Formative Fashions Pvt.Ltd., Surat vs Assessee

आयकर अपील सं./ ./ ITA No. 1952/Ahd/2011 िनधा रण वष /Assessment Year: 2007-08 Formative Fashions Pvt Ltd V/s. DCIT, 3024, World Trade Centre, Circle-1, Ring Road, Sruat, Surat PAN : AAACF 8809 P

अपीलाथ / (Appellant) ू"यथ यथ / (Respondent)

Assessee(s) by : Shri S.B. Vaidya, AR Revenue by : Smt. Sonia Kumar, Sr. DR.

सुनवाई क% तार ख/ / Dateof Hearing : 17/06/2015 घोषणा क% तार ख / Date of Pronouncement: 25/06/2015

आदे श/O R D E R

PER G.D. AGRAWAL, VICE PRESIDENT:

This is an appeal filed by the assessee and is directed against the order of the Ld. Commissioner of Income-tax(Appeals)-I, Surat dated 16.06.2011, pertaining to Assessment Year 2007-08.

2. The only ground raised in this appeal by the assessee is against the levy of penalty of Rs.4,61,417/- u/s. 271(1)(c) by the Assessing Officer.

3. We have heard both the parties and perused the material placed before us. The penalty u/s 271(1)(c) has been levied in respect of following two additions :-

i) Disallowance of commission and brokerage expenses - Rs.10,08,707/-

ii) Disallowance of travelling expenses - Rs.3,62,112/-

ITA No. 1952/Ahd/2011 Formative Fashions Pvt Ltd vs. DCIT For AY 2007-08 2

4. On appeal before the ITAT, it set aside the disallowance of Rs.10,08,707/- back to the file of the Assessing Officer. Therefore, at present, since the addition does not stand, the penalty based upon such addition cannot be sustained.

5. The disallowance out of travelling expenses Rs.3,62,112/- is sustained by the ITAT with the finding that the assessee was unable to prove that the foreign tours of the directors were for the purpose of business. In our opinion, merely because the travelling expenses incurred by the assessee and claimed as deduction is disallowed would not automatically result into levy of penalty u/s 271(1)(c). While taking this view, we derive support from the decision of the Hon'ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd, reported in [2010] 322 ITR 158 (SC), wherein their Lordships held as under:-

"Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. "

6. The ratio of above decision of Hon'ble Apex Court would be squarely applicable to the facts of the assessee's case, because no details furnished by the assessee have been found to be false or inaccurate. The genuineness of the expenditure incurred is not in dispute, but the claim of the expenditure was disallowed for the failure of the assessee to establish that the expenditure was incurred for the purpose of business. On these facts, in our opinion, the decision of the Hon'ble Apex Court would be squarely ITA No. 1952/Ahd/2011 Formative Fashions Pvt Ltd vs. DCIT For AY 2007-08 3

applicable. Respectfully, following the same, we hold that the levy of penalty in relation to disallowance of travelling expenses cannot be sustained. In view of above, the penalty levied by the Assessing Officer u/s 271(1)(c) is cancelled.

7. In the result, the assessee's appeal is allowed.

Order pronounced in the Court on 25th June, 2015 at Ahmedabad.

Sd/- Sd/-

(RAJPAL YADAV) (G.D. AGRAWAL) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 25/06/2015 Biju T., PS

षत Copy आदे श क% ूितिल,प अमे,षत/ of the Order forwarded to : 1. अपीलाथ / The Appellant 2. ू"यथ / The Respondent. 3. संबंिधत आयकर आयु. / Concerned CIT 4. आयकर आयु.(अपील) / The CIT(A)

5. ,वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड फाईल / Guard file.

/ BY ORDER, आदे शानु सार

TRUE COPY Dy./Asstt.Registrar) उप/सहायक पंजीकार ( उप/ अिधकरण, अहमदाबाद / आयकर अपीलीय अिधकरण, ITAT, Ahmedabad