BHAVANI URBAN CO-OPERATIVE BANK LIMITED,PUNE vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE, JALNA, JALNA

PER SATBEER SINGH GODARA, J.M. :

This assessee’s appeal, for assessment year 2017-

2018, arises against the National Faceless Appeal Centre [in

short the “NFAC”] Delhi’s Din and Order No.

ITBA/NFAC/S/250/2023-24/1058833374(1) dated 18.12.2023,

in proceedings u/s.270 of the Income Tax Act, 1961 (in short

“the Act”).

Heard both the parties at length. Case file perused.

grievance herein challenging correctness of sec.270A penalty

of Rs.16,69,750/- levied by the Assessing Officer in his order

2 I.T.A.No.357/PUN./2024 dated 11.12.2019 as upheld in the CIT(A)-NFAC’s lower

appellate discussion as under :

“DETERMINATION AND DECISION

4.1. Grounds of Appeal Nos.1to7 : These grounds of

appellant pertains to imposition of penalty at

Rs.16,69,750/- by the Assessing Officer under section

270A of the Income Tax Act vide order dated 09.09.2021.

In this case, the assessment was completed under section

143(1) of the Act on 11.12.2019 and addition of

Rs.1,00,33,623/- was made by the Assessing Officer. It is

noticed that the said addition was not conferred by the

appellant before the appellate authorities. Before the

Assessing Officer, the appellant admitted that this was a

mistake but not done with an intention. Similar contentions

were taken by the appellant during the appellate

proceedings.

4.2. In view of the above facts and circumstances, I

hold that the Assessing Officer has taken legally correct

view by imposing penalty as the so called mistake would

have not been pointed out by the department, the revenue

might have been escaped. It is on the part of the appellant

to furnish accurate particulars and such mistake are

prejudicial to revenue and cannot be waived.”

3 I.T.A.No.357/PUN./2024 3. Suffice to say, there is hardly any dispute between

the parties that the quantum issue herein is that of assessee’s

claim involving bad and doubtful debts in it’s computation

during the course of assessment. Even the learned assessing

authority(ies) assessment discussion in para-3 page-2 dated

11.12.2018 makes it clear that the assessee had followed RBI

norms for the purpose of making the impugned bad and

doubtful resources computation, whereas the same was held

to be admissible only under the corresponding sec.36(1)(viia) of

the Act. This lead to fresh computation resulting in addition of

Rs.1,00,30,583/- followed by sec.40(a)(ii) disallowance to the

tune of Rs.3,040/- respectively. There is again no quarrel

between the parties that the assessee did not avail it’s

quantum appeal remedy rendering the foregoing twin

additions to have attained finality.

us is that it had committed a bonafide mistake in following

RBI norms than computing it’s provision of “bad and doubtful

debts” u/sec.36(1)(viia) of the Act in light of the assessment

discussion(s) supra.

the point that we are dealing with the newly introduced

penalty provision inserted by the Finance Act, 2016 w.e.f.

01.04.2017 onwards wherein sub-sec.(2)(a) thereof is a

4 I.T.A.No.357/PUN./2024 mandatory clause which gets attracted herein since the

assessee’s income assessed is greater than that processed

u/sec.143(1)(a) of the Act. Mr. Sathe sought to draw a

distinction between the earlier penalty provision u/sec.271(1)

of the Act vis-à-vis this newly introduced penalty mechanism.

He highlighted the fact that the earlier leverage of assessee

claiming a bonafide mistake is no more available under this

newly introduced provision and therefore, we ought to upheld

both the lower authorities action imposing the impugned

penalty.

Revenue’s vehement contentions and see no merit therein. It is

an admitted fact that the assessee’s computation of bad and

doubtful debts was in tune with RBI norms which has been

held to be admissible only in compliance to sec.36(1)(vii) of the

Act. We further reiterate that the assessment discussion

(supra) had already treated as a bonafide mistake only. Faced

with this situation, we note from perusal of the newly

introduced provision i.e., sec.270A(6)(a) that the legislature

has itself stipulated that the former limb of “under-reported

income” under sub-sec.(2) hereinabove would not include an

instance of the tax payer offering bonafide explanation

disclosing all the material facts in support thereof. We are of

the considered view that the assessee’s foregoing computation

of bad and doubtful debts provision is a fit case to be treated

5 I.T.A.No.357/PUN./2024 as a “bonafide” one since it had duly followed the banking

sector regulator’s norms. That being the case, the legislature

has itself offered a leverage to such bonafide mistakes

u/sec.270A(6)(a) of the Act. Their lordships’ landmark decision

in CIT vs. Reliance Petro Products [2010] 322 ITR 158 (SC)

would also apply herein as well that it is not each and every

disallowance/addition in question which attracts the

consequential penalty. We accordingly delete the impugned

penalty of Rs.16,69,750/- in very terms. Ordered accordingly.

Order pronounced in the open Court on 29.07.2024

Sd/- Sd/- [INTURI RAMA RAO] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER

Pune, Dated 29th July, 2024

VBP/-

Copy to

//By Order//

//True Copy //

Sr. Private Secretary, ITAT, Pune Benches, Pune.