Sharsh Finance & Investment Co. Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 878/DEL/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3286 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 01-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 22-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: V K AGARWAL
• Keywords: Business expenditure; Income from undisclosed sources; Principle of natural justice; Bonafide belief; Question of law; Wrong claim; Difference of opinion; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 878/ DEL/201 2 A.Y. : 20 0 5 - 0 6 M/S SHARSH FINANCE & INVESTMENT CO. PVT. LTD., 16L, CONNAUGHT PLACE, NEW DELHI 110 001 (PAN: AAHCS1410L) VS. ACIT, CIRCLE 18(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. V.K. AGARWAL, A.R. DEPARTMENT BY : SH. N.K. BANSAL, SR. DR ORDER PER H.S. SIDHU, JM THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 19/12/2011 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XI, NEW DELHI ON THE FOLLOWING GROUNDS:- 2 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPE LLATE ORDER PASSED BY THE LD. CIT(A) IS ILLEGAL BEING AGA INST THE PRINCIPLES OF NATURAL JUSTICE AND AGAINST THE PROVISIO NS OF I.T. ACT, 1961. 2. THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS WELL AS IN LAW IN CONFIRMING THE PENALTY U/S. 271(1)(C) IN RESPECT OF ADDITIONS OF RS. 5,15,176/- ON ACCOUNT OF FOREIGN TR AVEL EXPENSES AND RS. 1,50,000/- ON ACCOUNT OF ADDITION U /S. 68. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY AND WITHDRAW ANY GROUND OF APPEAL BEFORE OR DURING THE APPELLATE PROCEEDINGS. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RET URN OF INCOME ON 31.10.2005 DECLARING TOTAL INCOME OF RS. 3,51,13,855/ -. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF TH E ACT WAS ISSUED. IN RESPONSE TO THE SAME THE A.R. OF THE ASSESS EE ATTENDED THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME AND FILED THE DETAILS. 2.1 THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINES S OF DEALING IN SHARES AND MUTUAL FUNDS. IT HAS ALSO SHOWN INCOM E FROM BROKERAGE AND COMMISSION. 2.2 THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT VIDED ORDER DATED 24.12.2007 AT AN INCOME OF RS. 3,92,91,3 60/- MAKING 3 VARIOUS ADDITIONS. AGGRIEVED WITH THE ORDER OF THE A O, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A), WHEREBY THE ADD ITIONS / DISALLOWANCES ON ACCOUNT OF FOREIGN TRAVELLING EXPEN SES, DISALLOWANCE U/S. 14A BEING 2% OF DIVIDEND INCOME A ND INCOME FROM UNDISCLOSED SOURCES WERE CONFIRMED. THE ADDI TION ON ACCOUNT OF INTEREST EXPENSE ON ACCOUNT OF DIVERSION OF BORROWE D FUNDS WAS RESTRICTED TO RS. 15,43,526/-. THE AO OBSERVED THAT THE ASSESEE HAD INCURRED AN EXPENDITURE OF RS. 5,15,176/- ON FOR EIGN TRAVEL OF ONE OF ITS DIRECTORS. THE AO HELD THAT THE ASSESSEE W AS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AND THERE WAS NO RELEVANCE FOR TRAVEL TO SINGAPORE, BANGKOK, ROME, LON DON ETC. BY ONE OF ITS DIRECTORS. THE EXPENDITURE ON FOREIGN TR AVEL CAN BY NO MEANS BE CONSIDERED AS BUSINESS EXPENDITURE. FURTHE R, NO EVIDENCE HAS BEEN FURNISHED TO PROVE THE PURPOSE OF FOREIGN TRA VEL TO JUSTIFY EXPENSES. AO FURTHER OBSERVED THAT AS FAR AS INCOME FROM UNDISCLOSED SOURCES IS CONCERNED, THE ASSESSEE HAD SHOWN UNSECURED LOAN OF RS. 1,50,000/- RECEIVED FROM ONE SH. S. MAITRA. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKE D TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE PARTY AND GENUI NENESS OF THE TRANSACTIONS. HOWEVER, THE ASSESSEE ONLY FILED A CONFIRMATION LETTER PURPORTEDLY SIGNED BY THAT PERSON AND NO OTHE R EVIDENCE OR MATERIAL WAS FILED TO PROVE THE GENUINENESS EITHER AT THE 4 ASSESSMENT STAGE, APPELLATE STAGE AND NOW DURING PENA LTY PROCEEDINGS. IN VIEW OF THE ABOVE, AO HAS OBSERVED THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME W ITH A VIEW TO EVADE TAXES AND MADE A PENALTY OF RS. 3,777,546/- VID E HIS ORDER DATED 31.3.2010 PASSED U/S. 271(1) OF THE ACT. 3. AGGRIEVED BY THE PENALTY ORDER, ASSESSEE FILED AP PEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE HIS IMPUGNED ORDER DATED 19.12.2012 PARTLY ALLOWED THE APPEAL FILED BY THE AS SESSEE BY HOLDING THAT THE ASSESSEE IS A SHARE TRADER AND HIS VI SITS TO FOREIGN COUNTRIES ARE NOT RELATED TO BUSINESS, HENCE, HE OB SERVED THAT ASSESSEE HAS MADE A WRONG CLAIM AND FURNISHED INAC CURATE PARTICULARS OF INCOME WITH A VIEW TO CONCEALMENT OF IN COME AND ACCORDINGLY THE EXPLANATION OF THE ASSESSE IS NOT BONA FIDE AND PENALTY WAS CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ADDITIONS OF RS. 5,15,176/- FOR FOREIGN TRAVEL AND PENALTY ON AC COUNT OF ADDITION U/S. 68 OF THE ACT OF RS. 1,50,000/-, LD. CIT(A) OBS ERVED THAT IT WAS NOWHERE SUBMITTED THAT THE THREE BASIC REQUIREMENTS OF PROVING THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRAN SACTIONS WERE DULY FULFILLED. LD. CIT(A) HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS WITH A VIEW TO CONCEALMENT OF IN COME AND EXPLANATION GIVEN BY THE ASSESSEE IS NOT BONAFIDE. HE NCE, THE PENALTY WAS CONFIRMED ON ADDITIONS OF RS. 5,15,176/- ON ACCOUNT OF 5 FOREIGN TRAVEL AND RS. 1,50,000/- ON ACCOUNT OF ADDI TION U/S. 68 OF THE ACT VIDE IMPUGNED ORDER DATED 19.12.2011 PASSED U/ S. 271(1)(C) OF THE ACT. 6. AGGRIEVED WITH THE IMPUGNED ORDER DATED 19.12.201 1 PASSED BY THE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE THE T RIBUNAL. 7. IN SUPPORT OF HIS CONTENTION, LD. A.R. OF THE AS SESSEE HAS FILED THE SYNOPSIS OF SUBMISSIONS (REVISED) AND REITERATED THE CONTENTS THEREOF, WHICH READ AS UNDER:- 1. PENALTY U/S 271(1)(C) HAS BEEN LEVIED IN RESPECT OF ADDITIONS OF RS. 5,15,176/- ON ACCOUNT OF FOREIGN TR AVEL EXPENSES, RS. 1,50,000/- ON ACCOUNT OF ADDITION U/S 68 AND DISALLOWANCE OF RS. 3,66,654/- U/S 14A (PG. 2 O F THE PENALTY ORDER). PENALTY WAS CONFIRMED BY THE LD. C!T (A) EXCEPT ON DISALLOWANCE U/S 14A. PENALTY NOTICE U/S 271(1)(C) IS BAD IN LAW 2. A PERUSAL OF THE NOTICE U/S 271(1)(C) CLEARLY IN DICATES THAT IT HAS NOT BEEN ISSUED FOR ANY SPECIFIC DEFAULT. IT HAS BEEN ISSUED FOR CONCEALMENT OF INCOME AS WELL AS FOR FILING INACCURATE PARTICULAR OF INCOME. THIS INDICATE S THAT LD. AO IS NOT SURE ABOUT THE DEFAULT ON THE PART OF THE ASSESSEE. BY NOW IT IS JUDICIALLY SETTLED THAT THE PENA LTY NOTICE, IF NOT ISSUED FOR A SPECIFIC DEFAULT, IS INVA LID AND ACCORDINGLY THE PENALTY ORDER IS NOT SUSTAINABLE. RELI ANCE IS PLACED ON THE FOLLOWING CASE LAWS: - 6 - CIT VS. V S LAD & SONS, 2013-TIOL-536-HC-KAR-I T '61 THUS THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COUR T IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 = (2007-TIOL-98-SC-IT) AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJRAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 171 TAXMN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NO T SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON- APPLICATION OF MIND.' (SLP DISMISSED) - CIT VS. V S LAD & SONS, TS-807-SC-2014 'WE FIND NO REASON TO ENTERTAIN THESE SPECIAL LEAVE PETITIONS, WHICH ARE, ACCORDINGLY, DISMISSED. - VEERBHADRAPPA SANGAPPA & CO. [TS-381-SC-2016] 7 'CONCLUSION: SC DISMISSES REVENUE'S SLP AGAINST KARNATAKA HC JUDGEMENT LAYING DOWN LAW ON 'PENALTY LEVY' FOR AY 20 03- 04; HC HAD HELD THAT NOTICE ULS 274 MUST SPECIFICALLY STATE GROUND FOR INITIATION OF PROCEEDINGS (WHETHER CONCEALMENT OR FILING INACCURATE PARTICULARS); HC HAD CLARIFIED THAT 'MERE SENDING OF PRINTED FORM WITH ALL GROUNDS MENTIONED NOT SUFFICIENT COMPLIANCE OF LAW'; DISMISSING SLP, SC HOLDS THAT 'WE DO NOT FIND ANY ME RIT IN THESE PETITIONS.' - NAYAN C SHAH VS. ITO, 2016-TIOL-739-HC-AHM ' ... WHETHER SUBMITTING AN INCORRECT CLAIM WHILE FIL ING RETURN, WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME, WARRANTING INITIATION OF PENALTY PROCEEDIN GS - NO: HC WHETHER THE AO WHILE ISSUING A NOTICE U/S 271 (1) (C), IS REQUIRED TO SPECIFY AS TO WHAT IS THE DEFAULT ON THE P ART OF ASSESSEE, AS TO WHETHER THE CASE IS ONE OF CONCEALMENT OF INCOME, OR WHETHER IT IS CASE OF FURNISHING INACCURATE PARTICULARS - YES: HC' - SANGHAVI SAVLA COMMODITY BROKERS PVT LTD VS. ACIT, 2016-TIOL-170-ITAT-MUM ' ... WHETHER NOTICE UNDER SECTION 274 OF THE ACT SHO ULD SPECIFICALLY STATE THE GROUND MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCO ME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME - YES: ITAT' 8 - M/S SAJAN KUMAR BANSAL AND SONS (HUF) VS. DCIT, 2016-TIOL-114-ITAT-KOL '++ THE SHOW CAUSE NOTICE U/S. 274 OF THE ACT IS DEFECTIVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHIC H THE PENALTY IS SOUGHT TO BE IMPOSED. FOLLOWING THE DECISION OF THE KARNATAKA HIGH COURT, THE ORDERS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE TO BE HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANCELLED; (PARA 7.3)' PENALTY CANNOT BE LEVIED MERELY BECAUSE THE EXPLANATI ON OF THE ASSESSEE IS NOT ACCEPTABLE 3. THE LD. AO, VIDE PAGE 2 OF THE PENALTY ORDER, HAS LEVIED THE PENALTY BY HOLDING THAT THE EXPLANATION FILED BY THE ASSESSEE IS NOT ACCEPTABLE. AS PER SECTION 271(1) (C), EXPLANATION 1, PENALTY CAN BE LEVIED ONLY IF THE ASS ESSEE FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATI ON WHICH IS FALSE OR OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT EXPLANATIO N IS BONAFIDE AND ALL THE FACTS HAVE BEEN DISCLOSED. A P ERUSAL OF THE PENALTY ORDER INDICATES THAT THERE IS NO SUCH ALLEGATION AGAINST THE APPELLANT. THE ONLY FINDING BY THE LD. AO IS THAT THE EXPLANATION IS NOT ACCEPTABLE. THEREFORE, THE LD. AO WAS NOT JUSTIFIED IN LEVYING TH E PENALTY. RELIANCE IS PLACED ON THE FOLLOWING CASE LA WS: - - CIT VS. BHARAT HIRALAL POPAT, 2015-TIOL-232-HC- AHM-IT 9 '++ FURTHER, IT IS THE CASE OFTHE REVENUE THAT THE EXPLANATION GIVEN BY THE ASSESSEE IN CONNECTION WITH HIS INCOME IS NOT ACCEPTABLE AND IT IS NOT THE CASE THAT TH E ASSESSEE HAS OFFERED NO EXPLANATION OR FALSE EXPLAN ATION, AT ALL. INSTEAD THE CASE OF THE REVENUE IS THAT THE EXPLANATION GIVEN BY THE ASSESSEE CANNOT BE ACCEPTED . IN SIMILAR CIRCUMSTANCES, THIS COURT IN THE CASE OF AMRUT TUBEWELL COMPANY VS. ACIT RENDERED IN TAX APPEAL NOS. 128 & 129 OF 2001, IT HAS OBSERVED THAT THE TRIBUNAL HAS RECORDED THAT THE CIT(A) CONFIRMED THE PENALTY IMPOSED BY THE AO UNDER THIS SECTION ON THE GROUND THAT THE DIFFERENCE BETWEEN THE EARNED INCOM E AND THE ASSESSED INCOME OF THE ASSESSEE WAS MORE AND THAT THE ASSESSEE, HIMSELF, HAD DECLARED INCOME OF RS.75,000/- BY FILING REVISED RETURN. THE TRIBUNAL, FURTHER, OBSERVED THAT THE CIT(A) HAD FOUND THAT THE ASSESSEE WAS NOT ABLE TO PROVE THE SOURCE OF CASH CRE DIT, AND THEREFORE, CIT(A) UPHELD THE PENALTY LEVIED BY TH E AO, WHICH IS CONFIRMED BY THE TRIBUNAL. HOWEVER, WH ILE DOING SO, HERE AGAIN, THE TRIBUNAL FAILED TO APPRECI ATE THE FACT THAT THE ASSESSEE HAD NOT FURNISHED ANY DETAILS PERTAINING TO ADVANCE TAX WHICH WAS UNTRUE. ON THE CONTRARY, THE ADDITIONS WERE OF SUCH NATURE THAT THE ASSESSEE COULD NOT HAVE FORESEEN. WE ARE, THEREFORE, OF THE OPINION THAT THE ORDER OF THE TRIBUNAL CANNOT BE SUSTAINED AND DESERVES TO BE QUASHED AND SET ASIDE. I N ABOVE VIEW OF THE MATTER, THE DECISION OF THE APEX C OURT IN CIT VS. KHODAY ESWARSA & SONS AND OF THIS COURT IN AMRUT TUBEWELL OMPANY VS. ASST. CIT, WOULD 10 APPLY TO THE FACTS OF THE PRESENT CASE. HENCE, THE APPE AL DESERVES TO BE ALLOWED. FOREIGN TRAVELLING EXPENSES 4. A) THE AO HAS LEVIED THE PENALTY ON THE GROUND THAT THE ASSESSEE IS A DEALER IN SHARES AND SUCH EXPENDITU RE CANNOT BE CONSIDERED AS BUSINESS EXPENDITURE BECAUSE EVIDENCE HAS BEEN FILED TO PROVE THE BUSINESS PURPOSE . II B) THE AO HAS COMPLETELY IGNORED THE FACT THAT THE APPELLANT IS A SHARE BROKER ALSO (PG.16, PB). IT HAS DECLARED BROKERAGE INCOME AT RS. 22,23,372/- DURING THE YEAR. FOREIGN TRAVELLING EXPENSES ARE DULY DECLARED AT RS. 5,15,176/- IN THE PROFIT AND LOSS ACCOUNT OF THE ASSE SSEE COMPANY (PG. 16, PB). THE ACCOUNTS ARE DULY AUDITED. DETAILS OF EXPENSES FILED BEFORE THE AO (PG. 6, PB] CLEARLY INDICATE THAT THE FOREIGN TOURS WERE UNDERTAKEN THROUGH GLOBAL E TRAVEL SOLUTION PVT. LTD. WHICH IS AN OUTSI DE PARTY. THE AO HAS NOT BROUGHT ANY NEW FACT ON RECORD THAN WHAT IS DECLARED IN THE ACCOUNTS. C) THE FOREIGN TOURS WERE UNDERTAKEN BY THE DIRECTOR I N CONNECTION WITH THE SHARE BROKING BUSINESS OF THE ASSESSEE COMPANY BECAUSE THE ASSESSEE COMPANY INTENDED TO HAVE NRIS, FIIS AS ITS CLIENT. THEREFORE, IT WAS PURELY BUSINESS EXPENDITURE. IN FACT, THE AO NEITHER FOUND THE EXPLANATION GIVEN BY THE ASSESSEE (PG. 8, P B) AS FALSE..NOR UNSUBSTANTIATED NOR BEING NOT BONAFIDE AND HENCE THE PENALTY COULD NOT BE LEVIED. THE LD. AO HA S NOT FOUND ANY FAULT WITH THE GENUINENESS OF THE EXPENDITURE CLAIMED BY THE APPELLANT. IT IS NOT HIS CAS E 11 THAT THE EXPENDITURE WAS NOT INCURRED AND THE CLAIM IS BOGUS. IT IS ALSO NOT HIS CASE THAT THE EXPENDITURE I S NOT VERIFIABLE. THEREFORE, IT IS AN ADMITTED FACT THAT THE EXPENDITURE IS GENUINE AND WAS ACTUALLY INCURRED. HA D THE APPELLANT BEEN SUCCESSFUL IN GETTING ANY CLIENT FR OM THE COUNTRIES, THE DIRECTOR VISITED, EVEN THE EXPENDIT URE WOULD HAVE BEEN ALLOWED AS BUSINESS EXPENDITURE. UNFORTUNATELY, THE DIRECTOR WAS NOT SUCCESSFUL IN GETTI NG CLIENTS FROM FOREIGN COUNTRIES. HOWEVER, THE FACT REM AINS THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF SHARE BROKING BUSINESS. THE DISALLOWANCE WAS ONLY O N ACCOUNT OF DIFFERENCE OF OPINION. HENCE THE APPELLAN T CLAIMED THE EXPENDITURE UNDER THE BONAFIDE BELIEF THA T THE SAME IS ALLOWABLE AS IT HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS ONLY. THE LD . AO HAS NOT POINTED OUT ANY INFORMATION GIVEN IN THE RE TURN AS INCORRECT AND INACCURATE AND THEREFORE, IT CANNOT BE SAID THAT THE APPELLANT FURNISHED INACCURATE PARTICULA RS. BY NOW IT IS JUDICIALLY SETTLED THAT PENALTY U/S 271(1) (C) CANNOT BE LEVIED ON ACCOUNT OF DISALLOWANCE OF FOREIG N TRAVELLING EXPENDITURE OR FOR THAT MATTER ANY EXPENDITU RE. RELIANCE IS PLACED ON THE FOLLOWING: - I) ACIT VS. T.R.B. EXPORTS (P.) LTD., (2010) 134 T TJ (CHD)(UO) 49 '6. PENALTY UNDER S. 271(1)(C) OF THE ACT IS ATTRACT ED IN CASE THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNIS HED INACCURATE PARTICULARS OF INCOME. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ASSESSEE HAD CLAIMED FOR EIGN 12 TRAVEL EXPENSES OF WIFE OF THE DIRECTOR WHO HAD ACCOMPANIED HER HUSBAND ON FOREIGN TRAVEL. THE SAID EXPENDITURE WAS DISALLOWED BEING NOT RELATABLE TO THE BUSINESS OF THE ASSESSEE COMPANY. MERELY BECAUSE AN EXPENDITURE HAS BEEN DISALLOWED IN THE HANDS OF THE ASSESSEE DOES NOT AUTOMATICALLY MAKE THE ASSESSEE EXIGIBLE TO LEVY OF PENALTY UNDER S. 271(1)(C) OF TH E ACT. IN ANY CASE, MERE DISALLOWANCE OF EXPENDITURE DOES NOT ATTRACT THE LEVY OF PENALTY UNDER S. 271(1)(C) OF THE A CT. WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT(A) THAT THERE IS NO MERIT IN THE LEVY OF PENALTY ON DISALLOWAN CE OF EXPENSES HOLDING THE SAME TO BE NON-BUSINESS EXPENSE S II) ACIT VS. VIJAY KIRAN HOTELS (P) LTD., (2008) 1 0, DTR (CHD) (TRIB) 225 'PENALTY UNDER S. 271(1) (C)- CONCEALMENT-DISALLOWANCE OF EXPENDITURE-DIRECTOR OF T HE ASSESSEE COMPANY TRAVELLED ABROAD TO EXPLORE AVENUE S OF STUDIES FOR HIS SON-EXPENDITURE ON FOREIGN TRAVEL DISALLOWED ON THE GROUND THAT THE SAME WAS INCURRED FOR NON-BUSINESS CONSIDERATION-NO CASE IS MADE OUT BY TH E AO THAT THE CLAIM FOR EXPENDITURE REFLECTED ANY FALSITY -IN FACT, THE PURPOSE OF THE TRAVEL WAS FULLY EXPLAINED A ND THE SAME HAS NOT BEEN REJECTED AS, FALSE OR LACKING BO NA FIDES-MERELY BECAUSE THERE IS DIFFERENCE OF OPINION AS REGARDS THE ALLOWABILITY OF THE CLAIM FOR DEDUCTION, IT COULD NOT BE SAID THAT THERE WAS CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS WITHIN THE MEANIN G OF S. 271(1)(C)-PENALTY RIGHTLY DELETED' 13 III) SHRI KAMAL SAHDEV VS. ACIT, 2014-TIOL-49-ITAT - DEL '3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE PENALTY HAS BEEN LEVIE D ON ACCOUNT OF DISALLOWANCE OF EXPENSES AMOUNTING TO RS.5,22,996/- UNDER VARIOUS HEADS I.E. FOREIGN TRAVE LING EXPENSES, REPAIR AND MAINTENANCE EXPENSES, ELECTRIC ITY EXPENSES, BUSINESS PROMOTION EXPENSES AND CAR EXPENSES. OUT OF THESE EXPENSES, PART OF THE EXPENSES HAS BEEN DISALLOWED ON AD-HOC BASIS. IN OUR OPINION , ON SUCH AD-HOC DISALLOWANCE OUT OF EXPENSES, NO PENALTY UNDER SECTION 271(1)(C) IS LEVIABLE. PENALTY CANNOT BE LEVIED ON ALLEGED INCORRECT CLAIM 5. BY NOW IT IS JUDICIALLY SETTLED THAT PENALTY U/S 271(1)(C) CANNOT BE LEVIED ON ACCOUNT OF DISALLOWANC E OF EXPENDITURE/CLAIM. RELIANCE IS PLACED ON THE FOLLOWIN G:- I) CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., (2010) 322 ITR 158 (SC) 'PENALTY UNDER S. 271(1)(C)-CONCEALMENT-DISALLOWANCE OF CLAIM FOR DEDUCTION-IN ORDER TO ATTRACT THE PROVISIO NS OFS. 271(1)(C), THERE HAS TO BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF HIS INCOME BY THE ASSESSEE-IN THE INSTANT CASE, ASSESSEE CLAIMED DEDUCT ION OF INTEREST ON LOANS TAKEN BY IT FOR PURCHASE OF SHA RES-AO DISALLOWED SUCH INTEREST-ADMITTEDLY. NO INFORMATION GI VEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE - HENCE. THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISH ING 14 INACCURATE PARTICULARS-MAKING AN INCORRECT CLAIM IN L AW CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS-MERELY BECAUSE THE ASSESSEE CLAIMED DEDUCTION WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE, PENALTY UNDER S. 271(1)(C) IS NOT ATTRACTED-IF THE CONTENTION OF THE REVENUE IS ACCEPTED, THE ASSESSEE WOULD BE LIABLE FOR PENALTY UNDER S. 271(1)(C) IN EV ERY CASE WHERE THE CLAIM MADE BY THE ASSESSEE IS NOT ACCEPTED BY THE AO FOR ANY REASON-THAT IS CLEARLY NO T THE INTENDMENT OF THE LEGISLATURE.' II) CIT VS. UDAIPUR HOTELS LTD, 2013-TIOL-16-HC-D EL-IT 'INCOME TAX - SECTION 271(1)(C) - WHETHER MERE SUBMISSION OF A CLAIM WHICH IS INCORRECT IN LAW WOUL D AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCOME , HENCE PENALTY FOR CONCEALMENT CAN BE LEVIED ON THE SAME. APPEAL IS DISMISSED.' III) BIJLI INVESTMENTS (P) LTD. VS. ITO , [2007] 1 3 SOT 725 (DEL) 'PENALTY UNDER S. 271 (L)(C) - CONCEA LMENT / FURNISHING INACCURATE PARTICULARS OF INCOME - FEE P AID TO ROC DISALLOWED AS CAPITAL EXPENDITURE - ASSESSEE CLA IMED FEE PAID TO ROC AS REVENUE EXPENDITURE - AO DISALLOWE D THE SAME AS CAPITAL EXPENDITURE AND MADE ADDITION - PENALTY UNDER S. 271 (L)(C) IMPOSED - NOT JUSTIFIED. ' IV) DCIT VS. RAHOUL SIEMESSEN ENGG. (P) LTD., [2004] 91 TTJ (DEL) 62 'ASSESSEE HAVING CLAIMED DEBATABLE DEDUCTIONS , TOWARDS INTEREST PAID TO 15 DEPARTMENT UNDER SS. 201(LA),217, 220(2),220(3) AND 234 B OUT OF TAXABLE INCOME, THERE WAS NO CONCEALMEN T ATTRACTING PENALTY UNDER S. 271 (L)(C).' V) NUCHEM LIMITED VS. DCIT, [1992] 49 TTJ (DEL) 177 'PENALTY UNDER S. 271 (L)(C), EXPLANATION - CONCEALMENT - WHERE CERTAIN ADDITIONS AND DISALLOWANCE S WERE MADE WHICH WERE CONFIRMED UP TO THE STAGE OF T HE TRIBUNAL, UNLESS THERE IS A FINDING THAT THE EXPLANAT ION GIVEN BY THE ASSESSEE WAS FALSE, THE CLAIM OF ASSESS EE CANNOT BE TREATED AS MALA FIDE AND IT WOULD BE COVERE D BY THE PROVISO TO EXPLN. 1 - IF AFTER FURNISHING NEC ESSARY PARTICULARS OF INCOME ASSESSEE'S CLAIM FOR CERTAIN DEDUCTIONS ARE DISALLOWED, IT MAY BE ON ACCOUNT OF DIFFERENCE OF OPINION ON PARTICULAR SET OF FACTS BUT IT DOES NOT AMOUNT TO CONCEALMENT - ASSESSEE HAVING DISCLOSED IN RETURN ALL MATERIAL FACTS RELATING TO COMPUTATION OF INCOME, THEREFORE NOT LIABLE TO PENALTY THROUGH CERTAIN ITEMS CLAIMED AS DEDUCTION WERE DISALLOWED, HOLDING A S CAPITAL EXPENDITURE OR NOT RELATING TO RELEVANT PREVIO US YEAR. CASH CREDIT 5. AS REGARDS CREDIT IN THE NAME OF MR. S. MAITRA, CONFIRMATION WAS DULY FILED CLEARLY INDICATING THE DE TAILED ADDRESS OF THE CREDITOR (PG. 7, PB). THE CREDIT IS DU LY DECLARED IN THE AUDITED BALANCE SHEET (PG. 18, PB). T HE LD. AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO ESTABLISH THAT IT IS THE INCOME OF THE ASSESSEE. MERELY DISBELIEVING THE CLAIM OF THE ASSESSEE DOES NOT AMOU NT 16 TO FILING OF INACCURATE PARTICULARS. THE LD. AO HAS N OT BROUGHT ANY MATERIAL ON RECORD TO ESTABLISH THAT THE CONFIRMATION FILED WAS FALSE OR THE CREDIT REPRESENTS APPELLANT'S INCOME. ALL THE FACTS WERE DISCLOSED BY T HE APPELLANT AND THE LD. AO HAS NOT FOUND ANY FALSITY IN THEM. UNDER THE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE APPELLANT FILED INACCURATE PARTICULARS OF INCOME. RELIANCE IS PLACED ON THE FOLLOWING: - I) NATIONAL TEXTILES VS. CIT, (2001) 249 ITR 125 (GUJ) 'CONCLUSION IN ORDER TO JUSTIFY LEVY OF PENALTY FOR ADDITION OF C ASH CREDITS, THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESENT ASSESSEE'S INCOME AND THE CIRCUMSTANCES MU ST SHOW THAT THERE WAS CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PARTICULARS; EXPLN. 1 DOES NOT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE INCOME HE ASSESSEE' II) BHARTESH JAIN VS. ITO, (2011) 137 TTJ (DELHI) 200 ASSESSEE HAVING PRODUCED CONFIRMATION FOR BOTH THE ALLEGED LOANS, IT CANNOT BE SAID THAT THE EXPLANATION OF THE ASSESSEE WAS NOT BONA FIDE OR THAT MATERIAL FACTS WERE NOT DISCLOSED MERELY BECAUSE ADDITIONS UNDER S. 68 HAVE BEEN CONFIRMED FOR THE REASON THAT THE FIRST CRE DITOR DENIED THAT THE AMOUNT WAS GIVEN TO THE ASSESSEE AS A LOAN AND THERE WAS SERIOUS DOUBT ABOUT THE GENUINENESS OF THE SOURCE OF SOURCE OF SECOND LOAN AND, THEREFORE , 17 EXPLN. 1 TO S. 271(1)(C) IS NOT APPLICABLE AND PENALT Y IS NOT LEVIABLE.' CONCEALMENT CAN BE OF FACTS BUT NOT OF CONCLUSION FROM FACTS 6. IT MAY BE APPRECIATED THAT MERE DISALLOWANCE OR REJECTION OF A CLAIM DOES NOT MEAN THAT CLAIM WAS FALS ELY MADE. THE FACT THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT ACCEPTED BY THE AUTHORITIES, IT CANNO T BE SAID THAT THE ASSESSEE HAD MADE AN INCORRECT CLAIM. NO QUESTION OF ANY LIABILITY WILL ARISE WHERE THE AS SESSEE IS MERELY CONTENDING FOR A PARTICULAR POSITION CONTRARY TO THE VIEW TAKEN BY THE ASSESSING OFFICER. IN FACT, THE ASSESSEE HAS THE INHERENT RIGHT TO TAKE ANY CLAIM WHIC H MAY OR MAY NOT BE ALLOWED. MERE DISALLOWANCE OF THA T CLAIM BY ITSELF DOES NOT FORM BASIS FOR INITIATING OR IMPOSING ANY PENALTY IN THE ABSENCE OF MATERIAL TO S HOW THAT THE CLAIM WAS MADE MALA FIDE. THE ASSESSEE HAS DISCLOSED ALL THE FACTS MATERIAL TO COMPUTATION OF INC OME. ON THE SAME FACTS, THE LD. AO HAS DRAWN A DIFFERENT CONCLUSION WHILE PASSING THE ASSESSMENT ORDER. PENAL TY U/S 271 (1) (C) CANNOT BE LEVIED IF ALL MATERIAL FAC TS HAVE BEEN DISCLOSED TO ENABLE THE AO TO ARRIVE AT THE CORR ECT CONCLUSION BECAUSE CONCEALMENT CAN BE OF FACTS BUT NOT OF CONCLUSION FROM FACTS. THE RELIANCE MAY BE PLACED ON THE FOLLOWING:- I) HIMATVELLANJI KARIA VS. ITO (1991) 40 TTJ (AHD.) 446 18 'WHERE THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS TO ENABLE TO ITO TO COME TO THE CORRECT CONCLUSION, IT CANNOT BE SAID THAT HE IS GUILTY OF CONCEALMENT - CONCEALMENT CAN ONLY BE OF FACTS AND NOT OF THE CONCLUSION- ASSESSEE HAD CLAIMED HIMSELF TO BE A NON-RESIDENT BUT HAD FURNISHED ALL SUPPORTING DETAILS- IT WAS FOR THE ITO TO DERIVE THE CORRECT STATUS.' II) IMPULSE INDIA (P) LTD. VS. ITO (1992) 40 ITD (DEL) 36 'CLAIM MADE OVERTLY AND OPENLY WAS REJECTED FINALLY, PENALTY FOR CONCEALMENT OF INCOME CANNOT BE LEVIED.' III) ITO VS. BUDGE BUDGE CO. LTD., (2006) 100 ITD 387 (KOL) '7 AS ALL THE CLAIMS AND FIGURES AND FIGURES ARE NOTICEABLE AND AVAILABLE ON RECORDS, IT CANNOT BE SAID THAT THE APPELLANT HAD FALSELY SUPPLIED OR GIVEN INACCURATE PARTICULARS OF INCOME OR THAT IT HAS CONCEALED PARTICULARS OF INCOME. A CLAIM OF DEDUCTION MAY BE ALLOWABLE OR DISALLOWABLE. HOWEVER, SUCH CANNOT BE SAID TO BE GIVING INACCURATE PARTICULARS OF INCOME OR CONCEALING THE PARTICULARS OF INCOME AS IT REMAINS A CLAIM ONLY, TO BE ALLOWED OR DISALLOWED DEPENDING ON THE FACTS OF THE CASE.' PENALTY NOT AUTOMATIC IF ADDITIONS CONFIRMED 19 7. THE AO HAS LEVIED THE PENALTY U/S 271(1)(C ) ON THE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. HE HAS LEVIED THE PENALTY ONLY ON THE BASIS OF ADDITIONS MADE IN THE ASSESSMENT ORDER. ASSESSMENT ORDER IS NOT A CONCLUSIVE EVIDENCE FOR LEVYING PENALTY U/S 271(1)(C). BOTH THE IMPUGNED ITEMS ARE DULY DECLARED IN THE AUDITED ACCOUNTS AND THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE FACTS AND FIGURES DECLARED IN THE ACCOUNTS ARE INACCURATE. THE PROCEEDINGS FOR THE ASSESSMENT AND PENALTY ARE ENTIRELY DIFFERENT. THE ADDITION IN THE ASSESSMENT ORDER CAN BE ENOUGH FOR INITIATING THE PENALTY PROCEEDINGS BUT NOT FOR LEVYING THE PENALTY. PENALTY CANNOT BE AUTOMATIC EVEN IF ADDITIONS ARE CONFIRMED IN APPEAL. THEREFORE, PENALTY U/S 271(1)(C ) CANNOT BE LEVIED ONLY ON THE GROUND ON WHICH ADDITIONS HAVE BEEN MADE IN THE ASSESSMENT ORDER. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS : - CIT VS. TRANSCEIVERS INDIA LTD., 2015-TIOL-338-HC - DEL '7 THAT ULTIMATELY SUCH EXPENDITURE WAS DISALLOWED ON MERITS COULD NOT AUTOMATICALLY RESULT IN THE IMPOSITION OF A PENALTY, AKIN TO THE AO'S APPROACH. HAVING REGARD TO THE MATERIALS PLACED ON THE RECORD, WHICH WERE ANALYSED IN DETAIL AND DISCUSSED, THIS COURT IS OF THE OPINION THAT THE REASONING AND CONCLUSIONS OF THE COURTS BELOW BEING 20 ENTIRELY FACTS BASED, DO NOT INVOLVE DETERMINATION OF ANY SUBSTANTIAL QUESTION OF LAW. THE APPEAL IS, THEREFORE, DISMISSED. - SONA SOMIC LEMFORDER COMPONENTS LTD. VS. DCIT, 2015-TIOL-464-ITAT- DEL-IT '8 WE NOTE THAT NO DOUBT THE CLAIM PUT FORTH BY THE ASSESSEE WAS NOT ALLOWED HOWEVER IT CANNOT BE SAID CONSIDERING THE JUDICIAL PRECEDENT CITED THAT THERE WAS ANY FILING OF INACCURATE PARTICULARS OR NON-DISCLOSURE ON THE PART OF THE ASSESSEE. IT IS MERELY A CASE OF CLAIM NOT ALLOWED. IT IS ALSO SEEN THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, THE PENALTY HAS BEEN IMPOSED AND UPHELD PURELY ON ACCOUNT OF THE FINDINGS ARRIVED AT IN THE QUANTUM PROCEEDINGS WHICH IS NOT THE MANDATE OF LAW. THE EXPLANATION OFFERED BY THE ASSESSEE IN THE PENALTY PROCEEDINGS HAS TO BE CONSIDERED INDEPENDENTLY AND JUDICIOUSLY AND ONLY THEREAFTER A FINDING HAS TO BE RECORDED . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ' - DCIT VS. PEC LTD., 2010-TIOL-50-ITAT-DEL. A. Y. 2004-05 '6 ... .IT IS BY NOW SETTLED LAW THAT ONLY BECAUSE ADDITION IS SUSTAINED, THE PENALTY IS NOT AUTOMATIC ....' - CIT VS. HARYANA WAREHOUSING CORPORATION, (2009) 314 ITR 215 (P&H) 21 '24. THE SECOND CONTENTION ADVANCED BY THE LEARNED COUNSEL FOR THE APPELLANT- REVENUE WAS, THAT THE IMPUGNED ORDER PASSED BY THE TRIBUNAL DELETING THE PENALTY IMPOSED ON THE RESPONDENT ASSESSEE UNDER S. 271(1)(C) OF THE ACT, WAS NOT SUSTAINABLE IN LAW BEC AUSE OF THE CLEAR JUDGMENT RENDERED BY THE SUPREME COURT IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS & ORS, (2008) 219 CTR (SC) 617 : (2008) 306 ITR 277 (SC). ACCORDING TO THE LEARNED COUNSEL FOR THE APPEL LANT- REVENUE THE ENTIRE INCOME WHICH REMAINED UNDISCLOSED , 'WITH OR WITHOUT' ANY CONSCIOUS ACT OF THE ASSESSEE, W AS LIABLE TO PENAL ACTION. IT IS SUBMITTED BY THE LEARNE D COUNSEL FOR THE APPELLANT REVENUE, THAT THE CONCEPT OF LAW, WITH REGARD TO LEVY OF PENALTY HAS DRASTICALLY CHANGED IN VIEW OF THE SAID JUDGMENT, INASMUCH AS, NOW PENALTY CAN BE LEVIED EVEN WHEN AN ASSESSEE CLAIMS DEDUCTION OR EXEMPTION BY DISCLOSING THE CORRECT PARTICULARS OF ITS INCOME. ACCORDING TO THE LEARNED COUNSEL, IF AN ADDITION IS MADE IN QUANTUM PROCEEDI NGS BY THE REVENUE AUTHORITIES, WHICH ADDITION ATTAINS FINALITY, AN ASSESSEE PER SE BECOMES LIABLE FOR PEN AL ACTION UNDER S. 271(1)(C) OF THE ACT. IT IS THE VEHEMEN T CONTENTION OF THE LEARNED COUNSEL FOR THE APPELLANT- REVENUE, THAT A PENALTY AUTOMATICALLY BECAME LEVIABLE AGAINST THE RESPONDENT-ASSESSEE UNDER S. 271(1)(C) OF THE ACT, AFTER THE FINALISATION OF QUANTUM PROCEEDINGS. IN THIS BEHALF, IT IS ALSO POINTED OUT, THAT IN VIEW OF TH E JUDGMENT OF THE SUPREME COURT REFERRED TO ABOVE, THE 22 DICHOTOMY BETWEEN PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS STANDS COMPLETELY OBLITERATED. 25. WE HAVE CONSIDERED THE SECOND CONTENTION ADVANCE D BY THE LEARNED COUNSEL FOR THE APPELLANT REVENUE. TO STATE THE LEAST. THE INSTANT SUBMISSION IS ABSOLUTELY ABSURD ..... ' - CIT VS. MIS SIDHARTHA ENTERPRISES, 2009-TIOL-349-HC - P&H-IT '5 ... THE JUDGMENT OF THE HON'BLE SUPREME COURT IN DHARMENDRA TEXTILE (SUPRA) CANNOT BE READ AS LAYING DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. WHAT HAS BEEN LAID DOWN IS THAT QUALITATIVE DIFFERENCE BETWEEN CRIMINAL LIABILITY UNDER SECTION 276C AND PENALTY UNDER SECTION 271(1)(C) HAD TO BE KEPT IN MIND AND APPROACH ADOPTED TO THE TRIAL OF A CRIMINAL CASE NEED NOT BE ADOPTED WHILE CONSIDERING THE LEVY OF PENALTY. EVEN SO, CONCEPT OF PENALTY HAS NOT UNDERGONE CHANGE BY VIRTUE OF THE SAID JUDGMENT. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAKE .... ' 8. IN VIEW OF THE FACTS AND LAW AS DISCUSSED ABOVE, IT IS HUMBLY REQUESTED THAT THE PENALTY U/S 271(1)(C) MAY KINDLY BE DELETED. 8. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS PA SSED BY THE LOWER AUTHORITIES. 23 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECO RDS, ESPECIALLY THE ORDERS OF THE AUTHORITIES BELOW AS WEL L AS THE SYNOPSIS FILED BY THE LD. AR OF THE ASSESSEE, WE FIND THAT THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER DATED 24. 12.2007 AT AN INCOME OF RS. 3,92,91,360/- MAKING VARIOUS ADDITION S. AGGRIEVED WITH THE ORDER OF THE AO, THE ASSESSEE WENT IN APPEAL B EFORE THE LD. CIT(A), WHEREBY THE ADDITIONS / DISALLOWANCES ON ACC OUNT OF FOREIGN TRAVELLING EXPENSES, DISALLOWANCE U/S. 14A BEING 2% OF DIVIDEND INCOME AND INCOME FROM UNDISCLOSED SOURCES WERE CON FIRMED. WE FURTHER FIND THAT THE ADDITION ON ACCOUNT OF INTEREST E XPENSE ON ACCOUNT OF DIVERSION OF BORROWED FUNDS WAS RESTRICTE D TO RS. 15,43,526/-. WE NOTE THAT THE AO OBSERVED THAT THE AS SESEE HAD INCURRED AN EXPENDITURE OF RS. 5,15,176/- ON FOREIG N TRAVEL OF ONE OF ITS DIRECTORS. THE AO HELD THAT THE ASSESSEE WAS ENG AGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AND THERE WA S NO RELEVANCE FOR TRAVEL TO SINGAPORE, BANGKOK, ROME, LONDON ETC. BY ONE OF ITS DIRECTORS. THE EXPENDITURE ON FOREIGN TRAVEL CAN BY NO MEANS BE CONSIDERED AS BUSINESS EXPENDITURE. FURTHER, NO EVID ENCE HAS BEEN FURNISHED TO PROVE THE PURPOSE OF FOREIGN TRAVEL TO JU STIFY EXPENSES. AO FURTHER OBSERVED THAT AS FAR AS INCOME FROM UNDISCL OSED SOURCES IS CONCERNED, THE ASSESSEE HAD SHOWN UNSECUR ED LOAN OF RS. 1,50,000/- RECEIVED FROM ONE SH. S. MAITRA. DUR ING ASSESSMENT 24 PROCEEDINGS, THE ASSESSEE WAS ASKED TO PROVE THE IDENTI TY AND CREDITWORTHINESS OF THE PARTY AND GENUINENESS OF THE TR ANSACTIONS. HOWEVER, THE ASSESSEE ONLY FILED A CONFIRMATION LETT ER PURPORTEDLY SIGNED BY THAT PERSON AND NO OTHER EVIDENCE OR MATERI AL WAS FILED TO PROVE THE GENUINENESS EITHER AT THE ASSESSMENT STAGE, APPELLATE STAGE AND NOW DURING PENALTY PROCEEDINGS. IN VIEW OF THE ABOVE, AO HAS OBSERVED THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME WITH A VIEW TO EVADE TAXES AND MADE A PENA LTY OF RS. 3,777,546/- VIDE HIS ORDER DATED 31.3.2010 PASSED U /S. 271(1) OF THE ACT. AGAINST THE PENALTY ORDER, ASSESSEE FILED APPE AL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE HIS IMPUGNED ORDER DATED 19.12.2012 PARTLY ALLOWED THE APPEAL FILED BY THE A SSESSEE BY HOLDING THAT THE ASSESSEE IS A SHARE TRADER AND HIS V ISITS TO FOREIGN COUNTRIES ARE NOT RELATED TO BUSINESS, HENCE, HE OB SERVED THAT ASSESSEE HAS MADE A WRONG CLAIM AND FURNISHED INAC CURATE PARTICULARS OF INCOME WITH A VIEW TO CONCEALMENT OF IN COME AND ACCORDINGLY THE EXPLANATION OF THE ASSESSE IS NOT BON AFIDE AND PENALTY WAS CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ADDITIONS OF RS. 5,15,176/- FOR FOREIGN TRAVEL AND PENALTY ON AC COUNT OF ADDITION U/S. 68 OF THE ACT OF RS. 1,50,000/-. IN VIEW OF THE ABOVE, WE FIND THAT LD. CIT(A) HAS RIGHTLY OBSERVED THAT IT WAS NOWHE RE SUBMITTED THAT THE THREE BASIC REQUIREMENTS OF PROVING THE IDENTITY , 25 CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS WE RE DULY FULFILLED. LD. CIT(A) HELD THAT THE ASSESSEE HAS FURN ISHED INACCURATE PARTICULARS WITH A VIEW TO CONCEALMENT OF INCOME AND E XPLANATION GIVEN BY THE ASSESSEE IS NOT BONAFIDE. HENCE, THE PEN ALTY WAS RIGHTLY CONFIRMED BY THE LD. CIT(A) ON ADDITIONS OF RS. 5,15,176/- ON ACCOUNT OF FOREIGN TRAVEL AND RS. 1,50,000/- ON A CCOUNT OF ADDITION U/S. 68 OF THE ACT, WHICH DOES NOT NEED ANY I NTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME AND ACCORDINGLY DISMISS THE ASSESSEES APPEAL. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/05/2017. SD/- SD/- (PRASHANT MAHARISHI) [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 05/05/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES