DCIT CIR 1(1), V. LORD KRISHNA BANK LTD ( NOKW MERGED WITH HDFC BAN LTD),

ITA 715/COCH/2007

• Counselvise Citation: 71519914 RSA 2007
• Duration Of Justice: 3 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: misc
• Appeal Filed On: 03-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIWAS RAO
• Assessee Lawyers: MRUDU INAMDAR
• Keywords: Depreciation

Judgement Text

1 ITA NO.715/COCHIN/2007 M/S. LORD KRISHNA BANK LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI N. V. VASUDEVAN, J.M. AND SHRI R.K. PAN DA, A.M. ITA NO.715/COCHIN/2007 ASSESSMENT YEAR : 2001-02 THE D EPUTY COMMISSIONER OF INCOME-TAX, CIT, CIRCLE 1(1), RANGE 1, C. R. BUILDINGS, I. S. PRESS ROAD, EMARKULAM, KOCHI-682 018 VS. M/ S. LORD KRISHNA BANK LIMITED (NOW MERGED WITH HDFC BANK LTD.) REGD. OFFICE HDFC BANK HOUSE, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI-400 013. PAN NO: AAACL4704F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GOLI SRINIWAS RAO RESPONDENT BY : SHRI MRUDU INAMDAR O R D E R PER R.K. PANDA, A.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 29.05.2007 PASSED BY THE CIT(A)-II, COCHIN RELATING TO ASSESSMENT YEAR 2001-02. 2. THE REVENUE IN THE GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF THE LD. CIT(A) IN CANCELLING THE PENALTY OF RS.2,15,24, 700/- LEVIED BY THE AO U/S. 271(1)(C) OF THE I.T. ACT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BANKING ACTIVITIES. THE ASSE SSMENT WAS COMPLETED ON A TOTAL INCOME OF RS.15,67,94,509/- AS AGAINST L OSS OF RS.56,80,229/- 2 ITA NO.715/COCHIN/2007 M/S. LORD KRISHNA BANK LTD. DECLARED IN THE RETURN FILED. SUBSEQUENTLY, THE AO INITIATED THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AND LEVIED PE NALTY U/S. 271(1)(C) AMOUNTING TO RS.2,15,24,700/- ON ACCOUNT OF THE FOL LOWING ADDITIONS :- SR. NO. DESCRIPTION AMOUNT RS. 1. PREMIUM AMORTIZATION ON PURCHASE OF SECURITIES 70,56,000 2. DIFFERENCE IN INVESTMENT DEPRECIATION ADDED BACK 5,00,00 0 3. LEASE DEPRECIATION AND LEASE EQUALIZATION RESERVE 33,23,018 4. RELATABLE INTEREST ON TAX FREE INVESTMENTS 4,35,45,000 3. IN APPEAL, THE LD. CIT(A) CANCELED THE PENALTY L EVIED BY THE AO. AGGRIEVED WITH SUCH ORDER, THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE MAJOR ADDITION OF RS.4,35,45,000/- O N WHICH PENALTY HAS BEEN LEVIED BY THE AO IS ON ACCOUNT OF RELATABLE INTERES T ON TAX FREE INVESTMENTS DISALLOWED U/S.14A OF THE I.T. ACT. THIS IN OUR OPI NION IS A DEBATABLE ISSUE. IT IS THE SETTLED PROPOSITION OF THE LAW THAT PENALTY IS NOT LEVIABLE ON ADDITIONS WHICH ARE DEBATABLE ISSUES. THEREFORE, THE LD. CIT( A) IN OUR OPINION WAS JUSTIFIED IN DELETING THE PENALTY ON THIS ADDITION. 5. SO FAR AS THE PENALTY ON ADDITION OF RS.70,56,00 0/- BEING PREMIUM AMORTIZATION ON PURCHASE OF SECURITIES IS CONCERNED , WE FIND THE TRIBUNAL IN THE PAST HAS ALLOWED THIS CLAIM OF THE ASSESSEE. TH E TRIBUNAL IN THE IMPUGNED ASSESSMENT YEAR HAS MERELY RESTORED THE IS SUE TO THE FILE OF AO FOR VERIFICATION. THEREFORE, IN OUR OPINION NO PENALTY ON THIS ADDITION IS CALLED 3 ITA NO.715/COCHIN/2007 M/S. LORD KRISHNA BANK LTD. FOR. THEREFORE, THE ORDER OF THE LD. CIT(A) DELETIN G THE PENALTY ON THIS ADDITIONS IS IN ORDER. 6. SO FAR AS THE PENALTY LEVIED ON ADDITION OF RS.5 ,00,000/- BEING THE DIFFERENCE IN DEPRECIATION ADDED BACK IS CONCERNED, WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT THE ADDITION WAS DUE TO NON APPLICATION BY MIND BY THE AO. A PERUSAL OF TH E ASSESSMENT ORDER AND THE PRINTED AUDITED ACCOUNTS (A COPY OF WHICH IS PL ACED AT PG. NO. 42 OF THE PAPER BOOK) SHOW THE PROVISIONS OF DEPRECIATION IN INVESTMENT AT RS.69 LAKHS. SIMILARLY THE COMPUTATION OF INCOME (A COPY OF WHICH IS PLACED AT PG. NO. 46 OF THE PAPER BOOK) SHOW THE INVESTMENT DEPRE CIATION AT RS.69 LAKHS. WE, THEREFORE, FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT THE AO IS NOT JUSTIFIED IN LEVYING PE NALTY ON ACCOUNT OF ADDITION BEING DIFFERENCE IN INVESTMENT DEPRECIATION ADDED B ACK. ALTHOUGH IT WAS NOT CHALLENGED IN THE QUANTUM, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE HAS NEVER AGREED FOR THE ADDITION AS ALLEGED BY THE AO. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY ON THIS ACCOUNT. 7. SO FAR AS THE PENALTY LEVIED ON ADDITION OF RS.3 3,22,018/- BEING LEASE DEPRECIATION AND LEASE EQUALIZATION RESERVE IS CONC ERNED, WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE HAS DISCUSSED THE I SSUE FOR THE A.Y.S 1995- 96 TO 1997-98 AND THE APPEAL FILED BY THE ASSESSEE ON THIS ISSUE HAS BEEN DISMISSED. HOWEVER SUCH ORDER OF THE TRIBUNAL IS DA TED 19.03.2004 AND THE ASSESSEE IN THE IMPUGNED CASE HAS FILED ITS RETURN OF INCOME MUCH EARLIER. THE ASSESSEE ALL ALONG WAS CLAIMING THE SAME IN THE RETURN OF THE INCOME AND FULL DISCLOSURES WERE THERE. FURTHER, THE LD. C IT(A) IN THE PAST HAS ALLOWED SUCH CLAIM OF THE ASSESSEE. THEREFORE, IN O UR VIEW, THE ISSUE BEING DEBATABLE IN NATURE, DOES NOT WARRANT ATTRACTION OF LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. WE THEREFORE, FIND NO INFIRMI TY IN THE ORDER OF THE LD. 4 ITA NO.715/COCHIN/2007 M/S. LORD KRISHNA BANK LTD. CIT(A) CANCELLING THE PENALTY. THE GROUNDS RAISED B Y THE REVENUE ARE ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 24 TH DAY OF JUNE, 2011. SD/- ( N.V. VASUDEVAN ) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED : 24/06/2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, H - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI