Income Tax Appellate Tribunal - Amritsar
The Baramulla Central Coperative Bank ... vs The Dy. Commissioner Of Income Tax, ... on 19 December, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE SH. N. K. CHOUDHRY, JUDICIAL MEMBER
AND SH. O. P. MEENA ACCOUNTANT MEMBER
I.T.A. No. 359/Asr/2016
Assessment Year: 2007-08
The Baramulla Central vs. Deputy Commissioner of Income
Co-operative Bank Ltd., Tax, Circle 3, Srinagar
National Highway, Baramulla,
Kashmir
[PAN: AAAAB 5145Q]
(Appellant) (Respondent)
Appellant by : Sh. Padam Bahl (C.A.)
Respondent by: Sh. Charan Dass (D.R.)
Date of Hearing: 19.12.2019
Date of Pronouncement:19.12.2019
ORDER
Per O. P. Meena, AM:
This appeal filed by the Assessee is directed against the order of learned Commissioner of Income Tax (Appeals), Jammu dated 29.02.2016 for the Assessment Year 2007-08.
2. The ground no. 1 to 4 relates to confirm the penalty u/s 271(1)(c) amounting to Rs.40,03,762/-.
3. Briefly stated the facts of the case are that the assessment was made u/s 143(3) on 24.12.2009 on a total income of Rs.1,18,94,720/- by denying deductions on account of additional provision for bad and doubtful debts 2 ITA No. 359/Asr/2016 (AY 2007-08) The Baramulla Central Coop. Bank Ltd. v. Dy. CIT amounting to Rs.70,95,288/- and disallowance u/s 36(i)(iv) and 36(i)(va) of the Act. These additions were confirmed by the CIT as well as ITAT penalty proceedings u/s 271(1)(c) were also initiated. After getting the order of the ITAT, the case was fixed for hearing on 22.05.2014 but the assessee failed to make any compliance therefore the AO imposed penalty of Rs.40,03,762/- u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income.
4. Being aggrieved the assessee carried the matter before CIT (A). Wherein it was submitted that the assessee bank claimed a deduction of Rs.70,95,288/- in respect of additional provision for bad & doubtful debts. However, the assessee restricted the claim of additional provision to the gross total income instead of restricting it to the amount of actual provision made. Therefore, the claim of deduction was made under bona-fide belief that same was allowable expenditure. The assessee has placed reliance on the decision of Reliance Petroproducts Pvt. Ltd. v. CIT & Ors. for his written submission has reproduced in the part order. However, the CIT(A) was of the view that it is not a case where all the particulars of income have been furnished, instead this is a wrong claim of deduction which was prima-facie to be wrong. The appellant being a cooperative society cannot escape from the responsibility of making the wrong claim of deductions knowingly fully well that these deductions were ab-initio not allowable under the Act. Therefore, the appeal of the assessee is dismissed.
5. Being aggrieved the assessee filed this appeal before this tribunal. The Ld. counsel submitted that the claim of deduction of Rs.70,95,288/- in respect of additional provision for bad & doubtful debts was to be restricted the actual provision made as against which the claim was made against the provision to the gross total income. Since the issue is debatable one and this is mere claim of deduction was not found to be allowable which does not furnish inaccurate particulars of income. Similarly, the assessee has written back bad debt 3 ITA No. 359/Asr/2016 (AY 2007-08) The Baramulla Central Coop. Bank Ltd. v. Dy. CIT amount of Rs.9,20,790/- which is allowable as per Banking Regulation Act, however this was treated as concealed by the AO. However, the same cannot be treated as concealment in nature, therefore the penalty has been wrongly sustained by the CIT(A). Ld. counsel further supported his view that placing the reliance on the decision of Hon'ble Supreme Court in the case of CIT v. Reliance Petro Products Pvt. Ltd. 322 ITR 158 (SC) where in it was held that the penalty of u/s 271(1)(c) was merely if it is incorrect, inadmissible claim has been made in the return and to the all material and facts having been disclosed in the return of income. The Ld. counsel placed reliance on the following case laws:
"1. Commissioner of Income Tax v. Ajaib Singh and Co. 253 ITR 630 (P&H)
2. Commissioner of Income Tax v. Mehta Engineers Ltd. 300 ITR 308 (P&H)
3. Commissioner of Income Tax v. Reliance Petro Products Pvt. Ltd. 322 ITR 158 (SC).
4. Price Water House Coopers Pvt. Ltd. v. Commissioner of Income Tax 348 ITR 306 (SC).
5. Tata Iron and Steel Co. Ltd. D.V Bapat Income Tax Officer 101 ITR 292 (Bom)."
6. Per contra, the Ld. DR relied upon the orders of the lower authorities.
7. We have heard the rival submissions and perused the relevant material on record. The perusal of the assessment order reveals that the AO has made addition on the basis of facts disclosed by the assessee in the return of income 4 ITA No. 359/Asr/2016 (AY 2007-08) The Baramulla Central Coop. Bank Ltd. v. Dy. CIT and also during the course of assessment proceedings. The claim of deduction of Rs.70,95,288/- in respect of additional provision for bad & doubtful debts was to be restricted the actual provision made as against which the claim was made against the provision to the gross total income. Since the issue is debatable one and this is mere claim of deduction was not found to be allowable which does not furnish inaccurate particulars of income. Similarly, the assessee has written back bad debt amount of Rs.9,20,790/- which is allowable as per Banking Regulation Act. Thus, the addition is made on difference of opinion from the point of view of the Assessee. It is trite law that penalty proceedings are distinct and separate proceedings from assessment proceedings. The finding recorded in the assessment order is not conclusive for deciding the imposition of penalty. It only has a persuasive value. Any finding recorded in the assessment order does not mean that the penalty has to be imposed automatically. Explanation 1 to section 271 (l) (c) provides that the penalty would be deemed to attract where in respect of a fact material to the computation of income either no explanation is offered, or explanation offered is found to be false. In this case, the assessee has offered explanation, however, the same was not found acceptable by the AO. However, the explanation offered was not found to be false and accordingly Clause (A) of Explanation 1 does not cover its case. Clause (B) of Explanation 1 provides that where the assessee is not able to substantiate its explanation and fails to prove 5 ITA No. 359/Asr/2016 (AY 2007-08) The Baramulla Central Coop. Bank Ltd. v. Dy. CIT that such explanation is bonafide and all the facts relating to the same have been disclosed, penalty is leviable. As the claim of provision for bad and doubtful debts was based on method of accounting as per Booking Regulation, therefore, it cannot be said that there was concealed income. This being the factual position, therefore penalty u/s 271(1) (c) is not leviable. Just because Appellant's explanation was not found acceptable by the AO, it does not follow that that the Appellant was unable to substantiate his explanation by providing various evidences and judicial opinions. Explanation 1 does therefore, not cover the case of the Appellant. Based on the above facts of the case, It can be held that the Appellant had made all the necessary disclosures on a bonafide belief, which is not agreeable to the AO, it will not automatically lead to a case for penalty under section 271(1)(c) of the IT Act, 1961. We are therefore of the considered view that the penalty is not sustainable in view of decision of the Hon'ble Supreme Court in case of CIT v Reliance Petroproducts Pvt. Ltd. (322 ITR 158) (SC) held that merely because the assessee has claimed the expenditure, which claim was not accepted or was not acceptable by the revenue, penalty u/s. 271(1) (c) of the Act cannot be attracted. The Hon'ble Supreme Court also observed that mere disallowance of claim made by the assessee, cannot amount furnishing of inaccurate particulars of income unless, the information as given in return of income was found to be incorrect or inaccurate. Similarly, the Hon'ble Gujarat High Court in the case of National 6 ITA No. 359/Asr/2016 (AY 2007-08) The Baramulla Central Coop. Bank Ltd. v. Dy. CIT Textile 249 ITR 125 (Gujarat) held that addition made is not conclusive, where the assessee has furnished evidence; it was held that no penalty is leviable. The other various decision of tribunals as well as High Courts as discussed above. In the light of above discussion, the penalty levied at Rs.3,04,750 is therefore, deleted. This ground of appeal is therefore allowed.
8. In the result, the appeal of the assessee stands allowed.
9. The order pronounced in the open Court on 19.12.2019.
Sd/- Sd/-
(N.K.CHOUDHRY) (O.P.MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Amritsar: Dated: December 19, 2019/opm
Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/ Guard file of ITAT.
By order Assistant Registrar