ASSISTANT COMMISSIONER OF INCOME-TAX, RATNAGIRI CIRCLE,, RATNAGIRI vs. THE RATNAGIRI DISTRICT CENTRAL CO-OPERATIVE BANK LTD,, RATNAGIRI

Since the identical facts and issues are involved in all these appeals, we proceed to dispose of them vide this common order.

For the sake of clarity and convenience, the facts relevant for the appeal in ITA No.1631/PUN/2018 for A.Y. 2004-05 are stated herein.

Briefly, the facts of the case are as under: The respondent-assessee is a co-operative bank engaged in the business of banking. The return of income for the assessment year 2004- 05 was filed on 29.10.2004 declaring loss of Rs.10,53,92,979/- and against the said return of income, original assessment was completed vide order dated 28.12.2006 passed u/s 143(3) of the Act accepting the returned loss.

Being aggrieved by the above assessment order, an appeal was filed before the CIT(A) contesting the above additions, who vide order dated 08.11.2016 had deleted the addition on account of overdue interest of Rs.13,23,80,669/- but sustained the addition on account of disallowance of claim for deduction u/s 36(1)(viia) of Rs.2,17,36,000/-. On receipt of the order of CIT(A), the AO has initiated penalty proceedings u/s 271(1)(c) of the Act for addition made on account of disallowance of claim for deduction u/s 36(1)(viia) of Rs.2,17,36,000/-. In response to the show cause notice, the appellant had not filed any explanation before the AO and therefore, in the circumstances, the AO had passed an order dated 27.03.2017 levying penalty of Rs.67,16,423/- u/s. 271(1)(c) of the Act.

Being aggrieved by the levy of penalty, an appeal was filed before the CIT(A), who vide impugned order deleted the penalty by holding that mere disallowance of claim does not entail levy of penalty placing reliance on the decision of Hon'ble Supreme Court in CIT vs. Reliance Petroproduct (P) Ltd. 322 ITR 158 (SC) and Price Waterhouse Coopers Pvt. Ltd. 348 ITR 306 (SC). Being aggrieved by the decision of CIT(A), the Revenue is in appeal before us challenging the correctness of order of CIT(A).

When the matter was called, none appeared on behalf of the assessee despite due service of notice. The Sr. DR submits that the respondent- assessee bank made wrong claim deliberately knowing that it was not entitled for deduction u/s 36(1)(viia) for the assessment year prior to A.Y. 2007-08. Therefore, the respondent-assessee is clearly guilty of furnishing of inaccurate particulars of income.

We have carefully gone through the material on record. On perusal of the assessment order, it would reveal that the claim made for deduction u/s 36(1)(viia) was disallowed by the AO on the ground that co-operative banks were entitled to claim deduction only from assessment year 2007-08 and not for years prior to assessment year 2007-08. Thus, it is a case of mere disallowance of claim under particular section of the Act, there is no finding by the AO, as to what particulars filed by the assessee and found to be inaccurate. It is settled position of law that mere disallowance of claim on legal ground does not entail levy of penalty under the provisions of section 271(1)(c) of the Act as laid down by the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproduct (P) Ltd. (supra). The relevant findings are extracted below:

The CIT(A) has rightly applied the ratio of said decision to the facts of the case. Therefore, we do not see any reason to differ with the reasoning of CIT(A). Hence, we do not find any merit in the appeals filed by the Revenue.

The facts and issues involved in ITA Nos.1632/PUN/2018 to 1634/PUN/2018 & 1674/PUN/2018 are similar to the facts and issues involved in ITA No.1631/PUN/2018. Therefore, the decision rendered in ITA No.1631/PUN/2018 shall apply mutatis mutandis to ITA Nos.1632/PUN/2018 to 1634/PUN/2018 & 1674/PUN/2018.

In the result, all the appeals of Revenue are dismissed.