2014 (5) TMI 185 - AT - Income Tax

Addition of travelling expenses Held that - While disallowing the expenses, the AO had not doubted the expenditure nor pointed out any specific instance of personal expenses - CIT(A) has upheld the disallowance by noting that Assessee could not controvert the findings of AO and has held the part of the expenses to be personal in nature - each assessment year is a separate unit and the principle of res judicata is not applicable to income tax assessments - the disallowance is restricted to Rs 1 lac Decided partly in favour of Assessee. Addition on account of late payment of PFC and ESIC Employees contribution Held that - The Assessee had deposited employees contribution of ESIC and PF for various months after the due dates prescribed under the Act Relying upon COMMISSIONER OF INCOME TAX II Versus GUJARAT STATE ROAD TRANSPORT CORPORATION 2014 (1) TMI 502 - GUJARAT HIGH COURT - any sum with respect to the employees contribution as mentioned u/s 36(l)(va), assessee shall be entitled to the deduction of such sum towards the employees contribution if the same is deposited in the accounts of the concerned employees and in the concerned fund such as Provident Fund, ESI Contribution fund, etc provided the sum is credited by the assessee to the employees accounts in the relevant fund or funds on or before the due date under the Provident fund Act, ESI Act, Rule, Order or Notification issued thereunder or under any Standing Order, Award, Contract or Service or otherwise - the amount of employees contribution towards PF and ESIC has been deposited beyond the due dates prescribed under the relevant Act there is no need to interfere in the order of the CIT(A) Decided against Assessee. Deletion of penalty u/s 271(1)(c) of the Act Held that - During the course of assessment proceedings disallowance of employees contribution was made on account of late payment of employees contribution of provident fund and ESIC - CIT(A) while deleting the penalty has noted that AO has not made out any case that the Assessee had concealed income or furnished inaccurate particulars of income Relying upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT - Revenue could not controvert the findings of CIT(A) thus, there was no reason to interfere with the order of CIT(A) Decided against Revenue.

Summary

Issues involved:
1. Disallowance of traveling expenses for foreign visits and director's traveling.
2. Disallowance of late payment of PF and ESIC contributions.
3. Deletion of penalty under section 271(1)(c) for delayed payment of employees' contributions.

Issue 1: Disallowance of traveling expenses for foreign visits and director's traveling:
The Appellate Tribunal considered the appeal for A.Y. 07-08 regarding the disallowance of Rs. 3,80,477 out of Traveling Expenses. The Assessing Officer disallowed 20% of foreign-related expenses and director's traveling expenses as they were deemed personal in nature due to the absence of exports or income generation. The CIT(A) upheld the disallowance, stating the expenses were not wholly business-related. The Assessee argued for deletion based on past tribunal decisions. The Tribunal noted the AO did not doubt the expenses but upheld the disallowance. However, considering past rulings and lack of specific evidence of personal expenses, the Tribunal reduced the disallowance to Rs. 1 lac, allowing the appeal partially.

Issue 2: Disallowance of late payment of PF and ESIC contributions:
The second ground concerned the disallowance of Rs. 91,729 due to late payment of PF and ESIC contributions. The AO disallowed the amount as employees' contribution was paid after the due date. The CIT(A) upheld the disallowance citing a Supreme Court decision. The Assessee acknowledged adverse jurisdictional rulings. The Tribunal, following the Gujarat High Court's precedent, upheld the disallowance, stating that timely deposits were necessary for deductions. Consequently, the appeal on this ground was dismissed.

Issue 3: Deletion of penalty under section 271(1)(c) for delayed payment of employees' contributions:
Regarding the deletion of penalty under section 271(1)(c) for delayed payment of employees' contributions, the AO levied a penalty after disallowing contributions to PF and ESIC. The CIT(A) annulled the penalty, highlighting that penalty proceedings are distinct from assessments. The Tribunal noted the absence of concealment or inaccurate particulars by the Assessee and upheld the CIT(A)'s decision based on the Apex Court's ruling. The Revenue's appeal against the penalty deletion was dismissed, emphasizing the lack of evidence of concealment or inaccuracies.

In conclusion, the Tribunal partly allowed the Assessee's appeal on the disallowance of traveling expenses and dismissed the appeal on late payment of PF and ESIC contributions. Additionally, the Tribunal dismissed the Revenue's appeal against the penalty deletion, maintaining the decisions made by the CIT(A) in each case.