Income Tax Appellate Tribunal - Mumbai
Smk Shares And Stock Broking Pvt. Ltd., ... vs Assessee on 4 March, 2013
ITA No.7224 of 2011 SMK Shares and Stock Broking Pvt Ltd Mumbai
IN THE INCOME TAX APPELLATE TRIBUNAL
"E" Bench, Mumbai
Before Shri B. Ramakotaiah, Accountant Member
& Shri Amit Shukla, Judicial Member
ITA No. 7224/Mum/2011
(Assessment year: 2005-06)
SMK Shares & Stock Broking Vs. ACIT 4(2), Aayakar Bhavan,
Pvt Ltd, 617 Palm Spring MK Road, Mumbai 400020
Centre, Above Croma Near D-
Mart Link Road, Malad (W)
Mumbai 400064
PAN: AABCS 4531 Q
(Appellant) (Respondent)
Assessee by: Shri Satish R. Mody
Department by: Shri Manoj Kumar, DR
Date of Hearing: 04/03/2013
Date of Pronouncement: 20/03/2013
ORDER
Per B. Ramakotaiah, A.M.
This is an assessee's appeal against the penalty under section 271(1)(c) of `.1,49,537 levied by AO and confirmed by the CIT (A)-8, Mumbai vide his order dated 02.08.2011.
2. Assessee is a stock broker and has offered income of `.58,92,409 for the impugned assessment year. Apart from various disallowances made in the assessment order, AO disallowed an amount of `.4,08,654 claimed under the head "Foreign Travel Expenses" for want of concrete evidence. The brief order of AO is as under:
"9.1 During the year Shri Dinesh Khemka along with his family has visited U.K. Assessee was asked to explain the business purpose of the said trip. The AR has explained that the expenditure was incurred to solicit clients. The AR has not been able to furnish the details of clients with whom meetings were held. Assessee Page 1 of 3 ITA No.7224 of 2011 SMK Shares and Stock Broking Pvt Ltd Mumbai submission has no force. The visits abroad are not blind visits. They are undertaken after certain preliminary negotiations that may have taken place. Going abroad with one's family under the garb of soliciting clients is unacceptable. The benefits though have not been proven, even the benefits if any accruing by any chance appear to be remote and illusionary. The expenditure on foreign travel amounting to `.4,08,654 is disallowed for want of concrete evidence".
3. The same was contested before the CIT (A) who upheld AO's disallowance as assessee is not able to justify and substantiate with any credible evidence, even though assessee submitted some correspondence and visiting cards in support of claim of foreign travel expenditure. The main reason for disallowing and confirming the amount by the CIT (A) is on the basis of the noting made by the invoice of SOTC wherein it was mentioned was that "Europe Experience" "Scheme -Family". On this reason the CIT (A) opined that personal expenditure was claimed as business expenditure. Accordingly he confirmed the disallowance. AO levied penalty under section 271(1)(c) on the same. The learned CIT (A) confirmed the penalty on the reason that assessee has not only failed to establish the correctness of his claim that the expenditure was business expenditure but has also failed to establish any commercial expediency or commercial compulsion for incurring such expenditure.
4. We have heard the learned Counsel and the learned DR. After considering the rival submissions, we are of the opinion that mere disallowance of foreign travel expenses does not call for any penalty under section 271(1)(c). There is no dispute with reference to the foreign travel by the Directors. It may be that he might have availed the scheme along with the family members so that direct expenditure can be less, in view of the subsidies given for group bookings, but that does not establish malafide intention on the part of assessee either for concealment the income or for furnishing Page 2 of 3 ITA No.7224 of 2011 SMK Shares and Stock Broking Pvt Ltd Mumbai inaccurate particulars. A mere disallowance in assessment proceedings does not automatically attract penalty under section 271(1)(c). The Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd, 322 ITR 158 has already held that a claim made which was disallowed does not attract penalty under section 271(1)(c). This claim of foreign expenditure is also similar one. Considering the facts of the case, we are of the opinion that mere disallowance of foreign travel expenses does not attract penalty in this case. Accordingly the same was cancelled. Assessee's ground is allowed.
5. In the result appeal filed by assessee is allowed.
Order pronounced in the open court on 20th March, 2013 Sd/- Sd/-
(Amit Shukla) (B. Ramakotaiah)
Judicial Member Accountant Member
Mumbai, dated 20th March, 2013.
Vnodan/sps
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, "E " Bench, ITAT, Mumbai
By Order
Assistant Registrar
Income Tax Appellate Tribunal,
Mumbai Benches, MUMBAI
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