ACIT, Nashik V. THE NASHIK DISTRICT CENTRAL CO-OP BANK LTD, Nashik

ITA 1541/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85302 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1541/PN/2013 (ASSESSMENT YEAR: 2009-10) THE JOINT COMMISSIONER OF INCOME TAX, RANGE 1, NASHIK . APPELLANT VS. THE NASHIK DISTRICT CENTRAL COOPERATIVE BANK LTD., MUMBAI AGRA MAHAMARG, NEAR DWARKA CIRCLE, NASHIK 422011 PAN: AAAAT3794P . RESPONDENT APPELLANT BY : SHRI RAJESH DAMOR RESPONDENT BY : SHRI NIKHIL PATHAK DATE OF HEARING : 08-12-2014 DATE OF PRONOUNCEMENT : 16-12-2014 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CI T(A)-I, NASHIK DATED 03.05.2013 RELATING TO ASSESSMENT YEAR 2009 -10 IS AGAINST THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE IN COME-TAX ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING THE PENALT Y OF RS.15,64,800/- U/S 271(1)(C) OF THE INCOME ACT, 1961. 2. THE APPELLANT PRAYS THE ORDER OF THE ASSESSING OFFIC ER MAY BE RESTORED. 3. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE HIS CASE. ITA NO.1541/PN/2013 THE NASHIK DIST. CENTRAL CO-OP. BANK LTD. 2 4. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIFY, AMEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN THE OCCAS ION DEMANDS. 3. THE ISSUE RAISED IN THE PRESENT APPEAL BY THE REVEN UE IS AGAINST THE DELETION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT, WHILE COMPLETING ASSESSMENT UNDER SECTION 143(3) OF THE ACT, CERTAIN ADDITIO NS WERE MADE BY THE ASSESSING OFFICER TOTALING TO RS.52,03,690/-. A GAINST THE SAID ADDITIONS, PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED AND SHOW CAUSE NOTICE WAS ISSUED TO THE A SSESSEE WITH REGARD THERETO. 5. THE FIRST ADDITION MADE IN THE CASE OF ASSESSEE WAS ON ACCOUNT OF DISALLOWANCE OF VRS EXPENSES RS.19,76,882/-, DISALLOWANCE O N ACCOUNT OF PROVISION FOR ELECTION FUND OF RS.6 LAKHS AND AD DITION ON ACCOUNT OF CESSATION OF LIABILITY / UNCLEARED DEMAND DRAFTS O F RS.26,26,810/-. THE ASSESSING OFFICER HELD THE ASSESSEE TO HAVE FURNISHED IN-ACCURATE PARTICULARS OF INCOME IN RESPECT OF TH E DISALLOWANCE OF VRS EXPENSES AND CESSATION OF LIABILITY / UNCLE ARED DEMAND DRAFTS, AMOUNTING TO RS.19,76,882/- AND RS.26,26,81 0/- RESPECTIVELY. PENALTY UNDER SECTION 271(1)(C) OF THE ACT WA S LEVIED AT RS.15,64,800/-. 6. THE CIT(A) VIDE PARAS 7 TO 7.2 AT PAGE 7 OF THE APPELLA TE ORDER HELD THAT PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS N OT LEVIABLE IN RESPECT OF TWO ADDITIONS AS SAME DO NOT AMOUNT TO CONC EALMENT OF PARTICULARS OF INCOME OR FURNISHING OF IN-ACCURATE PARTICULARS AS THE ASSESSEE HAD DISCLOSED ALL THE MATERIAL FACTS ABOUT VRS CO MPENSATION SCHEME AS EXPENDITURE AND ALSO IN RESPECT OF UNCLEARED DEMAND DRAFTS, IN THE RETURN OF INCOME DURING THE ASSESSMENT PRO CEEDINGS. ITA NO.1541/PN/2013 THE NASHIK DIST. CENTRAL CO-OP. BANK LTD. 3 THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT THUS, WAS DELETED BY THE CIT(A). 7. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE HAS PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 9. THE PLEA OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US THAT THE TOTAL EXPENDITURE ON ACCOU NT OF VRS WAS INADVERTENTLY CLAIMED AS EXPENDITURE UNDER SECTION 37(1) O F THE ACT THOUGH SECTION 35DDA OF THE ACT RESTRICTS THE DISALLOWANC E ON ACCOUNT OF VRS EXPENDITURE. IT WAS FURTHER POINTED BY THE LEARN ED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT EVEN IN THE AUDITO RS REPORT THE TAX AUDITOR COMMITTED AN INADVERTENT ERROR BY NOT DISCL OSING THE DISALLOWANCE UNDER SECTION 35DDA OF THE ACT. IT WAS FURTH ER STATED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE SAID CLAIM IS ALLOWABLE TO THE ASSESSEE FROM YEAR TO YEAR AND E VEN OTHERWISE AS AGAINST TAX LIABILITY OF RS.4.38 CRORES, THE ASSESSEE HAD DEPOSITED ADVANCE TAX OF RS.7 CRORES. 10. IN RESPECT OF THE SECOND ADDITION OF UNCLEARED DEMAND DRAFTS, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THIS AMOUNT WAS ACCUMULATED OVER A PERIOD OF YEARS AND EVEN THOUGH THE ADDITION WAS MADE IN THE HANDS OF THE ASSESS EE, THERE WAS NO CASE OR EVIDENCE THAT CUSTOMERS WAIVED OFF THEIR RIGH TS. IT WAS FURTHER CLARIFIED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WHENEVER THE DRAFTS WOULD BE PRESENTED, THEN THE SAME HAD TO BE HONOURED AND CLEARED. ITA NO.1541/PN/2013 THE NASHIK DIST. CENTRAL CO-OP. BANK LTD. 4 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO LEV Y OF PENATY UNDER SECTION 271(1)(C) OF THE ACT, WHICH IS LEVIABLE IN CASE EIT HER OF THE TWIN CONDITIONS PROVIDED IN THE SECTION ARE FULFILLED. THE FIRST CONDITION PROVIDED UNDER THE SECTION IS THAT WHERE THE A SSESSEE HAS CONCEALED ITS INCOME AND SECOND CONDITION IS WHERE THE AS SESSEE HAS FURNISHED IN-ACCURATE PARTICULARS OF INCOME. IN CASE EITHER OF THE CONDITIONS BEING FULFILLED, THE ASSESSEE CAN BE HELD TO BE LIAB LE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THE CASES , WHERE THE ASSESSEE HAS MADE A BONAFIDE CLAIM WHICH HAS NOT BEEN ALLO WED BY THE ASSESSING OFFICER AND ADDITION TO THAT EFFECT HAS BEEN MADE IN THE HANDS OF THE ASSESSEE, THEN, THE ISSUE WHICH ARISES WHETH ER IN SUCH FACTS, THE PERSON CAN BE HELD TO HAVE CONCEALED ITS INCOM E AND THUS, IS EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, OR NOT. 12. IN THE FACTS OF THE PRESENT CASE, THE ADDITIONS MADE IN THE HANDS OF THE ASSESSEE WERE THREE FOLDS I.E. ON ACCOUNT OF DISALLOWA NCE OF VRS EXPENSES, PROVISION FOR ELECTION FUND AND ON ACCOUNT OF CES SATION OF DEMAND DRAFTS. THE ASSESSEE DURING THE YEAR UNDER CON SIDERATION HAD DEBITED A SUM OF RS.24,71,102/- ON ACCOUNT OF VOLUNTARY R ETIREMENT SCHEME IN RELATION TO 7 EMPLOYEES, WHO HAD TAKEN VOLUNTA RY RETIREMENT. THE ASSESSING OFFICER HOWEVER, IN VIEW OF THE P ROVISIONS OF SECTION 35DDA OF THE ACT ALLOWED 1/5 TH OF EXPENDITURE AT RS.4,94,220/- AND DISALLOWED THE REMAINING SUM OF RS.19,76,88 2/-. THE ASSESSEE HAD BOOKED THE SAID EXPENDITURE AS PER T HE RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF THE ASSESSEE BANK AND HAD CLAIMED EXPENDITURE AS BUSINESS EXPENDITURE RELATABLE TO T HE YEAR UNDER CONSIDERATION. THE PLEA OF THE ASSESSEE WAS THAT COMPLETE DETAILS IN RESPECT OF THE SAID EXPENDITURE WERE AVAILABLE ON RECORD AND ITA NO.1541/PN/2013 THE NASHIK DIST. CENTRAL CO-OP. BANK LTD. 5 BY AN INADVERTENT ERROR, THE ASSESSEE HAD CLAIMED THE E NTIRE EXPENDITURE AS A DEDUCTION IN THE YEAR ITSELF AS AGAINST T HE PROVISIONS OF THE ACT, WHICH ENTAIL 1/5 TH OF THE SAID EXPENDITURE TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. THE AUDITOR IN THE AUDIT REP ORT VIDE ITEM 15 OF FORM NO.3CD HAD TO MAKE A DECLARATION OF AMOUNTS ADMISSIBLE UNDER VARIOUS SECTIONS INCLUDING SECTION 35DDA OF THE ACT, BUT BY AN ERROR, THE AUDITOR ALSO DECLARED THE SAME AT NIL. IN THE ENTIRETY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE THE ASSESSING OFFICER HAD ALLOWED 1/5 TH OF THE EXPENDITURE AS AGAINST THE TOTAL CLAIM MADE BY THE ASSESSEE ON ACCOUNT OF THE PROVISIONS OF THE ACT, IT COU LD NOT BE SAID THAT THE ASSESSEE HAD FURNISHED IN-ACCURATE PARTICULARS OF INCOME IN RESPECT THEREOF, ESPECIALLY WHERE THE EXPENDITURE WAS N OT FOUND TO BE INCURRED. THE BONAFIDE CLAIM MADE BY THE ASSESSEE HAVING NOT BEEN ALLOWED AS A DEDUCTION IN THE HANDS OF THE ASSESSEE DOE S NOT ENTAIL LEVY OF PENALTY FOR CONCEALMENT UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED ON THIS ACCOUNT OF DISALLOWANCE OUT OF VRS EXPENSES. 13. THE SECOND ADDITION MADE IN THE HANDS OF THE ASSESSE E WAS ON ACCOUNT OF CESSATION OF LIABILITY I.E. UNCLEARED DEMAND DRAFTS. THE ASSESSEE FROM YEAR TO YEAR WAS MAKING THE ENTRIES IN R ESPECT OF AMOUNTS RECEIVED FROM ITS CUSTOMERS FOR ISSUE OF DEMAND D RAFTS. IF THE AMOUNT REMAINED OUTSTANDING IN THE DEMAND DRAFTS PAYABLE ACCOUNT FOR MORE THAN 3 YEARS, USUALLY IT WAS TRANSFERRED TO ST ALE DEMAND DRAFT ACCOUNT AND THEREAFTER, THE SAME WAS BOOKED AS EXPENDITURE. THE ASSESSING OFFICER CONSEQUENTLY ARRIVED AT THE FIGURE OF RS.26,22,810/- BEING THE AMOUNT OF DEMAND DRAFT PAYABLE FO R MORE THAN 3 YEARS AS ON 31.03.2009. AS PER THE ASSESSEE, TH E SAID AMOUNT OUTSTANDING IN STALE DEMAND DRAFT ACCOUNT AS ON 31.03.200 9 ITA NO.1541/PN/2013 THE NASHIK DIST. CENTRAL CO-OP. BANK LTD. 6 REPRESENTS THE UN-PAID AND UN-PRESENTED DEMAND DRAFTS FROM JUNE, 1960 ONWARDS WHICH WERE NOT CANCELLED UP TO 31.03.2009. THE ASSESSING OFFICER HAD ADDED THE SAID SUM OF RS.26,22,810/- TO THE INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTIO N 41(1) OF THE ACT IN RESPECT OF CESSATION OR REMISSION OF LIABILITY. THE CASE OF THE ASSESSEE BEFORE US WAS THAT THE SAID LIABILITY HAS NEITHER CEASED NOR REMITTED AS WHENEVER THE DEMAND DRAFTS WOULD BE BROUGH T TO THE BANK, THEN THE SAME HAVE TO BE HONOURED AND CLEARED. IN THE ENTIRETY OF THE ABOVE FACTS AND CIRCUMSTANCES, WHERE THE COMPLETE DETAILS IN RESPECT OF THE EXPENDITURE WERE FILED BY THE ASSESSEE AN D MERE DISALLOWANCE OF CLAIM BONAFIDELY MADE BY THE ASSESSEE CANNO T ATTRACT THE LEVY OF PENALTY FOR CONCEALMENT UNDER SECTION 271(1)(C) OF THE ACT. WE FIND NO MERIT IN THE ORDER OF ASSESSING OFFICER IN LEVYING T HE SAID PENALTY. UPHOLDING THE ORDER OF CIT(A), THE GROUNDS OF APP EAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF DECEMBER, 2014. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 16 TH DECEMBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE DEPARTMENT; 2) THE ASSESSEE; 3) THE CIT(A)-I, NASHIK; 4) THE CIT-I, NASHIK; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE