2015 (5) TMI 902 - AT - Income Tax

Penalty u/s 271(1)(c) - as no documents in support of any meetings set up with the M/s Mavel Manufacturing Inc. was placed on record the CIT(A) confirmed the penalty order - Held that - CIT(A) has not even cared to address the fact that M/s Mavel Manufacturing Incorporation was a customer of the assessee and not a supplier. It is further seen that the export sales of the assessee have increased over the years which to some extent can be said to be on account of continued customer satisfaction and the rationale though not being good enough for quantum proceedings can be a relevant argument in the penalty proceedings in the peculiar nature of assessee s business. 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 the quantum proceedings which is not the mandate of law. The explanation offered by the assessee in the penalty proceedings has to be considered independently and judiciously and only thereafter a finding has to be recorded. This exercise is found missing both in the penalty order as well as the impugned order. Thus impugned order is set aside and by allowing the appeal of the assessee, the penalty order is quashed. - Decided in favour of assesse.

Summary

Issues Involved:
Assessment of penalty under section 271(1)(c) for concealment of income by furnishing inaccurate particulars in the form of foreign travel expenses.

Analysis:

Issue 1: Quantum Proceedings and Penalty Imposition
The assessee contested the penalty imposed by the Assessing Officer under section 271(1)(c) based on the additions made in the assessment proceedings. The additions were related to non-deduction of TDS for traveling bills and disallowance of foreign travel expenses of the Managing Director. While the ITAT deleted one addition, the penalty was upheld based on the other addition. The penalty was imposed due to the alleged concealment of income by furnishing inaccurate particulars.

Issue 2: Appeal Against Penalty Order
The assessee challenged the penalty order, arguing that the facts were wrongly considered in the quantum proceedings. The contention was that the Managing Director's visits were for business purposes to meet an old customer, not for personal reasons. Despite the absence of documented evidence of meetings, the assessee maintained that the penalty should not have been levied solely based on the quantum proceedings' findings.

Issue 3: Judicial Precedent and Independent Consideration
The assessee's representative cited judicial precedents and argued that the penalty proceedings required an independent assessment of facts. It was emphasized that the company's shareholding structure and international presence indicated a legitimate business purpose for the travel. The argument focused on distinguishing between the quantum and penalty proceedings, urging a reevaluation of the facts and circumstances.

Issue 4: Tribunal's Decision
Upon considering the submissions and judicial precedents, the Tribunal found that the penalty was imposed solely based on the quantum proceedings' outcomes, without independent evaluation. The Tribunal noted the increase in export sales over the years, suggesting ongoing customer satisfaction. It was concluded that the penalty was not justified as there was no deliberate concealment or filing of inaccurate particulars. The Tribunal set aside the penalty order, ruling in favor of the assessee.

In conclusion, the Tribunal allowed the assessee's appeal, quashing the penalty order on the grounds of independent consideration of facts and absence of deliberate concealment or inaccurate particulars.