The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) granted relief to the ICICI bank by deleting the penalty imposed under section 14A of the Income Tax Act,1961 due to improper filing of return of income.
ICICI Bank Ltd, the respondent-assessee filed a return of income and the assessing officer imposed a penalty to the income. The Commissioner of the Income Tax(Appeals) deleted the penalty with the observation that no penalty leviable on account of disallowance under section 14A of the Income Tax Act when the disallowance had been made on an estimate basis and the return of income was filed before insertion of section 14A of the Income Tax Act.
Aarti Visanji, the counsel for the assessee contended that after combined reading of section 10(33) of the Income Tax Act and section 115-O of the Income Tax Act, the exemption was available on gross dividend and not on net income and the investment in the tax-free bonds and shares had been made out of the net worth of Bank and not from borrowed capital, therefore, no part of interest was allocable to exempt income and it was submitted that there is no formula under section 14A of the Income Tax Act for allocation of interest towards exempt income.
K.C. Salvamani and Manish Ajudia, the counsels for the department contended that the penalty imposed by the assessing officer was as per the law and the order passed by the Commissioner of Income Tax (Appeals) was not as per the law.
The bench observed that the assessing officer had levied the penalty on the disallowance of interest expenditure under section 14A of the Income Tax Act on an estimate basis.
It was also observed that the assessing officer had disallowed the interest expenditure and disallowance on an estimated basis even though the assessee had filed the return of income before the insertion of section 14A of the Income Tax Act.
The two-member bench comprising Amit Shukla(Judicial ) and Rifaur Rahman(Accountant) held that the penalty levied on the same amount was not maintainable while dismissing the appeal filed by the revenue.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
