TMI Blog2016 (7) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... vied by the AO in respect of disallowance of AIR discrepancy and foreign travelling expenses. 3. The facts in brief are that the AO framed the assessment u/s 143(3) of the Act vide order dated 30.11.2011 assessing the income of the assessee at ₹ 3,35,57030/- as against the returned income of ₹ 3,27,12,510/- by the assessee by adding ₹ 79,680/- on the basis of AIR information which is related to short offering of hire income to this extent, disallowance of foreign travelling expenses of ₹ 6,45,182/- also initiating the penalty proceedings u/s 274 r.w.s.271(1) (c ) read with explanation 1 thereto. The ld AO ultimately imposed a penalty on the disallowance of foreign travel expenses of ₹ 6,45,182/- at ₹ 4,97,806/- being equal to 200% of the tax sought to be evaded after rejecting the submissions of the assessee which has been incorporated in para 3 of the penalty order. The order was thereafter rectified u/s 154 of the Act revising the penalty imposed to ₹ 4,38,568/-.The assessee did not challenge the quantum additions before the First Appellate Authority(FAA) and the assessment attained finality. 4. The aggrieved assessee preferred an appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the appellant had booked it through a travel agent like M/s.Thomas Cook itself is a proof that it is not for the purpose of business but purely towards a personal pleasure trip. The travel itinerary for the entire tour should have been furnished by the appellant to prove that there was a spare time available for survey with various' cranes manufacturing concerns. Since the appellant failed to furnish any documentary evidence, the AO had rightly come to the conclusion that Foreign Travel Expenses is not for the purpose of the business. 2.6 The appellant had filed a resolution passed by the Board of Directors in this regard. However, in the absence of any documentary evidence to prove that really the Directors have carried out' inquiry with several crane manufacturers, the claim of the appellant cannot be entertained. 2.7 The appellant had also filed copy of the letter dated 22.11.2011 filed before the ACIT- 10(2) containing note towards Foreign Travel. The note clearly indicates that the tour operator has handled the entire package which includes travel, food, stay and conveyance in the foreign country. When the Directors are part of the tour package, I wonder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars of income which was not so in the present case as the assessee did not conceal its income and nor furnished inaccurate particulars as all the particulars qua the foreign expenses were disclosed in the return of income. The counsel of the assessee argued that mere making a claim which is not sustainable in law by itself will not amount to furnishing in accurate particulars of income and thus the claim of the assessee qua foreign expenses which was not acceptable to revenue would not be liable for any penalty u/s 271(1) ( c ) of the Act. In defence of his arguments the ld counsel relied on a series of decisions namely CIT Vs Reliance Petro Products (P) Ltd (2010) 322 ITR 158(SC), Hogkong Shanghai Banking Corporation Ltd Vs DDIT Int. Tax (2012) 16 ITR 275(Bom) and ITO Vs Chemeform (2012) 51 SOT 27 (Kol). The ld AR of the assessee further relied on the decisions of tribunal in the case of M/S Vistar Construction Pvt Ltd Vs DCIT (ITA No.5149/Del/2011) dated 19.10.2012 and DCIT Vs Control Switchgears Ltd (ITA No1981/Del/2013) dated 4.3.2015 in which the coordinate benches of the Tribunal deleted the penalty levied u/s 271(1) ( c ) of the Act for disallowance of foreign travel exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 271(1)(c) and if the claim of revenue is accepted then in every case where a claim is not accepted by the revenue for any reasons, the assessee will be subjected to penalty u/s 271(1)(c) of the Act. In the following cases, the tribunal considered and followed the decision of the Hon‟ble Apex Court in the case of CIT Vs Reliance Petro Products Ltd (Supra) and held that penalty is not leviable where foreign travelling of directors were disallowed. In the case of M/S Vistar Construction Pvt Ltd Vs DCIT , the tribunal held as under:- 7. We have carefully considered the submissions and perused the records. We find that disallowance in this case has been made to the extent of 50% of expenditure incurred on foreign travel expenses. The basis of making disallowance in this regard is that two directors and their wives who were also directors visited foreign countries which was not fully for business purposes. Assessee‟s submissions in this regard is note worthy that both the wives, who were also Directors of the company were receiving considerable salary which was accepted year after year. Hence, the visits cannot be said to be for non-business purposes. It has further be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where it was held that mensrea was a essential requirement of penalty u/s 271(1)(c). The Hon‟ble Apex Court also observed that if the contention of the revenue is accepted then in case of every return where the claim is not accepted by the Assessing Officer for any reason, the assessee will invite the penalty u/s 271(1)(c). This is clearly not the intendment of legislature. 10. In the background of the aforesaid discussions and precedents, we set aside the orders of the authorities below and delete the levy of penalty. In the case of DCIT Vs Control Switchgears Ltd , the tribunal held as under:- 4. We have considered the rival submissions and have perused the order of the AO. With regard to the disallowance of Additional Depreciation and of Exemption u/s10B of the Act, the matter has been restored to the file of the AO to determine the same afresh in accordance with law as per the directions of the Tribunal and the matter is still pending before the AO. In these facts, we cancel the penalty levied u/s 271(1)(c) of the Act on these two items of disallowance. However, the AO while framing the assessment as per the directions of the Tribunal, may if so warrante ..... X X X X Extracts X X X X X X X X Extracts X X X X
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