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It appears that the assessee filed its original return for the assessment year 2007-08 on 30.10.2007, declaring total income at Rs.3,90,26,699/- while claiming deduction of Rs.50,000/- under Section 80P(2)(c)(ii). Subsequently, a revised return was filed by the assessee on 13.12.2007, declaring income of Rs.82,88,771/-. In this revised return, in addition to the claim of deduction under Section 80P(2)(c)(ii) amounting to Rs.50,000/-, the assessee also claimed further deduction of Rs.3,07,37,988/- under section 80P(2)(d) of the Act. However, on being informed by the AO after scrutiny about amendment of Section 80P, the assessee filed re- revised return on 29.12.2009, seeking to withdraw the claim of above deduction. The AO found the re-revised return not a valid one; and completed the assessment on total income of Rs.3,90,76,700/-, disallowing both the claims of deduction under Section 80P(2)(c)(ii)) and 80P(2)(d) made in the first revised return. During the assessment proceedings, penalty notice was also issued with reference to such claims of deduction, requiring the assessee to show cause as to why penalty under Section 271(1)(c) should not be imposed on it for alleged concealment of particulars of income/furnishing of inaccurate particulars of income.

The assessee submitted that in essence, it was a technical error, which occurred due to amendment of the provisions of Section 80P of the Act; and the mistake was sought to be rectified in the re-revised return. The assessee also submitted that the penalty could be levied under Section 271(1)(c) only in a case of deliberate concealment of particulars of income or deliberate furnishing of inaccurate particulars, which had not been the case here. The AO, however, rejected the contentions of the assessee and held that the assessee had intentionally claimed inadmissible deductions under Section 80P(2) to reduce the taxable income; and proceeded to impose the penalty under Section 271(1)(c) of the Act to the tune of Rs.93,70,460/-.

The Revenue seeks to question the order so passed by ITAT with the submissions that in the original return, no claim for deduction was made but it was made by filing the revised return and, thereafter, when confronted, the assessee attempted to file a belated re-revised return. Thus, according to the Revenue, the finding of ITAT that it were a case of bona fide mistake, is not justified. It is contended that the attempt of the assessee to reduce the taxable income by claiming inadmissible deduction tantamount to furnishing of inaccurate particulars of income and the AO had rightly imposed the penalty in this case.

The assessee, a banking institution and a registered co- operative society, of course, ought to have been remained vigilant while filing its return or revised return but, it remains a fact that earlier, the deduction in question under Section 80P (2) was being allowed to the assessee, for being a co- operative society engaged in the business of banking and providing credit facilities. It was by virtue of insertion of Sub- section (4) by Finance Act, 2006 with effect from 01.04.2007 that the provisions of Section 80P were made inapplicable in relation to any Co-operative Bank other than the Primary Agriculture Credit Society or Primary Co-operative Agriculture and Rural Development Bank. Apparently, the claim for this deduction in the assessment year 2007-08 had been a matter of bona fide mistake and could not have been taken to be a case of concealment of particulars of income or furnishing of inaccurate particulars of income. In fact, when confronted with the legal position, the assessee filed re-revised return, albeit belatedly, withdrawing such claim of deduction.