Axis Bank Limited Vs ACIT (ITAT Ahmedabad)
Penalty on Lease Rent Accounting Difference Quashed – ITAT Ahmedabad Deletes ₹30.90 Crore Penalty on Axis Bank for AYs 2011-12 to 2015-16
The Ahmedabad Bench of the ITAT partly allowed the appeals of Axis Bank Ltd. and quashed penalties of ₹30.90 crores (and similar penalties for five years) levied u/s 271(1)(c) on account of disallowance of additional lease rental expense claimed on Straight Line Method (SLM) basis under Accounting Standard-19.
The bank had changed its accounting policy to recognise lease rentals on SLM basis as mandated by AS-19, resulting in an additional claim of ₹93.04 crores in AY 2011-12. Though this claim was disallowed in quantum proceedings and confirmed by the Tribunal, the ITAT noted that:
- The change in accounting policy was fully disclosed in the audited financial statements (Schedule-17).
- The issue was debatable, with coordinate benches in Bata India Ltd. and HDFC Securities Ltd. allowing similar claims.
- Even the Tribunal in quantum had observed that the exercise was tax-neutral over the lease period.
- The assessee had adopted a plausible and bona fide view based on accounting standards and judicial precedents.
Relying on the Supreme Court ruling in Reliance Petroproducts, the Tribunal held that mere rejection of a claim or difference of opinion cannot attract penalty, when full disclosure is made and no inaccurate particulars are furnished.
Accordingly, the ITAT quashed all penalties u/s 271(1)(c) for AYs 2011-12 to 2015-16, holding that this was not a fit case for concealment or furnishing inaccurate particulars. The appeals were partly allowed, deleting the penalties in entirety.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
