N.D.I.M.C. Bank Ltd., Nashik V. Income-tax Officer,

ITA 1458/PUN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93722 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 17-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI
• Keywords: Wrong claim; Bad and doubtful debts; Bonafide mistake

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE: SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO. 1458 /PN/201 4 ASSESSMENT YEAR : 20 10 - 11 N.D.I.M.C. BANK LTD., 1, SHIVKAMAL APARTMENT, CANADA CORNER, NASHIK-422005 VS. ACIT, CENTRAL CIRCLE-II, NASHIK (APPELLANT) (RESPONDENT) PAN NO. AAAAN1531A ASSESSEE BY: SHRI M.K. KULKARNI REVENUE BY: SHRI D.S. KOTHARI DATE OF HEARING : 06-05-2015 DATE OF PRONOUNCEMENT : 15-05-2015 ORDER PER VIKAS AWASTHY, JM:- THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 18-06 -2014 FOR THE ASSESSMENT YEAR 2010-11, CONFIRMING PENALTY OF RS.38,62 ,706/- LEVIED U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTE R REFERRED TO AS THE ACT). 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE-APPELLANT IS A CO-OPERATIVE BANK HAVING BRANCHE S IN RURAL AREA. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMEN T YEAR 2010-11 ON 28-09-2010 DECLARING TOTAL LOSS OF RS.3,65,60,799/-. DURIN G THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER OBSER VED THAT THE 2 ITA NO. 1458/PN/2014, A.Y. 2010-11 ASSESSEE HAS CLAIMED PROVISION FOR BAD AND DOUBTFUL DEBT U /S. 36(1)(VIIA) TO THE TUNE OF RS.1,25,10,670/-. THE ASSESSING OFFICER HELD T HAT TWO RURAL BRANCHES OF THE ASSESSEE AT NIPHAD AND PIMPALGAON BASWANT IN RESPECT OF WHICH PROVISION HAS BEEN CREATED DOES NOT FALL WITHIN THE AMBIT OF THE TERM RURAL BRANCH AS DEFINED IN EXPLANATION (IA) TO SECTION 36(1)(VIIA). THEREFORE, THE ASSESSEE IS NOT ELIGIBLE TO CLAIM BEN EFIT OF SECTION 36(1)(VIIA) OF THE ACT. ACCORDINGLY, DISALLOWANCE OF RS.1,25,10,670/- WAS MADE. PENALTY PROCEEDINGS U/S. 271(1)(C ) R.W.S. 274 OF THE ACT WERE ALSO INITIATED FOR ALLEGEDLY FURNISHING INA CCURATE PARTICULARS OF INCOME. DESPITE SERVICE OF NOTICE THE ASSES SEE DID NOT FURNISH ANY REASONS/EXPLANATION FOR CLAIMING DEDUCTION U/S. 3 6(1)(VIIA) IN PENALTY PROCEEDINGS. THE INCOME TAX OFFICER LEVIED PENALT Y OF RS.38,62,706/- VIDE ORDER DATED 11-09-2013. AGGRIEVED BY THE PENALTY ORDER U/S. 271(1)(C), THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). IN APPEAL, THE ASSESSEE EXPLAINED THAT DEDUCTION U/S. 36 (1)(VIIA) WAS WRONGLY CLAIMED BY THE ACCOUNTANT. IT WAS A BONAFIDE MIS TAKE ON HIS PART. THE FIRST APPELLATE AUTHORITY REJECTED THE SUBMISS IONS OF THE ASSESSEE AND CONFIRMED THE PENALTY ORDER. NOW, THE ASSE SSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). 3. SHRI M.K. KULKARNI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY AND IS ENGAG ED IN THE BANKING BUSINESS. THE ASSESSEE CO-OPERATIVE BANK WAS REQUIRED TO CREATE PROVISION FOR NON-PERFORMING ASSETS (NPA) IN ACCORDANCE WITH THE RESERVE BANK OF INDIA GUIDELINES. THE ACCOUNTANT OF THE B ANK WRONGLY MADE PROVISION FOR BAD AND DOUBTFUL DEBTS U/S. 36(1)(VIIA). TH E MISTAKE 3 ITA NO. 1458/PN/2014, A.Y. 2010-11 THAT CREPT IN AT THE INITIAL STAGE COULD NOT BE POINTED OU T SUBSEQUENTLY DUE TO OVERSIGHT. THE LD. AR SUBMITTED THAT THE BANK HA S SUFFERED HUGE LOSSES AND THERE WAS NO DELIBERATE INTENTION ON THE PART OF ACCOUNTANT OR ANY STAFF OF THE BANK TO CLAIM UNDUE ADVANTAGE. THE MISTA KE IS BONAFIDE. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAD FURNISHED FULL AND COMPLETE PARTICULARS, IF AT ALL ANY DEDUCTION IS WRONGLY CLAIMED IT DOES NOT AMOUNT TO FILING OF INACCURATE PARTICULARS. IN ORD ER TO SUPPORT HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF THE HON'BLE SUPREME COURT OF INDIA RENDERED IN THE CASE OF C IT VS. RELIANCE PETROPRODUCTS (P) LTD. REPORTED IN 322 ITR 158 (SC). 4. SHRI D.S. KOTHARI REPRESENTING THE DEPARTMENT CONTEN DED THAT THE EXPLANATION FURNISHED BY THE ASSESSEE FOR WRONGLY CLAIMING DEDUCTION U/S. 36(1)(VIIA) IS NOT ACCEPTABLE. THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME, THEREFORE, PENALTY U/S. 271(1((C) IS LEVIABLE . THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF COMMISSIONER OF IN COME TAX (APPEALS) AND PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS A CO-OPERATIVE SOC IETY CARRYING ON BANKING BUSINESS. IT IS ALSO NOT DISPUTED THAT THE ASSES SEE HAS SUFFERED HUGE LOSSES IN THE IMPUGNED ASSESSMENT YEAR. THE ASSES SEE HAS CLAIMED DEDUCTION U/S. 36(1)(VIIA) IN RETURN OF INCOME. THE EXPLA NATION GIVEN BY THE ASSESSEE FOR MAKING WRONG CLAIM IN RESPECT O F ITS RURAL BRANCHES IS, THAT THE ACCOUNTANT WHO HAD PREPARED THE ACCOUNTS WAS IGNORANT ABOUT THE FACT THAT THE POPULATION OF RURAL AREA S I.E. NIPHAD AND PIMPALGAON BASWANT IS MORE THAN TEN THOUSAND. THEREFORE , THE 4 ITA NO. 1458/PN/2014, A.Y. 2010-11 BRANCHES LOCATED AT ABOVE TWO PLACES DO NOT FALL WITHIN TH E AMBIT OF THE TERM RURAL BRANCHES. WE ARE OF THE VIEW, THAT THE EXPLANATION FURNISHED BY THE ASSESSEE SEEMS TO BE FAIRLY JUSTIFIED. THE ASSESSEE IS A COOPERATIV E BANK AND THE EMPLOYEES/ACCOUNTANT WOULD NOT HAVE GAINED BY GIVING FALSE OR INACCURATE PARTICULARS. THE BONAFIDE MISTAKE COMMITTED BY THE ACCOUNTANT AT INITIAL STAGE REMAINED UN-DETECTED EVEN DU RING AUDIT DUE TO OVERSIGHT. 6. BE THAT AS IT MAY, THE ASSESSEE HAD CLAIMED WRONG DE DUCTION U/S. 36(1)(VIIA). IT IS NOT THE CASE OF REVENUE THAT VITAL IN FORMATION WAS CONCEALED OR NOT FURNISHED BY THE ASSESSEE. THE ASSES SEE HAD FURNISHED COMPLETE PARTICULARS WITHOUT CAMOUFLAGING ANY TRANSACTION. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF RELIANCE PETROPROD UCTS (P) LTD. (SUPRA) HAS HELD; BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISH INACCURATE PARTIC ULARS. THE HON'BLE APEX COURT FURTHER OBSERVED THAT MERELY BECAU SE THE ASSESSEE HAD CLAIMED DEDUCTION WHICH HAS NOT BEEN ACCEPTED BY TH E REVENUE, PENALTY U/S. 271(1)(C) CANNOT BE LEVIED. MERE MAKING OF A C LAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHIN G OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. 7. IN THE PRESENT CASE IT IS EVIDENT THAT THE ASSESSEE HAD MADE WRONG CLAIM U/S. 36(1)(VIIA) WITH RESPECT TO TWO RURAL BRANCHES I.E. NIP HAD AND PIMPALGAON BASWANT, WITHOUT ASCERTAINING WHETHER THE AFORE SAID TWO BRANCHES FALL WITHIN THE DEFINITION OF TERM RURAL BRANCHES O R NOT. IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCU RATE PARTICULARS. AT THE MOST IT CAN BE TERMED AS RECKLESS CLAIM. FOR 5 ITA NO. 1458/PN/2014, A.Y. 2010-11 INVOKING PENAL PROVISIONS FOR FILING INACCURATE PARTICULARS, DELIB ERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE SHOULD BE MADE OUT. IN VIEW OF THE FACTS OF THE CASE AND THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT OF INDIA, WE ARE OF THE CONSIDERED VIEW THAT IT IS NOT A CASE FOR LEVY OF PENALTY U/S. 271(1)(C). ACCORDINGLY, W E SET ASIDE THE IMPUGNED ORDER AND ALLOW THE APPEAL OF THE ASSESSEE. ORDER PRONOUNCED ON FRIDAY, THE 15 TH DAY OF MAY, 2015 AT PUNE SD/- SD/- (R.K. PANDA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 15 TH MAY, 2015 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, NASHIK 4 THE CIT - I , NASHIK 5 6 THE DR, ITAT, B BENCH, PUNE. GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, PUNE