The Mumbai bench of Income Tax Appellate Tribunal in the case of M/s. Advance Power Display Systems Ltd versus DCIT on Monday ruled that levy of penalty is not mandatory in case of every addition confirmed.
The bench comprising Amarjit Singh, Judicial Member, and R.C.Sharma, Accountant Member was ruled so while considering the appeal of Assessee, who is engaged in the business of manufacturing and export of power supplies.
In the instant case, Assessee manufactures customized models of SMPS and every design is unique for a particular customer. All the customers of the assessee are located outside India and none of the sales of the assessee are generated in India.
Here, the penalty was levied for partly disallowing foreign traveling expenses alleged to be incurred on account of personal enjoyment. Regarding that Assessee submitted that certain traveling expenses were incurred before but no disallowance was made in those years. The counsel also added that Assessee being the manufacturer and exporter of power supplies used to visit foreign countries for making purchases from the customers abroad and the expenditure so incurred on traveling was only for the purpose of business.
AO mentioned that the tours of the appellant were for an abnormally long period, Accordingly, AO disallowed the part of traveling expenditure and also levied penalty u/s.271(1)(c).
Accordingly, the Assessee pleaded that Mere disallowance of the part of the expenditure will not entitle the AO to levy penalty for concealment of income. Contrary to this Revenue relied on the decision of lower authority.
The bench heard both the recitals and perused the records and found that principle customers of the assessee from whom the orders are generated located in various parts of the country like USA and Canada. The income of Assessee also generated from this these customers, extensive direct contact on a regular basis is necessary.
The Assessee before this tribunal also submitted details of foreign travel expenses, places visited and the period of visit. The assessee also submitted certain direct correspondences between the assessee and customers.
The Tribunal observed that aforementioned details have not been challenged by any of the authorities. However, the Tribunal noted that addition so made by AO was confirmed by CIT (A) and also by Tribunal but merely confirming part of disallowance does not automatically leads to the levy of penalty u/s.271(1)(c).
Finally, the bench comprising two members said that “the penalty proceedings and quantum proceedings are independent of each other and therefore levy of penalty is not mandatory in case of every addition confirmed”.
The Tribunal deleted the penalty by considering the bonafide claim of Assessee regarding the traveling expenditure.
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