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2020 (10) TMI 1045 - AT - Income TaxPenalty u/s 271(a)(c) - Disallowance towards cost of raising of loan treated as Deferred Revenue expenditure - Disallowance of provision of Non-performing assets - HELD THAT - 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 - penalty on such disallowance is directed to be deleted. Disallowance of provision of Non-performing assets - It is clear that the assessee made claim of provision for NPA on 31.1.2001 in the return of income filed for 2001-02 and at that point of time, the issue was debatable and the assessee placing reliance on the decision of the ITAT Chennai in the case of Overseas Sanmar Financial Ltd 2001 (2) TMI 303 - ITAT MADRAS-C made the said claim in the return of income - We may point out that subsequently, after filing return the Hon'ble Madras High Court rendered decision on 23.1.2002 against the assessee in the case of Southern Technologies 2002 (1) TMI 61 - MADRAS HIGH COURT but the assessee of that case filed SLP before the Hon'ble Supreme Court 2010 (1) TMI 5 - SUPREME COURT . Thus, the issue could not attain finality at that point of time while the assessee filed first appeal making same claim before the Tribunal for A.Y 2002-03 and the issue was also debatable. - Decided in favour of assessee.
Issues Involved:
1. Penalty under section 271(1)(c) of the Income Tax Act. 2. Disallowance towards the cost of raising loans treated as Deferred Revenue Expenditure. 3. Disallowance of provision for Non-performing assets (NPA). Detailed Analysis: 1. Penalty under Section 271(1)(c) of the Income Tax Act: The assessee challenged the penalty levied under section 271(1)(c) concerning two disallowances: the cost of raising loans treated as Deferred Revenue Expenditure and the provision for Non-performing assets. The Tribunal analyzed whether the assessee had furnished inaccurate particulars of income or concealed income, which are prerequisites for imposing a penalty under this section. 2. Disallowance towards the Cost of Raising Loans Treated as Deferred Revenue Expenditure: The Tribunal noted that in the quantum proceedings, the disallowance of ?9,34,93,091/- as Deferred Revenue Expenditure was deleted. The Tribunal had previously allowed the deduction of ?18,72,22,842/- incurred on debentures and discounts thereon under section 37(1) of the Act. The Tribunal observed that the issue was covered in favor of the assessee by a co-ordinate bench decision for the Assessment Year 2000-01. Consequently, the penalty on this disallowance was directed to be deleted. 3. Disallowance of Provision for Non-performing Assets (NPA): The assessee had claimed a deduction of ?73,46,160/- for the provision of NPA based on the ITAT Special Bench decision in the case of Overseas Sanmar Financial Ltd., which was favorable at the time of filing the return on 31.10.2002. However, the Supreme Court later reversed this position in Southern Technologies Ltd., ruling that such provisions were not allowable under section 36(1)(vii) of the Act. The Tribunal noted that the assessee’s claim was bona fide and based on prevailing judicial precedents and RBI guidelines, thus not amounting to furnishing inaccurate particulars of income. The Tribunal also noted that a similar penalty for the preceding year was deleted, reinforcing the bona fide nature of the claim. Therefore, the penalty on this disallowance was also directed to be deleted. Conclusion: The Tribunal concluded that the assessee had made claims based on bona fide beliefs and existing judicial precedents at the time of filing the return. As such, the claims did not amount to furnishing inaccurate particulars of income or concealment. Consequently, the penalties levied under section 271(1)(c) for both disallowances were deleted, and the appeal of the assessee was allowed. Order Pronounced: The order was pronounced in the open Court on 31st August 2020.
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