Sh. Ravinder Kumar, Jalandhar V. The Income Tax Officer, Jalandhar

ITA 774/ASR/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1448 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 09-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 31-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR KANCHAN SHARMA
• Assessee Lawyers: DH J S BHASIN
• Keywords: Business expenditure; Wrong claim; Bonafide mistake; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR (SMC) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NO.774(ASR)/2014 ASSESSMENT YEAR:2007-08 PAN: ADDPK-0 124D SH. RAVINDER KUMAR VS. INCOME TAX OFFICER, C/O STANDARD INDUSTRIAL CORPN. WARD-III(3), INSIDE PARTAP BAGH, JALANDHAR. MANDI ROAD, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:DH. J.S. BHASIN, ADVOCATE RESPONDENT BY:DR. KANCHAN SHARMA, DR DATE OF HEARING: 09/12/2015 DATE OF PRONOUNCEMENT: 10/12/2015 ORDER THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2007-08, CHALLENGING THE CONFIRMATION OF PENALTY OF RS.36,32 0/-, LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT ( IN SHORT, THE AC T) 1961, ON THE ASSESSEE. 2. THE FACTS AS PER THE RECORDS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHILE EXAMINING THE SALE PR OMOTION AMOUNTING TO RS.5,53,733/-, THE ASSESSEE WAS ASKED TO GIVE TH E COMPLETE DETAIL ALONG WITH NAME AND ADDRESSEE OF THE PERSONS WHO WE NT ABROAD ON BEHALF OF STANDARD INDUSTRIAL CORPORATION, MANDI RO AD, JALANDHAR. ON BEING ENQUIRED, THE ASSESSEE FILED THE EXPLANATION THAT IN ORDER TO PROMOTE THE SALES THE ALLUREMENT WAS GIVEN TO THE R EGULAR CUSTOMERS. THE COUNSEL OF THE ASSESSEE FILED THE LIST OF 15 CU STOMERS WHOM THE ASSESSEE HAS TAKEN TO BANGKOK AND ALSO SUBMITTED TH E BILLS OF KANWAL HOLIDAY RESORTS LTD., WHO ARRANGED THE FOREIGN TRIP OF 15 PERSONS. AS PER ITA NO. 774(ASR)/2014 2 THE SAID DETAILS THERE WERE FOUR PERSONS, NAMELY, MRS. W.K.BHASIN, MRS. LATA CHADHA, MR. CHADHA, WHO WERE NOT DIRECTLY OR I NDIRECTLY INVOLVED WITH THE BUSINESS OF THE ASSESSEE. ADDITION OF RS.1 ,18,692/- WAS MADE BY THE AO AND PENALTY PROCEEDINGS U/S 271(1)(C) WER E ALSO INITIATED. NOTICE U/S 129 WAS ISSUED ON 23.11.2009 FOR 11.12.2 009 ASKING THE ASSESSEE TO SHOW CAUSE WHY AN ORDER IMPOSING A PENA LTY SHOULD NOT BE MADE U/S 271(1)(C) OF THE ACT. IN RESPONSE, THE ASS ESSEE STATED THAT THIS WAS A BONAFIDE MISTAKE AND WAS NOT IN THEIR KNOWLED GE TILL THEY WERE PREPARING THE DETAILS IN REPLY TO GENERAL QUERIES. THE ASSESSEE ALSO STATED THAT THIS WAS NEITHER A PERSONAL EXPENSES NO R A CAPITAL EXPENDITURE. THE ASSESSEE HAS FURTHER STATED THAT H E HAD ALSO WRITTEN A LETTER TO M/S. KAMAL HOLIDAYS RESORTS PVT. LTD. JA LANDHAR FOR REFUND THE EXCESS AMOUNT FOR 4 PERSONS. THE ASSESSEE ALSO QUO TED THE FOLLOWING JUDGMENTS: ITA NO.1055(ASR)/1990 IN THE CASE OF M/S. DESAR SE RVICES STATION ITA NO.12249ASR)/1992 IN THE CASE OF SH. VIPAN KUM AR 123 TTH (DEL) 433 (2009). 3. HOWEVER, THE AO DID NOT FIND THE EXPLANATION OFF ERED BY THE ASSESSEE TO BE ACCEPTABLE. IT WAS OBSERVED THAT THE ASSESSEE HAD STATED IN HIS REPLY THAT HIS CONCERN HAD SENT A GROUP OF 1 1 CUSTOMERS ON FOREIGN TOUR BUT THE BILL HAD BEEN RECEIVED FOR 15 PERSONS; AND THAT HIS ACCOUNTANT HAD NOT CHECKED THE BILL AND ENTERED THE SAME IN A ROUTINE MANNER AND THE PAYMENT HAD BEEN MADE ACCORDINGLY. I T WAS OBSERVED THAT IT WAS ONLY IN THE ASSESSMENT PROCEEDINGS THAT IT WAS POINTED OUT TO THE ASSESSEE THAT HE HAD CLAIMED EXCESS EXPENDITURE UNDER THE HEAD SALE PROMOTION; AND THAT WHEN THE ASSESSEE WAS CONFRONTE D WITH THIS FACT, HE COULD NOT FURNISH ANY SATISFACTORY REPLY. IT WAS ON THIS BASIS THAT THE ADDITION OF RS.1,18,692/- WAS MADE UNDER THE HEAD S ALE PROMOTION. THE AO OBSERVED THAT HE WAS SATISFIED WITH THE PARTICU LARS OF INCOME FURNISHED BY THE ASSESSEE WERE INACCURATE AND THE A SSESSEE HAD FAILED TO EXPLAIN THE EXPENDITURE AT THE TIME OF ASSESSMENT A ND THE ADDITION HAD ITA NO. 774(ASR)/2014 3 BEEN MADE CORRECTLY. IT WAS IN THIS MANNER, THE PEN ALTY WAS LEVIED ON THE ASSESSEE. THE LD. CIT(A) CONFIRMED THE LEVY OF PENA LTY. 4. BEFORE ME, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY LEVI ED BY THE AO. HE FURTHER STATED THAT THE LD. CIT(A) HAS NOT APPRECIA TED THE CIRCUMSTANCES LEADING TO EXPENDITURE OF RS.1,18,692/- IN CONSEQUE NCE OF WHICH AO HAS LEVIED THE PENALTY. IT WAS A CASE OF ABSENCE OF DUE CARE, AND THERE IS NO FINDING THAT IT WAS A CONSCIOUS ACT OF FURNISHING I NACCURATE PARTICULARS OF INCOME. THE EXPENSES, IN FACT, HAVE BEEN ACTUALLY I NCURRED DURING NORMAL COURSE OF BUSINESS. THE LD. COUNSEL FURTHER SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY IGNO RING ALL THE CASE LAWS WHICH HELD THAT IF THE EXPLANATION WAS BONAFIDE AND HAS NOT PROVE TO BE FALSE, NO PENALTY U/S 271(1)(C) OF THE ACT CAN BE L EVIED. ACCORDINGLY, HE PLEADED THAT THE PENALTY CONFIRMED BY THE LD. CIT(A ) BE CANCELLED. 5. ON THE OTHER HAND, THE LD. DR PLACED STRONG RELI ANCE ON THE IMPUGNED ORDER., CONTENDING THAT IT WAS ONLY WHEN T HE AO DETECTED THE WHOLLY WRONG CLAIM MADE BY THE ASSESSEE, THAT THE A SSESSEE FILED THE EXPLANATION THAT THOUGH HIS CONCERN HAS SENT GROUP OF 11 PERSONS ON FOREIGN TOUR, THE BILL RECEIVED WAS FOR 15 PERSONS AND THAT HIS ACCOUNTANT HAD NOT CHECKED THE BILL AND HAD ENTERED THE SAME I N A ROUTINE MANNER DUE TO WHICH THE PAYMENT WAS MADE. IT HAS BEEN CON TENDED THAT THE ADDITION OF RS.1,18,692/- WAS ACCORDINGLY MADE. IT HAS BEEN SUBMITTED THAT CLEARLY THE ASSESSEE FURNISHED INACCURATE PART ICULARS OF INCOME AND, THEREFORE, THE PENALTY HAS BEEN RIGHTLY LEVIED AND CONFIRMED. 6. HAVING CONSIDERED THE RIVAL CONTENTIONS IN THE L IGHT OF MATERIAL ON RECORD, I FIND THAT THE ADDITION OF RS.1,18,692/- W AS MADE ON EXCESS CLAIM OF EXPENDITURE UNDER THE HEAD SALE PROMOTION . IT IS SEEN THAT IT WAS ONLY ON ENQUIRY BY THE AO, THAT THE ASSESSEE FU RNISHED THE DETAILS OF ITA NO. 774(ASR)/2014 4 EXPENSES AND SURRENDERED THE AMOUNT. THE EXPENSES O F RS.1,8,692/- WERE IN RESPECT OF FOREIGN TOUR EXPENSES OF SH. H.S . BHASIN, MR. W.K. BHASIN, MRS. LATA CHADHA AND SH. S.K.CHADHA, AND W ERE NOT RELATED TO THE ASSESSEES BUSINESS. THE ADDITION OF RS.1,18,69 2/- LEAD TO THE LEVY OF PENALTY OF RS.36,320/- U/S 271(1)(C) OF THE ACT. 7. THE ASSESSEE HAS MAINTAINED THAT HE WAS UNAWARE OF THE FACT THAT M/S. KANWAL HOLIDAY RESORTS LTD., JALANDHAR, I.E., THE TOUR OPERATOR HAD INCLUDED THE FOREIGN TOUR EXPENSES OF THE SAID 4 PE RSONS INTO THE BILL RAISED ON THE ASSESSEE. THIS EXPLANATION OF THE ASS ESSEE HAS RIGHTLY NOT FOUND FAVOUR WITH EITHER THE AO, OR THE LD. CIT(A). FIRSTLY, IT NEEDS TO BE REITERATED THAT IT WAS ONLY WHEN THE AO INVESTIGAT ED THE DETAILS OF EXPENSES WITH REGARD TO SALE PROMOTION THAT THE ASS ESSEE OFFERED HIS EXPLANATION AND MADE THE SURRENDER. AS RIGHTLY OBSE RVED BY THE LD. CIT(A), THE FACT THAT THE ASSESSEE COULD NOT RECOVE R THE EXCESS AMOUNT PAID TO THE TRAVEL AGENT, IS OF NO CONSEQUENCE. FUR THER, THE ASSESSEE DOES NOT SAY THAT ANY PROCEEDINGS HAVE BEEN INITIATED A GAINST THE SAID TOUR OPERATOR FOR NOT RETURNING HIM THE AMOUNT OF RS.1, 18,692/-. 8. THEN, THE ASSESSEE IS ALSO WRONG IN CONTENDING T HAT THE EXPENDITURE IN QUESTION WAS A BUSINESS EXPENDITURE INCURRED DURING NORMAL COURSE OF BUSINESS, DUE TO THE NEGLIGENCE OF THE ACCOUNTANT. THOUGH, IT HAS BEEN STATED THAT THE FOREIGN TOUR I S AN INCENTIVE OFFERED TO RETAILER, WHICH IS TRANSFERABLE AND IT IS NOT NECES SARY THAT THE RETAILER HIMSELF AVAILED OF THE INCENTIVE, WHICH CAN BE TRAN SFERRED, NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT IN THE PRESENT CASE, IN FACT, IT WAS, THAT THE INCENTIVE WAS INDEED SO TRANSFERRED BY THE RETAILER. FURTHER, THE ASSESSEE IS ALSO INCORRECT IN CONTENDING THAT SUCH EXPENSE, INCURRED DURING THE NORMAL COURSE OF BUSINESS CANNOT BE AVOI DED, AS NEGLIGENCE OF THE ACCOUNTANT IS VERY MUCH POSSIBLE AND CANNOT ATT RIBUTE ANY MALAFIDE TO THE ASSESSEE. THE ASSESSEE HAS ALSO NOT SHOWN A NY ACTION HAVING ITA NO. 774(ASR)/2014 5 BEEN TAKEN AGAINST THE ACCOUNTANT. MOREOVER, EVEN I F IT IS TO BE TAKEN A CASE OF NEGLIGENCE OF THE ASSESSEES ACCOUNTANT, TH E ASSESSEE HAVING PASSED THE BILL, HE CANNOT ESCAPE THE RIGORS OF THE LEVY OF PENALTY. 9. THEN, THE ASSESSEES ARGUMENT THAT THE SURRENDER WAS MADE IN ORDER TO AVOID LITIGATION WITH THE DEPARTMENT ALSO DOES NOT HAVE ANY FORCE. IF, AS IN THE PRESENT CASE, THE ASSESSEES C ASE FALLS WITHIN THE FOUR CORNERS OF THE PENALTY PROVISIONS OF SECTION 271(1) (C), SURRENDER, IN ORDER TO AVOID LITIGATION WITH THE DEPARTMENT IS OF NO HE LP TO THE ASSESSEE. THE ASSESSEE HAS ALSO CONTENDED THAT IT IS A CASE OF AB SENCE OF DUE CARE BUT IT DOES NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE H AS FURNISHED INACCURATE PARTICULARS OF INCOME. THIS IS NOT SO. I N CASE ABSENCE OF DUE CARE RESULTS IN FURNISHING INACCURATE PARTICULARS O F INCOME AS IS THE CASE TRIED TO BE MADE OUT HEREIN, THE LEVY OF PENALTY ON THIS SCORE IS JUSTIFIED, PARTICULARLY WHEN THE ASSESSEE HIMSELF ADMITS THAT IT WAS NEGLIGENCE ON THE PART OF HIS ACCOUNTANT, WHO DID NOT CHECK THE C ONTENTS OF THE BILL AND ENTERED THE SAME IN A ROUTINE MANNER. THE FACT REMA INS THAT THE ASSESSEE RATIFIED THIS ACTION OF THE ACCOUNTANT BY PASSING THE BILL. 10. THERE IS ALSO NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE FOUR PERSONS INVOLVED WERE NOT RELATED TO THE ASSES SEE IN ANY WAY. NO FACTS IN THIS REGARD WERE BROUGHT BEFORE THE TAXING AUTHORITIES, EITHER IN THE ASSESSMENT PROCEEDINGS, OR EVEN IN THE PENALTY PROCEEDINGS. THE ASSESSEE HAS, AS OBSERVED, TAKEN A GENERAL STAND TH AT THE INCENTIVE OFFERED IS TRANSFERABLE ONE. HOWEVER, NOTHING HAS B EEN PRODUCED BY WAY OF EVIDENCE IN THIS REGARD. 11. RELIANCE BY THE ASSESSEE ON THE FACT THAT THERE HAD, RATHER, OCCURRED A LOSS TO THE ASSESSEE, ALSO DOES NOT BRIN G THE ASSESSEE OUT OF THE KEN OF THE PENALTY PROVISIONS. BY CLAIMING WRON GFUL EXCESS EXPENDITURE, THE ASSESSEE HAS INDEED FURNISHED INAC CURATE PARTICULARS OF HIS INCOME. ITA NO. 774(ASR)/2014 6 12. THE ASSESSEE HAS ALSO MAINTAINED THAT IN VIEW O F ALL DETAILS HAVING BEEN FURNISHED BEFORE THE AO, THE AO HAD NOTHING TO SUSPECT AGAINST THE ASSESSEE. THIS ARGUMENT IS ALSO OF NO HELP TO THE A SSESSEE. IT WAS ONLY WHEN THE AO DISCOVERED THE WRONGFUL EXCESS CLAIM MA DE BY THE ASSESSEE AND FINDING HIS EXPLANATION NOT TO BE SATISFACTORY THAT THE ADDITION WAS MADE AND THE PENALTY CONSEQUENTLY LEVIED. 13. IN VIEW OF THE ABOVE, FINDING NO MERIT IN THE G RIEVANCE SOUGHT TO BE RAISED BY THE ASSESSEE, THE SAME IS HEREBY REJECTED . 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10TH D ECEMBER, 2015. SD/- (A.D. JAIN) JUDICIAL MEMBER DATED: 10/12/2015 /SKR/ COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE: SH.RAVINDER KUMAR, JALANDHAR. 2. THE ITO, WARD-III(3), JALANDHAR. 3. THE CIT(A), JALANDHAR 4. THE CIT, JALANDHAR 5. THE SR. DR, ITAT, ASR.