TaxTMI 
TaxTMI 
2008 (4) TMI 371
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome on 30th Nov., 2000 disclosing total income at Rs. 19,58,180. The AO framed the assessment under s. 143(3) of the Act on total income of Rs. 23,82,770. The AO made an addition of Rs. 2,37,370 being LTC paid to Arun Kumar Gupta. While framing the assessment, AO made the above addition observing as under: "From the P&L a/c it is seen that assessee has claimed an expenditure amounting to Rs. 63,42,455 under the head 'Payment to employees'; the expenditure under this head claimed in the immediate preceding period was at Rs. 53,26,772 suggesting that there has been significant increase in the expenditure claimed under this head during the accounting period relevant to assessment year under scrutiny. The details in respect of this claim are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s family has no connection whatsoever with the business activities of the company. The journey apparently seems to be a pleasure trip made by Shri Gupta along with his family. It would be appropriate to place on record that Shri Arun Kumar Gupta to whom the payment has been made under the. LTC and claimed as expenditure under the head 'Payment to employees' happens to be family members of the director of the company and is accordingly covered under the provision of s. 40A(2)(b). As a matter of fact, the tax audit report/auditor has also reported this fact in Annex. 4. The company could not also state as to whether the LTC facility has been allowed to any other employee of the company. From the what has been discussed above, it is abundantly....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubmitted by the learned counsel for the assessee that from a perusal of assessment order it would be clear that some disallowances have been made out of expenses claimed by the assessee. A sum of Rs. 2,37,370 on account of foreign trip expenses of Arun Kumar Gupta, director of the company has been disallowed on the ground that the sum was not spent for business. According to learned counsel for the assessee, it is simply a case where the AO disagreed with the submissions of the assessee, the assessee bona fidely spent the amount in course of its business and debited it in the books. Shri Rakesh Garg, advocate, learned counsel for the assessee, vehemently argued that it is not a case where the payment is bogus or there is no evidence of paym....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ustified. He also relied on the decision of A.M. Shah & Co. vs. CIT (1998) 150 CTR (Guj) 1 : (1999) 238 ITR 415 (Guj). 7. We have carefully considered the rival submissions and have also perused the materials available on record. The decisions cited at the time of hearing of appeal were duly considered. It is apparent from the record that the assessee company had debited a sum of Rs. 2,37,370 under the head Travelling expenses and claimed the above expenditure as a business expenditure. Shri Rakesh Garg, advocate, learned counsel for the assessee submitted that Arun Kumar Gupta, employee of the company, had travelled abroad along with his family members and as a part of understanding the said amount was incurred and claimed as expenditur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions that arise in penalty proceedings are different from those that arise in assessment proceedings. In the instant case, in absence of sufficient proof of business expediency, the said expenditure, claimed by the assessee was disallowed. It is not a case where the expenditure has been found to be bogus or having not incurred. The accounts have been audited and all the facts relating to the addition have been disclosed by the assessee. Furthermore, the explanation given in respect of entries in the books are bona fide, it is only a case of assessee's failure to establish his case in quantum proceedings. Therefore, it is not a fit case for penalty. In the case of Kerala Spinners Ltd. the Hon'ble Kerala High Court has been as under: "Hel....