TMI Blog2015 (5) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... gs in the peculiar nature of assessee's business. 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. This exercise is found missing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of foreign travel expenses u/s 40(a)(i) was deleted by the ITAT. As a result of confirmation of the addition on account of the foreign travel expenses of the Managing Director, the AO initiated penalty u/s 271(1)(c). Considering the facts and the explanation of the assessee, penalty of ₹ 6,68,270/- was imposed holding as under:- The assessee company has debited ₹ 53,40,546/- under the Foreign Travelling . The details of foreign travel revealed that out of total travelling, some visits were made by Mr.Sanjay kapur (Managing Director) of the Company to London. The purpose of such visits were shown as meeting with representatives of M/s. Maval Manufacturing Inc. concerning sale/supply of assessee's products and pricing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective customers. 3. The assessee challenged the said order pleading that the facts have been wrongly considered in the quantum proceedings. It was submitted that M/s Mavel Manufacturing Incorporation considered to be a supplier in the quantum proceedings is actually a customer of the assessee. Being an old customer it was canvassed that Mr. Sanjay Kapur as Managing Director of the assessee company was nominated as the competent person for holding meetings with the old customer for supply, quality and pricing matter etc. Holding of meetings with the customers, it was argued, is an ongoing process as a result of which the export sales of the assessee over the years had been increased. The statement was supported by the following chart wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttention to the details filed on record where particulars of the persons who were beneficial owners of the equity share holding in the assessee company not less than 10% of the voting power at any time from 01.04.2005 to 31.03.2006 were relied upon. Referring to the same it was submitted that 33.7% of the shares were held by Sona Investment Pvt. Ltd. an independent assessee; and 26.66% was held by ZF Lemforder Metallwaren AG ; and 39.64% by Somic Engineering Inc. where the last two companies had their offices in Germany and Japan. The nomination of Mr. Sanjay Kapoor as Managing Director to travel to UK in the business interests of the assessee it was submitted in the penalty proceedings needs to considered in the proper perspective. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customer about the quality, supply and other issues on which satisfaction of the customer is necessary for the goodwill and extension of the company it was submitted cannot be discarded. It was his submission that no report is required to be generated by a person of the stature of a Managing Director. It was submitted that lack of the same may be good for quantum proceedings but the penalty proceedings required a re-appraisal of the entire facts, circumstances and explanation to be considered independently. In these facts and circumstances considering the judicial precedent as settled by Price Waterhouse Coopers (P.) Ltd. vs CIT (2012) 348 ITR 306 (SC); CIT vs Reliance Petroproducts (P.) Ltd. 322 ITR 158 (SC); CIT vs Gem Granites (Karna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent relied upon. On a cumulative consideration thereof we are of the view that no doubt the assessee failed in the quantum proceedings right up to the ITAT for want of corroborative evidence to support its claim, however considering the argument on facts qua the beneficial owners of equity share holding pattern of the assessee which has not been assailed by the Revenue, evidently the assessee is not a family controlled concern where expenses of a personal nature can be said to have been passed on as the expenses of the company. The presence of various Directors based in China, Japan etc would necessarily act as a deterrent to any such practice. The Ld. AR has pleaded that a Managing Director is not required to generate a report on his fore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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