2013 (11) TMI 148 - AT - Income Tax

Penalty u/s 271(1)(c) Inaccurate particulars of income Expenses on education of son of managing director named as Staff and labour training expenses Held that - The assessee could not furnish details when the son of the managing director of the assessee-company returned from abroad and when he joined the assessee-company and could not give any detail of any of the resolution passed in favour of the person who entered into an agreement with son of the managing director of the assessee-company Assessee relied on the decision in the case of Mukeshchandra A. Lakdawala v. ITO - The assessee has been charged for both the default and this is not permissible under law - The assessee has not raised the ground before CIT(A) The issue is remitted back to the files of CIT(A) for fresh adjudication - Decided in favour of Revenue.

Summary

Issues:
- Appeal against deletion of penalty under section 271(1)(c) for assessment years 1997-98 and 1998-99.
- Claimed business expenditure on education of managing director's son.
- Dispute over the nature of expenditure - personal or business.
- Lack of details and resolutions supporting the business purpose of the expenditure.
- Setting aside the order for fresh decision based on previous tribunal decisions.

Analysis:
- The Revenue appealed against the deletion of penalty under section 271(1)(c) for the assessment years 1997-98 and 1998-99. The dispute centered around the claimed business expenditure of sponsoring the managing director's son for higher education abroad. The Revenue contended that the expenditure was personal in nature as the son was not an employee of the company, leading to inaccurate particulars of income. The Commissioner of Income-tax (Appeals) had deleted the penalty, prompting the Revenue's appeal.

- The Revenue argued that the expenditure, claimed under 'staff and labour training expenses,' was not for business purposes as the son was not connected to the company's affairs. They emphasized the personal nature of the expenditure and the lack of evidence supporting its business intent. The Revenue cited a Delhi High Court decision to support their position.

- In response, the assessee maintained that the expenditure was legitimate business expenditure, duly reflected in the books of account. They presented an agreement with the managing director's son, outlining a commitment for future service to the company. The assessee highlighted resolutions and documents supporting the business purpose of the expenditure. They argued against the Revenue's claim of deliberate concealment or furnishing of inaccurate particulars of income.

- The Tribunal noted the absence of crucial details and resolutions supporting the business nature of the expenditure. They observed that the argument regarding the penalty for both concealment and inaccurate particulars was not raised before the Commissioner of Income-tax (Appeals). Citing previous tribunal decisions, the Tribunal set aside the order and remitted the case back for a fresh decision, emphasizing the need for a reasonable opportunity for the assessee to present their case.

- Consequently, the Tribunal allowed the Revenue's appeal for statistical purposes, directing a reevaluation of the penalty deletion in light of the previous tribunal decisions. The consistent view was taken for the assessment year 1998-99, remitting the file back to the Commissioner of Income-tax (Appeals) for a fresh decision. Both appeals by the Revenue were allowed for statistical purposes, ensuring a comprehensive review of the penalty deletion issue.