Case Law Details
RELEVANT PARAGRAPHS:
7. We have carefully considered the rival submissions and have also perused the materials available on record. The decisions cited at the time of hearing of appeal were duly considered. It is apparent from the record that the assessee company had debited a sum of Rs. 2,37,370/ – under the head `travelling expenses’ and claimed the above expenditure as a business expenditure. Shri Rakesh Garg, Advocate, learned counsel for the assessee submitted that Arun Kumar Gupta, employee of the company, had traveled abroad along with his family members and as a part of understanding the said amount was incurred and claimed as expenditure. .It was further explained that the said expenditure be allowed as LTC paid to Arun Kumar Gupta In the instant case, there/Was a difference of opinion between the assessee and the department whether the amount in question has been incurred for the purposes of business or not. The assessee claimed the expenditure under the head travelling, and on the other hand department took a view that it was not laid wholly and exclusively for business purposes and further it was also held that if the expenses were incurred on the employee towards his travelling, no TDS had been deducted. The department also held that Arun Kumar Gupta is closely related to the Director of the company and the expenditure incurred was disallowable u/s 40A(2)(b) of the Act it is apparent from the record that the Tribunal, ,Lucknow Bench confirmed the addition holding that expenditure in question was not wholly incurred for the purposes of business. However, the Assessing Officer has not doubted the genuineness of expenditure, it is not the case of the Assessing Officer that the claim was bogus rather the Assessing Officer himself had held that the expenditure has been incurred for personal purposes and not for business purposes. It is well settled law that findings in the assessment proceedings are relevant but not conclusive in penalty proceedings. Findings given in assessment proceedings are certainly relevant and have probative value, but such findings are material alone and may not justify the penalty in a given case because the considerations that arise in penalty proceedings are different from those that arise in assessment proceedings. In the instant case, in absence of sufficient proof of business expediency, the said expenditure, claimed by the assessee, was disallowed. It is not a case where the expenditure had been found to be bogus or having not incurred. The accounts have been audited and all the facts relating to the addition had been disclosed by the assessee. Further more/the explanation given in respect of entries in the books are bonafide, it is only a case of assessee’s failure to establish his case in quantum proceedings. Therefore, it is not a fit case for penalty. In the case of Kerala Spinners Limited ((supra),), the Hon’ble Kerala High Court has held (head-note) as under:
“Held, that mere failure on the part of the assessee to substantiate its explanation was not enough to warrant penalty if such explanation was bona fide and all fact relating to the same were disclosed by it. The assessee had offered an explanation in respect of the entries and it was a case of the assessee’s failure to establish or explain them. Therefore, the Tribunal was justified in treating it to be a case covered by clause (B) of Explanation 1 to section 271(1)(c) and cancelling the penalty. The Tribunal had based its conclusion on the factual aspects and hence no interference was called for.”
8. In the instant case, the assessee had offered an explanation in respect of the expenditure of Rs. 2,37,370/ -. In our view, the assessee was not able to establish his case for deduction in quantum proceedings; but that would not automatically become a case for levy of penalty for concealment of furnishing inaccurate particulars. As we have already stated herein above that findings in assessment proceedings are relevant but not conclusive in penalty proceedings particularly u/s 271(1)(c) of the I. T. Act. The decision cited by Learned D. R. in the case of A. M. Shah (supra), is not applicable to the facts of the present case. The said decision is relevant to assessment year 70-71 and there is substantial change by the Taxation Laws Amendment Act, 1975 with effect from 1/4/76 as well as in the year 1986 by Act No. 46. We, therefore hold that the decision cited by Learned D. R. is of no help to the Revenue’s case. In our view, in the instant case the assessee has furnished explanation which he has also substantiated and the Revenue has not brought any material on record to show that the assessee has not disclosed any material fact necessary for assessment. It is one of the contentions of the learned counsel for the assessee that so far as assessee company is concerned the expenses incurred for the welfare of the employee is a business expenditure. It is a different matter the amount in question would be taxable in the hands of the employee. Thus considering the entire facts of the present case, we hold that the explanation offered by assessee for claiming deduction in quantum proceedings is bonafide and therefore, there is no case for levy of penalty. Accordingly, we cancel the penalty levied by the Assessing Officer and confirmed by the CIT(A) on the amount of Rs. 2,37,370/ -.
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