Shri Mahalaxmi Co-op. Bank Ltd., Kolhapur V. Assistant Commissioner of Income-tax,

ITA 2149/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2288 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHEI
• Keywords: Question of law; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / ITA NO. 2149 /P U N/201 6 / ASSESSMENT YEAR : 20 1 0 - 1 1 SHRI MAHALAXMI CO - OPERATIVE BANK LTD., 167 - B, MANGALWAR PETH, KOLHAPUR - 416012 . / APPELLANT P AN: AA ATS3679R VS. THE ASST . COMMISSIONER OF INCOME TAX, CIRCL E - 1, KOLHAPUR . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : S HRI S ANJEEV GHEI / DATE OF HEARING : 2 3 . 1 0 .201 8 / DATE OF PRONOUNCEMENT: 14 . 1 1 .201 8 / ORDER PER SUSHM A CHOWLA, J M : TH E APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT ( A ) - 1 , KOLHAPUR , DATED 01.07.2016 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED ASSESSING OFFICER HAS ERRED IN CONFIRMING THE PENALTY U/S 271(1)(C) FOR SUM OF RS.33,24,510/ - BY DISREGARDING APPELLANTS CONTENTION THAT AP PELLANT HAS MADE BONAFIDE CLAIM OF PROVISION, REQUIRED TO BE MADE U/S 36(1)(VIIA) OF THE INCOME TAX ACT, 1961, AND THE DISALLOWANCE OF SUCH CLAIM IS HIGHLY DEBATABLE ISSUE AND THEREFORE NO PENALTY IS LEVIABLE. ITA NO. 2149 /P U N/20 1 6 SHRI MAHALAXMI CO - OPERATIVE BANK LTD. 2 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF 1,17,59,060/ - . THE CASE OF ASSESSEE WAS PICKED UP FOR SCRUTINY. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF 58 LAKHS IN THE PROFIT AND LOSS ACCOUNT FOR PROVISION FOR BAD AND DOUBTFUL DEBTS FOR RURAL BRANCHES. HOWEVER, AS P ER COMPUTATION OF INCOME, THE ASSESSEE HAD CLAIMED DEDUCTION AT 1,65,58,930/ - UNDER SECTION 36(1)(VIIA) OF THE ACT FOR PROVISION FOR BAD AND DOUBTFUL DEBTS FOR RURAL BRANCHES. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED EXCESS DEDUCTION IN THE COMPUTATION OF INCOME AS COMPARED TO THE PROFIT AND LOSS ACCOUNT AT 1,07,58,930/ - . THE ASSESSEE WAS SHOW CAUSED AS TO WHY THIS EXCESS DEDUCTION IN COMPUTATION OF INCOME SHOULD NOT BE DISALLOWED. AFTER NOTING DOWN THE PROVISIONS OF THE ACT AND CBD TS INSTRUCTION NO.17/2008, DATED 26.11.2008, THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS ENTITLED TO CLAIM THE DEDUCTION ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS ONLY TO THE EXTENT OF AMOUNT ACTUALLY CREATED IN THE BOOKS OF ACCOUNT I.E. 5 8 LAKHS. CONSEQUENTLY, EXCESS SUM OF 1,07,58,930/ - WAS DISALLOWED AND ADDED BACK IN THE HANDS OF ASSESSEE. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 5. THE SECOND ISSUE WHICH WAS RAISED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS WAS THE DISALLOWANCE TO BE MADE ON ACCOUNT OF ACCRUED INTEREST ON NON PERFORMING ASSETS (NPAS) . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INCOME NOT RECOGNIZED BY ASSESSEE FOLLOWING RBI GUIDELINES WOULD NOT COVER THE P OSITION UNDER THE INCOME TAX ACT AND HELD THAT THE SAID INCOME WAS ITA NO. 2149 /P U N/20 1 6 SHRI MAHALAXMI CO - OPERATIVE BANK LTD. 3 INCLUDABLE IN THE HANDS OF ASSESSEE. THE ASSESSING OFFICER THUS, MADE AN ADDITION OF 64, 66,409/ - ON ACCOUNT OF ACCRUED INTEREST INCOME. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. IT MAY BE POINTED OUT HEREIN ITSELF THAT THE ASSESSING OFFICER FAILED TO RECORD SATISFACTION AS TO WHICH LIM B OF SECTION 271(1)(C) OF THE ACT WAS APPLICABLE. THEREAFTER, THE ASSESSING OFFICER PASSED ORDER LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON BOTH COUNTS I.E. DISALLOWANCE OF PROVISION MADE UNDER SECTION 36(1)(VIIA) OF THE ACT AT 1,07,58,930/ - AND DISALLOWANCE OF ACCRUED INTEREST ON NPAS AT 64,66,409/ - . THE ASSESSING OFFICER HELD THE ASSESSEE TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME AND PENALTY OF 53,22,630/ - WAS LEVIED. 6. THE CIT(A) UPHELD LEVY OF PENALTY ON THE ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE FOR PROVISION OF BAD AND DOUBTFUL DEBTS, REJECTING THE PLEA OF ASSESSEE THAT WHETHER THE SAID DEDUCTION IS TO BE ALLOWED OR NOT WAS A DEBATABLE ISSUE. IN RESPECT OF SECOND ISSUE OF DISALLOWANCE MADE FOR NON INCLUSION OF INTERES T ACCRUED ON NPAS, THE CIT(A) NOTED THAT THE TRIBUNAL HAD ALLOWED THE CLAIM OF ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO DELETE THE AFORESAID ADDITION . CONSEQUENTLY, THE LEVY OF PENALTY IN RESPECT OF SAID ADDITION WAS NOT CALLED FOR AND THE ASSESSING OFFICER WAS DIRECTED TO DELETE THE SAME. 7. THE ASSESSEE IS IN APPEAL AGAINST PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT WITH REGARD TO DISALLOWANCE ON ACCOUNT OF PROVISION MADE FOR BAD AND DOUBTFUL DEBTS. 8. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD POINTED OUT THAT THE ISSUE ON MERITS WAS NOT ALLOWED BY THE TRIBUNAL. HOWEVER, ITA NO. 2149 /P U N/20 1 6 SHRI MAHALAXMI CO - OPERATIVE BANK LTD. 4 THE APPEAL FILED BY ASSESSEE ON THE AFORESAID ISSUE HAS BEEN ADMITTED BY THE HONBLE BOMBAY HIGH COURT VIDE ITS INTERIM ORDER DATED 07.11.2017, WHEREIN THE QUESTION OF LAW RAISED BY ASSESSEE WAS ADMITTED AS SIMILAR QUESTION OF LAW WAS ADMITTED FOR ASSESSMENT YEAR 2008 - 09. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DREW OUR ATTENTION TO THE QUESTION OF LAW RAISED IN ASSESSMENT YEAR 20 08 - 09 AND THE INTERIM ORDER OF THE HONBLE BOMBAY HIGH COURT DATED 17.11.2016, WHICH IS PLACED AT PAGES 3 AND 4 OF PAPER BOOK AND ALSO INTERIM ORDER OF HONBLE BOMBAY HIGH COURT RELATING TO ASSESSMENT YEAR 2010 - 11, WHICH IS PLACED AT PAGES 5 AND 6 OF PAPER BOOK. HE ALSO REFERRED TO INTERIM ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE APPEAL FILED BY REVENUE DATED 22.01.2018 AGAINST RELIEF GIVEN BY TRIBUNAL ON ACCOUNT OF ACCRUED INTEREST ON NPAS. THE NEXT PLEA OF ASSESSEE WAS THAT SINCE THE QUESTION OF LA W HAS BEEN ADMITTED ON THE AFORESAID ISSUE, THE ISSUE BECOMES DEBATABLE AND ON SUCH DEBATABLE ISSUE BEING ADMITTED, IMPOSITION OF PENALTY CANNOT BE JUSTIFIED. IN THIS REGARD, HE PLACED RELIANCE ON THE JUDGMENTS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. ADVAITA ESTATE DEVELOPMENT PVT. LTD. IN INCOME TAX APPEAL NO.1498 OF 2014, JUDGMENT DATED 17.02.2017 AND IN THE CASE OF CIT VS. M/S. NAYAN BUILDERS AND DEVELOPERS IN INCOME TAX APPEAL NO.415 OF 2012, JUDGMENT DATED 08.07.2014 . HE FURTHER POINTED OUT THAT THE ORDER OF ASSESSING OFFICER SUFFERS FROM INFIRMITY AS NO PROPER SATISFACTION HAS BEEN RECORDED WHILE INITIATING PENALTY PROCEEDINGS AND EVEN WHILE LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 9. THE LEARNED DEPARTMENTAL REPRESEN TATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. ITA NO. 2149 /P U N/20 1 6 SHRI MAHALAXMI CO - OPERATIVE BANK LTD. 5 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LIMITED ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY FOR CONCEALMENT OF INCOME UNDER SEC TION 271(1)(C) OF THE ACT. THE PERUSAL OF ASSESSMENT ORDER WHILE FINALIZING THE ADDITION IN THE HANDS OF ASSESSEE REFLECTS THAT THE ASSESSING OFFICER HAS FAILED TO COME TO A FINDING AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT HAS NOT BEEN FULFILLED. THE ASSESSING OFFICER ONLY RECORDS SATISFACTION THAT PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ARE TO BE INITIATED. IN THE ABSENCE OF ASSESSING OFFICER COMING TO PROPER SATISFACTION OF WHICH LIMB HAS NOT BEEN FULFILLED, THE ORDER PASSED BY A SSESSING OFFICER LEVYING PENALTY AGAIN WITHOUT COMING TO ANY CONCLUSION AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT IS APPLICABLE, SUFFERS FROM INFIRMITY IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. SHRI SAMSON PERINCHERY IN INCOME TAX APPEAL NO.1154 OF 2014 WITH OTHER INCOME TAX APPEALS NOS.953 OF 2014, 1097 OF 2014 AND 1226 OF 2014, JUDGMENT DATED 05.01.2017. 11. NOW, COMING TO THE LINKED ISSUE THAT THE ADDITION IN THE PRESENT CASE HAS BEEN MADE ON ACCOUNT OF DISALLOW ANCE OF PROVISION MADE FOR BAD AND DOUBTFUL DEBTS, WHEREIN IN THE PROFIT AND LOSS ACCOUNT PROVISION WAS MADE AT A LESSER FIGURE, WHEREAS IN THE INCOME & EXPENDITURE ACCOUNT, IT WAS CLAIMED AT HIGHER FIGURE. THE SAID ISSUE ADMITTEDLY, HAS BEEN DECIDED BY T HE TRIBUNAL AGAINST ASSESSEE AND HENCE THE PENALTY. HOWEVER, THE ASSESSEE IS IN APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT AND THE QUESTION OF LAW ON THE SAID ISSUE HAS BEEN ADMITTED. THE ASSESSEE HAS FURNISHED INTERIM ORDERS OF THE HONBLE BOMBAY HIGH COURT, WHEREIN THE SAID QUESTION OF LAW HAS BEEN ADMITTED BOTH FOR ASSESSMENT YEAR 2008 - 09 AND ALSO FOR THE YEAR UNDER APPEAL I.E. ASSESSMENT YEAR 2010 - 11. ITA NO. 2149 /P U N/20 1 6 SHRI MAHALAXMI CO - OPERATIVE BANK LTD. 6 12. ANOTHER ISSUE WHICH WAS RAISED BY ASSESSING OFFICER AND PENALTY WAS ALSO LEVIED BY HIM WAS THE ADDITION ON ACCOUNT OF ACCRUED INTEREST ON NPAS. THE SAID ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BUT THE REVENUE HAS FILED AN APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT AND THE QUESTION OF LAW RAISED BY RE VENUE HAS BEEN ADMITTED. 13. IN SUCH SCENARIO, WHERE SUBSTANTIAL QUESTION OF LAW HAS BEEN ADMITTED, THE ISSUE WHICH HAS BEEN RAISED, CAN THE IMPOSITION OF PENALTY BE JUSTIFIED? IN THIS REGARD, WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE BOM BAY HIGH COURT IN CIT VS. M/S. NAYAN BUILDERS AND DEVELOPERS (SUPRA), WHEREIN IT WAS OBSERVED THAT AGAINST THE DECISION OF TRIBUNAL, ASSESSEES APPEAL IN QUANTUM PROCEEDINGS HAD BEEN ADMITTED AND SUBSTANTIAL QUESTION OF LAW HAS BEEN FRAMED THEREIN, THEN TH ERE WAS NO JUSTIFICATION ON IMPOSITION OF PENALTY FOR CONCEALMENT AND THE APPEAL OF ASSESSEE WAS ALLOWED. 1 4 . FURTHER, THE HONBLE BOMBAY HIGH COURT IN ANOTHER DECISION IN CIT VS. M/S. ADVAITA ESTATE DEVELOPMENT PVT. LTD. (SUPRA) ON SIMILAR ISSUE HAD HELD THAT PROPOSITION OF QUESTION OF LAW AGAINST DELETION OF PENALTY MUST UNDER SECTION 271(1)(C) OF THE ACT BY THE TRIBUNAL DOES NOT AROSE AND HENCE, APPEAL OF REVENUE WAS DISMISSED , FOLLOWING EARLIER DECISION IN THE CASE OF CIT VS. M/S. NAYAN BUILDERS & DEVE LOPERS (SUPRA). 15. APPLYING THE SAID PROPOSITION TO THE ISSUE BEFORE US, WE HOLD THAT SINCE THE ISSUE ON MERITS THOUGH DECIDED AGAINST ASSESSEE BUT WHERE THE HONBLE BOMBAY HIGH COURT HAS ADMITTED SUBSTANTIAL QUESTION OF LAW ON THE ISSUE, THEN, ITA NO. 2149 /P U N/20 1 6 SHRI MAHALAXMI CO - OPERATIVE BANK LTD. 7 IN SUCH CIRCUMSTANCES, THERE IS NO JUSTIFICATION FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE GROUND OF APPEAL RAISED BY ASSESSEE IS THUS, ALLOWED. 1 6 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 14 TH D AY OF NOVEMBER , 201 8 . SD/ - SD/ - ( D.KARUNAKARA RAO ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 14 TH NOVEMBER , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1, KOLHAPUR ; 4. THE CIT - 1, KOLHAPUR ; 5. 6. , , / DR A , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE