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TMI Blog2016 (7) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, disallowance of foreign travelling expenses of Rs. 6,45,182/- also initiating the penalty proceedings u/s 274 r.w.s.271(1) (c ) read with explanation 1 thereto. The ld AO ultimately imposed a penalty on the disallowance of foreign travel expenses of Rs. 6,45,182/- at Rs. 4,97,806/- being equal to 200% of the tax sought to be evaded after rejecting the submissions of the assessee which has been incorporated in para 3 of the penalty order. The order was thereafter rectified u/s 154 of the Act revising the penalty imposed to Rs. 4,38,568/-.The assessee did not challenge the quantum additions before the First Appellate Authority(FAA) and the assessment attained finality. 4. The aggrieved assessee preferred an appeal before the FAA which was also dismissed by the ld. CIT(A) by rejecting the contentions and submissions of the assessee as incorporated in para 2.3 of the appeal order by observing and holding as under:- "2.4 I have carefully considered the above submission of the appellant and the impugned penalty order. The total expenditure incurred under the head Foreign Travel was Rs. 7,64,842/- out of which, the AO had allowed the expenditure incurred towards Foreign Travel expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avel Expenses is not for the purpose of the business. 2.6 The appellant had filed a resolution passed by the Board of Directors in this regard. However, in the absence of any documentary evidence to prove that really the Directors have carried out' inquiry with several crane manufacturers, the claim of the appellant cannot be entertained. 2.7 The appellant had also filed copy of the letter dated 22.11.2011 filed before the ACIT- 10(2) containing note towards Foreign Travel. The note clearly indicates that the tour operator has handled the entire package which includes travel, food, stay and conveyance in the foreign country. When the Directors are part of the tour package, I wonder how they can travel to various places only to make inquiry about the cranes. Further documentary evidence like air ticket, hotel bills were not available with the company and it was not furnished before the A.O. 2.8 As rightly pointed out by the AO, Explanation 1 to Section 271(1) squarely applies to the facts of the appellant's case and appellant had miserably failed to rebut the presumption raised under the explanation. Hence, in my view, it is a fit case for levy of penalty u/s 271 (1)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty u/s 271(1) ( c ) of the Act. In defence of his arguments the ld counsel relied on a series of decisions namely CIT Vs Reliance Petro Products (P) Ltd (2010) 322 ITR 158(SC), Hogkong & Shanghai Banking Corporation Ltd Vs DDIT Int. Tax (2012) 16 ITR 275(Bom) and ITO Vs Chemeform (2012) 51 SOT 27 (Kol). The ld AR of the assessee further relied on the decisions of tribunal in the case of M/S Vistar Construction Pvt Ltd Vs DCIT (ITA No.5149/Del/2011) dated 19.10.2012 and DCIT Vs Control & Switchgears Ltd (ITA No1981/Del/2013) dated 4.3.2015 in which the coordinate benches of the Tribunal deleted the penalty levied u/s 271(1) ( c ) of the Act for disallowance of foreign travel expenses. Finally the ld AR prayed for deletion of the penalty as the assessee is fully covered by the various decisions referred and relied. The ld DR,on the other hand, relied on the order of CIT(A). 6. We have considered the rivals submissions and perused the relevant materials on records carefully including the orders of authorities below. The AO has imposed penalty of Rs. 4,97,806/- on the disallowance of foreign travel expenses of Rs. 6,45,142/- of two directors which was subsequently reduced to Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under:- "7. We have carefully considered the submissions and perused the records. We find that disallowance in this case has been made to the extent of 50% of expenditure incurred on foreign travel expenses. The basis of making disallowance in this regard is that two directors and their wives who were also directors visited foreign countries which was not fully for business purposes. Assessee‟s submissions in this regard is note worthy that both the wives, who were also Directors of the company were receiving considerable salary which was accepted year after year. Hence, the visits cannot be said to be for non-business purposes. It has further been noted that disallowance in this regard in the preceding year was only 20% and on that addition penalty was not imposed, even the penalty notice has been issued by the Assessing Officer. In this background, we have to see whether the penalty proceedings u/s. 271(1)(c) is sustainable or not. We find that section 271(1)(c) of the Act postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. In this case disallowance has been made only on estimate basis. In the preceding year this di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of penalty." In the case of DCIT Vs Control & Switchgears Ltd , the tribunal held as under:- "4. We have considered the rival submissions and have perused the order of the AO. With regard to the disallowance of Additional Depreciation and of Exemption u/s10B of the Act, the matter has been restored to the file of the AO to determine the same afresh in accordance with law as per the directions of the Tribunal and the matter is still pending before the AO. In these facts, we cancel the penalty levied u/s 271(1)(c) of the Act on these two items of disallowance. However, the AO while framing the assessment as per the directions of the Tribunal, may if so warranted initiate the penalty u/s 271(1)(c) of the Act afresh in accordance with law. With regard to the disallowance of Guarantee Commission of Directors, the Tribunal has already allowed the miscellaneous application preferred by the assessee and following the decision of the Hon'ble Delhi High Court has allowed deduction of Guarantee Commission paid to the Directors and their remain no basis for levy of penalty u/s 271(1)(c) of the Act on this issue and the same is accordingly cancelled. With regard to the other two it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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