Travelling Expenses claimed us 57 did not attract concealment penalty – High Court

Travelling Expenses claimed us 57 did not attract concealment penalty particularly when untenable claim was made on the advice of an Accountant and coming to know, the assessee offered the same to taxation – High Court

ABCAUS Case Law Citation:
ABCAUS 2018 (2017) (08) HC

The Issue:
The issue was whether penalty under Section 271(1)(c) of the Income Tax Act, 1961, (the Act) should be confirmed qua the Assessee.

Important Case Laws Cited/relied upon by the parties:
CIT V. Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158.
MAK Data (P) Ltd. V. Commissioner of Income-tax-II [2013] 38 taxmann.com 448 (SC).

Brief Facts of the Case:
Present appeals were preferred by the Revenue as against the common order of the Income Tax Appellate Tribunal (ITAT) against its common order passed qua Assessment Years (AY) 2008-09, 2009-10 and 2010-11.

In all the concerned AYs, the respondent assessee had claimed deduction towards expenditure incurred on travelling etc. under Section 57 of the Act related to deductions that can be claimed out of income from other sources. The Revenue reopened the assessments qua A.Ys.2008-09 and 2010-11. For AY 2009-10, the return was picked up for scrutiny.

For all the AYs, the assessee, offered for tax, the sum expended on travel. Accordingly, both tax and interest were paid by the assessee on the addition made on account of money expended on travel.

The Revenue, for all the assessment years initiated penalty proceedings u/s 271(1)(c) of the Act. Consequent thereto, penalty orders were passed for each of the AYs

Being aggrieved, the Assessee preferred appeals against penalty orders to the CIT(A) who dismissed the appeals by a common order.

The Tribunal, allowed the appeals of the Assessee and reversed the order of CIT(A). Aggrieved by the impugned judgment, the instant appeal had been preferred by the Revenue.

Observations made by the High Court:

The Hon’ble High Court observed that the ITAT had given a finding that the assessee claimed travelling and other expenses for earning income from other sources. During the course of assessment proceedings, the assessee claimed that the accountant engaged by her was not immediately available and the vouchers and other documents were not available for production before the Assessing Officer. The ITAT placing reliance on the decision of the Hon’ble Apex Court in the case of Reliance Petroproducts Pvt. Ltd. Opined that when the assessee by furnishing all details claims a deduction which was otherwise allowable could not produce the material during the course of assessment, does not mean that inaccurate particulars were furnished in the return of income.

According to the ITAT, the claim of the assessee towards expenditure was not substantiated due to temporary absence of the Accountant. Therefore, ITAT opined that it was not a fit case for levy of penalty u/s 271(1)(c) of the Act.

The Hon’ble High Court observed that even though, the assessee had earned income, inter alia, from business, (apart from income from salary, house property and income from other sources), she had claimed deduction for the expenditure incurred on travelling under Section 57 of the Act. The said claim, as per the explanation given by the Assessee, was “wrongly” made by the Accountant under Section 57 of the Act. Having realised that the expenditure incurred towards travelling could not be claimed under Section 57 of the Act, the said sums were offered for tax and, accordingly, both tax and interest was paid by the Assessee. Also, the Assessee, took a stand before the authorities below that the claim was made, albeit, on her behalf, by the Accountant, who was no longer in her service. The assessee also indicated that for the very same reason, the record and the evidence could not be produced with regard to the expenditure incurred on travelling.

With respect  to the submission of the revenue that the decision of the Hon’ble Supreme court in the case of MAK Data (P) Ltd. was a more apposite decision than the one relied by the ITAT, the Hon’ble High Court opined that the facts set out in the case of Reliance Petroproducts Pvt. Ltd. are closer to the case in hand. In that case the Supreme Court examined the issue threadbare and discussed at length as to what was meant by the expression concealment of particulars of income and/or furnishing inaccurate particulars of income.

The Hon’ble High Court observed that the assessee, having realised that the expenditure claimed towards travelling under Section 57 of the Act was not tenable, offered the amounts expended to be added to her income and, accordingly, paid the requisite tax and interest upon the same.

Thus the Hon’ble High Court opined that it was not a case, where, the assessee could be said to have either concealed particulars or furnished inaccurate particulars of her income but it was, essentially, a case, where, an untenable claim for deduction of travel expenditure under Section 57 of the Act had been made and that too based on the advice of a professional, i.e., an Accountant.

Held:
All the appeal(s) of the Revenue were dismissed.