TaxTMI 
TaxTMI 
2017 (5) TMI 364
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....the Assessee filed return of income on 31.10.2005 declaring total income of Rs. 3,51,13,855/-. The case was selected for scrutiny and notice u/s. 143(2) of the Act was issued. In response to the same the A.R. of the assessee attended the 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 Rs. 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. The addition on account of interest expense on account of diversion of borrowed funds was restricted to Rs. 15,43,526/-. The AO observed that the assesee had incurred an expenditure of Rs. 5,15,176/- on foreign travel of one of its Directors. The AO held that the assessee was engaged in the business of purchase and sale of shares an....
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.... by the Ld. CIT(A), Assessee is in appeal before the Tribunal. 7. In support of his contention, Ld. A.R. of the assessee has filed the Synopsis of submissions (revised) and reiterated the contents thereof, which read as under:- "1. Penalty u/s 271(1)(c) has been levied in respect of additions of Rs. 5,15,176/- on account of foreign travel expenses, Rs. 1,50,000/- on account of addition u/s 68 and disallowance of Rs. 3,66,654/- u/s 14A (Pg. 2 of the penalty order). Penalty was confirmed by the Ld. C!T(A) except on disallowance u/s 14A. Penalty notice u/s 271(1)(c) is bad in law 2. A perusal 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: - - CIT vs. V S Lad & Sons, 2013-TIOL-536-HC-KAR-IT "61 Thus the Assessing Officer while issuing notic....
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.... 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 imposed is cancelled; (para 7.3)" Penalty cannot be levied merely because the explanation of the assessee is not acceptable 3. The Ld. AO, vide page 2 of the penalty order, has levied the penalty by holding that the explanation filed by the assessee is not acceptable. As per section 271(1)(c), Explanation 1, penalty can be levied only if the assessee fails to offer an explanation or offers an explanation which is false or offers an explanation which he is not able to substantiate and fails to 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,....
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....enses filed before the AO (Pg. 6, PB] clearly indicate that the foreign tours were undertaken through Global E Travel Solution Pvt. Ltd. which is an outside party. The AO has not brought any new fact on record than what is declared in the accounts. c) The foreign tours were undertaken by the director in connection with the share 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 the claim is bogus. It is also not his case that the expenditure is not verifiable. Therefore, it is an admitted fact that the expenditure is genuine and was actually incurred. Had the appellant been successful in getting any client from the countries, the director visited, even the expenditure would have been allowed as business expenditure. Unfortunately, the direc....
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....tion, 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 have heard both the sides and perused the material placed before us. The penalty has been levied on account of disallowance of expenses amounting to Rs. 5,22,996/- under various heads i.e. foreign traveling expenses, repair and maintenance expenses, electricity expenses, business promotion expenses and car expenses. Out of these expenses, part of the expenses has been disallowed on ad-hoc basis. In our opinion, on such ad-hoc disallowance out of expenses, no penalty under Section 271(1)(c) is leviable...." 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 furnis....
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....s but it does not amount to concealment - Assessee having disclosed in return all material 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 establish that it is the income of the assessee. Merely disbelieving the claim of the assessee does not amount to filing of inaccurate particulars. The Ld. AO has not brought any material on record to establish that the confirmation filed was false or the credit represents appellant's income. All the facts were disclosed by the appellant and the Ld. AO has not found any falsity in them. Under the circumstances, it cannot be said that the appellant filed inaccurate particulars of income. Reliance is placed on the following: - i) National Textiles vs. CIT, (2001) 249 ITR 125 (Guj) "Conclusion In order....
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....ealment - Concealment can only be of facts and not of the conclusion- Assessee had claimed himself to be a non-resident but had furnished all supporting details- It was for the ITO to derive the correct status." ii) Impulse India (P) Ltd. vs. ITO (1992) 40 ITD (DEL) 36 "Claim made overtly and openly was rejected finally, penalty for concealment of income cannot be levied." iii) ITO vs. Budge Budge Co. Ltd., (2006) 100 ITD 387 (kol) "7 As all the claims and figures 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 additions confirmed 7. The AO has levied the penalty u/s 271(1)(c ) on the ground that the assessee has furnished inaccurate particulars of income. He has levied the penalty only on the basis of additions made in the assessment orde....
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....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 for the appellant- Revenue the entire income which remained undisclosed, "with or without" any conscious act of the assessee, was liable to penal action. It is submitted by the learned counsel for the appellant Revenue, that the concept of law, with regard to levy of penalty has drastically changed in view of the said judgment, inasmuch as, now penalty can be levied even when an assessee claims deduction or exemption by disclosing the correct particulars of its income. According to the 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-assesse....
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....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 Rs. 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 the genuineness either at the assessment stage, appellate stage and now during penalty proceedings. In view of the above, AO has observed that assessee has furnished inaccurate particulars of his income with a view to evade taxes and made a penalty of Rs. 3,777,546/- vide his order dated 31.3.2010 passed u/s. 271(1)(c) of the Act. Against the penalty order, assessee filed appeal before the Ld. First Appellate Authority who vide his impugned order dated 19.12.2012 partly allowed the....