THE KANGRA CENTRAL COOPERATIVE BANK LIMITED,DHARAMSHALA vs. DEPUTY COMMISSIONER OF INCOME TAX, PALAMPUR

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ITA 805/CHANDI/2023Status: DisposedITAT Chandigarh28 January 2025AY 2013-141 pages
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What did the Tribunal hold?

The Tribunal held that the levy of penalty under Section 271(1)(c) was not sustainable. The Tribunal noted that the assessee made adequate disclosure regarding the provision for standard assets in its books of accounts and the return of income. It was clarified that the assessee did not specifically claim the provision under Section 36(1)(viia); rather, the AO considered it in that context and held it disallowable. The Tribunal found that a disallowance in quantum proceedings, where there is adequate disclosure and the matter is debatable, cannot automatically lead to a charge of furnishing inaccurate particulars without positive evidence of wrong furnishing of information. The Tribunal relied on the Supreme Court's decision in Reliance Petroproducts Ltd., which held that a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. The penalty was directed to be deleted. The same reasoning was applied to the appeal for AY 2013-14.

What were the facts?

The assessee, The Kangra Central Cooperative Bank Ltd., filed appeals against orders of the CIT(A)/NFAC, Delhi, for Assessment Years 2012-13 and 2013-14. These orders sustained penalties levied under Section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer (AO) initiated penalty proceedings following a disallowance of Rs. 2,21,28,000/- made towards provisions for standard assets during the assessment under Section 143(3). The AO later levied a penalty of Rs. 66,38,400/-, representing 100% of the tax sought to be evaded, for alleged concealment of income by furnishing inaccurate particulars. The CIT(A) upheld this penalty.

What were the issues?

1. Whether the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961, is justified for allegedly concealing income by furnishing inaccurate particulars, when the disallowance was based on provisions for standard assets made in compliance with RBI directions. Assessee's contentions: The assessee argued that provisions for standard assets were made in compliance with RBI prudential norms, and it had no option but to comply. The AO incorrectly held that the assessee made a claim under Section 36(1)(viia). The assessee contended that the disallowance of a claim, which is a debatable issue with differing views from various ITAT benches (citing decisions from Amritsar, Mumbai, and Indore benches), cannot lead to penalty under Section 271(1)(c) as it implies a debatable issue and not furnishing inaccurate particulars. The AO's order was also challenged for not specifying the limb of Section 271(1)(c) under which the penalty was levied. Revenue's contentions: The revenue, through the Addl. CIT, Sr. DR, did not record specific arguments in the judgment regarding the penalty, other than implicitly supporting the AO's action sustained by the CIT(A).

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 250,Section 143(3),Section 274,Section 36(1)(viia),Section 14A

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