2018 (3) TMI 1021 - AT - Income Tax

Penalty u/s.271(1)(c) - bonafide claim of travelling expenditure - Held that - As per record, we observe that all the facts were disclosed and the claim was made for deduction of travelling expenses. As per record the assessee has made a bonafide claim. The AO as well as CIT(A) have not challenged the genuineness / bonafides of the expenditure so incurred. The claim of the assessee is also supported by various decisions and documentary evidences placed on the record. Thus, penalty cannot be levied where a bonafide claim of the assessee was rejected by the tax department. No merit for the penalty so imposed u/s. 271(1)(c) on account of disallowance of part of travelling expenses. - Decided in favour of assessee.

Summary

Issues:
1. Imposition of penalty u/s.271(1)(c) of the IT Act for A.Y.1997-98 and 2003-04.
2. Deletion of penalty for addition of ?33,25,027/- in A.Y.1997-98.
3. Penalty levied for disallowance of foreign travelling expenses in A.Y.2003-04.

Analysis:
1. The appeals were filed against the order of CIT(A)-16, Mumbai for the imposition of penalty u/s.271(1)(c) of the IT Act. The Tribunal deleted the penalty for the addition of ?33,25,027/- in A.Y.1997-98. The Tribunal observed that the material's worth value at the time of use was not the same as the invoice value, and the raw material was taken at 'zero' cost for manufacturing activity. As the profits from sales were already offered for taxation, adding the bill value would result in double taxation. Thus, the penalty was deemed unjustified and deleted.

2. In A.Y.2003-04, penalty was imposed for a partial disallowance of foreign travelling expenses. The assessee argued that the expenditure was solely for business purposes, visiting foreign countries to make purchases from customers abroad. The Tribunal noted that the assessee's turnover depended on orders from renowned international customers, necessitating extensive direct contact. The AO disallowed a portion of the expenses, alleging personal enjoyment, and levied a penalty. However, the Tribunal found that the expenditure was for business purposes, supported by detailed submissions and documentary evidence. The genuineness of the claim was not challenged, leading to the deletion of the penalty.

3. The Tribunal emphasized that penalty proceedings and quantum proceedings are independent, and the mere confirmation of a part of disallowance does not mandate penalty imposition. As the assessee had made a bonafide claim, supported by disclosures and evidences, the penalty for disallowance of travelling expenses was deemed unwarranted. The Tribunal cited various judicial pronouncements to support its decision and allowed the appeals of the assessee in both instances.

In conclusion, the Tribunal ruled in favor of the assessee, deleting the penalties imposed for the respective assessment years based on detailed analysis and justifications provided in each case.