Income Tax Appellate Tribunal - Pune
Deputy Commissioner Of Income-Tax,, vs The Nshik Road Deolali Vyapari Sahakari ... on 17 March, 2017
आयकर अपील
य अ धकरण "बी" यायपीठ पण
ु े म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, PUNE
ी आर. के. पांडा, लेखा सद य, एवं ी !वकास अव थी, या#यक सद य के सम$
BEFORE SHRI R.K PANDA, AM AND SHRI VIKAS AWASTHY,JM
आयकर अपील सं. / ITA No. 328/PUN/2015
#नधा&रण वष& / Assessment Year : 2008-09
Deputy Commissioner of Income Tax
Circle-1
Nashik.
.......अपीलाथ / Appellant
बनाम / V/s.
The Nashik Road, Deolali Vyapari Sahakari Bank Ltd.,
"Kalpawriksha" Ashanagar,
Nashik Road,
Pin-422 101
PAN :AAAAT4688C
......
यथ / Respondent
Revenue by : Shri H.B Ninawe
Assessee by : Shri P.S Shinghate
सन
ु वाई क तार ख / Date of Hearing : 16.03.2017
घोषणा क तार ख / Date of Pronouncement : 17.03.2017
आदे श / ORDER
PER VIKAS AWASTHY, JM
This appeal by the Department is directed against the order of Commissioner of Income Tax (Appeal)-I, Nashik dated 30.01.2015 for the assessment year 2008-09 deleting penalty levied u/s 271 (1) (c) of the Income Tax Act, 1961, (hereinafter referred to as 'the Act'). 2 ITA No. 328/PUN/2015
Assessment year: 2008-09
2. The brief facts of the case as emanating from the record are: The assessee is a Co-operative Bank. The assessee filed its return of income in the assessment year 2008-09 on 14.10.2008 declaring income of Rs.2,71,61,445/-.During the course of scrutiny assessment, the Assessing Officer made following additions/ disallowances:
1) Deduction claimed on account of investment fluctuation fund Rs.20 Lakhs.
2) Provision for cash shortage due to misappropriation Rs. 22 Lakhs.
3) Fringe Benefit Tax (FBT) claimed as expenditure Rs.67,587/-.
The Assessing Officer levied penalty u/s 271 (1) (c) of the Act in respect of the aforesaid additions/ disallowances. Aggrieved by the order levying penalty dated 30.03.2013, the assessee filed appeal before the Commissioner of Income Tax (Appeal). The First Appellate Authority vide impugned order deleted the penalty in respect of all the three additions. Against the findings of Commissioner of Income Tax (Appeal), now the Department is in appeal before the Tribunal.
3. Shri H.B Ninawe representing the Department submitted that additions made during the course of assessment have been upheld by the Tribunal. The assessee challenged the addition in ITA No. 1499/PN/2011 before the Tribunal. The Tribunal vide order dated 30.05.2013 has upheld the addition in respect of cash shortage due to misappropriation of fund. The addition made on other grounds was also accepted by the assessee. The Assessing Officer has initiated penalty proceedings u/s 271 (1) (c) of the Act as the assessee has failed to furnish correct information in the return of income. The Commissioner of Income Tax (Appeal) has erred in coming to the 3 ITA No. 328/PUN/2015 Assessment year: 2008-09 conclusion that the assessee had no mala-fide intention in claiming said expenditure in the profit and loss account. If it was bona-fide mistake, the assessee could have rectified the same by filing revised return of income. The Commissioner of Income Tax (Appeal) has erred in deleting penalty in respect of addition made on account of investment fluctuation fund by placing reliance on the decision of the Hon'ble Supreme Court of India in the case of CIT V/s. Reliance Petro Products Pvt Ltd, 322 ITR 158. The assessee could have made disallowances and computed correct income in the revised return of income. The assessee has evaded tax by claiming excess expenditure with mala-fide intention. The ld. DR vehemently defended the order of levying penalty u/s 271 (1) (c) of the Act and prayed for setting aside of the impugned order.
4. On the other hand, Shri P.S. Shinghate appearing on behalf of the assessee submitted that penalty was levied by Assessing Officer in respect of three additions made during assessment proceedings. The first addition is in respect of investment fluctuation fund. Whether investment fluctuation fund can be claimed as expenditure or not is a debatable issue. The assessee had claimed the same as expenditure without any mala-fide intention. The ld. AR further submitted that the Hon'ble Supreme Court of India in the case of CIT v/s. Reliance Petro Products Pvt. Ltd. (supra) has held that a mere making of claim which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars of income. The assessee may have made bona- fide mistake in claiming the said amount as expenditure which may be disallowed but no penalty is called for.
4ITA No. 328/PUN/2015
Assessment year: 2008-09 The second addition was in respect of cash shortage arising out of misappropriation of funds. The dispute with regard to the said claim was the year of claim. The ld. AR submitted that where the dispute is with regard to year of allowability of claim, no penalty is leviable. As regards claim of FBT as expenditure is concerned, it was an inadvertent bona-fide mistake. The assessee is a Co-operative Bank and there was no intention for unjust enrichment by claiming FBT as expenditure. The ld. AR placed reliance on the decision of Hon'ble Supreme Court of India in the case of Price Waterhouse Coopers Pvt. Ltd. V/s. CIT reported as 348 ITR 306.
5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. The Department has assailed the findings of Commissioner of Income Tax (Appeal) in deleting the levy of penalty in respect of additions made on account of investment fluctuation fund, cash shortage due to misappropriation and FBT claimed as expenditure. It is an undisputed fact that assessee has accepted the additions made on account of all above three counts. The Commissioner of Income Tax (Appeal) has deleted the levy of penalty in respect of investment fluctuation fund and claimed of FBT by placing reliance on the decision of CIT V/s. Reliance Petro Products Pvt Ltd (supra).
6. The assessee had claimed provision for investment fluctuation fund Rs. 20 Lakhs. During course of assessment proceedings, the assessee has voluntarily offered the same for taxation. R.B.I master Circular dated 01.07.2013 gives details of classification and valuation of various securities held under various categories such as Held to 5 ITA No. 328/PUN/2015 Assessment year: 2008-09 Maturity, Available for Sale and Held for Trade. The R.B.I also gives details of investment fluctuation reserve, investment reserve accounts. The assessee has given all relevant details in its returned of income. However, the assessee had inadvertently claimed provision for investment fluctuation fund under mistaken belief.
The Hon'ble Supreme Court of India in the case of Reliance Petro Products Pvt Ltd V/s. CIT has held that;
"Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271 (1) (c) . If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271 (1) (c) . That is clearly not the intendment of the Legislature."
Thus, in view of the case and the decision of Hon'ble Apex Court, we do not find infirmity in the findings of Commissioner of Income Tax (Appeal) in deleting penalty on this ground.
7. The second addition on which penalty has been deleted, is shortage of cash arising out of misappropriation of funds. Undisputedly, there was misappropriation of funds to the tune of Rs. 22 Lakhs by bank staff in the year 2004 and the same was shown as cash shortage in the Balance sheet. The Assessing Officer had disallowed the claim of the assessee as the loss had not occurred during the period relevant to assessment year under appeal. The Assessing Officer held that the loss caused by embezzlement of funds had occurred during financial year 2004-05 and the assessee had registered FIR in 2004 itself. It is apparent that the embezzlement has come to the knowledge of assessee in 2004. Embezzlement amount could not be recover in financial year 2004-05 hence the said amount 6 ITA No. 328/PUN/2015 Assessment year: 2008-09 is not allowable in the assessment year 2008-09. We find that while making disallowance, the Assessing Officer has not raised any suspicion over the loss suffered by assessee. The expenditure was disallowed as the assessee has claimed the same in wrong assessment year. It is a well settled law that where expenditure has been claimed in the wrong year, it can be added back to the income returned but no penalty is leviable on such addition.
8. The third addition on which penalty is levied, is disallowances of FBT claimed as deduction. It is the case of the assessee that FBT paid was inadvertently claimed as expenditure. The Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd (supra) deleted the penalty levied u/s 271 (1 ) (c ) where the assessee a multidisciplinary management consultancy service claimed deduction in respect of provision towards payment of gratuity, though in statement it was indicated that the said provision is not allowable. Penalty proceedings u/s 271 (1) (c ) were initiated for furnishing inaccurate particulars of income. The Hon'ble Apex Court held that notwithstanding the fact that the assessee is a reputed firm and has great expertise, it is possible that the assessee could make silly mistake. The penalty was deleted holding the claim of assessee as bona-fide and inadvertent mistake. In the present case, the assessee is a bank. Claiming payment of FBT as expenditure is an error arising out of laxity.
9. Thus, in view of the facts of case and decisions of the Hon'ble Supreme Court of India referred above, we do not find any infirmity in the order of Commissioner of Income Tax (Appeal) in deleting penalty. 7 ITA No. 328/PUN/2015
Assessment year: 2008-09 Accordingly, impugned order is upheld and appeal of the Department is dismissed being devoid of any merit.
10. In the result, appeal of the Department is dismissed.
Order pronounced on Friday, the 17th day of March, 2017.
Sd/- Sd/-
(आर. के. पांडा /R.K Panda) (!वकास अव थी /Vikas Awasthy)
लेखा सद य/ACCOUNTANT MEMBER या यक सद य/JUDICIAL MEMBER
पण
ु े / Pune; !दनांक / Dated : 17th March, 2017.
SB
आदे श क) *#त,ल!प अ-े!षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT (A)-I, Nashik.
4. The CIT, Nashik.
5. %वभागीय त न(ध, आयकर अपील य अ(धकरण, "बी" ब,च, पण ु े / DR, ITAT, "B" Bench, Pune.
6. गाड/ फ़ाइल / Guard File.
// True Copy // आदे शानुसार / BY ORDER, çðèðÚð¨î Ñðü¸ðó¨îðÜ /Assistant Registrar आयकर अपील य अ(धकरण, पुणे / ITAT, Pune 8 ITA No. 328/PUN/2015 Assessment year: 2008-09