TaxTMI 
TaxTMI 
2026 (1) TMI 986
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.... ITA No. 1121/Ahd/2025: A.Y 2011-12 3. The brief facts of the case are that the assessee had filed its return of income for AY 2011-12 on 09.09.2011 declaring total income of Rs. 58,30,66,59,722/-. The assessment was completed u/s 143(3) on 21.11.2013 at total income of Rs. 61,14,55,65,633/-. In the course of assessment, the A.O had disallowed the claim for deduction of Rs. 93,04,00,000/-, made by the assessee on account of revision of lease operating expense. The A.O had also initiated penalty proceeding u/s 271(1)(c) of the Act in respect of this addition, for furnishing inaccurate particulars of the income. Subsequently a penalty order u/s 271(1)(c) of the Act was passed on 29.06.2022 and penalty of Rs. 30,90,55,620/- was imposed in respect of addition of Rs. 93.04 crores on account of disallowance of lease rent expense, which was upheld by the Tribunal in the quantum addition. 4. Aggrieved with the penalty order of the AO, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed. 5. Now the assessee is second appeal before us. The assessee has raised th....
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....he plethora of judicial precedents that mere difference of opinion is not a fit case to levy penalty. 1.6. The leamed AO and the Hon'ble CII(A) erred in levying penalty without considering the fact that the entire exercise of amortization of lease expense over the lease period is tax neutral, which was even accepted by the Hon'ble Ahmedabad Bench of Tribunal in the order dealing with merits on the underlying issue. 1.7. The learned AO and Hon'ble CIT(A) erred in relying on the decision in case of Dharamendra Textiles Processors [306 ITR 277) (2008) (SC) without appreciating the fact that the same is not applicable to the instant case as the Appellant had not furnished any inaccurate particulars of income and it has relied upon judicial precedents and the accounting standards applicable to the Bank to claim the lease rent expense on SLM basis 1.8. The Hon'ble CIT(A) erred in law and on facts by placing reliance on certain judicial precedents that are not applicable and does not have any nexus with the issues and facts under consideration for the Bank in the present appellate proceedings. 2. Penalty order barred by limitation in acc....
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..../or modify the above grounds of appeal on or before the final date of hearing. Submissions of the Assessee 6. Shri Tushar Hemani, ld. Sr. Advocate appearing for the assessee has taken us through the facts of the case. He explained that during the A.Y. 2011-12 the assessee had changed its accounting policy with respect to lease rental expense in view of Accounting Standard 19 (AS- 19) and started applying Straight Line Method (SLM), for recognition of lease rent expense over the lease tenure instead of recognition on actual payment basis. This has resulted in incremental lease rent expense of Rs. 93.04 crores during the year under consideration. The ld. Senior Counsel explained that the assessee was earlier claiming lease expense on the basis of actual payment. However, the lease agreements had a clause for increase of lease rent over a period of time during the life of the lease. In order to give effect to such increase equally, AS-19 mandated that lease rental should be claimed on SLM basis over the life of the lease as the underlying resource is used for the entire life of the lease equally. In order to give effect to this mandate of AS-19, the assessee changed the method o....
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....nce on the following decisions: (i) CIT Vs. Virtual Soft Systems Limited 404ITR409(SC), (ii) CIT Vs. Virtual Soft Systems limited 341 ITR593(Delhi). 9. The ld Senior Counsel further submitted that the assessee had made due disclosure in its financial statement regarding the change in the accounting policy in respect of lease operating expense. Therefore, there cannot be any case of furnishing of inaccurate particulars of income by the assessee. He submitted that the claim of the assessee was in accordance with the mandatory Accounting Standard. The ld. Senior Counsel emphasised that on identical facts the incremental lease rent expense on SLM basis, in accordance with AS19, was allowed by the Coordinate Benches of the Tribunal in the following cases. i. Bata India Ltd. vs. DCIT 11 taxmann.com 453 (Kol-Trib.) ii. HDFC Securities Ltd. vs. CIT(A) 115 ITR(T)179 (Mum- Trib.) 10. According to ld. Senior counsel, in view of the divergent decisions on this issue, the view adopted by the assessee was a plausible view and penalty cannot be levied merely for the diverse view of the assessee. The ld. Senior counsel submitted that mere rejection of a cl....
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....ended 31st March 2011", which reads as under: 4.2 Change in estimate of lease term for operating leases During the current year, the Bank has revised its estimate of lease term in the case of assets taken on operating leases to include the secondary period of the lease involving further payment of lease rentals based on continuation of the lease at the option of the Bank, as against the primary lease period as considered hitherto. As a result the operating expenses for the year are higher by Rs. 93.04 crores with a consequent reduction to the profit before tax. 13. The quantum addition made by the Revenue in respect of disallowance of lease operating expense of Rs. 93.04 crores was confirmed by the Coordinate Bench of this Tribunal in ITA No. 311/Ahd/2016 & Others dated 28.10.2021, a copy of which has been brought on record. The Tribunal had held that the deduction claimed by the assessee on the basis of incremental clause in the lease deed over the lease period, can't be treated as accrued liability. As per the lease agreement, the liability for the assessee for payments of increase in rent was arising in later years only. Therefore, the claim of Rs. 93.04 cro....
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....accordance with the AS-19 on the ground that straight-lining of lease rentals reflected a better and accurate picture of true commercial profits and such claim was not contrary to specific provisions in the Act. Similarly, the Co-ordinate Bench of Mumbai Tribunal in the case of HDFC Securities Limited (Supra) had held as under: "17. On perusal of the above it emerges that, though the Revenue had invited the attention of the Tribunal towards the provisions contained in Section 30 of the Act, the Tribunal decided identical issue in favour of Assessee and confirmed the order passed by the first appellate authority deleting the disallowance made by the Assessing Officer in respect of the provision for lease rent created as per AS-19. On perusal of computation sheet furnished by the Assessee in respect of 127 operational leases [placed at pages 136 to 139 of the paper-book], we find that, both, upward as well as downward adjustment of lease rental expenses has been made for the relevant previous year. We note that the Assessee has been following this method of accounting for operational lease expenses on a consistent basis over the years. We also note that the aforesaid decisio....