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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI.NARENDER KUMAR CHOUDHRY & SHRI. GAGAN GOYAL
O R D E R Per N.K. Choudhry (JM): This appeal has been preferred by the Assessee, against the order dated 25/07/2023 impugned herein passed by the Ld. Commissioner of Income Tax (Appeals-7), Mumbai {‘Ld. Commissioner’} under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for the A.Y. 2012-23.
2 ITA 1762/Mum/2013 M/s ICICI Bank Ltd 2. In the instant case, the Assessee declared its income at loss of Rs.21,71,45,820/- by filing its return of income on 30/10/2004 which was later on revised, whereby the total income of Rs. 720,47,89,971/- was disclosed as deemed income under section 115JB of the Act. 2.1 The Assessee also claimed exemption to the tune of Rs.223,49,79,266/- being gross dividend received under section 10(34) & 10(35) of the Act, however, no expenses have been apportioned by the Assessee for earning the said dividend income on the ground that the investment in shares have been made out of its own cost free funds. 2.2 The Assessing Officer Vide order dated 25/02/2009 completed the assessment under section 143(3) of the Act, whereby the total income of the Assessee was computed at Rs.1396,45,542,760/- and also worked out the interest expenses and administrative expenses attributable to earning of such exempt income of Rs.211,68,34,691/- and accordingly made a disallowance of Rs.211,68,34,691/- by invoking the provisions of section 14A of the Act. Consequently exemption under section 10(34) and 10(35) was restricted to Rs.11,81,44,575/- as against the amount of Rs.223,49,79,266 as claimed by the Assessee.
2.3 The Assessing Officer simultaneously also initiated penalty proceedings under section 271(1)(C) of the Act and issued notice dated 29/12/2006 under section 274 read with section 271(1)(c) of the Act accordingly.
On appeal by the Assessee, the then Ld. Commissioner, while relying on the decision of the Assessee’s own case for A.Y. 2001-02, allowed certain benefits and issued directions, in pursuance to which the amount of exemption under section 10(34) and 10(35) was ultimately computed at Rs.109,25,81,119/- as against Rs.223,49,79,266/- as claimed by the 3 ITA 1762/Mum/2013 M/s ICICI Bank Ltd Assessee. Thus, the net disallowance under section 14A consequent to CIT(A)’s directions was computed to the tune of Rs.114,23,98,147/- as against the amount Rs.211,68,34,691/- made by the Assessing Officer in his order under section 143(3) of the Act. On the aforesaid facts and circumstances, the addition on the direction of the Ld.CIT(A) stood confirmed to the extent of Rs. Rs.114,23,98,147/- only.
Thereafter the AO issued a Notice dated 08/03/2010 requiring the Assessee to explain, as to why an order imposing penalty under section 271(1)(c) of the Act should not be passed in the case of the Assessee. The Assessee more or less before the Assessing Officer claimed that claim of exemption as made by the Assessee is bonafide and based on the legal position and facts of the case. Therefore, it cannot be held as concealment of income and question of levy of penalty under section 271(1)(c) does not arise in this case. The Assessee also claimed before the Assessing Officer that it has already filed an appeal before the Hon’ble ITAT against the order of the then CIT(A). The Assessee further claimed that disallowance under section 14A, in fact, is an issue involving legal interpretation and rejection of legal claim will not attract levy of penalty, in view of the judgment passed by the Hon’ble jurisdictional High Court in the case of Reliance Utilities & Power Ltd (ITA 1398 of 2008) and Hon’ble Punjab & Haryana High Court in the case of Hero Cycles (ITA 331 of 2009).
4.1 The Assessing Officer, though considered the claim of the Assessee and also taken into account, the filing of the appeal before the Hon’ble ITAT, however, by observing “that although the Assessee has filed an appeal before the Hon’ble ITAT, however proceedings cannot be kept in abeyance in light of provisions of section 275 of the Income-tax Act, as per which the penalty
4 ITA 1762/Mum/2013 M/s ICICI Bank Ltd proceedings in this case are required to be finalized on or before 31/03/2010” ultimately levied the penalty to the tune of Rs.40,98,35,335/- being 100% of the tax sought to be evaded on the amount of Rs.114,23,98,147/- for concealment of particulars of income.
The Assessee being aggrieved, challenged the said imposition of penalty before the Ld. Commissioner, who more or less, by relying on the judgment passed by the Hon’ble Apex Court in the case of Reliance Petro products Pvt. Ltd (322 ITR 158) and by analyzing the facts and circumstances of the case specific to the effect “that the allocation of expenses for earning of income was merely based on estimation as the Assessing Officer and the Ld.CIT(A) determined the exempt income on different yardsticks”, deleted the penalty.
The Revenue department being aggrieved preferred the instant appeal.
We heard the parties and perused the material available on record. It is admitted fact that the Assessing Officer made a disallowance of Rs.211,68,34,691/- by invoking the provisions of section 14A and consequently restricted the exemption claimed under section 10(34) & 10(35) of the Act, to the tune of R.11,81,44,575/- as against the claim of the Assessee to the tune of Rs.223,49,79,266/-. 7.1 The Assessee challenged the said addition before the Ld.CIT(A), who, allowed the partial relief to the Assessee and gave certain directions, in compliance to the same, the Assessing Officer worked out the exemption under sections 10(34) & 10(35) of the Act to the tune of Rs.109,25,81,119/- and consequently, the addition of Rs.114,23,98,147/- under section 14A of the Act on account of disallowance.
5 ITA 1762/Mum/2013 M/s ICICI Bank Ltd 7.2 The Assessee being aggrieved, also challenged the affirmation of disallowance under section 14A of the Act to the tune of Rs.114,23,98,147/- before the Hon’ble Tribunal, who vide order dated 03/11/2017 in & 6217/Mum/2008 for the A.Y. 2004-05 by relying on the order passed by the Hon’ble Tribunal in the Assessee’s own case for the A.Y. 2001- 02 (ITA 393/Mum/2008 decided on 02/03/2016), restored the matter / issue back to the file of the Assessing Officer for decision afresh keeping in view the directions of the Hon’ble Tribunal in the case pertains to AY 2001-02.
7.2 In compliance to the directions of the Hon’ble Tribunal order dated 03/11/2017, the Assessing Officer vide consequential order dated 31/12/2018 deleted the amount of Rs.6,42,51,502/- and Rs.209,44,84,898/- which were claimed as exempt under section 10(15) and 10(34) of the Act. The Assessing Officer, after taking the administrative expenses at 1% of the exempt income, viz. at Rs.7,44,427/- and Rs.223,49,793/- worked out the exempt income to the tune of Rs.7,36,98,282/- under section 10(15) of the Act and Rs.221,26,29,473/- under section 10(34) & 10(35) of the Act. Consequently, the Assessing Officer by giving effect to the order of the Tribunal granted further relief of Rs.4,87,54,792/- and Rs.112,00,48,354/- and in effect made no addition u/s14A of the Act.
7.3 We have given thoughtful consideration to the facts and circumstances of the case and observe that more or less substantive addition on the basis of which the penalty was levied, infact has been deleted by the Assessing Officer by passing consequential order dated 31/12/2018 in compliance to 6 ITA 1762/Mum/2013 M/s ICICI Bank Ltd the directions issued by the Hon’ble Tribunal vide order dated 31/12/2017 in and 6137/Mum/2008.
7.4 The Ld. DR before us mainly claimed that as the Assessing Officer has computed the administrative expenses at 1% of the exempt income and, therefore, the penalty is liable to be affirmed even otherwise, on proportionate basis. The Ld. DR further claimed that the penalty proceedings are altogether different and by confirming 1% of the administrative expenses by the Assessing Officer goes to show that the Assessee has filed the inaccurate particulars of income and, therefore, penalty is liable to be affirmed.
7.5 On the contrary, the Ld. AR claimed that the Assessee has made the claim in bonafide manner and in fact produced every details document before the Revenue authorities and there is nothing on record to show that Assessee has furnished any inaccurate particulars of income.
7.6 We have given thoughtful consideration to the peculiar facts and circumstance of the case and observe that the Hon’ble co-ordinate bench of the Tribunal in Assessee’s own case for the A.Y. 2003-04 (ITA No.4305/Mum/2014) decided on 19/12/2023 also dealt with identical penalty which was imposed by the Assessing Office on the similar facts and circumstances, but variation in amount. The Hon’ble co-ordinate bench of the Tribunal in the aforesaid case, by taking into consideration the decision rendered by Hon’ble Apex Court in the case of Reliance Petro products (P) Ltd (supra) and by taking refuge of the notice under section 274 read with section 271(1)(c) of the Act, wherein the limb of penalty proposed was not 7 ITA 1762/Mum/2013 M/s ICICI Bank Ltd specified, ultimately affirmed the deletion of the penalty levied by the Assessing Officer.
7.7 The Hon’ble Apex Court in the case of Reliance Petro products (P) Ltd (supra) has clearly held that mere making a claim which is not sustainable in law will not amounts to concealment of income and cannot attract penalty provisions. It is an admitted fact that in the instant case, the Assessee has made full disclosure of the exempt income in its notes and submissions filed along with the return of income and during the course of assessment proceedings also furnished all the details related to exempt income i.e. in the accounts, audit report, notes to the return explaining claims, statement giving details of exemption claimed under section 10(34) and 10(35) and other documents in respect of such claims, as observed by the Ld. Commissioner in the impugned order. The Ld. Commissioner also gave specific findings that the complete factual data pertaining to the Assessee’s claim was also available before the Assessing Officer during the course of assessment proceedings and, therefore, in our considered view, in any sense, the penalty is not warranted. We also observe that addition in the instant case has been made by the Assessing Officer and partly affirmed by the Ld. Commissioner on adhoc/ estimate basis and set aside by the Hon’ble Tribunal and it is also well settled that on the basis of adhoc/estimate addition, no penalty is leviable, hence on this point as well, the penalty is unwarranted. And therefore in the aforesaid facts and circumstances, we are of the considered view, the Ld. Commissioner correctly deleted the penalty under consideration and therefore the impugned order does not require any interference because the same does not suffer from any perversity, impropriety and/or illegality, hence, the same is affirmed.