Commissioner Of Income Tax vs Doon Valley Rice Ltd
2011 Latest Caselaw 5814 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI
+      ITA 476/2009
%                         Date of decision: 29th November, 2011.

       COMMISSIONER OF INCOME TAX            ..... Appellant
                       Through: Mr.Sanjeev Sabharwal, Sr.Standing
                                Counsel.
                versus

       DOON VALLEY RICE LTD                          ..... Respondent
                     Through:             None.

       CORAM:
       HON'BLE MR. JUSTICE SANJIV KHANNA
       HON'BLE MR. JUSTICE R.V. EASWAR

       1. Whether Reporters of local papers may be allowed to see the judgment?
       2. To be referred to the Reporter or not ?
       3. Whether the judgment should be reported in the Digest?

SANJIV KHANNA, J.:
1.     Vide order dated 21.01.2010 the following substantial question of law was

framed:-

           "Whether the Income Tax Appellate Tribunal, after holding
           that the Commissioner of Income Tax (Appeals) had erred in
           deleting the penalty under Section 271(1)(c) of the Income
           Tax Act, 1961, could have given further direction restoring the
           matter to the file of the Assessing Officer for deciding the
           issue afresh and directing the assessee to furnish full details of
           the travelling expenses?"

2.     The respondent-assessee had filed return declaring loss of Rs. 9,81,50,987/-

on 27.11.2003 for the assessment year 2003-04.

3.     The Assessing Officer vide order dated 30.03.2006 computed the total

income of the assessee at a loss of Rs. 9,33,25,287/-. The Assessing Officer held
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 that the respondent was engaged in the business of manufacturing, trading and

export of rice and had shown negative GP rate as compared to the Assessment

Year 2001-02. A questionnaire was issued to the assessee why GP rate should not

be enhanced as a similar addition was made in the earlier years. There was no

response of the assessee and, therefore, the Assessing Officer applied the GP rate

of 4.5%. We need not examine the effect of this addition and no question of law

has been framed on this aspect. The question of law, as noticed above, has been

framed on the addition of Rs. 11,48,881/-, claimed as an expense on account of

foreign travel.   During the course of quantum assessment proceedings, the

assessee had filed a copy of the ledger account of foreign travel but the Assessing

Officer made the said addition holding that the assessee had failed to furnish

justification as to why the trips were undertaken for business purposes. The

Assessing Officer also noticed that in one of the foreign trips one of the directors

was even accompanied by his wife.

4.     Penalty proceedings under Section 271(1)(c) were initiated separately and

penalty of Rs. 16,88,029/- was imposed by the Assessing Officer on the two

counts i.e., low GP rate and foreign travel. It was held that the respondent-

asseessee had concealed particulars of income on account of expenditure on

foreign travel.

5.     The CIT(A) deleted the penalty on both counts. He held that the addition

made on lower GP rate was without any firm substance and material to show that

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 the account books were unreliable or had false entries. It was also pointed out that

in the quantum assessment proceedings, the assessee was unable to reply to the

communications because of lack of time and failure to provide adequate

opportunity. The CIT(A) held that the failure to justify foreign tour by the

directors or the employees cannot be equated with furnishing of inaccurate

particulars of income and/or the concealment of income.

6.     On the appeal filed by the Revenue, the Income Tax Appellate Tribunal in

respect of the foreign tour expenses has directed as under:-

        "....So far as disallowance of traveling expenses of Rs. 11.48 lac is
        concerned, the AO has asked the assessee to submit supporting
        details/the documents to prove that expenditure was incurred for
        purpose of business, due to absence of the assessee before the AO
        no such details could be furnished. Therefore AO imposed the
        penalty with reference to the disallowance of traveling expenses.
        The CIT(A) has deleted the penalty by observing that failure to file
        justification of conducting the foreign tour by the Directors and/or
        the employees of the assessee company cannot be equated with the
        furnishing of inaccurate particulars of income &/or the
        concealment of income. We do not find any merit in the action of
        the CIT(A), in so far as the assessee could not furnish the details of
        the traveling expenses so incurred and also the traveling expenses
        have been incurred by the wife of the Director Shri R.G. Gupta
        there was no justification for deleting the penalty imposed.
        Accordingly we set aside this part of CIT(A)'s order and matter is
        restored back to the file of AO for deciding the issue afresh and the
        assessee is also directed to furnish full details of foreign traveling
        expenses alongwith justification for incurring of such expenses by
        the wife of Director of the company who had undertaken foreign
        tour with him before the AO. We direct accordingly.
        4.     In the CO the assessee has basically aggrieved for not giving
        the reasonably opportunity by the AO before deciding the
        imposition of penalty u/s 271(1)(c) the other grounds taken by the
        assessee are in support of CIT(A)'s order for deleting the penalty.
        As we have already confirmed the action of the CIT(A) with
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         reference to deletion of penalty on account of GP addition, and has

        set aside the order of CIT(A) in respect of penalty levied for
        disallowance of traveling expenses, the CO is allowed in part."
7.     It is clear from the said reasoning that one of the grievances which had

appealed to the Tribunal was that the assessee was not granted sufficient and

adequate opportunity to establish their claim with regard to the foreign travel

expenses i.e. whether the said expense is allowable under Section 37 of the Act?

Therefore, the Tribunal,     while setting aside the order of the CIT(A) on the

question of foreign travel expenses, had remitted the matter to the Assessing

Officer be decided afresh with liberty to the assessee to furnish full details of the

foreign travel expenses alongwith justification for incurring of the said expenses

including the foreign travel of the wife of the director.

8.     In view of the aforesaid, we do not see any reason to interfere with the

order of the Tribunal. The appeal is dismissed. The question framed above is

discharged. No costs.


                                                   SANJIV KHANNA, J.

R.V.EASWAR, J. NOVEMBER 29, 2011 mb