THE DCIT CIR 3(1), MUMBAI vs. M/S. ICICI BANK LTD (IN RESPECT OF M.S, ICICI LTD. MRGED WITH M.S, ICICI BANK LTD), MUMBAI

सुनवधई की तधयीख /Date of Hearing : 17.2.2017 घोषणध की तधयीख /Date of Pronouncement : 12. 4.2017 आदेश / O R D E R PER RAJESH KUMAR, A. M: Appeal preferred by the revenue is directed against the order dated 21.11.2007 passed by the ld.CIT(A)-XXVII, Mumbai pertains to the assessment year-1997-98 wherein the revenue raised the ground that the ld.CIT(A) erred in deleting the penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 as imposed by the AO qua the addition on account of write 2 back of bad debts, writing back of investments, deduction u/s 10(23) of the Act, disallowance of depreciation on lease transactions treated as finance transactions, expenses for earning dividend u/s 80M, expenses apportioned for earning dividend income, share issue expenses and disallowance of deduction u/s 36(1)(viii) of the Act.

S.No. Nature of disallowance Amount in Rs. 1 Under Rule 6D 87,337 2 Guest House expenses 11,43,524 3 write back of bad debts 54,57,02,401 4 writing back of investments 47,83,79,789 5 deduction u/s 10(23), 23,22,56,327 6 depreciation on lease assets 4,38,37,46,515 7 u/s 80M 52,08,28,403 8 Expenses incurred in earning dividend 1,71,74,80,473 income 9 Share issue expenses 24,10,42,017 Thereafter, penalty was imposed vide order dated 31.3.2006 passed under section 271(1)( c ) of the Act levying a penalty of Rs.3,78,54,03,692/- equal to 100% of the tax sought to be evaded by holding that the assessee has committed default within the meaning of section 271(1)( c ) of the Act read with explanation (1) by furnishing inaccurate particulars of income/ concealing its income to the tune of Rs.8,80,32,64,401/-.

3 3. In the appellate proceedings, the ld.CIT(A) deleted the penalty qua the disallowance under rule 6D of the Income Tax Rules, 1962 by holding that since the assessee itself disallowed an amount of Rs.14,50,370/- and revised its claim during the course of assessment proceedings by following the decision of Hon’ble Jurisdictional High Court in the case of Arrow (I) Ltd reported in 229 ITR 325 (Bom) and therefore the penalty was not justified on the disallowance of Rs.87,337/- made under rule 6D of the Rules. 3.1 Qua Guest house expenses of Rs.11,43,524/-, the ld.CIT(A) deleted the penalty by following the Tribunal order for the assessment year 1996- 97, wherein the penalty was deleted in the similar circumstances. 3.2 As regards the write back of bad debts of Rs.54,57,02,401/-, the ld.CIT(A) deleted the addition on the ground that the assessee offered the entire write back of bad debts of Rs.54,57,02,401/- in the return of income and the same could not be said to be concealment of income. 3.3 On the writing off of investments Rs.47,83,79,789/-, the ld.CIT(A) deleted the penalty on the ground that the assessee has not claimed any writing off of investments and therefore there was no concealment of income on the part of the assessee. 3.4 On the deduction u/s 10(23G) of Rs.23,22,56,327/-, the ld. CIT(A) deleted the penalty by holding that section 14A of the Act was introduced by the Finance Act, 2001 subsequent to the filing of the return of income on 29.11.1997. An identical issue was also decided in assessee’s own case 4 in the assessment year 2000-01, wherein the predecessor of the ld.CIT(A) deleted the penalty on the ground that as all particulars had been declared by the assessee in the return of income. 3.5 The depreciation on lease transaction treated as finance Rs.4,38,37,46,515/- was deleted by the ld.CIT(A) by following the decision of the Co-ordinate Bench of the Tribunal in the assessment year 1995-96 in assessee’s own case, wherein the Special Bench of the Tribunal has allowed the claim of the assessee. 3.6 The disallowance under section 80M and expenses for earning the dividend income of Rs.52,08,28,403 and Rs.171,74,80,473/- respectively were deleted by the ld.CIT(A) by holding that the entire expenses apportioned to earning the dividend income as has not been disallowed in the assessment order but only deduction u/s 80M has been disallowed and qua the second issue of expenses for earning dividend, the ld. CIT(A) deleted the penalty by following the decision of the Tribunal in assessee’s own case for the assessment year 1994-95 in which the same penalty was deleted. 3.7 In respect of share issue expenses of Rs.24,10,42,017/-, the ld.CIT(A) held that in absence of any mens rea no penalty could be confirmed and also specially when the appellant made claim only during the course of assessment proceedings no penalty was leviable. 3.8 On the disallowance of deduction of Rs.68,25,97,615/-, the ld.CIT(A) held that when there was no specific method prescribed under the Act 5 for the calculation of special reserve given in the Act and it could not be presumed that the one followed by the assessee was erroneous. Further, the ld.CIT(A) held that since the deduction is linked to the business profits, the same would be subject to revision on account of changes to the business profits and accordingly held that no penalty was attracted.

6 6. We have carefully considered the rival contentions and perused the material placed before us including the orders of authorities below. We find that the ld.CIT(A) has passed very reasoned and detailed order giving detailed explanations and justifications for deleting the penalty imposed by the AO on various disallowances, the details whereof has been given hereinabove. We find that under Rule 8D of the Rules, the disallowance was made by following the decision of Hon’ble Jurisdictional High Court and most of the issues are therefore are covered by the assessee’s own case and we also find that all the facts have been fully disclosed in the return of income and in the assessment proceedings and therefore do not attract any penal action u/s 271(1)( c ) of the Act specifically linking with the disallowance under rule 8D, the same was made by following the decision of Jurisdictional High Court which was not available at the time of filing of the return. The rest of the expenses were claimed by following the decisions in assessee’s own cases for the assessment year 1987-88 which ultimately has been followed by the ld.CIT(A).The issue regarding disallowance of deduction u/s 36(1)(viii) of the Act of 68,25,97,615/- and the issue with regard to deduction u/s 10(23G) of the Act, we find that section 14A was introduced by the Finance Act, 2001whereas the return of income was filed before 29.11.1997. On the issue of depreciation on lease asset, the same was deleted by the Co-ordinate Bench of the Tribunal in the earlier year in assessee’s own case and hence no order of ld.CIT(A) on this issue is correct. On disallowance u/s 80M, the expenses apportioned 7 to earning the dividend income and mentioned in the return of income and thus the penalty was rightly deleted by the FAA. Lastly, on the issue of disallowance and deduction u/s 36(1)(viii), the deduction was verifiable as linked with the business profit of the assessee and the ld.CIT(A) was also justified in deleting the same. With regard to writing of bad debts, the investment were not claimed in the return of income and claimed in the assessment proceedings and therefore do not constitute in filing inaccurate particulars of income or concealment of income. During the course of hearing before us, the ld.DR except reiterating the contentions as raised before the ld. CIT(A) neither brought any material to prove contrary to the findings of the ld.CIT(A) nor produced any case law so as to compel us to take a different view than the view so taken by the ld.CIT(A). Therefore, in view of this discussion hereinabove, we do not find any infirmity in the order of ld.CIT(A). Accordingly, we confirm the action of the ld.CIT(A) and dismiss the appeal of the Revenue.

Order pronounced in the open court on 12th April, 2017. sd (Mahavir Singh) (Rajesh Kumar) न्याययक सदस्य / Judicial Member लेखा सदस्य / Accountant Member भुंफई Mumbai; ददनधंक Dated :12.4.2017 SRL,Sr.PS