2019 (4) TMI 51 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of foreign travel expenses - HELD THAT - As pointed out on behalf of the assessee, it is manifest that the penalty u/s 271(1)(c) cannot be imposed both on merits as well as on account of non-maintainability of the Revenue s appeal. The relevant primary details of foreign travel expenses to support the foreign travel expenses are available on record. In the circumstances, notwithstanding, the disallowance confirmed by the Tribunal in the quantum proceedings, the penalty of strict nature is not sustainable in view of long line of judicial precedents including the decision of Reliance Petroproducts 2010 (3) TMI 80 - SUPREME COURT Secondly, the appeal of the Revenue itself is not maintainable owing to low tax effect in terms of CBDT Circular No.3 of 2018 dated 11/07/2018. Therefore, the appeal of the Revenue is dismissed on both counts.

Summary

Issues Involved:
Imposition of penalty under s. 271(1)(c) of the Income Tax Act, 1961 arising from the penalty order concerning assessment year 2000-01.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) regarding the imposition of penalty under s. 271(1)(c) of the Income Tax Act, 1961. The assessee also filed a cross objection in the Revenue's appeal. The Revenue contended that the CIT(A) erred in law and on facts in deleting the penalty amount levied under s.271(1)(c) of the Act. The learned AR for the assessee referred to the penalty order and submitted that all additions and disallowances, except for foreign travel expenses, were deleted by the Tribunal in quantum proceedings. The AR argued that the penalty imposition was not justified as all material facts related to foreign travel expenses were provided to the authorities. The Revenue's penalty amount was specified at a higher value, but after deletions by the ITAT, only the foreign travel expenses remained. The AR also argued that the penalty amount would be less than the threshold limit due to the deletions. The Learned DR supported the AO's order, stating that the business purpose of foreign travel expenses was not established.

The Tribunal carefully considered the submissions and found that the penalty on disallowance of foreign travel expenses was not sustainable. Despite the disallowance confirmed by the Tribunal, the penalty was deemed unjustifiable based on judicial precedents, including the decision of the Hon'ble Supreme Court in Reliance Petroproducts. Additionally, the Revenue's appeal was deemed not maintainable due to low tax effect as per CBDT Circular No.3 of 2018. Consequently, the appeal of the Revenue was dismissed on both grounds. The cross objection raised by the assessee was also dismissed as infructuous for the same reasons. In conclusion, both the Revenue's appeal and the assessee's cross objection were dismissed.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by the parties, and the Tribunal's reasoning leading to the dismissal of the appeal and cross objection.