M/S. NOIDA COMMERCIAL CO-OPERATIVE BANK LTD.,NEW DELHI vs. JCIT, NOIDA

The brief facts of the case are the return of income was filed declaring income of Rs. 68,39,060/- and the assessment was completed u/s 143(3) of the Act after making an addition of Rs. 5,44,744/- by disallowing excess deduction claimed by the assessee u/s 36(1)(viii) of the Act. During the assessment proceedings, the AO had noticed that the assessee had transferred to statutory reserve, an amount of Rs. 22,79,684/- being 25% of the ‘net profit’ whereas the assessee was allowed to transfer to reserve @ of only 20%. Penalty proceedings were initiated subsequently and penalty was imposed for furnishing inaccurate particulars of income. On appeal, this penalty was confirmed by the Ld. CIT (Appeals). Now the assessee is before the ITAT and has challenged the upholding of penalty by the Ld. CIT (Appeals).

The Ld. Authorised Representative submitted that the assessee is a Co-operative Bank registered under the U.P. Co- operative Societies Act, 1965 and has been carrying on the banking business for more than 15 years. It was submitted that as

Iit was submitted that this was a bona fide mistake on the part of the assessee and it was not a case of furnishing inaccurate particulars of income. It was further submitted that all the facts relevant for the computation of income were already before the AO and it could not be said that there was any furnishing of inaccurate particulars on the part of the assessee. It was submitted that the assessee was not aware that as per the Co- operative Society Act only 20% of the net profits had to be transferred to the general reserve account and this was a bona fide mistake on the part of the assessee. The Ld. Authorised Representative also submitted that during the year under appeal the assessee had paid tax to the tune of Rs. 21,67,670/- on the taxable income and, therefore, an additional amount of tax of Rs. 1,68,400/- was a meager amount to have been sought to be evaded by the assessee. It was prayed that the penalty be deleted.

In response, the Ld. Sr. Departmental Representative placed reliance on the orders of the authorities below and vehemently argued that the penalty had been rightly imposed. It was further submitted that had the assessee’s excess transfer to the reserve not been detected during the course of assessment proceedings, the income to that extent would have remained untaxed.

We have heard the rival submission and have also perused the relevant material on record. It is seen that the Assessing Officer, in the penalty order, has observed that the assesseee has furnished inaccurate particulars. The AO has held that the act of transfer of excess amount to the reserve was an act of furnishing of inaccurate particulars of income. The Ld. CIT (Appeals) has noted that the explanation of the assessee regarding inadvertent error was not tenable. However, with regard to the provisions of section 271(1)(c ) of the Act pertaining to penalty, the Hon’ble Apex Court has authoritatively laid down that making of a claim by the assessee which is not sustainable will not tantamount to furnishing inaccurate particulars. In CIT vs. Reliance Petroproducts Pvt. Ltd. (supra), the Hon’ble Apex Court has held as follows:

In the final result the appeal of the assessee stands allowed.