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2015 (5) TMI 902 - ITAT DELHI

2015 (5) TMI 902 - ITAT DELHI - TMI - Penalty u/s 271(1)(c) - as no documents in support of any meetings set up with the M/s Mavel Manufacturing Inc. was placed on record the CIT(A) confirmed the penalty order - Held that:- CIT(A) has not even cared to address the fact that M/s Mavel Manufacturing Incorporation was a customer of the assessee and not a supplier. It is further seen that the export sales of the assessee have increased over the years which to some extent can be said to be on account .....

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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 both in the penalty order as well as the impugned order. Thus impugned order is set aside an .....

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e relevant facts of the case are that return filed by the assessee declaring a loss of ₹ 8,35,51,857/- was varied to the disadvantage of the assessee in completing the assessment at a loss of ₹ 8,09,74,290/-. The variance occurred as a result of two additions made in the assessment proceedings of ₹ 5,92,192/- and ₹ 19,85,375/-u/s 40(a)(i) on account of non-deduction of TDS for travelling bills of Prof. Y.Kato, who visited assessee concern for imparting training; and addit .....

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he 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 wer .....

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Business Promotion, Development and in formulating business strategies; trying up strategic collaboration and development of new business; and that the assessee company had to find potential customers and to visit them price negotiation and taking orders. The assessee has not submitted any evidence concerning the stated client meeting or their outcome impacting the assessee's business which resulted in the addition of ₹ 19,85,375/- as personal in nature. The addition made by the AO was .....

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ufacturing Inc. even though 8 such trips were made and which establishes that any negotiation took place between the respective and prospective 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 .....

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04-05 2,51,48,749 2005-06 3,24,46,421 2006-07 3,15,62,377 2007-08 4,76,78,083 4. However in view of the fact that no documents in support of any meetings set up with the M/s Mavel Manufacturing Inc. was placed on record the CIT(A) confirmed the penalty order. 5. Aggrieved by this the assessee is in appeal before the Tribunal. 6. The ld. AR referring to the facts on record as recorded in the quantum proceedings by the CIT(A) and the Tribunal submitted that no doubt the assessee has not led any ev .....

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cts on record. The assessee it was submitted is not a private limited company consisting of himself and some close family members. Inviting attention 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.& .....

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an/Director of the assessee company was Mr. Kozo Ishikawa and out of the four Directors, one Director was based in China and the order Director was in Japan and two Directors were based in Delhi. Apart from that the Dy. Managing Director was based in Japan. Accordingly the nomination for business purposes of the Managing Director was not a casually taken decision by a company controlled by a family concern and infact had gone through rigorous decision making process by persons of various interna .....

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en attracted. Referring to the assessment order it was submitted that the assessee company is a manufacturer of ball joints for steering systems used mainly in manufacturing of automobiles and the visit in this background by a person of the rank of the Managing Director of the company being nominated to represent the interests of the assessee company and visiting its old customer in regard to satisfy the assessee and the customer about the quality, supply and other issues on which satisfaction o .....

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edent 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 (Karnataka) (2014) 42 Taxmann.com 493 judgement delivered by the Madras High Court on 12.11.2013 and various unpublished orders of the Tribunal namely Shernik M. Sjhah vs DCIT (ITA No.-4886/Mum/2012) (ITAT Mumbai); Vistar Constructions Pvt. Ltd. vs DCIT (ITA No.-5149/Del/2011) (ITAT Delhi); ACIT vs T.R.B. Exports (P.) Ltd. (2011) 45 .....

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₹ 9,97,448 and ₹ 9,87,927 respectively is fully disclosed by the assessee and infact it is the disclosure of the assessee which has been the basis for the addition. 7. The Ld. Sr. DR in reply relying upon the findings in the quantum proceedings which has been reproduced in the penalty proceedings submitted that evidently till date no evidence in support of the details of travel by way of any cogent evidence has been filed by the assessee accordingly the impugned order deserves to be .....

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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 foreign travel, we find for the absence of the same addition in the quantum proceedings h .....

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