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2017 (5) TMI 364 - ITAT DELHI

2017 (5) TMI 364 - ITAT DELHI - TMI - Penalty u/s. 271(1)(c) - additions on account of foreign travel expenses and addition u/s. 68. - Held that:- CIT(A) has rightly observed that it was nowhere submitted that the three basic requirements of proving the identity, creditworthiness and genuineness of the transactions were duly fulfilled. Ld. CIT(A) held that the assessee has furnished inaccurate particulars with a view to concealment of income and explanation given by the assessee is not bonafide. .....

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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:- 1. Under the facts and circumstances of the case, the appellate order passed by the Ld. CIT(A) is illegal being against the principles of natural justice and against the provisions 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 ₹ 5,15,1 .....

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assessment proceedings from time to time and filed the details. 2.1 The assessee company is engaged in the business of dealing in shares and mutual funds. It has also shown income 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 ₹ 3,92,91,360/- making various additions. Aggrieved with the order of the AO, the assessee went in appeal before the Ld. CIT(A), whereby the additions / disallowances on account of .....

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r 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 evidence has been furnished to prove the purpose of foreign travel to justify expenses. AO further observed that as far as income from undisclosed sources is concerned, the Assessee had shown unsecured loan of ₹ 1,50,000/- received from one Sh. S. Maitra. During assessment proceedings, the assessee was asked to prove .....

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ide his order dated 31.3.2010 passed u/s. 271(1)© of the Act. 3. Aggrieved by the penalty order, assessee filed appeal before the Ld. First Appellate Authority who vide his impugned order dated 19.12.2012 partly allowed the appeal filed by the Assessee by holding that the assessee is a share trader and his visits to foreign countries are not related to business, hence, he observed that assessee has made a wrong claim and furnished inaccurate particulars of income with a view to concealment .....

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particulars with a view to concealment of income and explanation given by the assessee is not bonafide. Hence, the penalty was confirmed on additions of ₹ 5,15,176/- on account of foreign travel and ₹ 1,50,000/- on account of addition 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 19.12.2011 passed by the Ld. CIT(A), Assessee is in appeal before the Tribunal. 7. In support of his contention, Ld. A. .....

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rusal of the notice u/s 271(1)(c) clearly indicates 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 indicates that Ld. AO is not sure about the default on the part of the assessee. By now it is judicially settled that the penalty notice, if not issued for a specific default, is invalid and accordingly the penalty order is not sustainable. Reliance is placed on the following case laws: - .....

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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 not 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 .....

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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 merit in these petitions." - Nayan C Shah Vs. ITO, 2016-TIOL-739-HC-AHM " ... Whether submitting an incorrect claim while filing return, would amount to giving inaccurate particulars of such income, warranting i .....

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, i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income - YES: ITAT" - 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 which 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 i .....

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o prove that explanation is bonafide and all the facts have been disclosed. A perusal 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 the penalty. Reliance is placed on the following case laws: - CIT vs. Bharat Hiralal Popat, 2015-TIOL-232-HCAHM- IT "++ Further, it is the case ofthe Revenue that the explanation given by the asses .....

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tion on the ground that the difference between the earned income and the assessed income of the assessee was more and that the assessee, himself, had declared income of ₹ 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 credit, and therefore, CIT(A) upheld the penalty levied by the AO, which is confirmed by the Tribunal. However, while doing so, here again, the Tribunal failed to apprecia .....

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acts of the present case. Hence, the appeal 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 expenditure 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 ₹ 22,23,372/- during the year. Foreign trav .....

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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, PB) as false..nor unsubstantiated nor being not bonafide and hence the penalty could not be levied. The Ld. AO has not found any fault with the genuineness of the expenditure claimed by the appellant. It is not his case that the expenditure was not incurred and t .....

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e purpose of share broking business. The disallowance was only on account of difference of opinion. Hence the appellant claimed the expenditure under the bonafide belief that 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 return as incorrect and inaccurate and therefore, it cannot be said that the appellant furnished inaccurate particulars. By now it is judicially settled that pena .....

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rector 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 the Act. In any case, mere disallowance of expenditure does not attract the levy of penalty under s. 271(1)(c) of the Act. We are in conformity with the order of the CIT(A) th .....

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that the claim for expenditure reflected any falsity-In fact, the purpose of the travel was fully explained and the same has not been rejected as, false or lacking bona 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 meaning of s. 271(1)(c)-Penalty rightly deleted" iii) Shri Kamal Sahdev vs. ACIT, 2014-TIOL-49-ITATDEL "3. We hav .....

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eviable…. 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 disallowance of expenditure/claim. Reliance is placed on the following:- 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 provisions ofs. 271(1)(c), there has to be concealment of income or furnishing of inaccurat .....

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ccepted 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 every case where the claim made by the assessee is not accepted by the AO for any reason-That is clearly not the intendment of the legislature." ii) CIT vs. Udaipur Hotels Ltd, 2013-TIOL-16-HC-DEL-IT "Income Tax - Section 271(1)(C) - Whether mere submission of a claim which is incorrect in law would amount to gi .....

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- Not justified." iv) DCIT vs. RAHOUL SIEMESSEN ENGG. (P) LTD., [2004] 91 TTJ (Del) 62 "Assessee having claimed debatable deductions , towards interest paid to Department under ss. 201(lA),217, 220(2),220(3) and 234 B out of taxable income, there was no concealment 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 disallowances were made which were .....

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ial facts relating to computation of income, therefore not liable to penalty through certain items claimed as deduction were disallowed, holding as capital expenditure or not relating to relevant previous year. Cash Credit 5. As regards credit in the name of Mr. S. Maitra, confirmation was duly filed clearly indicating the detailed address of the creditor (Pg. 7, PB). The credit is duly declared in the audited balance sheet (Pg. 18, PB). The Ld. AO has not brought any material on record to estab .....

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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 cash credits, there must be some material or circumstances leading to reasonable conclusion that the amount does represent assessee's income and the circumstances must 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 asse .....

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of source of second loan and, therefore, Expln. 1 to s. 271(1)(c) is not applicable and penalty 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 falsely made. The fact that the explanation offered by the assessee was not accepted by the authorities, it cannot be said that the assessee had made an incorrect claim. No question of any liability will arise where the .....

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rent conclusion while passing the assessment order. Penalty u/s 271 (1) (c) cannot be levied if all material facts have been disclosed to enable the AO to arrive at the correct 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 "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 g .....

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s 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 addi .....

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te. 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-HCDEL .....

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nents 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 .....

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ion, (2009) 314 ITR 215 (P&H) "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 because 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 f .....

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learned counsel, if an addition is made in quantum proceedings by the Revenue authorities, which addition attains finality, an assessee per se becomes liable for penal action under s. 271(1)(c) of the Act. It is the vehement 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 .....

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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 e .....

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the Act vide order dated 24.12.2007 at an income of ₹ 3,92,91,360/- making various additions. Aggrieved with the order of the AO, the assessee went in appeal before the Ld. CIT(A), whereby the additions / disallowances on account of foreign travelling expenses, disallowance u/s. 14A being 2% of dividend income and income from undisclosed sources were confirmed. We further find that the addition on account of interest expense on account of diversion of borrowed funds was restricted to ͅ .....

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foreign travel to justify expenses. AO further observed that as far as income from undisclosed sources is concerned, the Assessee had shown unsecured loan of ₹ 1,50,000/- received from one Sh. S. Maitra. During assessment proceedings, the assessee was asked to prove the identity and creditworthiness of the party and genuineness of the transactions. However, the assessee only filed a confirmation letter purportedly signed by that person and no other evidence or material was filed to prove .....

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