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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Ms. Annapurna Gupta & Shri TR Senthil Kumar
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) Before: Ms. Annapurna Gupta, Accountant Member And Shri TR Senthil Kumar, Judicial Member ITA No. 310/Rjt/2017 Assessment Year 2011-12
Shri Rajkot District Deputy Commissioner Cooperative Bank Ltd. of Income Tax, Circle- 'Jilla‘Bank Bhavan:, Vs 1(2), Rajkot Kasturba Road Opp. (Respondent) Chaudhari High School- Rajkot PAN: AAAAR0564K (Appellant)
Appellant by : Shri Deepak Rindani, A.R. Respondent by : Shri S. S. Rathi, Sr.D.R. Date of hearing : 28-04-2022 Date of pronouncement : 31-05-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-
The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-1, Rajkot, (in short referred to as CIT(A)), dated 31-07-2017, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Years (A.Y) 2011-12 ,confirming levy of penalty u/s 271(1)(c) of the Act for concealing/furnishing inaccurate particulars of income
I.T.A No. 310/Rjt/2017 A.Y.. 2011-12 Page No 2 Shri Rajkot District Co.Op. Bank Ltd. vs. DCIT 2. The ground raised by the assessee before us in this regard reads as under: 1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals), Rajkot-1 has erred in confirming the Order passed by Assessing Officer u/s 271(l)(c) of the Income Tax Act, 1961 imposing a penalty of Rs. 18,50,900 on the appellant despite the fact that the claim for the deduction was bona-fide, the details furnished for the claim for allowance were not found to be inaccurate and that there was no deliberate attempt to furnishing of inaccurate particulars on the part of the appellant assesse. The AO's action being erroneous on facts and in law, the appellant prays that the penalty of Rs. 18,50,900 be deleted..
As transpires from the orders of the authorities below, the penalty levied u/s 271(1)© of the Act pertained to disallowance of provision, made and claimed as deduction by the assessee for the purposes of computing its taxable income , towards standard asset contingency fund amounting to Rs.60 lakhs u/s. 36(1)(viia) of the Act .The assessee is a cooperative bank engaged in banking business and other allied activities and had created a provision for bad and doubtful debts in relation to its Standard assets amounting to Rs 60 lacs and claimed deduction of the same u/s 36(1)(viia) of the Act. The same was disallowed in the assessment framed u/s 143(3) of the Act holding that such provisions for Standard assets do not qualify for deduction under the section as it relates only to bad and doubtful debts . Subsequently penalty u/s 271(1)© of the Act was levied on the said disallowance for furnishing inaccurate particulars of income, which in turn was confirmed by the Ld.CIT(A) brushing aside the assesses contention that it was a debatable issue. The Ld.CIT(A) held that there was no debate at all with respect to this claim of the assessee which was clearly not allowable as per law and having been claimed so by the assessee ,it was a
I.T.A No. 310/Rjt/2017 A.Y.. 2011-12 Page No 3 Shri Rajkot District Co.Op. Bank Ltd. vs. DCIT clear case of furnishing inaccurate particulars of income ,eligible for levy of penalty u/s 271(1)(c) of the Act.
The argument of the Ld. Counsel for the assessee before us was multifold as under: (i) the claim had been made bonafidely in accordance with the Circular ,guidelines and instructions issued by the RBI from time to time. In this regard, our attention was drawn to the pleadings made before the A.O. at Para 5 of the order as under:
In response to this show cause notice, assesses submitted reply on 04.03,2014 as under,
"Wiih reference to the above matter you are requested to consider our justification for the deducibility of standard assess contingency fund as under;
Provision of Rs. 6000000/- made against standard assets of the bank is eligible for deduction u/s 36{l){viia) of the act Your Honour should consider that the deduction u/s 36(i)(viiia) is statutory deduction and the same deduction should be allowed,
Besides we are governed by the RBI guidelines and we have to follow the circulars, guidelines and instructions issued by RBI from time to time. As a major element of the Financial Sectors Reforms in India, RBI introduced prudential norms for banking regulation. Capital adequacy, exposure ceilings for lending to individual and group of borrowers, marking to market of the investment portfolio and , income recognition, asset classification arid provisioning norms for the loan portfolio (IRAC in short). In conformity with prudential norms. UCBs should make
I.T.A No. 310/Rjt/2017 A.Y.. 2011-12 Page No 4 Shri Rajkot District Co.Op. Bank Ltd. vs. DCIT provisions on the HPAs bases on classification of assets in to prescribed categories. Considering the time tag between an accounts becoming doubtful of recovery, its recognition as such, the realization of the security and erosion in the value of security over time, hanks are required to make provisions. As per circular standard assets contingency fund with minimum of .25% on standard assets from the year ending 31.3.2000.
We would also like to place on your record the recent judgment of Honorable Gujarat High Court Dated 10.02,2014 in our own case for the assessment year 2008-09 { Tax Appeal Ho 56 of 2013) wherein it was decided that assessee being cooperative Bank bound by the RBI directives and accordingly amortization premium as per RBI instruction is allowed."
(ii) the issue of eligibilty of claim of deduction on account of provision credited on standard assets is a debatable issue since there are conflicting decisions of the ITAT on it.That while the A.O. had relied on the decision of the ITAT Chennai Bench in the case of Bharat Overseas Bank Ltd. Vs. CIT [2012] 26 taxmann.com 330 (Chennai) wherein it was held that standard assets could not be considered for the purposes of provisioning for bad and doubtful debts,Ld.Counsel for the assessee drew our attention to the decision of the of the ITAT in ITA No. 61/Asr/2017 dated 03-01-2018 pertaining to A.Y. 2013-14 holding otherwise that provisioning could be created on standard assets u/s. 36(1)(viia) of the Act. Copy of the order was placed before us. (iii) That no penalty in any case was leviable since the assessee had disclosed all particulars of income correctly and it was only disallowance of claim made by it. Reliance in this regard was placed on the decision of the Apex Court in the case of CIT vs Reliance Petroproducts Pvt.Ltd (2010) 189 Taxman 322(SC).
I.T.A No. 310/Rjt/2017 A.Y.. 2011-12 Page No 5 Shri Rajkot District Co.Op. Bank Ltd. vs. DCIT (iv) Ld. Counsel for the assessee also relied on the decision of the Amritsar Bench of the ITAT on an identical issue in the case of DCIT vs Pathankot Primary Cooperative Development Bank Ltd.(2011) 142 TTJ 401 ,wherein identical penalty levied for claiming provision on standard assets by Cooperative Bank u/s. 36(1)(viia) of the Act ,was deleted.
Ld. D.R. was unable to controvert the contention of the assessee as above that its claim was bonafide in view of the norms prescribed by the RBI, that the issue was a debatable as is evident from the conflicting decisions of the ITAT referred to by the Ld. Counsel for the assessee above and that in any case since all particulars of income had been disclosed and the disallowance pertained merely to a claim made by it,no penalty was leviable.
In view of the above, we find merit in the contention of the Ld. Counsel for the assessee that it is not a fit case for levy of penalty. The Ld.CIT(A)’s finding that there was no debate with respect to the allowability of the claim is found to be incorrect in view of the conflicting decisions of the ITAT on the issue cited by the Ld.Counsel for the assessee before us. The ITAT Amritsar Bench in its order in the case of DCIT Vs Nawanshahr Central Co-op Bank Ltd, in Ita No.61/Asr/2017 has clearly taken a view in favour of the assessee. This clearly goes to establish that the claim was not free from debate. Even otherwise the fact that even as per norms prescribed by the RBI for provisioning for bad and doubtful debts, requiring creating a provision in case of standard assets also, shows that the claim of the assessee was not entirely baseless but was in fact bonafide. Undeniably the assessee has disclosed all particulars with respect to the impugned claim, which claim we find is bonafide and not free from debate. The disallowance of the said claim of provision created on standard assets does not
I.T.A No. 310/Rjt/2017 A.Y.. 2011-12 Page No 6 Shri Rajkot District Co.Op. Bank Ltd. vs. DCIT tanatamount to furnishing any inaccurate particulars of income so as to attract levy of penalty u/s 271(1)(c) of the Act.
The penalty levied therefore amounting to Rs. 18,50,900/- is directed to be deleted.
In effect appeal of the assessee is allowed.
Order pronounced in the open court on 31-05-2022
Sd/- Sd/- (TR SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad : Dated 31/05/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, राजकोट