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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND ASHWANI TANEJA, AM (A.Y:2004-05) Subhakam Stocks and Shares P. Ltd. Income Tax Officer Ward The International House 4th Floor, 16, Vs. 4(2)(3) Aaykar Bhavan, M.K. Road, Churchgate, Mumbai-20 Mumbai PAN No.AAACM7389K Appellant .. Respondent Assessee by .. Shri Sanjay Parikh, AR Revenue by .. Miss. Arju Garodia, DR Date of hearing .. 21-11-2016 Date of pronouncement .. 21-11-2016 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of CIT (A)-8, Mumbai in appeal No. CIT(A)/8/Cir.4/40/2012-13 dated 18-02-2013. The Assessment was framed by ITO ward-4(2)(2), Mumbai for the A.Y. 2004-05 vide order dated 21-12-2006 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The Penalty under dispute was levied by ITO Ward-4(2)(3), Mumbai vide his order dated 21-03-2012 u/s 271(1)(c) of the Act.
The only issue in this appeal of assesse is against the order of CIT(A) confirming levy of penalty by the AO u/s 271(1)(c) of the Act in respect of disallowance of expenses of foreign Travel expenses and inter city travel expenses.
Brief facts relating to the issue are that the assessee is engaged in the business of shares and securities and carries on brokering activities being member of National Stock Exchange. During the year under consideration the assessee claimed foreign travelling expenses amounting to Rs.21,19,584/-, which were incurred on account of foreign travel of director. The assessee also incurred travelling and conveyance expenses i.e. the domestic traveling expenses amounting to Rs.4,14,462/-. The assessee before AO claimed that the director has travelled foreign countries for the purpose of business i.e. exploring the market and in search for new business opportunities. According to AO nothing has been brought on record to show that the trip was undertaken to explore foreign market and in search for new business opportunities. Accordingly, he disallowed the entire foreign and conveyance expenses amounting to Rs.21,19,584/-. Similarly, the AO required the assessee to explain the local travelling and conveyance expenses amounting to Rs.4,14,462/-. It was claimed that these expenses relates to the local traveling expenses including that of the director. The assessee furnished bills and vouchers of inter city travels and stated that the director and others had made such visits for meeting with clients and exploring new parties. Here also, the AO observed that nothing has been brought on record to show that the trips were undertaken to meet the old clients and also explore new clients. Accordingly, he disallowed local travel expenses of Rs.4,14,462/-. Thereby the AO disallowed entire travelling and conveyance expenses including foreign travelling at Rs.25,77,614/-. This addition was challenged and Tribunal also confirmed both the disallowances by observing para 8 and para 11 as under: - “8. We have heard the learned representatives of the parties and perused the record. We find that since the assessee failed to substantiate foreign travel claim of Rs.21,19,584/- by its director that the expenditure is wholly incurred wholly and exclusive for the purpose of business, the revenue authorities disallowed the claim of the assessee. Even before us the assessee failed to substantiate that the expenditure incurred for the purpose of business. Therefore, we find no infirmity in the order of CIT (A) in confirming the disallowance of expenditure of Rs. 21,19,584/- on account of foreign travel by AO. Accordingly, we confirm the order of CIT (A) in this regard and dismiss the ground raised
by the assessee.
11. After hearing the learned representatives of the parties and perusing the record, the disallowance made by the revenue authorities in this ground is also similar to the ground No.2 for the reason that the assessee failed to substantiate its claim that the expenditure incurred for the purpose of business. Therefore, in the same analogy we uphold the order of the CIT (A) in confirming the action of the AO in disallowing the claim of Rs.4,14,462/- on account of visits to various cities in India. Even before us, the assessee failed to substantiate that the expenditure incurred to travel in India along with various persons for the purpose of the business. Thus, this ground of appeal of the assessee is also dismissed.”
The AO started penalty proceedings u/s 271(1)(c) and levied the penalty for concealment of income by observing that the addition has been confirmed by the CIT (A) as well as ITAT and further by observing that the travel expenses and inter city expenses were not incurred wholly and exclusively for the purpose of business. Accordingly, AO levied the penalty. Aggrieved assessee preferred appeal before CIT (A), who also confirmed the action of the AO levying penalty by observing in para 3.3(c) as under: - “3.3(c) I find that in the instant case the appellant was not able to give any documentary evidences for satisfying the AO that the foreign travel expenses as well as the intra city travel expenses are for the purpose of the business. The fact that the appellant is simply reiterating the explanation that this was incurred in relation to business has no meaning until and unless the same is supported with corroborative evidences on record. I find that the appellant even before the CIT (A) or before ITAT was not able to prove its claim. Therefore, it is not a case where the appellant has made a legal claim of the expenses that are otherwise allowable to it. It is a case where the appellant had made a false claim without any corroborative evidences to prove the same. Therefore, the case laws relied upon by the appellant are of no help to it. In view of the foregoing discussion, the penalty levied by the Ld. AO is accordingly, confirmed. This ground of appeal
is dismissed.” Aggrieved, now assessee is in second appeal before Tribunal.
5. We have heard rival contentions and gone through the facts and circumstances of the case. We have gone through the assessment order, the order of Tribunal, whereby addition was confirmed. We have also gone through the penalty order and notice that the penalty in respect of foreign travelling expense as well as local travelling expenses was levied due to the reason that the assessee did not discharge basic onus to prove that the expenditure was incurred for the purpose of business. The CIT(A) observed since the assessee did not produce any documentary evidence of the Inland travelling undertaken by various persons in relation to the business of the assessee, the same cannot be held to be incurred wholly and exclusively for the purpose of business. But now before us, from the orders of the lower authorities, it is clear that the assessee has furnished full details of expenses incurred by assessee i.e. bills, vouchers and payment details. The expenditure incurred is not in doubt but whether it is for the business or for personal the same has been doubted. The assessee was not able to substantiate AO, CIT(A) and even before Tribunal the factum that these expenses were incurred for the purpose of business. Now before us and before lower authorities during penalty proceedings, the assessee claimed that this is merely a disallowance of expenditure by holding the same as for non-business purposes. But the assessee claimed that the expenses were incurred only for the purpose of business, be it foreign traveling expenses or inter city expenses. For this assessee has produced complete bills relating to travelling expenses. The only premise for making addition was that, “Nothing has been brought on record to show that the trip was undertaken to explore foreign market and to search for new business opportunities. Even otherwise the expenditure incurred for exploring the foreign market and search for new business opportunities would be for the purpose of new venture.” Further, in regard to inter city expenses, the AO added by observing that, “Nothing has been brought on record to show that the trips were undertaken to meet the old clients and pursue new clients. The expenditure is not incurred wholly & exclusively for the purpose of assessee’s business.”
6. From the above facts it is clear that the expenditure is not in doubt but only the purpose is in doubt whether it is for business or for personal. But the AO has no were brought on record that this expenditure is personal in nature. In such circumstances, whether the explanation filed by the assessee is bonafide or not it is to be considered. We find that the assessee has filed complete particulars in regard to claim of foreign traveling expenses and inter city expenses and claimed deduction of the same. Assessee could produce all the bills and vouchers of the expenses and claimed the same as business expenses. Whether simpliciter disallowance of expenses attracts penalty or not, it is to be considered. Therefore, we are of the view that the mere fact that these figure of expenses or particulars have been disclosed by assessee itself, even if takes out the case from the purview of non-disclosure, the assessee cannot by itself take out the case from the purview of furnishing inaccurate particulars. In view of the provisions of section 271(1)(C)of the Act, disclosure which has been made in any part of the return which is incorrect or false to the knowledge of the assessee and if that fact is established, such disclosure cannot take it out from the purview of the act of concealment of particulars of income or act of furnishing inaccurate particulars for the purpose of levy of penalty. But we are of the view that the process of inquiry into the correctness, truthfulness or accuracy of the particulars furnished by the assessee cannot be closed at the threshold by looking at the return. That would negative and render otiose the very provisions of the statute. We are of the view that as per rule of evidence, there is distinction between set of facts “not proved” and facts disproved and facts proved. Benefit of the principle that mere non-satisfactory nature of explanation furnished cannot amount to proof of falsity of explanation furnished can apply in case the fact-finding authority reaches to a stage where it can only conclude that the fact alleged is “not proved” which would result that except rejection of the explanation furnished by the assessee, there is no material to sustain the plea of concealment. But, on the other hand, if the state of affairs reveals a stage where one can positively reach a conclusion that the fact alleged is proved or disproved, the principle that mere rejection of explanation cannot result in levy of penalty will have no application. To reach this stage also, inquiry will have to be undertaken of the disclosure made in the return or in the statement annexed to the return and to arrive at a finding whether the particulars disclosed are truthful, or false or not proved to be satisfactory. In the first case, it would be a positive case of no concealment, in the second stage, it would be a positive case of concealment and in the third case, benefit of doubt will go in favour of assessee. But in either case, inquiry must proceed from the stage the alleged disclosure has taken place and not stop at that stage and close the inquiry at the threshold on the abstract principle that mere rejection of explanation does not result into levy of penalty. In the present case also the Revenue has no where proved the allegation of concealment despite explanation offered by the assessee. The AO has made disallowance of foreign travel expenses and local travel expenses merely on the basis of non-business purposes without making any enquiry. The assessee produced complete details i.e. the bills and vouchers relating to expenses incurred on foreign travelling and local travelling and claimed by the assessee for business purposes. The actual position in law is that merely because the assessee’s addition has been confirmed, that cannot automatically bring in levy of penalty for concealment. If the assessee Revenue authorities have to consider the acceptability of the explanation and pass necessary orders. In the present case, the Revenue has not rejected the explanation of the assessee and merely levied the penalty on the basis that the expenses are for non-business purposes. In term of the above discussion and facts of the case, we delete the penalty and allow the appeal of assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21-11-2016.