2018 (2) TMI 1711

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....he order dated 25th February, 2013 of the Commissioner of Income Tax (Appeals) [CIT(A)], upholding the order of the Assessing Officer, imposing the penalty under Section 271 (1)(c) of the Act, for the Assessment Year 2009-10. 2. Revenue urges the following question of law, for our consideration: "(a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in law in holding that the assesssee had neither furnished inaccurate particulars of income nor concealed its income when the assessee following the mercantile system of accounting had not accounted for the accrued interest on loans which were considered good as per the 'Notes on Accounts'?" 3. The Respondent-Assessee is Non-Banking ....

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....icated that the Respondent-Assesee was negotiating with both borrowers and lenders of the amalgamating entities as to determine /renegotiate the terms and conditions in respect of grant of advance/ loan received and/or given. Therefore, pending the determination of new terms, it had neither recognized accrued interest income nor expenditure. This, as it had taken a policy decision not to recognize interest receivable on loans granted and/or interest payable on loans taken by the erstwhile amalgamating companies till it negotiate its terms. In that regard, the Respondent had specifically made Notes 13 & 14 in its Notes of Account which forms part of the Respondent's Balance-sheet and Profit & Loss Account. It was specifically provided....

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....n by the erstwhile amalgamating company would not be taken into account to determine its income. The impugned order further records that in the order under Section 143(3) of the Act, the Assessing Officer completely ignores the interest expenditure which was not accounted by them while determining its taxable income in view of its policy decision. In the above view, the impugned order found the explanation valid and deleted the penalty imposed under Section 271(1)(c) of the Act. 9.Mr. Kotangle, learned Counsel for the Revenue submits that penalty is imposable as the Respondent-Assessee had failed to show the non-recording of interest receivable in its return of income. According to him disclosure in the balance-sheet is not sufficient di....