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The Deputy Commissioner of Income Tax, Corporate Circle -4 (1) , Chennai. Versus M/s. Madura Micro Finance Limited

Penalty u/s 271(1)(c) - addition on account of cash collateral offered to ICICI Bank - whether assessee’s claim on the amount kept in cash collateral is not permissible as it is mere diversion of income by overriding title - Held that:- Assessee company claims that its case falls in capacity of contractor and the money is retained for a certain period and retention money shall not be taxable until the retention period is over and the assessee relied on the decisions but amount kept in cash colle .....

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im and furnishing inaccurate particulars of income. The explanations given by the assessee cannot be considered as bonafide and assessee tried to conceal the income by misrepresenting the case by not bringing true income to the books of accounts.

We rely on the decision of DCIT vs. Rattha Cidadines Boulevard Chennai (P) Ltd (2015 (11) TMI 991 - ITAT CHENNAI) where it observed that Auditor’s report cannot override provisions of act and, thus, merely because assessee’s false claim for .....

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Respondent : Shri. R. Vijayaraghavan, Advocate PER G. PAVAN KUMAR, JUDICIAL MEMBER: The appeal is filed by the Revenue against the order of Commissioner of Income Tax (Appeals)-IV, Chennai in ITA No.414/2013-14, dated 21.08.2014 for the assessment year 2007-2008 passed u/s.271(1)(c) of the Income Tax Act, 1961. 2. The department has raised the following grounds challenging the order of ld.Commissioner of Income Tax (Appeals):- 2.2 The learned Commissioner of Income Tax (Appeals) ought to have a .....

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culars made the claim vulnerable, entailing levy of penalty u/s.271 (1)(a) of the I.T. Act, 1961. 2.4 The learned Commissioner of Income Tax (Appeals) ought to have appreciated that making a claim contrary to a statutory provision is a clear case of furnishing inaccurate particulars of income, leading to concealment of income. 2.5 Having regard to the Hon ble Delhi High Court s decision in the case of CIT vs. Zoom Communication (P) LTD 327 ITR 510, the learned Commissioner of Income Tax (Appeals .....

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sh collateral offered to ICICI Bank A2,10,99,000/- as income of the previous year and assessed total income at A7,87,40,505/-. Aggrieved by the order of the Assessing Officer the company has filed an appeal before ld. Commissioner of Income Tax (Appeals)-IV and reiterated its submissions with the judicial decisions on the ground of retention of money were the contractor could not treat the retention amount as income till the contract period is lapsed or completed but the ld. Commissioner of Inco .....

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ned that company has sold a portion of loans granted by its various self help groups to ICICI Bank on the basis of Bilateral Buy Out Basis. A per the terms and conditions of the buyout deal the assessee shall provide cash collateral for the amount equal to 2% of purchase consideration for receivables assigned to ICICI Bank and such collateral is made by way of bank deposits and company shall make a lien in favour of ICICI Bank. The terms being the cash collateral provided shall be utilized by IC .....

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enalty of A71,01,923/-. Aggrieved by the order of penalty u/s.271(1)(c) the assessee preferred an appeal before Commissioner of Income Tax (Appeals). 5. In appellate proceedings the assessee company has reiterated its earlier submissions and relied on the legal decisions were the amount of retention money was not considered as income until the contract period expires. But the ld. Commissioner of Income Tax (Appeals) in quantum appeal has confirmed the addition of Assessing Officer. Meanwhile tim .....

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d appeal against the order of the Commissioner of Income Tax (Appeals) passed u/Secs. 143(3) and 250 of the Act due to claim of Bad debts. The NBFC company has filed submissions duly supported by the Jurisdictional High Court decision. 6. As submitted the assessee has fixed deposits to cover the probable deficiency occurs to ICICI Bank in case of difference in realization of loans, which takes the characterises of retention money. Further, the assessee is following Auditing and accounting standa .....

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dard, the appellant had adopted an accounting policy with respect to recognition of revenue in respect of income from buyout of portfolio of loans. The said Accounting policy, which has been mentioned as part of the notes forming part of the Audited accounts filed alongwith the return of income reads as under:- ç) Revenue Recognition i) ............ ii) In respect of loans sold on bilateral basis with banks and Financial Institutions, the difference between the book value of the loans sol .....

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has filed an appeal before the Tribunal. 7. The ld. Departmental Representative has urged that the cash collateral is not permissible and treated as mere diversion of income overriding title and assessee has not furnished genuine details in respect of Revenue recognition and pleaded for set aside the order of the Commissioner of Income Tax (Appeals) and relied on the judicial decisions. 8. On the other hand, the ld. Authorised Representative of the assessee submitted that there is no concealmen .....

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Tax (Appeals) has considered the accounting standards, accounting system and judicial decisions and directed to delete the penalty imposed on assessee in accordance with law and prayed for dismissal of the appeal of the Revenue. 9. We heard the rival submissions of both the parties, material on record, lower authorities order and judicial decisions cited. The assessee being a Micro Finance Company is in the business of providing financial loans to various self help groups. The loans granted to .....

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