TMI Blog2017 (6) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... d:- 31-5-2017 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER, AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER For The Appellant : Shri Subhash Aggarwal For The Respondent : Shri Manjit Singh DR ORDER PER ANNAPURNA GUPTA, A.M . : This appeal has been filed by the assessee against the order of CIT(Appeals)-1, Ludhiana dated 28.3.2016 relating to assessment year 2005-06 confirming the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act ). 2. The assessee has raised following grounds: 1. That the learned CIT(A)-1 has erred in confirming the levy of penalty u/s 271(1)(c) amounting to ₹ 1,90,867/- on disallowance of foreign travelling expenses ignoring the followings: - i) That no statutory notice u/s 274 r.w.s. 271(1)(c) had been issued by the AO in the assessment proceedings along with the assessment order and as such the order levying the penalty is vitiated. ii) That the appellant had duly disclosed all particulars relating to the claim of foreign travelling expenses and as such there was no concealment of particulars of income on which penalty could be levied. iii) That the foreign tours were under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee thereafter submitted that the Assessing Officer had disallowed the expenses relating to foreign traveling merely for the reason that the assessee had no business dealings in the countries visited. The assessee submitted that incurrence of expenditure was not in doubt and the Assessing Officer had not pointed out any single instance of expenses being non-business expenses. The assessee submitted that simply presuming no business relation or non-procurement of business from these countries or on account of non filing of documents, the disallowance had been made and penalty levied. The assessee further submitted that the disallowance made on account of traveling undertaken to Nepal was not justified since goods worth 18500 US Dollars has been exported to Nepal in the immediately succeeding assessment year. Thus clearly as far the traveling expenses incurred on account of trip undertaken to Nepal is concerned, there was clear business relation and thus no penalty ought to be levied on account of the same. The Ld. counsel for the assessee placed copy of the invoice evidencing export of goods to Nepal. The Ld. CIT (Appeals) after considering the assessee s submissions uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 271(l)(c) is leviable in such a case, Under explanation 1 to sec 271(l)(c) where a person fails to offer an explanation or offers an explanation which is found by the Assessing Officer to be false, the amount so added or disallowed, shall be deemed to represent the income in respect of which particulars have been concealed. In view of the said facts and circumstances, the Assessing Officer was justified in imposing the penalty u/s 271(l)(c) in this case. These grounds of appeal are dismissed. 6. Before us the Ld. counsel for the assessee raised two fold arguments against the levy of penalty: (1) That the addition made was only on account of difference of opinion and the assessee had not concealed any particulars of income. (2 That show cause notice was defective as it did not spell out the grounds on which penalty was sought to be imposed. 7. The Ld. DR relied upon the order of the CIT (Appeals). 8. Coming to the first argument raised by the Ld. counsel for the assessee, it was argued before us that all facts relevant to the claim of expenditure on account of foreign travelling undertaken had been duly disclosed and it was merely on the basis of difference of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d claim. The said explanation having not been controverted by the Ld. DR, we find that vis- -vis expenditure incurred on account of travel undertaken to Nepal it cannot be said that there was any concealment of income on account of Explanation-1(A)/(B) to section 271(1)(c) of the Act. As far as the rest of the expenditure claimed by the assessee, the assessee has failed to substantiate its explanation that the same was incurred for business purpose even before us. Except for stating that the incurrence of expenses has not been doubted by the Revenue or that Revenue has not pointed out how the expenses were not incurred for business purpose, the assessee has given no explanation to establish the bonafides of the claim. The language of the Explanation to section 271(1)(c) clearly fixes the onus on the assessee to explain facts material to the computation of income truly and correctly and in the situation where the assessee is unable to substantiate its explanation, to prove the bonafides of the claim made. On failing to do so the assessee, as per the Explanation, is deemed to have concealed particulars of its income. In the present case, we find that vis- -vis the balance expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujrat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 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 ..... 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