Gujarat High Court
Principal Commissioner Of Income Tax ... vs Jamnagar District Co. Operative Bank ... on 9 June, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/365/2015 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 365 of 2015
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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PRINCIPAL COMMISSIONER OF INCOME TAX JAMNAGAR....Appellant(s)
Versus
JAMNAGAR DISTRICT CO. OPERATIVE BANK LTD....Opponent(s)
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Appearance:
MR Harnish V Darji for MR. PRANAV G DESAI, ADVOCATE for the Appellant.
MR B S SOPARKAR, ADVOCATE for the Opponent.
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 09/06/2016
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ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) The Revenue has filed this appeal which was admitted on 21.7.2015 . We framed the substantial question of law for our consideration as under:
(A) Whether the Income Tax Appellate Tribunal erred in law in deleting penalty levied by the Assessing Officer under section 271(A)(c) of the Income-tax Act, 1961 ?
2. Briefly stated the facts are that the respondent assessee is a Co-operative bank. For the assessment year 2009-2010, the assessee had filed return of income in which the assessee had claimed bad and doubtful debts of Rs. 12.28 crores (rounded off). As per section 36(1)(viia) of the Act, the same had to be restricted to 7.5 per cent of the total income and 10 per cent of the aggregate average advances by the rural branch of the bank. The Assessing Officer noted that the assessee had made provision only of Rs. 3.50 crores by way of bad and doubtful debts while claiming the deduction under this head at Rs. 12.28 crores. After putting the assessee to notice, in the order of assessment dated 30.12.2011, the Assessing Officer restricted the deduction to Rs. 3.50 crores and ordered initiation of penalty proceedings.
3. The quantum addition came to be decided by the Tribunal through a third member opinion since there was difference in opinion between two members of the Bench who initially heard the appeal. In this background, when the Assessing Officer confirmed the penalty on the ground of Page 2 of 5 HC-NIC Page 2 of 5 Created On Tue Jun 14 01:43:35 IST 2016 O/TAXAP/365/2015 JUDGMENT concealment of the income at 100 per cent of the amount in question, the issue again reached the Tribunal. The Tribunal deleted the penalty making following observations:
"24. Rival submissions were considered. The issue under consideration is legal issue and at the most can be considered highly debatable. The assessee has disclosed full facts before lower authorities and only question is about the quantum of deduction is available to the assessee. In the present set of facts, the assessee is squarely covered by the decision of the Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) and therefore penalty cannot be sustained. Even otherwise on merits of the case, we have held in the quantum order in appeal No.63/Rjt/2013 that the assessee is entitled to succeed on the basis of the earlier decision of Tribunal in assessee's own case for the earlier two assessment years i.e. AY 2007-08 and 2008-09 and therefore the penalty under section 271(1)(c) is not leviable. For the aforesaid reasons, we hereby cancel the penalty of Rs. 2,71,31,636/- levied by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961."
4. Learned counsel for the Revenue submitted that the assessee had made provision for bad and doubtful debts only of Rs. 3.50 crores but claimed much larger amount by way of deduction under section 31(1)(viia) of the Act. The assessee raised such claim year after year.
5. On the other hand, learned counsel Mr. Soparkar for the assessee submitted that there was no concealment of the income on the part of the assessee. The issue itself was highly debatable requiring resolution through opinion of the third member of the Tribunal. In that view of the matter, the Tribunal correctly deleted the penalty. He relied on the Page 3 of 5 HC-NIC Page 3 of 5 Created On Tue Jun 14 01:43:35 IST 2016 O/TAXAP/365/2015 JUDGMENT decision of the Supreme Court in the case of Reliance Petroproducts (P) Ltd. 322 ITR 158 and Division Bench of this Court in case of Sambhav Media Ltd. 32 reported in taxmann.com 371.
6. As the facts reveal, the issue of the assessee's larger claim of deduction of bad and doubtful claims had to be resolved through opinion of the third member of the Tribunal. Clearly the issue of taxability was debatable. But apart from this, the Tribunal found that there was no concealment of income on the part of the assessee. All facts were on record to enable the Assessing Officer to make addition if he was of the opinion that the claim made by the assessee was not sustainable in law. A bonafide raising of a wrong claim by itself would not give rise to penalty. Supreme Court in the case of Reliance Petroproducts Pvt.Ltd. (Supra) held that where there is no concealment of particulars of income or the assessee has not furnished inaccurate particulars of income, penalty cannot be imposed. It was held that submitting incorrect claims in law do not give rise to penalty proceedings.
7. In the case of Sambhav Media Ltd. (supra), this Court relying on the decision of the Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) held as under:
"7. It appears that the assessee made a claim of statutory deduction under Section 24 of the Act as well as also for depreciation. At the time of assessment, all relevant material facts were disclosed by the assessee and depreciation was also claimed on its business assets. Both Assessing Officer and CIT(A) found that assessee was dis-
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entitled to claim double deduction of depreciation as well as deduction under Section 24 of the Act. The Tribunal rightly held that there was no concealment of income nor was there any filing of inaccurate particulars of income. Thus, on finding the conduct of the assessee bonafide and this being a matter of bona-fide difference of opinion between the assessee and the department regarding allowability of the claim, it was justified in deleting the penalty imposed by both the authorities."
8. In the result, we answer question against Revenue and in favour of the assessee and dismiss the Tax Appeal.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) VC DARJI Page 5 of 5 HC-NIC Page 5 of 5 Created On Tue Jun 14 01:43:35 IST 2016