RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD,JAIPUR vs. ACIT/DCIT CIRCLE-6, JAIPUR

4. Aggrieved by the order of the AO, the assessee preferred appeal before the ld. CIT (A). The ld. CIT (A) upheld the decision of the AO and confirmed the levy of penalty.

5. Aggrieved by the order of the CIT(A), the assessee preferred appeal before the us on the grounds mentioned herein above. The ld. AR of the assessee has submitted his written submission as under :- “The assessment of the aforesaid assessee has been framed by not allowing deduction u/s 80P of Interest on advances to staff and miscellaneous income.

Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. Interest on advances to staff is considered to be a necessary support to the main activities of the bank and therefore termed as a “ancillary income” of the assessee. It is a disputed matter among several courts and for the purpose of brevity of this appeal, they are not mentioned here.

Addition of miscellaneous income was deleted by learned CIT (Appeals) and therefore penalty was reduced accordingly.

Interest on advance to staff was held exempt u/s 80P earlier by Hon’ble ITAT in assessee’s own case for AY 2004-05 and 2005-06 but later on, reversed the decision due to Rajasthan High Court order vide dated 04.09.2008 in case of Sirohi Sahakari Bhoomi Vikas Bank Ltd. As per computation of the above mentioned assessment year submitted to Income Tax department and to assessing officer, it is clearly mentioned that treatment on interest on advances to staff is a disputed matter since long. (copy of computation enclosed at Paper Book on Pg. no. 4-6).

Even after addition of Rs. 30,05,845/-, the total taxable income comes to Rs. 68,025/- after allowing proportionate expenditure.

The assessee has not filed appeal before the higher authorities as the tax impact was very less and the assessee would have incurred much higher cost for the legal expense even though here were high chances of the case being in the favor of the assessee.

It is to mention that no concealment was made on the part of the assessee as everything has been properly disclosed in the computation and it is a legal dispute. Penalty under section 271(1)(c) can only be imposed if there is concealment of income or Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. furnishing of inaccurate particulars of income by the assessee. Mere legal findings or differences of opinion on interpretation of law do not justify impositionof penalty.

The assessee has acted in good faith and disclosed all material facts necessary for assessment. The disallowance of the claim in the assessment proceedings could not be the sole basis for levying penalty under section 271(1)(c) of the Act. There was no mala fide intention to evade tax.

The word “particulars” used in the section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in various cases that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars.

In this regard, the observations made by the Supreme Court in Sree Krishna Electricals v. State of Tamil Nadu (2009) 23 VST 249 are highly relevant. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court therefore, observed :

“So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant’s account books. Where certain items which are not included in the turnover are disclosed in the dealer’s own account books and the assessing authorities include these items in the dealer’s turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside.”

Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return. Furthermore, it is important to note that the assessee had already provided the Assessing Officer with the balance sheet and Profit & Loss (P&L) statement during the assessment proceedings. The interest on advances to staff was clearly reflected in the P&L statement, which was submitted for review. Therefore, there has been no concealment of facts by the assessee, and the disclosure made in the return was transparent and in good faith. As such, there is no basis for alleging any default on the part of the assessee in terms of concealment of income or providing inaccurate particulars. Reliance in this connection is placed on the following cases :-

CIT v. Reliance Petroproducts Pvt. Ltd.(2010) 322 ITR 158 (SC)

The Supreme Court held that mere making of a claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.

CIT v. Suvira Pearls (20190 415 itr 597 (Delhi)

The Delhi High Court held that where all facts were disclosed by the assessee, but the claim was not acceptable in law, it would not amount to furnishing inaccurate particulars of income. The court emphasized that there must be a conscious act or omission on the part of the assessee to attract penalty.

CIT v. Samson Perinchery (2017) 392 ITR 4 (Bombay)

The Bombay High Court ruled that where the assessee had disclosed all facts material for computation of income, the mere fact that such a claim was not acceptable would not justify imposition of penalty for furnishing inaccurate Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. particulars. The court stressed on the difference between “making an incorrect claim” and furnishing inaccurate particulars.” CIT v. Atul Mohan Bindal (2009) 317 ITR 1 (SC)

The Supreme Court held that where there is no finding that any details supplied by the assessee in its return were incorrect or erroneous or false, there is no question of imposing penalty.

CIT v. Smt. P.K. Noorjahan(1999) 237 ITR 570 (SC)

The Supreme Court held that where the question of law was debatable, penalty cannot be imposed.

In the light of the above arguments and case laws, it is respectfully submitted that the penalty imposed under section 271(1)(c) is not justified and should be deleted. The assessee has not concealed any income or furnished inaccurate particulars. The penalty has been imposed merely based on legal findings and issuance of a High Court order. Therefore, it is prayed that the Hon’ble ITAT may be pleased to delete the penalty and allow the appeal.”

Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. The AO without considering the reply of the assessee in proper perspective, held that the assessee has concealed the income of Rs. 1,30,845/- and liable for penalty under section 271(1)(c) of the IT Act, 1961 and levied penalty of Rs. 40,432/- being 100% of amount of tax sought to be evaded. 7.1 On perusal of the return of income as well as computation filed by the assessee, we find no fault in the particulars submitted by the assessee. Before the AO, the assessee has already submitted that in the computation of the aforesaid assessment year, it is clearly mentioned that the treatment on interest on advances to staff is a disputed matter and the assessee has not considered the same as income.” The assessee has also provided the Assessing Officer with the Balance Sheet and Profit & Loss account during the assessment proceedings. The interest on advances to staffs was clearly reflected in the Profit & Loss account. On perusal of the above details, we are of the view that the AO was not justified in observing that assessee has concealed income or furnished inaccurate particulars of income and levying penalty under section 271(1)(c) of the IT Act, 1961. 7.2 We rely on the principles laid down by the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC), wherein the Hon’ble Supreme Court has held as under:

Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. “10. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as : "not accurate, not exact or correct; not according to truth ; erroneous; as an inaccurate statement, copy or transcript."

Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur.

7.3 Therefore, we are of the opinion that said claim made under the provisions of the Act is disallowed by the AO would not attract the penalty provisions of Section 271(1)(c) of the Act. The Hon’ble Supreme Court in case of CIT vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) has held that where the information given by the assessee is not found to be incorrect, the assessee cannot be held guilty of furnishing inaccurate particulars of income for the purpose of levying the penalty U/s 271(1)(c) of the Act. The Hon’ble Supreme Court has also observed that merely making a wrong claim does not amount to furnishing Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. inaccurate particulars of income in the absence of finding that any detail by the assessee is incorrect or false. Accordingly, in view of the facts and circumstances of the case the penalty levied by the AO U/s 271(1)(c) of the Act is not sustainable and the same is deleted.

सहायक पंजीकार@Aेेज. त्महपेजतंत