THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), AHMEDABAD vs. M/S. APPLITECH SOLUTIONS LTD., AHMEDABAD

The assessee has also filed cross objection in the Revenue’s appeal as captioned above.

The grounds of appeal raised by the Revenue reads as under:-

When the matter was called for hearing, the learned AR for the assessee in Revenue’s appeal referred to the penalty order dated 30.03.2016 for the AY 2000-01 in question and submitted that AO has tabulated various additions and disallowances at page no.1 of its order. However, all the additions and disallowances stood deleted by the order of the Tribunal in quantum proceedings in ITA No. 1600 & 1452/Ahd/2014 & Ors. dated 19.04.2016 except disallowance of foreign travel expenses amounting to Rs.16,56,920/-. The learned AR made two fold submissions to defend the order of the CIT(A) and its cross objection namely: (i) the relevant basic details towards foreign travel expenses namely bills, vouchers, place of visit etc. has been provided to the lower authorities as recorded by the CIT(A) at page no.25 of its order in challenge. Therefore, where all the material facts have been placed on record which facts in themselves have not been found to be untrue, the imposition of penalty under s. 271(1)(c) of the Act is not justified merely on the ground that the purpose of travel could not be demonstrated to the satisfaction of the AO. The learned AR submitted that out of the substantial additions, all the additions have been deleted and a small amount towards foreign travel has been retained by the Tribunal which has not been challenged due to smallness involved. The learned AR submitted that merely because some disallowance has been carried out that does not ipso facto give

The Learned DR, on the other hand, relied upon the order of the AO and submitted that the business purpose of foreign travel expenses has not been established and therefore, penalty was justified in view of Explanation 1 to Section 271(1)(c) of the Act.

We have carefully considered the rival submissions. The correctness of imposition of penalty under s. 271(1)(c) of the Act on disallowance of foreign travel expenses is in question. As pointed out on behalf of the assessee, it is manifest that the penalty under s. 271(1)(c) of the Act cannot be imposed both on merits as well as on account of non-maintainability of the Revenue’s appeal. The relevant primary details of foreign travel expenses to support the foreign travel expenses are available on record. In the circumstances, notwithstanding, the disallowance confirmed by the Tribunal in the quantum proceedings, the penalty of strict nature is not sustainable in view of long line of judicial precedents including the decision of the

The cross objection raised by the assessee is also dismissed as infructuous owing to aforesaid reasons.

In the combined result, both the appeal of the Revenue and cross objection of the assessee are dismissed.