ACIT, CHENNAI vs. SHRIRAM CITY UNION FINANCE LTD., CHENNAI

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ITA 2485/CHNY/2014Status: DisposedITAT Chennai19 January 2015AY 2008-094 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that penalty was not leviable as the assessee claimed the deduction based on legal opinion and bonafide belief, following previous decisions in similar cases. The revenue did not prove concealment or furnishing of inaccurate particulars.

What were the facts?

The assessee transferred a sum to a Statutory Reserve Account and claimed it as a deduction, which was disallowed by the Assessing Officer. The Tribunal confirmed the disallowance but the CIT(Appeals) deleted the penalty levied under Section 271(1)(c).

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when a deduction is disallowed on legal grounds and claimed bonafide.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

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Income Tax Appellate Tribunal, “ C” BENCH, CHENNAI

Before: SHRI B.R. BASKARAN & SHRI VIKAS AWASTHY

For Respondent: Shri R. Sivaraman, Advocate
Hearing: 19.01.2015Pronounced: 19.01.2015

आदेश /O R D E R

PER B.R. BASKARAN, ACCOUNTANT MEMBER:

1.

The revenue has filed this appeal challenging the order dated 30.07.2014 passed by Ld CIT(Appeals)-VI, Chennai and it relates to the assessment year 2008-09. The revenue is aggrieved by the decision of Ld CIT(Appeals) in deleting the penalty levied u/s 271(1)(c) of the Act.

2.

We heard the parties and perused the record. The assessee had transferred a sum of `32.55 crores to “Statutory Reserve Account” in terms of RBI Act and claimed the same as deduction.

The Assessing Officer disallowed the said claim and levied penalty u/s 271(1)(c) of the Act on the said disallowance. It is pertinent to note that the Tribunal had also confirmed the said disallowance.

3.

However, the Ld CIT(Appeals) deleted the penalty by following the decision rendered by the Co-ordinate bench of Tribunal in the assessee’s own case in & 1852/Mds/2011 dated 24.01.2012 relating to the assessment year 2005-06 and 2006-07.

The revenue is aggrieved by the decision of Ld CIT(Appeals).

4.

In AY 2005-06 and 2006-07, we notice that the Co-ordinate bench of Tribunal had deleted the penalty levied on identical reasons by following the decision rendered by the Tribunal in the assessee’s own case in relating to the AY 2003-04. We further notice that the Tribunal has expressed the view that the assessee has not concealed any particulars of income or furnished any inaccurate particulars of income by claiming the deduction of amount transferred to Statutory reserves. The Tribunal has further noticed that the assessee had claimed the same on the basis of a legal opinion and also on bonafide and honest belief.

Under these set of facts, the Tribunal has deleted the penalty levied in AY 2005-06 and 2006-07 for identical disallowance, by following the decision of Hon’ble Supreme Court in the case of Reliance Petro Products Ltd (322 ITR 158)(SC) and also the decision rendered by Hon’ble Jurisdictional Madras High Court in the case of Caplin Point Laboratories (172 Taxman 279), wherein it was held that the penalty was not leviable on the disallowances made on legal grounds. As already stated, the Ld CIT(Appeals) has followed the decision of the Hon’ble Supreme Court rendered in the case of Reliance Petro Products Ltd (supra) and also the decisions given by the co-ordinate benches of Tribunal in the assessee’s own case.

Further, we notice that it was not the case of the revenue that the assessee has continued to claim the deduction after the decision of Tribunal on this issue, wherein the Tribunal has confirmed the disallowance. Under these set of facts, we do not find any reason to interfere with the order of Ld CIT(Appeals) on this issue.

5.

In the result, the appeal of the revenue is dismissed.

Order pronounced on the 19th day of January, 2015 at Chennai.

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