TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 1045
X X X X Extracts X X X X
X X X X Extracts X X X X
....0 has deleted the addition on account of Revenue expenditure incurred in respect of raising loan funds. Thus, no penalty can be levied on such disallowance. Regarding disallowance of provision for Non-performing asset, ld. counsel submitted that though this issue has been confirmed by the Tribunal by following the judgment of Hon'ble Supreme Court in the case of Southern Technologies Ltd., 320 ITR 577, however, he submitted that similar penalty was levied in the immediately preceding year on identical grounds, wherein the Tribunal has deleted the penalty after detailed discussion. 3. On the other hand, ld. CIT-DR on the issue of disallowance of provision of Non-performing assets of Rs. 73,46,160/- submitted that as per the provision of the Act u/s.36(1)(vii), the provision of bad and doubtful debt is prohibited from being allowed, and therefore, the claim itself made in the return of income was bad in law. Further, law pronounced by the Hon'ble Supreme Court itself goes to show that the claim made by the assessee was wrong and therefore penalty on such disallowance is leviable. 4. Ld. Counsel for the assessee on the other hand submitted that, at the time filing of return of incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h Court in June 2002 restraining the Central Board of Direct Taxes, Its agents and all assessing officers from assessing receivables as income where such amounts have not been recognised as income in the books of accounts of ALFS and its members and further allowing deduction for provision for doubtful assets while arriving at the taxable Income of an NBFC." 5. Thus, the claim of the assessee was based on judgment of Hon'ble Special Bench and then law prevailing; therefore, the claim was bona fide and cannot be held that it tantamount to furnishing of inaccurate particulars of income. 6. After considering the rival submissions and on perusal of the impugned orders and the decision of the Tribunal in assessee's own case in the quantum proceedings, we find that in so far as the disallowance of expenditure in respect of raising loan is concerned, the Tribunal has deleted the said addition after observing and holding as under: 1. Ground No. 3 of the appeal is against disallowance of Rs. 18,72,22,842/- on account of revenue expenditure incurred in respect of raising loan funds by treating the same as deferred revenue expenditure. The fact shows that in the computation of total incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Companies prudential Norms (RBI) Directives, 1998 issued by Reserve Bank of India in provision of RBI Act; the Assessing Officer noted that the assessee has debited Rs. 8,34,22,265/- in its P&L Account and has only added back amount of Rs. 7,60,76,105/-. In the notes to the account attached to the balance sheet, as noted above, the assessee has claimed it to be allowable. The Assessing Officer though noted that there was a decision of Special Bench in the case of M/s. Overseas Sanmar Financial Ltd. (supra), however, he stated that there is a specific provision u/s 36(1)(vii) under the Act, and therefore, such a decision is not applicable and he proceeded to make a disallowance. Later on, the Hon'ble Supreme Court in the case of Southern Technologies Ltd. (supra) has reversed the findings of Special Bench and for this reason the matter was decided against the assessee by the Tribunal in the quantum proceedings. 9. Here in this case, the return of income was filed on 31.10.2002 and at that time, assessee has made a claim on the basis of ITAT Special Bench decision and also disclosed the reason for making such a claim in the return of income. Hence, it cannot be said that at that poi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Court was not existing at that point of time when claim was made in the return, therefore, penal ty on this issue could not be levied. The ld. AR also pointed out that the assessee made provision for NPA as per RBI norms under bonafide belief that the assessee is duty bound to follow RBI norms and it was debatable issue that whether the provision of the Act would prevail over the provision of RBI Act, 1934. Therefore, the assessee cannot be alleged to have concealed particulars of income or furnishing of inaccurate particulars of income and therefore, the penalty u/s 271(1) (c) of the Act cannot be imposed against the assessee. The ld. AR placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT Vs Reliance Petro-products Pvt. Ltd, 322 ITR 158 [SC], submitted that merely because the claim of the assessee was not allowed due to subsequent decision of Hon'ble Supreme Court in the case of Southern Technologies [supra] which was rendered after nine years from the date of filing of return, penalty cannot be levied on the assessee u/s 271(1)(c) of the Act. 11. Replying to the above, the ld. DR supporting the penalty order as well as the first appellate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nation was bonafide. The High Court further held that this burden can only be discharged by producing cogent material and that penalty provisions are not criminal and do not require culpable mensrea. The High Court emphasised that whether or not the assessee had acted malafidely is not the relevant question to be asked and answered and went on to hold that the relevant question to be asked and answered is whether the assessee had discharged the onus and satisfied the conditions mentioned in Explanation 1 to Section 271(1) (c) of the Act. 13. The ld. DR also pointed out that the benefit of ratio of decision in the case of Reliance Petro-products Pvt Ltd. [supra] as relied by the assessee is not applicable to the present case as in that case issue was debatable and in the present case the issue that claim regarding provision of NPA is not allowable was settled by the Madras High Court at the time when assessment proceedings were going on and at the time when the assessee filed appeal on the same issue before the Tribunal. The ld. DR lastly submitted that as per the decision of the ITAT Mumbai in the case of M/s Development Credit Bank Ltd Vs. DCIT [2012]-TIOL-722- ITAT-MUM that if....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the case of Overseas Sanmar Financial Ltd [supra] was rendered on 5.2.2001 which was favouring the claim of the assessee pertaining to the provision for NPA made as per RBI norms. ii) The assessee filed return for A.Y 2001-02 on 31.10.2001. iii) Hon'ble Chennai High Court rendered decision in the case of Southern Technologies Vs. JCIT on 23.1.2002 favouring the Revenue that the claim of provision for NPA have made as per RBI norms is not allowable. iv) Meanwhile, ITAT Delhi 'B' Bench in the case of TEDCO Vs DCIT held that the addition made by the AO by ignoring the provision of Chapter IIIB of RBI Act and direction issued by the RBI of prudent claim sustain v) The assessee filed appeal before the Tribunal on 22.4.2004 for A.Y 2002-03 and again made same claim in the statement of facts and Ground No. 7 raised before the Tribunal. 16. Before we consider the factual matrix of this case to ascertain as to whether in the eyes of the provisions of the Act as explained by numerous judicial pronouncements, penalty can be levied in this case or not, we would like to discuss in nut shell the relevant legal position regarding levy of penalty u/s 271(1)(c) of the Act and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. 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." 17. W....