2019 (5) TMI 29 - AT - Income Tax

Deduction u/s.36(1)(viia) - amount of provision for bad and doubtful debts as per the books of account - as per assessee revised return offering income should have been accepted rather than making addition for the equal amount - HELD THAT - Irrespective of the fact whether the revised return is accepted or not, the computation of total income at ₹ 97.35 crore has not been assailed. The assessee has not challenged that the claim of deduction u/s.36(1)(viia) should have been enhanced to the originally claimed amount of ₹ 122.56 crore instead of the revised downsized amount of deduction at ₹ 25.21 crore. In view of this, it is held that the appeal of the assessee is merely academic in nature in so far as the computation of total income is concerned. Penalty u/s.271(1)(c) - Assessee claimed higher deduction u/s.36(1)(viia) - addition restricting the provision to the amount debited in the Profit and loss account only - bonafide mistake - HELD THAT - Assessee claimed higher deduction u/s.36(1)(viia) on the basis of the opinion of the Central Statutory Auditors. This practice was being followed by the other assessee similarly placed. It was only later on that when the view was canvassed against the banks in similar situation that the assessee came out by a filing revised return reducing the claim of deduction to the actual amount of provision created in the books of account. In our considered opinion, it is a clear cut case of bona fide opinion formed by the assessee in claiming deduction at a higher amount. There was no mala fide intention of the assessee to conceal the income or furnish inaccurate particulars of its income. The actual amount of provision was available before the AO in the Profit and loss account attached along with the return and the amount of deduction u/s.36(1)(viia) was equally available as per the Computation of income. If the intention had been to defraud the Revenue by claiming excess deduction, the assessee could have wrongly increased the amount of provision in its Profit and loss account as well, which it did not. Having declared the figures correctly proves the bona fides of the assessee. As in CIT vs. Reliance Petro Products Private Ltd. 2010 (3) TMI 80 - SUPREME COURT has held that a mere making of a claim which is not sustainable in law, by itself will not attract penalty 271(1)(c) of the Income-tax Act, when the assessee furnishes all the relevant particulars in his return which are not found to be inaccurate. There is no dearth of decisions holding that penalty under section 271(1)(c) cannot be imposed on disallowance of expenses, which were not otherwise bogus. We, therefore, set aside the impugned order and direct to delete the penalty. - Decided in favour of assessee.

Summary

Issues:
1. Quantum appeal related to deduction u/s. 36(1)(viia) of the Income-tax Act, 1961.
2. Penalty appeal u/s. 271(1)(c) in relation to the deduction claimed.

Quantum Appeal Analysis:
The assessee, engaged in banking business, filed a revised return reducing the deduction u/s. 36(1)(viia) to &8377; 25,21,93,0828/- from the originally claimed &8377; 122,56,95,246/-. The Assessing Officer made an addition of &8377; 97,35,02,163/-, the excess deduction given up in the revised return. The Tribunal noted that the total income computation was not challenged by the assessee. As the appeal was academic regarding total income, it was held that the appeal lacked merit.

Penalty Appeal Analysis:
The penalty appeal was against the confirmation of penalty u/s. 271(1)(c) related to the addition of &8377; 97.35 crore made by the Assessing Officer. The Chairman's statement revealed that the higher deduction claimed was based on the Central Statutory Auditors' suggestion. The Tribunal found the claim to be a bona fide opinion, not intending to conceal income. The assessee correctly declared the figures, proving good faith. Citing the Supreme Court's decision in CIT vs. Reliance PetroProducts Private Ltd., the Tribunal held that a mere unsustainable claim does not attract penalty if relevant particulars are furnished accurately. Consequently, the penalty was set aside, and the appeal allowed.

In conclusion, the Tribunal dismissed the quantum appeal as academic and allowed the penalty appeal, directing the deletion of the penalty. The judgment emphasized the importance of bona fide intentions and accurate disclosure of particulars in tax matters, following legal precedents to determine penalties for tax claims.