COMMISSIONER OF INCOME TAX Vs. MEHTA ENGINEERS LTD.

JUDGEMENT

(1.) THIS order shall dispose of IT Appeal Nos. 600 and 599 of 2007 which have been filed by the Revenue against the order 739/Chd/2004 and 213/Chd/2006 in the case of the respondent assessee for the asst. yrs. 1996 -97 and 1997 -98, respectively.

(2.) IN this case, the assessee filed the return of income for the assessment years 1996 -97 and 1997 -98 in which it had claimed a certain amount as business expenditure incurred by it on studies of Shri Varun Mehta son of a director of the company on the ground that under the agreement between the company and the said Varun, he was to serve the company for at least three years after finishing his studies abroad. The AO disallowed the said expenditure and the same was added towards the income. On appeals by the assessee, the said order become final upto the Tribunal. Thereafter, the Department started proceedings under s. 271(1)(c) of the IT Act, 1961 (hereinafter referred to as referred to as "the Act"), against the respondent for imposing penalty on the imposed a penalty of Rs. 2,75,451 equivalent to 100 per cent of the tax sought to be evaded.

(3.) FEELING aggrieved against the above order, the assessee filed an appeal before the CIT(A), who, vide order dt. 30th the case was not fit for imposition of penalty for concealment under s. 271(1)(c). Against the said order of the CIT(A), while observing as under : ".....The disallowance has been sustained for the reason that the assessee failed to justify that the expenditure incurred was for furtherance of the purposes of its business. Insofar as the proceedings under s. 271(1)(c) are concerned, it is a trite law that the same stands on an altogether different footing than the assessment proceeding. The findings of the Revenue authorities in the assessment proceedings may be relevant but cannot be considered as conclusive for justifying the imposition of penalty under s. 271(1)(c) of the Act.