Loading judgment…
Facts
The assessee, a cooperative bank, claimed deduction under section 36(1)(viia) for provisions for bad and doubtful debts pertaining to rural branches. The Assessing Officer disallowed the claim, and the CIT(A) upheld the penalty of Rs. 68 lakh levied under section 271(1)(c).
Held
The Tribunal held that penalty under section 271(1)(c) is leviable only when an assessee conceals income or furnishes inaccurate particulars. A mere claim, even if unsustainable, does not automatically amount to furnishing inaccurate particulars, especially when it arises from an interpretation of facts. The Supreme Court's judgment in CIT vs. Reliance Petroproducts Pvt. Ltd. was relied upon.
Key Issues
Whether the penalty levied under Section 271(1)(c) was justified when the disallowance arose from a claim based on interpretation of facts, and not from concealment of income or furnishing inaccurate particulars.
Sections Cited
271(1)(c), 36(1)(viia)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 04/03/2025 Date of Order – 03/04/2025
O R D E R PER V. DURGA RAO, J.M.
Appeal by the assessee is emanating from the impugned order dated 28/11/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2009–10.
The assessee has raised following grounds:–
“1. Whether on the facts and circumstances of the case, the learned CIT-(A) was justified in affirming the order of the assessing officer in levying penalty u/s 271(1)(c) to the tune of Rs.68,00,000/-. 2. The Appellant craves leave to add or alter any other ground that may be taken at the time of the hearing.”
2 The Wardha District Central Co–operative Bank Ltd. ITA no.11/Nag./2025
While perusing the material available on record, we find that this is a case where the learned CIT(A) upheld the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 ("the Act") to the tune of ` 68 lakh on account of disallowance of provision for bad and doubtful debts pertaining to rural Branches of the Bank which are considered to be allowable under section 36(1)(viia) of the Act. The core issue that we need to adjudicate in this appeal is, whether or not the penalty imposed under section 271(1)(c) of the Act was justified on account of disallowances of certain claims made during the course of assessment proceedings and more specifically in this case where the assessee is a District Central Co–operative Bank and the claim is pertaining to the deduction claimed by the assessee under section 36(1)(viia) of the Act. Before us, the learned Authorised Representative for the assessee submitted that the assessee had itself suo–moto claimed certain deduction in view of the provisions of section 36(1)(viia) of the Act which, according to the assessee Bank is a legitimate claim. She vehemently argued that where the disallowance of an incorrect claim is made, no penalty is leviable, particularly when the issue emanates from interpretation of facts as to whether a particular Branch is Rural or Urban. In this regard, we find that the said issue is squarely covered by the judgment of the Hon’ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158 (SC), wherein the Hon’ble Supreme Court held that –
“Section 271(1)(c) of the Act is only applicable when the conditions precedent stated therein are fulfilled, i.e., the Assessing Officer (AO) must be satisfied that an Assessee has concealed income or furnished inaccurate particulars of income and only then can penalty be levied. A mere making of a claim, which by itself, is not sustainable under law would not amount to furnishing of 3 The Wardha District Central Co–operative Bank Ltd. ITA no.11/Nag./2025 inaccurate particulars of income. Therefore, as a matter of fact, since there was no finding by any authority that the details submitted by the Assessee company were erroneous or false, no question of initiating penalty proceedings against the Assessee company would arise. Only the act of the Assessee company in claiming an expenditure in its ROI, whether such claim was acceptable or not to the revenue department, would, in isolation, not invite penalty under the provisions of section 271(1)(c) of the Act.
Keeping in view the overall facts and circumstances of the case and the arguments put forth by the learned A.R. for the assessee and the learned Departmental Representative, it emerges that the penalty imposed in this case is emanating from the disallowances made during the assessment proceedings pertaining to claim of deductions under section 36(1)(viia) of the Act. The jurisprudence on penalty vis-à-vis disallowance has already been settled in the landmark Judgment of Supreme Court in Reliance Petroproducts Pvt. Ltd. (supra), wherein it has been categorically held by the Hon’ble Supreme Court that no penalty can be levied on mere disallowance particularly when the explanation is bona fide. Consequently, penalty of ` 68 lakh levied by the Assessing Officer and confirmed by the learned CIT(A) is hereby directed to be deleted. Accordingly, the impugned order passed by the learned CIT(A) is hereby set aside by allowing the grounds of appeal raised by the assessee.
In the result, assessee’s appeal stands allowed.
Order pronounced in the open Court on 03/04/2025