THE E & NF RAILWAY CO-OPERATIVE BANK LTD.,KOLKATA vs. ACIT, CIR. 37, KOLKATA

The only issue for our consideration is that whether the learned CIT (A) erred in confirming the action of the learned

We have heard the rival contentions and perused the records placed before us and carefully gone through the orders of the learned lower authorities referred and relied by both the sides.

We observe that the assessee is a co-operative bank and its activities regulated by Reserve Bank of India. Income of ₹1,75,86,307/- declared in the return for A.Y. 2013-14 furnished on 28th September, 2013. During the course of assessment proceedings carried out after being selected for scrutiny through Computer Assisted Scrutiny Selection (CASS), the learned Assessing Officer observed that assessee had made excess claim towards provision for bad and doubtful debts at ₹1,35,68,450/- and excess claim of contingent provision on standard asset at ₹6,74,000/-. It was claimed before the learned Assessing Officer that these calculations are being done by the person, who prepares the return and it is an inadvertent mistake. However, the learned Assessing Officer was not satisfied and he made the addition and initiated the penalty proceedings under Section 271(1)(c) of the Act and finally levied the penalty of ₹44,00,917/- for furnishing inaccurate particulars of income.

Before us the learned counsel for the assessee referring various decisions including that of Hon'ble Apex Court in the case of CIT v. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) and that of the co-ordinate Bench, Pune in the

On the other hand, the learned Departmental Representative has supported the orders of the learned lower authorities.

We have heard the rival contentions and perused the records placed before us and carefully gone through the decisions relied on by the assessee. The impugned penalty has been levied under Section 271(1)(c) of the Act for the alleged furnishing of inaccurate particular of income. We note that the excess claim of deduction was on account of wrong calculation of provisioning for Non-Performing Assets (NPA). We note that the assessee who is engaged in banking business cannot write off any NPA immediately on becoming bad or doubtful. The assessee has to follow a long procedure before it write off its NPA from books because this is a regular feature of the banking industry of having NPA and there are relevant provisions under the Act providing mechanism for calculating the amount of provisioning for bad and doubtful debts. However, the probability of recovery of NPA accounts are remote and

It is claimed before us that the appellant bank has total NPA of ₹2,746.91 lacs and out of the said NPA’s unsecured portion of doubtful assets are ₹1155.04 and loss assets are ₹84.50 lac. This unsecured portion has actually become bad but due to provision of Co-operative Societies Act. The appellant bank could not write off the same without the permission of the competent authority. Based on this fact it is stated that the actual claim of the assessee of ₹273.03 lac is much below the actual loss on account of doubtful assets at ₹1239.54 loss.

We on considering the above facts find that the mistake has been committed inadvertently at the end of the return prepare and the assessee cannot be held to be having culpable mind of evading the tax liability by way of concealing the particulars or furnishing inaccurate particulars of income. The Hon'ble Apex court in the case of Reliance Petroproducts (P) Ltd. (supra) has held that “if there is no findings that any details supplied by the assessee in ints Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty under section 271(1)(c) of the Act. A mere making of the claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount

In the result, the appeal of the assessee is allowed.