Is expenditure on account of provision of standard assets an allowable expenditure under the Income Tax Act?

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI

BEFORE SHRI SHAMIM YAHYA, AM AND
SHRI PAVAN KUMAR GADALE, JM

ITA No. 4712/Mum/2019
(Assessment Year: 2012-13)

LKP Finance Limited
203, Embassy Centre,
Nariman Point, Mumbai-400 021 
PAN/GIR No. AAACL 2401 P
(Appellant)

Vs.

Dy. CIT-3(2)(1)
Room No. 608, Aayakar Bhavan,
Mumbai-400 020
(Respondent)

Appellant by : Ms. Dinkle Hariya
Respondent by : Shri Ajay Pratap Singh

Date of Hearing : 01.04.2021
Date of Pronouncement : 03.06.2021

O R D E R

Per Shamim Yahya, A. M.:

This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-9, Mumbai (‘ld.CIT(A) for short) dated 18.06.2019 and pertains to the assessment year (A.Y.) 2012-13 and the issue raised is confirming the levy of penalty of Rs.9,52,784/-.

2. Brief facts of the case are that the assessee filed its return of income on 26.09.2012 declaring total income of Rs.7,11,220/- under the normal provisions of Act and Rs.7,45,11,693/- under section 115JB of the Act. Thereafter, the case was selected for scrutiny vide notice u/s.143(2) of the Act on 07.08.2013. the assessee revised the return of income on 20.01.2014 to revise the book profit u/s.115JB to Rs.7,06,49,038/-. Assessment u/s. 143(3) was completed on 30.12.2016 by making addition on account of provision for standard asset of Rs.31,75,949/- which was claimed as expenditure but was not added back in the book profit for computation of income u/s.115JB. The A.O. initiated penalty proceedings for furnishing of inaccurate particulars of income.

3. During the penalty proceedings, the A.O. noted that the assessee failed to add back the expenditure on account of provision of standard assets which was not an allowable expenditure. The assessee argued that the computation of income was revised by the assessee on its own during the assessment proceedings and the mistake of not adding back the provision for standard asset was inadvertent and bonafide mistake which was corrected by it on it’s own. The A.O. in response commented that the revision of the computation of income was only after the initiation of scrutiny proceedings and therefore not purely suo motto and bonafide. As per the A.O., the revision of computation of income by the assessee was a result of scrutiny assessment. Therefore, the A.O. levied penalty of Rs.9,52,784/- u/s.271(1)(c) of the Act for filing of inaccurate particulars of income.

4. The ld. CIT(A) also confirmed the penalty order agreeing with the view taken by the A.O. He held that the assessee’s claim of bonafide mistake is not sustainable. He also rejected the submission that there was no concealment by observing that assessee has not made the disclosure of provision for standard assets in any of the enclosures with the computation of income. 

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