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Facts
The assessee, a cooperative bank, filed its return for AY 2011-12. The Assessing Officer made additions including disallowance of TDS, bad debts, and advertisement/miscellaneous expenses, leading to a penalty under Section 271(1)(c). The CIT(A)/NFAC confirmed some additions and directed recalculation of penalty.
Held
The Tribunal held that penalty cannot be imposed on disallowance of expenses. Further, since a coordinate bench had deleted one of the additions forming the basis of the penalty and another addition was based on estimated disallowance, the basis for levying the penalty did not survive.
Key Issues
Whether penalty under Section 271(1)(c) can be imposed when the additions forming the basis for penalty have been deleted by a higher authority or are based on estimated disallowance of expenses.
Sections Cited
271(1)(c), 143(1), 148, 40(a)(ia), 36(1)(viia)
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2011-12 Solapur Siddheshwar Vs. ACIT, Circle-1, Solapur. Sahakari Bank Ltd., 205, 1st Floor, Head Office, Mangalwar Peth, Solapur- 413002. PAN : AABAS6216L Appellant Respondent Assessee by : Shri Pramod S. Shingte Revenue by : Shri Arvind Desai Date of hearing : 07.01.2025 Date of pronouncement : 07.04.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 08.10.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2011-12.
The appellant has raised the following grounds of appeal :-
1. On the facts and in the circumstances of the case and in law Ld. AO erred in levying penalty u/s 271(1)(c) for a sum of Rs.5,51,606/- for alleged default to concealment of particulars without appreciating the facts of the case. Your appellant prays for deletion of this penalty.
2. Your appellant prays for deletion of entire addition. Your appellant craves for to add, alter amend, modify, delete any or all grounds of appeal before or during the course of hearing in the interest of natural justice.”
3. Facts of the case, in brief, are that the assessee is a co- operative society doing banking business and has filed its return of income on 14.09.2011 declaring total income of Rs.3,14,58,269/- which was processed u/s 143(1) and thereafter the case was selected for scrutiny and the assessment was finalized by an order dated 20.03.2014 by determining total income at Rs.3,18,06,634/-. The assessee preferred appeal before Ld. CIT(A) who deleted the addition of Rs.1,61,429/-. Subsequently, a notice u/s 148 was issued on 24.03.2018, the Assessing Officer made addition on account of non-deduction of TDS on interest credit to non-members u/s 40(a)(ia) of the Act of Rs.16,01,171/-. The Assessing Officer also disallowed excess deduction of Rs.10,66,707/- claimed u/s 36(1)(viia) i.e. provisions for bad and doubtful debts. Apart from above additions, the Assessing Officer also made addition of Rs.1,86,946/- to the income of the assessee (Advertisement expenses of Rs.61,407/- and miscellaneous expenses of Rs.1,25,539/-). Accordingly, the assessment was completed on a total income of Rs.3,43,13,090/- as against the income returned by the assessee at Rs.3,14,58,269/-. Penalty u/s 271(1)(c) of the Act was also initiated. In the meantime, the assessee preferred an appeal before Ld. CIT(A) who vide order dated 20.03.2020 partly allowed the appeal of the assessee and gave relief of Rs.10,69,690/- regarding interest paid to cooperative society without deducting tax. Accordingly, Ld. CIT(A) confirmed the disallowance u/s 40(a)(ia) of Rs.5,31,481/-. The rest of two additions respectively of Rs.10,66,707/- and Rs.1,86,946/- were confirmed by Ld. CIT(A)/NFAC and accordingly the Assessing Officer imposed penalty u/s 271(1)(c) of Rs.5,51,606/- on quantum addition of Rs.5,31,481/-, Rs.10,66,707/- and Rs.1,86,946/-.
4. While deciding the appeal against the penalty order, after considering the reply of the assessee, Ld. CIT(A)/NFAC partly allowed the appeal of the assessee and directed the Assessing Officer to re-calculate the quantum of penalty after reducing Rs.1,86,946/- from total disallowance of Rs.17,85,134/-. It is this order against which the assessee is in appeal before this Tribunal.
5. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR further submitted before us that the originally penalty u/s 271(1)(c) was imposed on the basis of three additions i.e. non- deduction of TDS on interest payment disallowance u/s 40(a)(ia) of Rs.5,31,481/-, disallowance for claiming deduction u/s 36(1)(viia) of Rs.10,66,707/- and disallowance of expenses of Rs.1,86,946/- on estimate basis. It was further submitted by Ld. AR that Ld. CIT(A)/NFAC has directed the Assessing Officer to re-calculate the penalty after excluding the disallowance of expenses of Rs.1,86,946/- on estimate basis. Accordingly, Ld. AR submitted before the Bench that now the assessee is challenging the imposition of penalty imposed on the basis of two additions i.e. Rs.5,31,481/- u/s 40(a)(ia) and Rs.10,66,707/- u/s 36(1)(viia) of the Act. In this regard, Ld. AR further submitted that a Co-ordinate Bench of this Tribunal has already deleted the addition of Rs.5,31,481/- made u/s 40(a)(ia) vide order dated 18.07.2022 in the quantum case of the assessee. Accordingly, it was prayed by Ld. AR that no penalty can be imposed on the basis of quantum addition which has already been deleted by the Co-ordinate Bench of this Tribunal. In the last, Ld. AR again submitted before the Bench that no penalty can be imposed for disallowance of expenses and relied on the judgement passed by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC). Accordingly, it was prayed by Ld. AR before the Bench that the penalty of Rs.5,51,606/- need to be deleted in total.
6. Ld. DR appearing from the side of the Revenue accepted the part of the contentions submitted by Ld. AR but did not agreed to delete the penalty in total. According to him, penalty for disallowance on NPA provisions has to be imposed.
We have heard Ld. Counsels from both the sides and perused the material available on record. In this regard, we find that originally penalty was imposed for three additions out of which one addition of Rs.1,86,946/- regarding estimated disallowance of expenses it was directed by Ld. CIT(A)/NFAC that the penalty cannot be imposed on the basis of estimated addition. Second addition of Rs.5,31,481/- i.e. disallowance u/s 40(a)(ia) has already been deleted by the Co-ordinate Bench of this Tribunal in quantum case of the assessee for the same assessment year. Accordingly, we find that the basis of imposition of penalty to the extent of Rs.5,31,481/- + Rs.1,86,946/- does not survive. Now, according to Ld. DR penalty needs to be imposed on the basis of NPA disallowance of Rs.10,66,707/- u/s 36(1)(viia), in this regard Ld. AR relied on the judgment passed by the Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) wherein it has been held that for disallowance of expenses, penalty cannot be imposed. Accordingly, we find force in the arguments of Ld.