Per H.L. Karwa, Judicial Member: This appeal filed by assessee, is directed against order of CIT(A)-II, Kanpur dated 15-12-2006 relating to assessment year 2000-01. 2. only dispute in this appeal relates to imposition of penalty under section 271(1)(c) of Income-tax Act (in short, 'the Act') on amount of Rs. 2,37,370 claimed as LTC paid to Shri Arun Kumar Gupta. assessee- company filed its return of income on 30-11-2000 disclosing total income at Rs. 19,58,180. Assessing Officer framed assessment under section 143(3) of Act on total income of Rs. 23,82,770. Assessing Officer made addition of Rs. 2,37,370 being LTC paid to Arun Kumar Gupta. While framing assessment, Assessing Officer made above addition observing as under: 'From P & L account it is seen that assessee has claimed expenditure amounting to Rs. 63,42,455 under head 'Payment to employees' expenditure under this head claimed in immediate preceding period was at Rs. 53,26,772 suggesting that there has significant increase in expenditure claimed under this head during accounting period relevant to assessment year under scrutiny. details in respect of this claim are available in Schedule 19 to balance sheet. perusal of details reveal that assessee has claimed expenditure of Rs. 2,37,370 as LTC expenses, vide order sheet entry dated 23-1-2003 assessee was, inter alia, required to furnish complete details in respect of claim amounting to Rs. 2,37,370 made towards LTC. During course of hearing on 13-2-2003 it was explained on behalf of assessee-company that payment of Rs. 2,37,370 was made to Shri Arun Kumar Gupta, Works Manager of company for undertaking foreign trip by him and his family. It was submitted/explained that though foreign trip made by Shri Gupta has no business nexus or business expediency but payment was made to him under head 'Leave Travel Concession'. assessee-company was, accordingly, required to produce Shri Gupta for examination. In compliance Shri Arun Kumar Gupta appeared and stated that he along with his family consisting of his wife Smt. Kiran Gupta and baby Nihalika and Mast. Abhisek undertook trip to Singapur and Thailand in summer of 1999 for seven days but no explanation was submitted to substantiate business expediency in respect of journey undertaken by Shri Gupta and his family. Shri Gupta also could not explain as to whether any other employees of company has been allowed similar facility. argument made by Shri Gupta have been carefully considered and it is seen that it is undisputed that foreign trip made by Shri Gupta along with his family has no connection whatsoever with business activities of company. journey apparently seems to be pleasure trip made by Shri Gupta along with his family. It would be appropriate to place on record that Shri Arun Kumar Gupta to whom payment has been made under LTC and claimed as expenditure under head 'Payment to employees' happens to be family members of Director of company and is, accordingly, covered under provision of section 40A(2)(b). As matter of fact tax audit report/auditors has also reported this fact in Annexure 4. company could not also state as to whether LTC facility has been allowed to any other employee of company. From what has been discussed above, it is abundantly clear that payment of Rs. 2,37,370 made to Shri Arun Kumar Gupta was made neither for any business consideration nor was for same and was clearly guided by family consideration and, therefore, same will be disallowed under section 40A(2)(b) of Act.' 3. On basis of above findings, Assessing Officer initiated penalty proceedings under section 271(1)(c) of Income-tax Act. After allowing opportunity of being heard to assessee, Assessing Officer imposed penalty of Rs. 1,58,760 in respect of following additions: (i ) Addition on account of LTC paid to Shri Arun Kumar Gupta (ii ) Amount paid to Flax Industries Ltd. Rs. 1,75,000 On appeal, CIT(A) cancelled penalty on amount of Rs. 1,75,000. However, CIT(A) confirmed penalty in respect of amount of Rs. 2,37,370. 4. Now assessee is in appeal against order of CIT(A) in confirming penalty under section 271(1)(c) of Income-tax Act on amount of Rs. 2,37,370. 5. Before us, Shri Rakesh Garg, Advocate, learned counsel for assessee reiterated submissions made before lower authorities. Learned counsel for assessee further submitted that assessee has neither concealed particulars of its income nor furnished inaccurate particulars of such income. It was also submitted by learned counsel for assessee that from perusal of assessment order it would be clear that some disallowances have been made out of expenses claimed by assessee. sum of Rs. 2,37,370 on account of foreign trip expenses of Arun Kumar Gupta, Director of company has been disallowed on ground that sum was not spent for business. According to learned counsel for assessee, it is simply case where Assessing Officer disagreed with submissions of assessee, assessee bona fidely spent amount in course of its business and debited in books. Shri Rakesh Garg, Advocate, learned counsel for assessee, vehemently argued that it is not case where payment is bogus or there is no evidence of payment. But so far as assessee-company is concerned, it is business expenditure because it was incurred for welfare of employee. It is different matter, it would be taxable in hands of employee. He also relied on following decisions: (1)CIT v. Kerala Spinners Ltd. [2001] 247 ITR 541 (Ker.). (2)National Textiles v. CIT [2001] 249 ITR 125 (Guj.). 6. On other hand, Shri Anadi Verma, Sr. D.R. kly supported orders o f authorities below. He further submitted that assessee-company had paid sum of Rs. 2,37,370 to Arun Kumar Gupta, who was looking after work of Works Manager in company. This money was paid to him for undertaking foreign trip of himself and his family members. Shri Arun Kumar Gupta was person covered under section 40A(2)(b) of Act and was related to Directors of company. Shri Anadi Verma, Sr. D.R. submitted that above expenditure was claimed as part of travelling expenses, obviously in order to camouflage said expenditure. assessee also could not give instance to camouflage said expenditure. assessee also could not give instance o f any other employee being given LTC facility. assessee had also not deducted TDS on this amount. Furthermore assessment under section 10(5) of Act is not available for journeys outside India. Thus, assessee has furnished inaccurate particulars of his income, therefore, penalty levied under section 271(1)(c) of Income-tax Act is justified. He also relied on decision of A. M. Shah & Co. v. CIT [1999] 238 ITR 415 (Guj.). 7. We have carefully considered rival submissions and have also perused materials available on record. decisions cited at time of hearing of appeal were duly considered. It is apparent from record that assessee-company had debited sum of Rs. 2,37,370 under head 'Travelling expenses' and claimed above expenditure as business expenditure. Shri Rakesh Garg, Advocate, learned counsel for assessee, submitted that Arun Kumar Gupta, employee of company, had travelled abroad along with his family members and as part of understanding said amount was incurred and claimed as expenditure. It was further explained that said expenditure be allowed as LTC paid to Arun Kumar Gupta. In instant case, there was difference of opinion between assessee and department whether amount in question has been incurred for purposes of business or not. assessee claimed expenditure under head 'Travelling', and on other hand, department took view that it was not laid wholly and exclusively for business purposes and further it was also held that if expenses were incurred on employee towards his travelling, no TDS had been deducted. department also held that Arun Kumar Gupta is closely related to Director of company and expenditure incurred was disallowable under section 40A(2)(b) of Act. It is apparent from record that Tribunal, Lucknow Bench confirmed addition holding that expenditure in question was not wholly incurred for purposes of business. However, Assessing Officer has not doubted genuineness of expenditure. It is not case of Assessing Officer that claim was bogus rather Assessing Officer himself had held that expenditure has been incurred for personal purposes and not for business purposes. It is well-settled law that findings in assessment proceedings are relevant but not conclusive in penalty proceedings. Findings given in assessment proceedings are certainly relevant and have probative value, but such findings are material alone and may not justify penalty in given case because considerations that arise in penalty proceedings are different from those that arise in assessment proceedings. In instant case, in absence of sufficient proof of business expediency, said expenditure claimed by assessee, was disallowed. It is not case where expenditure had been found to be bogus or having not incurred. accounts have been audited and all facts relating to addition had been disclosed by assessee. Furthermore, explanation given in respect of entries in books are bona fide, it is only case of assessee's failure to establish his case in quantum proceedings. Therefore, it is not fit case for penalty. In case of Kerala Spinners Ltd. (supra), Hon'ble Kerala High Court has held (head-note) as under: 'Held, that mere failure on part of assessee to substantiate its explanation was not enough to warrant penalty if such explanation was bona fide and all facts relating to same were disclosed by it. assessee had offered explanation in respect of entries and it was case of assessee's failure to establish or explain them. Therefore, Tribunal was justified in treating it to be case covered by clause (B) of Explanation 1 to section 271(1)(c) and cancelling penalty. Tribunal had based its conclusion on factual aspects and, hence, no interference was called for.' 8. In instant case, assessee had offered explanation in respect o f expenditure of Rs. 2,37,370. In our view, assessee was not able to establish his case for deduction in quantum proceedings; but that would not automatically become case for levy of penalty for concealment of furnishing inaccurate particulars. As we have already stated hereinabove that findings in assessment proceedings are relevant but not conclusive in penalty proceedings particularly under section 271(1)(c) of Income-tax Act. decision cited by learned D.R. in case of A.M. Shah & Co. (supra) is not applicable to facts of present case. said decision is relevant to assessment year 1970-71 and there is substantial change by Taxation Laws Amendment Act, 1975 with effect from 1-4-1976 as well as in year 1986 by Act No. 46. We, therefore, hold that decision cited by learned D.R. is of no help to revenue's case. In our view, in instant case, assessee has furnished explanation which he In our view, in instant case, assessee has furnished explanation which he has also substantiated and revenue has not brought any material on record to show that assessee has not disclosed any material fact necessary for assessment. It is one of contentions of learned counsel for assessee that so far as assessee-company is concerned, expenses incurred for welfare of employee is business expenditure. It is different matter amount in question would be taxable in hands of employee. Thus considering entire facts of present case, we hold that explanation offered by assessee for claiming deduction in quantum proceedings is bona fide and, therefore, there is no case for levy of penalty. Accordingly, we cancel penalty levied by Assessing Officer and confirmed by CIT(A) on amount of Rs. 2,37,370. 9. In result, appeal is allowed. *** ASHOK GRIH UDYOG KENDRA (P) LTD. v. ASSISTANT COMMISSIONER OF INCOME TAX