2018 (6) TMI 610

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.... derives income from banking activities. Subsequently the assessee had filed revised return of income on 21-07-2008 incorporating therein a claim of deduction u/s 38(l)(viia)(a) towards the provisions for bad and doubtful debts and filed the return declaring loss of Rs. 4,37,36,949/-. During the course of assessment proceedings it was noted by the Assessing Officer that the assessee had claimed a deduction of Rs. 8,21,77,045/- towards "Investment Depreciation Reserve" while no such amount has been debited to P&L a/c for the year under consideration. The Assessing Officer required the assessee to explain the same and it was stated by the assessee that the said amount had been debited in the P&L a/c in the case of the assessee for the respective years as under:- Financial year 2002-03 Amount Total 2004-05 22121000 22121000 2005-06 30000000 52131000 2005-06 30000000 82131000 4. It was further explained that since the amounts were not allowable in the respective years they were added back by the assessee itself in the computation of income of the respective years. It was explained that entries in the books of account in respect of the above should have been reversed at t....

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....filed by the assessee and reliance was placed on various judicial pronouncements including CIT V. Reliance Petro Products (P) Ltd. 322 ITR 158. The Assessing Officer considered the various submissions and came to the conclusion that the case of the assessee is a fit case for levy of penalty u/s 271(l)(c) and he therefore imposed penalty of Rs. 3,00,00,000/-. 8. Against the above order, the assessee appealed before the ld. Commissioner of Income Tax (Appeals). 9. The ld. Commissioner of Income Tax (Appeals) deleted the addition by inter-alia holding as under: 6. I have carefully considered the facts of the case and the written submissions of the appellant. I find substantial merit in the submissions made. The appellant is engaged in the business of banking and during the course of said activity acquired certain government securities in terms of policy of Reserve Bank of India. The said investment is clearly depicted in the balance sheet wherein the face value and market value of such securities at the close of each accounting year is duly reflected. The appellant has been acquiring the said securities since the FY 2001- 02 and the total investment made in receptive years along w....

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....10.2013; 4. CIT vs. HDFC Bank in ITA No. 250/Mum/2012 11. Against the above order, the Revenue is in appeal before us. 12. We have heard both the counsel and perused the records. The ld. Departmental Representative relied upon the orders of the assessing officer. 13. Per Contra, the learned counsel of the assessee supported the order of the ld. Commissioner of Income Tax (Appeals). Furthermore, the learned counsel of the assessee summarized his submissions as under: A) Assessee is co-operative bank holding various State & Central Govt. Securities. Cost of acquisition of Govt, Securities is Rs. 82.90 crores. Market value as on the close of accounting year is Rs. 67.74 crores. Diminution in value of Govt. Securities is thus to the tune of Rs. 17.62 crores. Assessee in return of income has claimed deduction at Rs. 8.21 crore on account of diminution in value of securities out of Rs. 17.62 crores . B) Details of cost of acquisition ,market value and face value in respect to government securities held are reflected on face of Balance Sheet (P-1, Vol-l) submitted along with return of income and also submitted in assessment proceedings. Facts and figures submitted in balance shee....

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....Reliance Petroproducts (P) Ltd ii) Hon'ble High court of Judicature at Bombay Order in ITA No 3899 of 2010 in the case of M/s Aditya Birla Nova Ltd Vide order dated 14/08/2012 (P-8)[Vol-lll] iii) (2007) 288 ITR 0570(Delhi) CIT vs International Audio visual (P-18)[Vol-lll] H) A.O. at para 4 at page 3 of penalty order has observed that the expenses claimed is prior period and levied penalty u/s 271(1)(c) of IT Act 1961. Disallowing expenditure as prior period expenses cannot be visited with penalty u/s 271 (1 )(c) of IT. Act 1961. Reliance on : I) ITAT order in ITAX No. 1511/Mum/2015 in case of M/s. Electropneumatics & Hydraulic (India) Pvt. Ltd. vide order dated 10/11/2016.( P-58,60)[Vol- II] I) The order imposing penalty makes it evident that A.O. has observed at para 10 that the claim of assessee in incorrect. It is settled proposition of law that incorrect claim cannot be visited with levy of penalty u/s 271(1)(c) of IT. Act 1961. J) It is settled proposition of law that the bonafied mistake cannot be visited with penalty u/s 271(1)(c) of IT. Act 1961. Reliance on : i) (1998)230 ITR0048(SC) CIT vs Ask Enterprises (P-21)[Vol-lll] ii) (2012) 348 ITR 0306(SC) P....

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....lue of the government securities was to the tune of Rs. 17.62 crores. The assessee in the return of income has claimed deduction of Rs. 8.21 crores on account of depreciation in value of the securities out of Rs. 17.62 crores. In these circumstances, the claim of deduction by the assessee cannot be said to be a subject matter of levy of penalty u/s. 271(1)(c) of the Act, just because assessee has accepted the quantum disallowance. The assessee has duly disclosed all the necessary materials. The sole reason for the Assessing Officer's disallowance was not routing the same through profit and loss account. This by itself cannot be said to be a contumacious conduct warranting levy of penalty u/s. 271(1)(c) of the Act. The assessee was under a bonafide belief that the said amount was an allowable expenditure. All the necessary facts in this regard were duly disclosed by the assessee. Hence, there was no concealment of income. Hence, the assessee cannot be held to be guilty of either concealment of income of furnishing of inaccurate particulars of income. In this regard, the case laws relied upon by the ld. Commissioner of Income Tax (Appeals) and referred by the ld. Counsel of the asses....