2020 (12) TMI 521 - AT - Income Tax

Penalty u/s. 271(1)(c) - assessee sold certain land and declared long term capital gain on sale thereof which as per AO should have been offered as Business income instead of long term capital gain - HELD THAT - It is a case of difference of opinion between the assessee and the AO on the facts already disclosed by the assessee. Merely because the AO treated the amount of income already offered differently from the one portrayed by the assessee, cannot in our considered opinion be a cause for imposing penalty u/s. 271(1)(c) - The Hon'ble Supreme Court in CIT Vs. Reliance Petro products 2010 (3) TMI 80 - SUPREME COURT has held that no penalty should be imposed when the assessee adopts a bona fide view and has declared all the necessary particulars concerning the income in dispute. Disallowance of Foreign tour and travelling expenses - relatives of the directors also joined in the foreign tours. This was followed by the penalty - HELD THAT - As assessee incurred foreign tour expenses for conducting meetings with cement dealers of India Cement Ltd. and Visaka Industries Ltd., for which it was acting as C F agent. These expenses included some amount spent on minor sons and daughters of the directors. CIT(A) has rightly relied on ACIT Vs. TRB Exports P. Ltd. 2010 (2) TMI 881 - ITAT, CHANDIGARH of the impugned order, in which the Tribunal deleted the penalty under similar circumstances. No contrary precedent has been brought on record by the ld. DR. We, therefore, uphold the deletion of penalty. - Decided against revenue.

Summary

Issues involved:
1. Penalty under section 271(1)(c) of the Income-tax Act, 1961 for treating long term capital gain as business income.
2. Penalty imposition for disallowance of foreign tour and traveling expenses.

Analysis:

Issue 1: Penalty for treating long term capital gain as business income
The appeal pertains to the deletion of a penalty amounting to ?1,66,43,021 imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961. The assessee had declared long term capital gain on the sale of land, which the AO considered as "Business income." The Tribunal noted that the assessee had consistently treated the land as a fixed asset in previous years and had offered long term capital gain on its sale. The difference of opinion between the assessee and the AO regarding the nature of income disclosed by the assessee cannot be a basis for imposing a penalty. Citing the decision in CIT Vs. Reliance Petro products, the Tribunal held that no penalty should be imposed when the assessee adopts a bona fide view and discloses all necessary particulars concerning the income in dispute. Consequently, the Tribunal endorsed the CIT(A)'s decision to delete the penalty.

Issue 2: Penalty imposition for disallowance of foreign tour and traveling expenses
The second issue involves the imposition of a penalty for disallowance of foreign tour and traveling expenses amounting to ?4,45,482. The AO disallowed the expenses as relatives of the directors also participated in the foreign tours. However, the CIT(A) deleted the penalty, leading to the Revenue appealing before the Tribunal. The assessee had incurred foreign tour expenses for conducting meetings with cement dealers of specific companies while acting as a C & F agent. These expenses included amounts spent on the directors' minor children. The Tribunal upheld the deletion of the penalty, citing a precedent from ACIT Vs. TRB Exports P. Ltd., where a similar penalty was deleted under comparable circumstances. With no contradictory precedent presented by the Revenue, the Tribunal affirmed the decision to delete the penalty.

In conclusion, the Tribunal dismissed the appeal, upholding the decisions to delete the penalties in both issues. The order was pronounced in the Open Court on 11th August 2020.