREM E COURT, DELETED THE PENALTIES UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT,1961, ON THE FINDINGS OF FACT THAT MERELY BECAUSE THE ASSESSEE RAISED A CLAIM WHICH WA S EVENTUALLY DISALLOWED, THAT DID NOT MEAN THAT THE INGREDIENTS OF CLAUSE (C) WER E SATISFIED OR FULFILLED SO AS TO JUSTIFY IMPOSITION OF A PENALTY. SUCH A FINDING ESS ENTIALLY BASED ON THE FACTS AND IN THE CIRCUMSTANCES PECULIAR TO THE ASSESSEE, DID NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. 5.2 IN THE PRESENT CASE BEFORE US THE ASSESSEE MAD E A BONAFIDE CLAIM OF EXPENSES WHICH WERE SUBSTANTIALLY ALLOWED AND ONLY A SMALL P ART WAS FINALLY SUSTAINED BY THE TRIBUNAL. IN OUR CONSIDERED OPINION THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE RATIO DECIDED IN THE ABOVE CASES. WE, THEREFORE , RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE ABOVE CASES DELETE THE PENALTY OF RS.6,92,330/- BY ALLOWING THE APPEAL OF THE ASSESSEE. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 13 ITA NO. 7698/MUM/12 (A.Y.2005-06) M/S. SHABRO INTERNATIONAL VS. DCIT ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH FEBRUARY, 2016 SD/- SD/- (SAKTIJIT DEY) (RAJESH KUM AR) % & ' / JUDICIAL MEMBER ' / ACCOUNTANT MEMBER ' ( MUMBAI; )' DATED : 16.02.2016 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT - CONCERNED 5. -. / &&01 , 01! , ' ( / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ' ( / ITAT, MUMBAI