SILVER SHIELD ENERGY P .LTD, MUMBAI V. ITO 2(3)-2, MUMBAI

ITA 8816/MUM/2011

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3538 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 04-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK OJHA
• Assessee Lawyers: TASNEEM VARAWALA
• Keywords: Business income
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 8816/MUM/2011 (ASSESSMENT YEAR : 2007-08) SILVER SHIELD ENERGY PRIVATE LIMITED, C/O. SHROFF & CO. CONTRACTOR BUILDING, GROUND FLOOR, VAJU KOTAK MARG, BALLARD ESTATE, MUMBAI -400038 PAN:AACCS 7799D ... APPELLANT VS. INCOME TAX OFFICER 2(3)-2, 581-A, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SMT. TAS NEEM VARAWALA RESPONDENT BY : SHRI VIVEK OJHA DATE OF HEARING : 04/01/2016 DATE OF PRONOUNCEMENT : 13/01/2016 ORDER PER JASON P. BOAZ, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS)-6, MUMBAI DATED 22/11/2011 CONFIRMING THE LEVY OF PENALTY OF RS.1,18,573/- UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR ASSESSMENT YEAR 2007- 08. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2 ITA NO. 8816/MUM/2011 (ASSESSMENT YEAR : 2007-08) 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF DESIGN AND SUPPLY OF LIGHTING PRODUCTS, FILED ITS RETURN OF IN COME FOR ASSESSMENT YEAR 2007-08 ON 31/03/2008 DECLARING TOTAL INCOME O F RS.880/-. THE RETURN WAS PROCESSED U/S. 143(3) OF THE ACT AND THE CASE WAS SUBSEQUENTLY SELECTED FOR SCRUTINY. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE HAD CLAIMED EXPENDITURE OF RS.3,52,271/- ON ACCOUNT OF FOREIGN TRAVEL AGAINST BUSINESS INCOME IN RESPECT OF THE TRIP OF T WO DIRECTORS, SHRI SATISH KAPOOR AND SHRI SAROJ SHROFF TO BANGKOK. IN THIS REGARD THE ASSESSEE FURNISHED EXPLANATIONS ON THE FOREIGN TRIP S UNDERTAKEN ALONGWITH DETAILS OF AIR TRAVEL AND AMOUNTS EXPENDE D FOR BOARDING AND LODGING. THE EXPLANATIONS FURNISHED BY THE ASSESSE E WERE REJECTED BY THE ASSESSING OFFICER. AS THE ASSESSEE WAS NOT AB LE TO FURNISH EVIDENCES WITH REGARD TO AN AMOUNT OF RS.2,71,400/- SPENT ON BOARDING AND LODGING AND THE ASSESSING OFFICER WAS OF THE V IEW THAT THE ASSESSEE HAD FAILED TO PROVE THAT THE EXPENDITURE CLAIMED W AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES B USINESS AS WAS REQUIRED UNDER SECTION 37 OF THE ACT, THE ENTIRE AM OUNT OF RS.3,52,271/- WAS DISALLOWED. THE ASSESSMENT WAS A CCORDINGLY CONCLUDED UNDER SECTION 143(3) OF THE ACT VIDE ORDE R DATED 24/12/2009. PENALTY PROCEEDINGS UNDER SECTION 271( 1)(C) OF THE ACT WERE SIMULTANEOUSLY INITIATED IN THIS REGARD. THE ASSESSEE PREFERRED APPEALS CHALLENGING THE AFORESAID ADDITION/DISALLOW ANCE OF FOREIGN TRAVEL EXPENSES OF RS.3,52,271/- BEFORE BOTH THE CI T(A)-6 AND SUBSEQUENTLY BEFORE THE TRIBUNAL. BOTH THE ASSESS EES APPEALS WERE DISMISSED BY ORDERS DATED 06/04/2010 OF THE LD. CI T(A) AND BY THE TRIBUNALS ORDER IN ITA NO.5734/MUM/2010 DATED 18/0 5/2012. 3 ITA NO. 8816/MUM/2011 (ASSESSMENT YEAR : 2007-08) 2.2 IN THE MEANWHILE, THE ASSESSING OFFICER TOOK UP PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IN R ESPECT OF THE DISALLOWANCE OF FOREIGN TRAVEL EXPENSES AMOUNTING T O RS.3,52,271/- FOR ASSESSMENT YEAR 2007-08. AFTER CONSIDERING THE EX PLANATION PUT FORTH BY THE ASSESSEE AND REJECTING THEM, THE ASSESSING O FFICER VIDE ORDER DATED 23/6/2010 PROCEEDED TO LEVY PENALTY OF RS.1,1 8,573/- UNDER SECTION 27(1)(C) OF THE ACT @ 100% OF THE TAX ON I NCOME SOUGHT TO BE EVADED. ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) DISMISSED THE ASSESSEES APPEAL VIDE ORDER DATED 18/11/2011. TH E LD. CIT(A) UPHELD THE LEVY OF PENALTY OF RS.1,18,573/- UNDER SECTION 271(1)(C) OF THE ACT ON THE GROUNDS THAT (I) THE ASSESSEE FAILED TO PROD UCE EVIDENCE OF FOREIGN EXCHANGE OBTAINED AMOUNTING TO RS.2,71,400/ - FROM KANJI FOREX P. LTD. AND (II) THAT THE ASSESSEE FAILED TO ESTAB LISH THAT THE EXPENDITURE INCURRED ON FOREIGN TRAVEL WAS FOR THE PURPOSES OF THE ASSESSEES BUSINESS. 3.1 AGGRIEVED BY THE ORDER OF THE CIT(A)-6, MUMBAI CONFIRMING THE LEVY OF PENALTY OF RS.1,18,573/- U/S.271(1)(C) OF T HE ACT VIDE ORDER DATED 22/11/2011 FOR ASSESSMENT YEAR 2007-08, THE ASSESS EE HAS RAISED THE FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME- TAX (APPEALS)-6, WAS NOT JUSTIFIED IN CONFIRMING TH E PENALTY OF RS.1,18,573/-(BEING 100% OF TAX SOUGHT TO BE EVADED) LEVIED U/S. 271(1) 9C) ON ADDITION OF FOREIGN TRAVEL EXPENSES OF RS.3,52,271/-. 3.2.1 THE LD. REPRESENTATIVE FOR THE ASSESSEE AT TH E OUTSET SUBMITTED THAT THE AMOUNT OF FOREIGN TRAVEL EXPENDITURE AMOU NTING TO RS. 3,52,271/- WERE CLEARLY REFLECTED IN THE PROFIT AN D LOSS ACCOUNT FILED ALONGWITH THE RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07. IT WAS SUBMITTED THAT IN THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSEE 4 ITA NO. 8816/MUM/2011 (ASSESSMENT YEAR : 2007-08) FURNISHED THE DETAILED EXPLANATION AND BREAKUP OF T HE FOREIGN BUSINESS TRIPS UNDERTAKEN BY THE TWO DIRECTORS SHRI SATISH KAPOOR AND SHRI SAROJ SHROFF ALONGWITH DETAILS OF AIR TICKETS, DATES OF TRAVEL; BUSINESS MEETINGS HELD WITH DIFFERENT PARTIES ETC. IT WAS S UBMITTED THAT THE FACT THAT THE AFORESAID EXPENDITURE WAS INCURRED ON FORE IGN TRAVEL WAS NEVER DOUBTED, EVEN BY THE ADDL. CIT, RANGE 2(3), WHO ON THE APPLICATION U/S. 144A OF THE ACT, DIRECTED THE ASSESSING OFFICER TO CONSIDER THE CLAIM OF THE ASSESSEE TO THE EXTENT OF DOCUMENTARY EVIDENCE S FURNISHED. IN THIS REGARD, THE LD. REPRESENTATIVE FOR THE ASSESSEE FU RTHER SUBMITS THAT THE ASSESSING OFFICER, ON EXAMINATION OF DETAILS FILED, OBSERVED THAT THE ASSESSEE WAS NOT ABLE TO FURNISH EVIDENCES ONLY WI TH REGARD TO THE AMOUNT OF RS.2,71,400/- FOR PURCHASE OF FOREIGN EXC HANGE FROM KANJI FOREX P. LTD. SPENT ON BOARDING AND LODGING OF THE TWO DIRECTORS, BUT DISALLOWED THE ENTIRE EXPENDITURE OF RS.3,52,271/- INCLUDING RS.76,571/- SPENT ON AIR TICKETS AND VISA CHARGES. 3.2.2. ACCORDING TO THE LD. REPRESENTATIVE FOR THE ASSESSEE, SIMILAR EXPENSES ON FOREIGN TRAVEL WERE INCURRED BY THE AS SESSEE YEAR ON YEAR AND THE FACT THAT THESE WERE INCURRED FOR BUSINESS PURPOSES WAS NEVER DOUBTED. IT IS SUBMITTED THAT IN IMMEDIATELY PRECE DING ASSESSMENT YEAR 2005-06, DISALLOWANCE OF THE SAME WAS MADE ONL Y TO THE EXTENT WHERE DOCUMENTARY EVIDENCES TO SUPPORT EXPENDITURE CLAIMED WOULD NOT BE FURNISHED AND AN ADHOC DISALLOWANCE OF 15% W AS MADE ON THE REASONING THAT IN SUCH TYPE OF EXPENDITURE, THE PER SONAL ELEMENT COULD NOT BE RULED OUT. THE LD. REPRESENTATIVE FOR THE A SSESSEE SUBMITS THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AS LAID OUT ABOVE, PENALTY U/S.271(1)(C) OUGHT NOT TO HAVE BEEN LEVIED SINCE T HERE WAS NO 5 ITA NO. 8816/MUM/2011 (ASSESSMENT YEAR : 2007-08) CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS SINCE DETAILS OF FOREIGN TRAVEL EXPENDITURE WERE CLEARLY MENTIONED IN THE ASSESSEES PROFIT AND LOSS ACCOUNT ACCOMPANYING THE RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08. IN THIS REGARD IT IS CONTENDED THAT A MERE MAKING OF A CLAIM THAT IS NOT SUSTAINABLE IN LAW, B Y ITSELF, WOULD NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF I NACCURATE PARTICULARS AND, THEREFORE, WOULD NOT JUSTIFY THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN SUPPORT OF THE AS SESSEES AVERMENTS THAT THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT I S NOT SUSTAINABLE, THE LD. REPRESENTATIVE FOR THE ASSESSEE PLACED RELIANC E ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETR OPRODUCTS P. LTD. (2010) 322ITR 158(SC) SUBMITTING THAT THE FACTS OF THE CITED CASE (SUPRA) ARE SIMILAR TO THOSE OF THE ASSESSEE IN THE CASE ON HAND. 3.3 PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW IN LE VYING AND CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT IN TH E CASE ON HAND. 3.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE FACTS THAT EMANATE FROM THE RECORD ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DESIGN AND SUPPLY OF LIGHTING PRODUCTS. IN THE YEA R UNDER CONSIDERATION IT INCURRED FOREIGN TRAVEL EXPENDITURE OF RS.3,52,2 71/-. ON EXAMINATION THEREOF IT WAS FOUND THAT THE FOREIGN TRIPS WERE UNDERTAKEN BY TWO DIRECTORS OF THE ASSESSEE COMPANY I.E. SHRI SATISH KAPOOR AND SHRI SAROJ SHROFF TO BANGKOK; ONE FROM 11/10/2006 TO 15/10/200 6 AND THE OTHER FROM 27/2/2007 TO 4/3/2007. IT WAS SUBMITTED THAT THESE TRIPS WERE UNDERTAKEN TO MEET THEIR REGULAR SUPPLIERS I.E. M/S . GREEN LIGHT 6 ITA NO. 8816/MUM/2011 (ASSESSMENT YEAR : 2007-08) PRODUCTS AND M/S. DAVIS LIGHTING AND OTHERS LIKE C& P LIGHTING, BE-LIT, ETC. FOR VARIOUS PROPOSED PROJECTS THAT THE ASSES SEE WAS INVOLVED IN. 3.4.2 FROM THE MATERIAL ON RECORD, ADMITTEDLY, IT I S SEEN THAT THE ASSESSEE FURNISHED THE DETAILS/BREAK-UP OF FOREIGN TRAVEL EXPENDITURE INCURRED ON THE AFORESAID TRIPS OF THE DIRECTORS T O BANGKOK. THE AUTHORITIES BELOW HAVE NEVER DOUBTED THAT THE SAID EXPENDITURE CLAIMED ON FOREIGN TRAVEL WAS NOT INCURRED. THE C ASE OF THE ASSESSING OFFICER WAS THAT SINCE THE ASSESSEE FAILED TO PROD UCE EVIDENCE TO ESTABLISH THAT THE FOREIGN TRAVEL EXPENDITURE CLAIM ED WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSES SEES BUSINESS; THE SAME WERE NOT ALLOWABLE. 3.4.3 ADMITTEDLY, THE DETAILS AND EXPLANATIONS IN RESPECT OF THE FOREIGN TRAVEL INCURRED WERE DULY FURNISHED BY THE ASSESSEE AND THE EXPENDITURE CLAIMED WAS ALSO REFLECTED IN THE PROF IT AND LOSS ACCOUNT OF THE ASSESSEE ACCOMPANYING THE RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07. IT IS SEEN FROM THE ORDER OF ASSESSMENT F OR THIS ASSESSMENT YEAR 2006-07 THAT THE ONLY DIFFERENCE BETWEEN THE R ETURNED INCOME AND THE ASSESSED INCOME, BEFORE SET OFF OF BROUGHT FORWARD LOSSES, REPRESENTED THE DISALLOWANCE OF FOREIGN TRAVEL EXPE NDITURE, THE DETAILS OF WHICH WERE DISCERNIBLE FROM THE DETAILS SUPPLIED BY THE ASSESSEE IN THE FINANCIAL STATEMENTS ACCOMPANYING ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07. IN THESE CIRCUMSTANCES IT IS NEITHER THE CASE OF THE ASSESSING OFFICER THAT THE DETAILS FURNISHED BY THE ASSESSEE WERE INACCURATE, ERRONEOUS OR FALSE NOR THAT THE EXPLANA TIONS AND DETAILS FURNISHED BY THE ASSESSEE WAS NOT BONAFIDE OR THA T ALL FACTS RELATING TO THE SAME AND THE COMPUTATION OF ITS INCOME WERE NOT DISCLOSED BY IT. 7 ITA NO. 8816/MUM/2011 (ASSESSMENT YEAR : 2007-08) THE DETAILS FURNISHED BY THE ASSESSEE PERTAINING TO THE ISSUE OF FOREIGN TRAVEL EXPENSES IN ITS ACCOUNTS AND RETURN OF INCOM E, THEREFORE, COULD NEITHER BE FOUND TO BE INACCURATE NOR VIEWED AS CON CEALMENT OF INCOME. 3.4.4 THE CASE OF THE AUTHORITIES BELOW WAS THAT TH E ASSESSEE FAILED TO PRODUCE EVIDENCE TO ESTABLISH THAT THE FOREIGN TRAV EL EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR ITS BUSINESS PU RPOSES. IN THIS CONTEXT, THE FOLLOWING OBSERVATIONS OF THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD.(SUPRA) ARE RELEVANT AND ARE EXTRACTED HEREUNDER:- ............ IT WAS UPTO THE AUTHORITIES TO ACCEPT THE CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPEND ITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE BY REVENUE, THAT BY ITSELF WOULD NOT IN OUR OPINION, ATTRACT PENALTY U/S.271(1)(C) . IF WE ACCEPT THIS CONTENTION OF REVENUE, THEN IN CASE OF EVERY RETURN WHERE THE CLA IM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESS EE WILL INVITE PENALTY U/S. 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE......... 3.4.5 IN OUR VIEW, THE FACTS OF THE CASE ON HAND AR E SIMILAR TO THE CIRCUMSTANCES AND FALL IN THE SAME CATEGORY AS THE CITED CASE(SUPRA). THERE IS NO FINDING BY THE AUTHORITIES BELOW THAT T HE DETAILS FURNISHED BY THE ASSESSEE WERE FOUND TO BE INCORRECT OR ERRON EOUS OR FALSE. IN THESE FACTUAL CIRCUMSTANCES, THERE WOULD BE NO QUES TION OF IMPOSING PENALTY U/S. 271(1)(C) OF THE ACT. A MERE CLAIM MADE IN THE RETURN OF INCOME WHICH IS NOT ACCEPTABLE BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. IN THIS VIEW OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT THE F OREIGN TRAVELLING EXPENSES INCURRED, CLAIMED BY THE ASSESSEE AND DISA LLOWED BY THE ASSESSING OFFICER IN THE CASE ON HAND CANNOT BE SA ID TO BE ATTRACT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT TO JUSTI FY AND SUSTAIN THE LEVY 8 ITA NO. 8816/MUM/2011 (ASSESSMENT YEAR : 2007-08) OF PENALTY THEREUNDER. WE, THEREFORE, CANCEL THE P ENALTY OF RS.1,18,573/- LEVIED BY THE ASSESSING OFFICER U/S. 271(1) (C) OF THE ACT FOR ASSESSMENT YEAR 2006-07 IN THE CASE ON HAND. I T IS ACCORDINGLY ORDERED. 4. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSM ENT YEAR 2006-07 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/01/2016 SD/- SD/- (RAM LAL NEGI) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED ..../01/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS