By AJAY R. SINGH
Advocate
14. Section 271(1)(c) – Penalty – Concealment –
Two views are possible – When two views are possible, penalty cannot be imposed
The assessee is a co-operative
bank. It had incurred expenditure for acquisition of three co-operative banks.
Claiming directives of the RBI contained in its circular, the bank amortised
such expenditure over a span of five years. The Revenue was of the opinion that
the expenditure was capital in nature and that the claim of expenditure would
be governed by the Income-tax Act, 1961 and not by the directives of RBI. The
expenditure was therefore disallowed.
The AO initiated proceedings for
imposition of penalty u/s 271(1)(c) and held that the assessee has deliberately
made a wrong claim of deduction which is otherwise inadmissible. Accordingly,
the AO proceeded to pass an order imposing a penalty of Rs. 1,41,30,553 u/s
271(1)(c).
Being aggrieved at the penalty
order so passed, the assessee preferred an appeal before the CIT(A). The CIT(A)
observed that the AO had taken a view that the expenditure is capital in nature
due to the enduring benefit accruing to the assessee, but as per the RBI
circular the assessee is allowed to amortise 1/5th of the expenditure over a
period of five years. He, therefore, inferred that there exist two different
views with regard to the assessee’s claim. Accordingly, he held that the issue
on which the addition was made being a debatable one, it cannot be said that
the claim made by the assessee is totally inadmissible. The assessee has
furnished all requisite particulars of income, so it cannot be said that the
assessee has furnished inaccurate particulars of income or concealed its
income. The Commissioner (A), relying upon the decision of the Hon’ble Supreme
Court in CIT vs. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158
(SC), deleted the penalty imposed by the AO.
But Revenue, now aggrieved by the
order of the CIT(A) preferred an appeal before the ITAT. The Tribunal held that
the addition on the basis of which penalty was imposed by the AO as on date
does not survive. Moreover, on a perusal of the circular issued by the RBI as
referred to by the CIT(A), it is seen that the acquirer bank is permitted to
amortise the loss taken over from the acquired bank over a period of not more
than five years, including the year of merger. It is also noticed that in the
case of Bank of Rajasthan, the Tribunal has allowed it as revenue expenditure.
Therefore, the claim made by the assessee cannot be said to be totally
inadmissible, or amounts to either furnishing of inaccurate particulars of
income or misrepresentation of facts. It is possible to accept that the
assessee being guided by the RBI circular has claimed the deduction. In such
circumstances, the assessee cannot be accused of furnishing inaccurate
particulars of income, more so when the assessee has furnished all relevant
information and material before the AO in relation to the acquisition of three
urban co-operative banks.
The
High Court held that, in relation to the assessee’s claim of expenditure, two
views were possible. Even otherwise, the Revenue has not made out any case of
concealment of income or concealment of particulars of any income. As is well
laid down through a series of judgements of the Supreme Court, raising a bona
fide claim even if ultimately found to be not sustainable, is not a ground
for imposition of penalty. In the result, the Revenue Appeal was dismissed.
