THE BARAMULLA CENTRAL COPERATIVE BANK LTD,KASHMIR vs. THE DY. COMMISSIONER OF INCOME TAX, SRINAGAR

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ITA 359/ASR/2016Status: DisposedITAT Amritsar19 December 2019AY 2007-086 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the claim for deduction, even if not allowable, does not automatically amount to furnishing inaccurate particulars of income, especially when based on a debatable issue and made with a bonafide belief. The penalty was not leviable as the assessee had disclosed all material facts.

What were the facts?

The assessee bank claimed a deduction for additional provision for bad and doubtful debts which was disallowed by the AO. Subsequently, a penalty was imposed under Section 271(1)(c) for furnishing inaccurate particulars of income.

What were the issues?

Whether a penalty under Section 271(1)(c) is leviable when a deduction claim is disallowed due to a debatable issue and bonafide belief, despite full disclosure of facts.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 36(i)(iv),Section 36(i)(va)

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Cases cited in this judgment(5)Show list

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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR

Before: SH. N. K. CHOUDHRY & SH. O. P. MEENA

Hearing: 19.12.2019Pronounced: 19.12.2019

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR

BEFORE SH. N. K. CHOUDHRY, JUDICIAL MEMBER AND SH. O. P. MEENA ACCOUNTANT MEMBER

I.T.A. No. 359/Asr/2016 Assessment Year: 2007-08

The Baramulla Central vs. Deputy Commissioner of Income Co-operative Bank Ltd., Tax, Circle 3, Srinagar National Highway, Baramulla, Kashmir

[PAN: AAAAB 5145Q] (Appellant) (Respondent)

Appellant by : Sh. Padam Bahl (C.A.) Respondent by: Sh. Charan Dass (D.R.)

Date of Hearing: 19.12.2019 Date of Pronouncement:19.12.2019

ORDER Per O. P. Meena, AM: This appeal filed by the Assessee is directed against the order of learned Commissioner of Income Tax (Appeals), Jammu dated 29.02.2016 for the Assessment Year 2007-08.

2.

The ground no. 1 to 4 relates to confirm the penalty u/s 271(1)(c) amounting to Rs.40,03,762/-.

3.

Briefly stated the facts of the case are that the assessment was made u/s 143(3) on 24.12.2009 on a total income of Rs.1,18,94,720/- by denying deductions on account of additional provision for bad and doubtful debts

2 ITA No. 359/Asr/2016 (AY 2007-08) The Baramulla Central Coop. Bank Ltd. v. Dy. CIT amounting to Rs.70,95,288/- and disallowance u/s 36(i)(iv) and 36(i)(va) of the Act. These additions were confirmed by the CIT as well as ITAT penalty proceedings u/s 271(1)(c) were also initiated. After getting the order of the ITAT, the case was fixed for hearing on 22.05.2014 but the assessee failed to make any compliance therefore the AO imposed penalty of Rs.40,03,762/- u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income.

4.

Being aggrieved the assessee carried the matter before CIT (A). Wherein it was submitted that the assessee bank claimed a deduction of Rs.70,95,288/- in respect of additional provision for bad & doubtful debts. However, the assessee restricted the claim of additional provision to the gross total income instead of restricting it to the amount of actual provision made. Therefore, the claim of deduction was made under bona-fide belief that same was allowable expenditure. The assessee has placed reliance on the decision of Reliance Petroproducts Pvt. Ltd. v. CIT & Ors. for his written submission has reproduced in the part order. However, the CIT(A) was of the view that it is not a case where all the particulars of income have been furnished, instead this is a wrong claim of deduction which was prima-facie to be wrong. The appellant being a cooperative society cannot escape from the responsibility of making the wrong claim of deductions knowingly fully well that these deductions were ab-initio not allowable under the Act. Therefore, the appeal of the assessee is dismissed.

5.

Being aggrieved the assessee filed this appeal before this tribunal. The Ld. counsel submitted that the claim of deduction of Rs.70,95,288/- in respect of additional provision for bad & doubtful debts was to be restricted the actual provision made as against which the claim was made against the provision to the gross total income. Since the issue is debatable one and this is mere claim of deduction was not found to be allowable which does not furnish inaccurate particulars of income. Similarly, the assessee has written back bad debt

3 ITA No. 359/Asr/2016 (AY 2007-08) The Baramulla Central Coop. Bank Ltd. v. Dy. CIT amount of Rs.9,20,790/- which is allowable as per Banking Regulation Act, however this was treated as concealed by the AO. However, the same cannot be treated as concealment in nature, therefore the penalty has been wrongly sustained by the CIT(A). Ld. counsel further supported his view that placing the reliance on the decision of Hon’ble Supreme Court in the case of CIT v. Reliance Petro Products Pvt. Ltd. 322 ITR 158 (SC) where in it was held that the penalty of u/s 271(1)(c) was merely if it is incorrect, inadmissible claim has been made in the return and to the all material and facts having been disclosed in the return of income. The Ld. counsel placed reliance on the following case laws:

“1. Commissioner of Income Tax v. Ajaib Singh and Co. 253 ITR 630 (P&H)

2.

Commissioner of Income Tax v. Mehta Engineers Ltd. 300 ITR 308 (P&H)

3.

Commissioner of Income Tax v. Reliance Petro Products Pvt. Ltd. 322 ITR 158 (SC).

4.

Price Water House Coopers Pvt. Ltd. v. Commissioner of Income Tax 348 ITR 306 (SC).

5.

Tata Iron and Steel Co. Ltd. D.V Bapat Income Tax Officer 101 ITR 292 (Bom).”

6.

Per contra, the Ld. DR relied upon the orders of the lower authorities.

7.

We have heard the rival submissions and perused the relevant material

on record. The perusal of the assessment order reveals that the AO has made

addition on the basis of facts disclosed by the assessee in the return of income

4 ITA No. 359/Asr/2016 (AY 2007-08) The Baramulla Central Coop. Bank Ltd. v. Dy. CIT and also during the course of assessment proceedings. The claim of deduction

of Rs.70,95,288/- in respect of additional provision for bad & doubtful debts

was to be restricted the actual provision made as against which the claim was

made against the provision to the gross total income. Since the issue is

debatable one and this is mere claim of deduction was not found to be

allowable which does not furnish inaccurate particulars of income. Similarly,

the assessee has written back bad debt amount of Rs.9,20,790/- which is

allowable as per Banking Regulation Act. Thus, the addition is made on

difference of opinion from the point of view of the Assessee. It is trite law that

penalty proceedings are distinct and separate proceedings from assessment

proceedings. The finding recorded in the assessment order is not conclusive for

deciding the imposition of penalty. It only has a persuasive value. Any finding

recorded in the assessment order does not mean that the penalty has to be

imposed automatically. Explanation 1 to section 271 (l) (c) provides that the

penalty would be deemed to attract where in respect of a fact material to the

computation of income either no explanation is offered, or explanation offered

is found to be false. In this case, the assessee has offered explanation,

however, the same was not found acceptable by the AO. However, the

explanation offered was not found to be false and accordingly Clause (A) of

Explanation 1 does not cover its case. Clause (B) of Explanation 1 provides that

where the assessee is not able to substantiate its explanation and fails to prove

5 ITA No. 359/Asr/2016 (AY 2007-08) The Baramulla Central Coop. Bank Ltd. v. Dy. CIT that such explanation is bonafide and all the facts relating to the same have

been disclosed, penalty is leviable. As the claim of provision for bad and

doubtful debts was based on method of accounting as per Booking Regulation,

therefore, it cannot be said that there was concealed income. This being the

factual position, therefore penalty u/s 271(1) (c) is not leviable. Just because

Appellant’s explanation was not found acceptable by the AO, it does not follow

that that the Appellant was unable to substantiate his explanation by providing

various evidences and judicial opinions. Explanation 1 does therefore, not

cover the case of the Appellant. Based on the above facts of the case, It can be

held that the Appellant had made all the necessary disclosures on a bonafide

belief, which is not agreeable to the AO, it will not automatically lead to a

case for penalty under section 271(1)(c) of the IT Act, 1961. We are therefore

of the considered view that the penalty is not sustainable in view of decision of

the Hon’ble Supreme Court in case of CIT v Reliance Petroproducts Pvt. Ltd.

(322 ITR 158) (SC) held that merely because the assessee has claimed the

expenditure, which claim was not accepted or was not acceptable by the

revenue, penalty u/s. 271(1) (c) of the Act cannot be attracted. The Hon'ble

Supreme Court also observed that mere disallowance of claim made by the

assessee, cannot amount furnishing of inaccurate particulars of income unless,

the information as given in return of income was found to be incorrect or

inaccurate. Similarly, the Hon’ble Gujarat High Court in the case of National

6 ITA No. 359/Asr/2016 (AY 2007-08) The Baramulla Central Coop. Bank Ltd. v. Dy. CIT Textile 249 ITR 125 (Gujarat) held that addition made is not conclusive, where

the assessee has furnished evidence; it was held that no penalty is leviable.

The other various decision of tribunals as well as High Courts as discussed

above. In the light of above discussion, the penalty levied at Rs.3,04,750 is

therefore, deleted. This ground of appeal is therefore allowed.

8.

In the result, the appeal of the assessee stands allowed.

9.

The order pronounced in the open Court on 19.12.2019.

Sd/- Sd/- (N.K.CHOUDHRY) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Amritsar: Dated: December 19, 2019/opm Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/ Guard file of ITAT. By order

Assistant Registrar

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