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TMI Blog2011 (1) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... of seminar expenses. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals)-IV ought not to have confirmed the penalty. 2 The Learned Commissioner of Income Tax (Appeals)-IV has erred in confirming the penalty for the disallowance of rent. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals)-IV ought not to have confirmed the penalty. 2. Facts, in brief, as per relevant orders are that the return declaring income of Rs. 94,65,330/- filed on 30-10-2002 by the assessee, stated to be engaged in the business of manufacture and sale of switchgears, instrument transformers, air circuit breakers, LT Switchboards etc., after being processed on 11.2.2003 u/s 143(1) of the Income-tax Act, 1961 [hereinafter referred to as the Act ] was selected for scrutiny with the service of a notice u/s 143(2) of the Act, on 22.10.2003.During the course of assessment proceedings the Assessing officer[AO in short] noticed that an amount of Rs. 4,25,000/- was paid to M/s Shashi Sales Marketing Pvt. Ltd., Delhi for conducting seminar and conferences to promote the products of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our account and there after we withdraw Cash and pay back to the party concerned. In this transaction we get commission of 0.25% . Ans. 4. As I have already stated we are doing the business of entry accommodation. We do not maintain any account of such accommodation. We have not done any real business with JSL. We have taken DDs. from them and we have given back cash to them. In view of the above categorical admission on part of the appellant that they were providing fictitious accommodation entries to the beneficiaries like assessee after charging commission of 0.25% and that the amount shown to have been paid by various persons was returned back either through cash or demand drafts or cheques, I hold that the claim of expenses of Rs. 4,25,000/- incurred by the assessee is bogus, accordingly, the addition made by the A.O. is confirmed. As regarding not granting of opportunity for cross-examination of Shri Surendra Pal Singh, Director of M/s. Shashi Sales and Marketing Pvt. Ltd., is concerned, I would like to observe that (there is no specific ground of this nature made by the appellant in the grounds of appeal, but then also, I would like to comment on the issue.) It has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business meeting/seminars held ? Who were the participants? These and various related questions arise in relation to its claim. The same, in fact, are only the primary facts and which were necessarily required to be given by the assessee, and which it has not, relying solely on bald and generalized statements. No expenditure in relation to travel to and back from the venue (of the meeting/seminars) etc. stand incurred by the assessee; i.e. as per its books, and which would definitely be, if not for the outside participants, at least for the company s own employees and directors, attending the same. Such business meetings, it may be added, are a regular feature in the corporate world, and are undertaken generally in hotels, as they have in place the necessary wherewithal for the purpose, providing all the necessary infrastructural facilities, viz., local conveyance, residential facilities, conference halls equipped with audio/video gadgets, communication/computing facilities, dining/banquet halls, etc. also, so that the engagement of an outside agency for the purpose is even otherwise not consistent with the practice, or understandable from the stand-point of business prudence or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim for Rs. 60.000/- deserves to be rejected at the threshold. 10.2 The assessee has claimed to have a good presence in Northern India, and that as it did not have the organizational capacity, or resources, at New Delhi, it hired the services of SSMPL for arranging the seminar(s) thereat, though the details in respect thereof, and therefore, of the services actually rendered by the said firm, were missing. It now claims to have hired/rented an open plot of land for the said purpose at Village Valadara. The two claims are contradictory. Further, how the land was found suitable for the purpose for which it was rented, and how the same would actually be utilized for the purpose of conducting conferences, given that there is no structure thereon, leave alone proper infrastructural facilities, which organizing of such a business meeting necessarily entails, besides the boarding and lodging of the out-station participants, etc., are questions/aspects we find as totally unaddressed by it, even as the answer thereto provide the basis on which its claim rests. Still further, how and why no conference could actually be held even as the assessee would only, reasonably speaking, enter into s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be conclusive evidence for the addition. Again in business a host of transactions take place. It cannot be possible for any person to remember all of them that too after a period of time since their occurrence. To accept the statement therefore without any documentary evidence is in our respectful submission incorrect. The addition itself therefore suffers from inherent weak legal support. However, arguing without accepting even if the statement and addition is accepted as correct the same cannot become a base for levy of penalty. Penalty proceedings by their very nature are quasi criminal in nature and need to be viewed accordingly. In this case a statement not supported by documentary or material evidence is taken, as base for addition cannot by itself form the base of levy of penalty. As mentioned earlier penalty proceedings being quasi criminal in nature conclusive evidence is needed to prove the fact. Since the statement of the director is not supported by any material evidence and again not cross examined suffers from lack of authenticity to become evidence for the levy of penalty. In our submission therefore to levy penalty in this case on the present facts would be totall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , whatsoever, was adduced by the assessee in support of its claim and so the onus to establish its case is very much upon the assessee. (vi) Even the assessee could not establish where and when the business seminar was held and who the other participants were. (vii) The assessee had not furnished name of the employees who attended the seminar, date(s) on which seminar was arranged. Had there been any expenditure on account of travelling expenses of employees and directors for attending such seminar, the assessee could have furnished the same in support of its claim. (viii) The assessee has substantial chunk of its business with its own associate concern viz M/s Jyoti Ltd. and Delhi Vidyut Board. No organized seminars were required for the business with these principal customers. (ix) Generally when such a seminar is arranged, photographs are taken. If at all such seminar was arranged, the assessee could have shown the same in support of its claim of expenses. (x) Since the matter was thoroughly probed by the Investigation Wing of the Department therefore, there is no scope for drawing any other inference. (xi) It is also not believable why the payee reacted in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy of penalty in relation to seminar expenses in the following terms:- 2.4 I have carefully considered the penalty order and the submissions of the Authorized Representative. The Hon ble Tribunal has rightly held that prime onus for claiming an expenditure as a business expense lies on the assessee. Evidence that such an expenditure has genuinely been incurred is to be filed by the assessee as and when called for. In the current case, the appellant has been unable to establish the genuineness of his claim that a sum of Rs. 4,25,000/- was paid for the purpose of holding seminars by the company. The Assessing Officer was therefore, justified in levying penalty u/s. 271(1)(c) of the Income tax Act. The same is therefore, confirmed. 4.1 As regards levy of penalty in respect of addition of Rs. 1,80,000/- on account of rent, the learned CIT(A) upheld the levy of penalty with the following observations:- 3.3. I have considered the penalty order and the submissions of the Authorized Representative. The highest fact finding Authority has found the claim of the appellant to be ungenuine. The Assessing Officer was therefore, justified in levying penalty u/s. 271(1)(c) of the Income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Veerasinghaiah Co. v. CIT, 123 ITR 457, the findings in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(1)(c) of the Act are different than those applied for making or confirming the additions. It is, therefore, necessary to reappreciate and reconsider the matter so as to find out as to whether the addition made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1)(c) of the Act and whether it is a fit case to impose the penalty by invoking the said provisions. The provisions of section 271(1)(c) of the Act stipulate that if the Assessing Officer or the CIT(Appeals) or the Commissioner, in the course of proceedings under this Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars thereof, he may direct that such person shall pay by way of penalty a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by a reason of the concealment of particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in this case nor even brought out as to whether the penalty is leviable for concealment of particulars of income or for furnishing inaccurate particulars thereof and which specific particulars were concealed or furnished inaccurate. A mere glance at the impugned order reveals that the order passed by the ld. CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice, namely, that every judicial/quasi-judicial body/authority must pass reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. The application of mind to the material facts and the arguments should manifest itself in the order. Section 250(6) of the Income Tax Act ,1961 mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision. The requirement of recording of reasons and communication thereof has been read as an integral part of the concept of fair procedure. The requirement of recording of reasons by the quasi-judicial authorities is an important safeguard to ensure observance of the rule of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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