HANNOVER MILAND FAIRS INDIA P.LTD,MUMBAI vs. DCIT RG 3(1), MUMBAI

आदेश / O R D E R

PER SHAILENDRA KUMAR YADAV, JM This appeal has been filed by the assessee against the order dated 30.09.2013 passed by the CIT(A) 5, Mumbai and it pertains to A.Y. 2009-10.

Your appellant submits that the order u/s. 271(1)(c) is illegal, bad-in-law and the same ought to be cancelled.

2. The learned CIT(A) erred in confirming the order of the Assessing Officer levying penalty u/s. 271(1)(c) of the Act amounting to Rs.8,48,499 in respect of addition of Rs.24,96,318 made to the total income on account of disallowance of Exhibitor Promotion expenses. The appellant submits that the penalty of Rs.8,48,499 is wrongly levied and the same ought to be cancelled.”

On the other hand, the learned D.R. supported the order of the CIT(A).

The parent company apportioned the expenditure between the assessee and the company in China equally. The Assessing Officer called for details of these expenses during the course assessment proceedings. The same were provided. On the basis of the detailed filed during the assessment proceedings the Assessing Officer concluded that out of the total invoices amounting to Euro 246641.38 only a sum of Euro 209647.94 could be related to trade fairs held in India. As per the Assessing Officer the balance sum of Euro36993.44 relates to Chinese fairs and hence not related to Indian activities.

Assessing Officer has taken the exchange rate of Euro as on 31.03.2009, i.e. 1 Euro is equivalent to INR 67.48 and disallowance and added back `24,96,318/- to the total income of the assessee.

Learned A.R. for the assessee has fairly admitted that assessee accept the quantum addition but simultaneously penalty under section 271(1)(c) amounting to `8.48,499/- was levied for the aforesaid addition. The stand of the assessee has been that all the details called for by Assessing Officer were submitted with respect of Exhibitor Promotion expenses including all invoices, ledger accounts, etc. Assessing Officer disallowed certain expenditure by rejecting the basis of apportionment between various regions and concluding that there is excess expenditure amounting to `24,96,318/- debited to the Profit & Loss Account of the assessee. As per Explanation 1 of section 271(1)(c) an assessee is said to have concealed particulars of its income in respect of any expense claimed in return of income. In this regard the stand of the assessee has been that the assessee has claimed certain expenditure which could not be accepted by Assessing Officer.

6.1 The provisions of section 271(1)(c) of the Act together with Explanation-1 there under, no principles of menserea is required for levy of such civil penalty. Levying penalty may not be justified in cases of explanation given is found bonafide and all the facts relating to the same and material to the computation of his total income have been disclosed by assessee. The disclosure should be full so that nature of claim could be inferred from the financial statements and and/or the notes on account, audit enclosed with the return itself. There should be bonafide claim by assessee. Merely because some addition has been made and such addition has become final, it does not necessarily follow that penalty is leviable. Therefore where inadmissible claim is made due to inadvertent and bonafide mistakes penalty is held to be not warranted. The Assessing Officer is expected to exercise their discretion based on the facts of the case. Mere claim of the assessee that issue was debatable and or two views were possible in law and facts is also not enough. The burden to substantiate the claim is upon the assessee. If the explanation given is found not to be bonafide then levy of penalty would be justified. In the case before us the Assessing Officer had given a specific show cause notice and examined the relevant invoices for Exhibit Promotion expenses and thereafter found that invoices for Euro 36993.45 were actually meant for Chinese exhibitions and as such were not related to the exhibition/fairs organized by the assessee. The disallowance was accordingly made to the equivalent amount in Rupees amounting to `24,96,318/-. This is not a case where disallowance originated due to difference of opinion as tried to be convinced by the assessee. The explanation of the assessee was that by mistake invoice to that extent relating to exhibition in India were sent by the parent company to China and that way tired to explain that the expenses debited in the Profit & Loss Account were actually incurred and there was no concealment and assessee had not furnished any incorrect particulars of income. If that was so, then the assessee had ample opportunity to get those invoices from its counterpart and/or could have obtained copy thereof from the parent company itself and submitted to the Assessing Officer at least during the penalty proceedings. Unfortunately, no such evidence was filed neither before the Assessing Officer nor even before the CIT(A) in the appellate proceedings. In view of the above the CIT(A) was justified in upholding the order of the Assessing Officer wherein he has held that the assessee has concealed its income by filing inaccurate particulars.

Therefore he rightly imposed penalty under section 271(1)(c). This reasoned factual findings by CIT(A) need no interference from our side.

We uphold the same.