TMI Blog2018 (7) TMI 1684X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reasons that assessee has given differential treatment of expenses in the books of account and in return of income without pointing out how such treatment given by the assessee towards expenses incurred on NPA is not allowable as revenue expenses, which is evident from the fact that the Assessing Officer has never doubted the genuineness of expenses and also not observed that these expenses are not revenue in nature. Additions made by the AO towards disallowance of expenses incurred on loan assets and treated as part of cost of asset and claimed as revenue in nature in statement of total income was only on account of different views taken on same set of facts and, therefore, they could at the most be termed as difference of opinion but nothing to do with concealment of income or furnishing of inaccurate particulars of income. This legal proposition is supported by the decision of Hon’ble Supreme Court in the case of Reliance Petroproducts (2010 (3) TMI 80 - SUPREME COURT), wherein, it was clearly observed that merely because the assessee has claimed the expenditure, which claim was not accepted or not acceptable to the Revenue, that by itself would not attract penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961. The case was selected for scrutiny and statutory notices u/s. 143(2) and 143(1) of the Act, were issued and served on the assessee. In response to the notices, the AR for the assessee appeared from time to time and filed various details as called for. During the course of assessment proceedings, the Assessing Officer observed that the assessee has capitalized expenses incurred in relation to non-performing loans and added to it to the loan asset account in the books of account. However, such expenses which are in the nature of Revenue expenses have been claimed in the statement of total income. Therefore, the Assessing Officer called upon the assessee to explain as to why expenses claimed in the return of income relating to loans assets which are otherwise added to cost of assets in books of account should not be disallowed. In response, the assessee vide letter dated 13.03.2015, submitted that it is in the business of acquiring non-performing loans from banks and financial institutions and resolving. Accordingly, whatever expenses are incurred on particular non-performing loan is charged to that particular asset and capitalized in the books of account to be treated as stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer erred in disallowing the revenue expenses amounting to ₹ 37.22,563/- as claimed by the Appellant on the alleged ground that the same are not debited to Profit and Loss Account and that there was no sale or transfer of assets in the year under consideration. He further erred in stating that these expenses cannot be allowed since they are directly added to cost of Loan Assets Account, which is in the nature of work in progress account. 5.1.2 I find that this issue has been decided by Hon'ble ITAT Mumbai in appellant's own case for AY 2009-10 2010-11 in ITA Nos. 3123 6331/Mum/2013 read with MA Nos. 308 309/Mum/2015. The relevant part of the order is reproduced below: 5. After going through the rival submissions and the material before us we find that the business of the assessee involves acquiring NPAs from banks or financial institutions. These NPAs are loan amounts of various types of parties where loss is outstanding against the party and such party has also given certain assets as security to the bank/financial institutions. The charge of such securities also comes to the assessee with NPAs. Either the NPA loan is recovered from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in this appeal is covered against the assessee by the decision of the ITAT A.Ys. 2009-10 and 2010-11 in ITA Nos. 3123 6331/Mum/2013, wherein the Tribunal held that expenditure incurred on NPA s capitalized in books of account and treated as work-in-progress shall not be allowed as revenue expenditure in the statement of total income. 6. The learned DR, also submitted that the issue is covered against the assessee by the decision of the Tribunal in its own case for A.Ys. 2009-10 and 2010- 11 in ITA Nos. 3123 6331/Mum/2013 7. We have heard both the parties and perused the material on record. The coordinate Bench of ITAT Mumbai Bench C in assessee s own case for A.Ys. 2009-10 and 2010-11 in ITA Nos. 3123 6331/Mum/2013 has deliberated the issue at length and after considering relevant facts held that expenses incurred on NPA s and treated as part of asset in the books of account cannot be treated as revenue expenditure in statement of total income as the same is not meeting the matching principles of accountancy. The relevant portion of the order is extracted below: 5. After going through the rival submissions and the material before us we find that the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and being consistent with the view taken by the coordinate Bench in assessee s own case for earlier years, we are of the view that the CIT(A) was right in confirming the additions made by the Assessing Officer towards disallowance of expenditure incurred on NPA and treated as cost of such assets in books of account but claimed as revenue expenditure in statement of total income. Hence, we are inclined to uphold the finding of the CIT(A) and dismiss the appeal of the assessee for A.Y. 2012-13. 8. The facts and issues involved in ITA No. 1020/Mum/2017 for A.Y. 2011-12 are identical to the issue discussed in ITA No. 1019/Mum/2017 above. The reasons given by us in the preceding paragraphs shall mutatis mutandis apply to this appeal. Therefore, for the similar reasons, we uphold the findings of the CIT(A) and dismiss the appeal filed by the assessee for A.Y. 2011-12 also. 9. We shall now take up ITA No. 747/Mum/2017 Co NO. 124/Mum/2018 . The appeal filed by the Revenue is directed against the order of CIT(A)-8, Mumbai, for A.Y. 2010-11, deleting penalty levied u/s. 271(1)(c) of the Income tax Act, 1961. The Revenue has raised the following Grounds of appeal: 1. Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as furnishing of inaccurate particulars of income when assessee has filed complete details of expenses in the return of income filed for the relevant assessment year. The learned Assessing Officer after considering the relevant submissions of the assessee observed that the assessee has claimed expenses incurred on loan asset and treated it as carrying cost in the books of account and as revenue in nature in the statement of total income without routing it through the profit loss account. He, therefore, opined that the assessee has furnished inaccurate particulars of income in respect of claim of expenses and, hence, levied penalty of ₹ 31,76,752 u/s. 271(1)(c) of the Income tax Act, 1961. Aggrieved by the penalty order, the assessee preferred appeal before the CIT(A). 11. Before the CIT(A) the assessee has filed elaborate written submissions, which has been reproduced at para 4.1 at page nos. 3 to 10 of the learned CIT(A) s order. The sum and substance of the arguments of the assessee before the CIT(A) are that it has furnished complete details of expenses claimed in the return of income filed for the year by way of notes to account, explaining treatment of expenses in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant's claim has been disallowed by the A.O. on the basis of details and information made available by the appellant itself. The amount in contention has also not been disputed anywhere. The A.O. has imposed penalty under section 271(1)(c) of the Act on the premise that the quantum addition has been confirmed by CIT(A). 5.2.3 It is a settled legal position that mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. The expression 'furnishing of inaccurate particulars of income' has also not been defined in the Act. The expression 'inaccurate', in ordinary parlance refers to 'not in conformity with the fact or truth' and that is the meaning which is relevant in the context of 'furnishing of inaccurate particulars'. The expression 'particulars' refers to facts, details, specifics, or information about someone or something. Therefore, the expression 'furnishing of inaccurate particulars of income' implies furnishing of details or information about income which are not in conformity with facts or truth. The details or infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icular source was exempt from tax then the loss from such source could not be set off from another source under the same head of income. In view of the above, the AO also initiated penalty proceedings and imposed penalty under section 271(1)(c) of the Act. The Hon'ble Bombay High Court.by dismissing the appeals filed by the Department affirmed the order of the Hon'ble Tribunal and held that: the Tribunal in the impugned order held that the respondent-Appellant had in its return of income filed a note with its computation of income disclosing all details about the sale of US-64 units, the loss and resultant carry forward. Further, all details were disclosed in its return of income as is evident from the fact that the AO gathered information about the carry forward loss and sale of units from return filed by the respondent-Appellant. The Tribunal held that the from the aforesaid facts at the highest it can be said that the claim of the Appellant was not sustainable in law but there was no furnishing of inaccurate particulars or concealment of income on the part of the respondent-Appellant. Thus, the penalty was set aside. * Further, the Hon'ble Bombay High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Tribunal deleted the penalty under section 271 (1)(c) of the Act since the Appellant had disclosed all the relevant details. 5.2.6 The tenets for determining concealment or furnishing of inaccurate particulars have been laid out in the above judgments. I find the facts and circumstances in the instant case are covered by the principles laid down in the above mentioned judgments of the Apex Court. Penalty u/s. 271(1)(c) of the Income Tax Act, 1961 of ₹ 31,76,7527-for alleged furnishing of inaccurate particulars of income is, therefore, deleted. ALLOWED 13. The learned DR submitted that the learned CIT(A) erred in deleting penalty u/s. 271(1)(c) without appreciating the fact that penalty levied is on inadmissible claim of expenses in the computation of income related to loan asset which is a clear case of filing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act. He, further submitted that the ITAT has upheld the additions made by the Assessing Officer towards disallowance of expenses, which evidence itself is enough that the assessee has failed to declare its true and correct income and claim made is not only incorr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r such expenses in the books of account and return of income filed for the relevant assessment years. 16. Having heard both the sides and considering the material on record, we find merit in the arguments of the assessee for the reason that mere disallowance of expenses incurred cannot be considered as furnishing inaccurate particulars of such income, when assessee has furnished complete details of expenses and treatment of such expenses in its books of account, by way of notes to account explaining reasons for differential treatment in the books of account and in return of income for the relevant assessment year. We further observe that it is not a case of the Assessing Officer that assessee neither furnished any details of expenses nor explained reasons for giving differential treatment in books of account and return of income filed for the year. He levied penalty only for the reasons that assessee has given differential treatment of expenses in the books of account and in return of income without pointing out how such treatment given by the assessee towards expenses incurred on NPA is not allowable as revenue expenses, which is evident from the fact that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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