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TMI Blog2017 (9) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... e of investment in security receipts, AO was of the opinion that the assessee has filed revised return after a specific question was asked to justify the expenditure debited in the profit and loss account. We do not find merit in the findings of the AO for the reason that the assessee has filed revised return although after issue of notice u/s.142(1), but much before the date of completion of assessment, therefore, the AO cannot hold that the assessee has filed revised return only after issue of notice u/s.142(1) of the IT Act 1961. Mere making a claim in respect of certain expenditure and disallowance of such expenditure by the AO during the course of assessment proceedings cannot be called as furnishing of inaccurate particulars of income in respect of such income. More so, when assessee has filed revised return voluntarily before completion of assessment withdrawing such provision created / expenditure debited in the profit and loss account. Therefore, we are of the considered view that the AO was incorrect in coming to the conclusion that the assessee has furnished inaccurate particulars of its income which warrants levy of penalty u/s. 271(1)(c) of the Act. - Decided in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was already in the process of filing revised return before issue of notice u/s.143(2), withdrawing provision created for impairment in investment in security receipts, however, due to various reasons such revised return has been filed subsequent to issue of notice u/s.142(1). The assessee further submitted that it has made a provision for impairment in investment in security receipts as per the statutory requirement of RBI guidelines which mandates making provisions for impairment in investment in security receipts. The assessee further submitted that it has disclosed necessary details in its financial statements in the form of notes to accounts and also explained the necessity of making provisions in its books of accounts. Therefore, making of provision towards impairment in investment in security receipts is a statutory requirement and hence, the provision is created in books of accounts with a detailed note to the accounts explaining such requirement. It was further submitted that subsequently on deliberations with tax experts and consultants, we came to know that provision created for impairment in investment in security receipts is not allowable deduction as per the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the security receipts and accordingly, it has made a provision for remaining amount in its books of accounts by creating provision for impairment in investment in security receipts. However, after deliberations with its tax experts and consultants, it has come to the conclusion that such provision created in respect of security receipts is not deductable as per the provisions of Income Tax Act 1961 and hence, filed revised return withdrawing provision created for impairment in investment in security receipts. Since, it has created provision as per statutory requirement and also disclosed such provision in its financial statements by way of notes to accounts, it cannot be considered that it has furnished inaccurate particulars of income in respect of provision created for impairment in value of investments in security receipts. The CIT(A) after considering the explanations of the assessee held that on the basis of explanation furnished by the assessee, it is difficult to accept that such claim of ₹ 1,81,25,000/- towards provision for impairment in investment in security receipts was voluntarily offered by the assessee in the revised return of income. On the basis of facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosed such provision in its books of accounts, it cannot be held that the assessee has furnished inaccurate particulars of its income in respect of provision created for impairment in investment in security receipts. The learned AR further submitted that the assessee has filed revised return and also explained the reasons for filing revised return withdrawing provisions created for impairment in investment in security receipts before the completion of assessment, therefore, the assessee case cannot be considered as deliberate concealment of particulars of income or furnishing inaccurate particulars of income which warrants of levy of penalty u/s.271(1)(c) of the Act. In support of his arguments relied upon the decision of Hon ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd., (2010) 322 ITR 158 SC, and also CIT vs. Harnarayan 67 DTR 0172 and CIT vs. Shriram Properties and Constructions Ltd., (2013)356 ITR 700(Mad.). 8. On the other hand, learned DR directly supporting the order of the CIT(A), submitted that the assessee has furnished inaccurate particulars of its income in respect of provision created for impairment in investment in security receipts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment in security receipts and hence opined that assessee has deliberately furnished inaccurate particulars, which comes within the purview of Section 271(1)(c) of the Act. 10. It is the claim of the assessee that it has created provision in respect of impairment in value of investment in security receipts as per the requirement of RBI guidelines, which suggest suitable provision is required to be made in respect of investment in security receipts after obtaining a rating from rating agency approved by SEBI. The assessee further contended that it has disclosed the reasons for creation of provision in respect of investments in its financial statements by way of notes to accounts. The assessee further contended that the assessee being an asset reconstruction company, as per the guidelines issued by RBI, the NAV of the security receipts should be restricted to recovery range associated with the rating assigned to security receipts. Securitization / Reconstruction Company based on its recovery experience to choose a particular percentage within the recovery range indicated by the rate agency to make a provision in its books of accounts. As per the guidelines of RBI, the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81,25,000/- and accordingly the assessee has made a provision in its books of accounts. We further observed that the assessee has fully disclosed all the details in its financial statements in the form of notes to accounts. Therefore, we are of the considered view that the AO was erred in holding that the assessee has willfully furnished inaccurate particulars of income to evade payment of taxes which warrants levy of penalty u/s.271(1)(c) of the Act. 12. The question whether there was a reasonable cause for which the requirement of concerned provisions of Section cannot be complied with is primarily an essential question of fact and it has to be decided in each case after considering the material placed before the concerned authority. The levy of penalty u/s. 271(1)(c) of the Act is not automatic. Before levy of penalty, the concerned Officer is required to find out that any violation referred to in the said provision is without a reasonable cause. The initial burden is on the assessee to show that there exists a reasonable cause which was the reason for the failure referred to in the concerned provisions of the Act. Therefore, the Assessing Officer dealing with the matter has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 158 SC. The Hon ble Supreme Court, while deleting the penalty u/s. 271(1)(c) of the Act, held that mere making a claim does not sustainable in law by itself will not amount to furnishing inaccurate particulars of income. The relevant portion of the order reproduced hereunder:- A glance of provision of section 27J(])(c ) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The instant case was not the case of concealment of the income. That was not the case of the revenue either. It was an admitted position in the instant case that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The revenue argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income. Such cannot be the interpretation of the concerned words. The words ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 27(1)(c). If the contention of the revenue was accepted, then in case of every return where the claim wade was not accepted by the Assessing Officer for any reason, the assessee would invite penalty under Section 27I(l)(c). That is clearly not the intendment of the Legislature.[para 10]. 14. The assessee has relied upon the decision of Hon ble High Court of Madras in the case of CIT vs. Shriram Properties and Constructions Ltd., (2013)356 ITR 700(Mad.). The Hon ble High Court, while deleting the penalty levied u/s. 271(1)(c), held that there was no lacking in bonafides in the claim of the assessee originally made, no penalty could be levied. The relevant portion of the order is extracted below:- The assessee, for the assessment year 2007-08, claimed deduction in respect of the contribution made to the trust fund and provisions for diminution in value of investments and sundry balances written off. In the course of the assessment proceedings, it filed a revised memo of computation. The Assessing Officer levied penalty under section 271(l)(c) of the Income-tax Act, 1961, holding that the assessee had not filed a revised return to offer the amount as income for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, it was also not the case of the Revenue that material was found during the search indicating that the gift transaction was an arranged affair to accommodate the assessee's unaccounted money. In this respect it is evident that the Tribunal correctly came to the conclusion that the AO did not possess any piece of information that the gift was not genuine and was part of the undisclosed income of the assessee. In the questionnaire dt. 10th Oct., 2005 the AO had j simply raised a query for the relevant assessment year in the following manner; Had you 1 taken/given any loan/gift during the financial year under consideration? If yes, please furnish details . In response to this query the assessee had furnished the details of gift received in the relevant year from NRIs and had also furnished the copy of gift deed along with reply. Apart from this, simultaneously the assessee made it clear that aforesaid amount was received by the assessee as gift, but to buy peace and to avoid any dispute the assessee was offering the amount of gift as taxable income subject to the condition that no penalty action should be initiated against the assessee. Furthermore, it was made clear ..... 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