Dy. CIT Cir-I Nashik, Nashik V. Rajlaxmi Urban Cooperative Bank Ltd;, Nashik

ITA 307/PUN/2012

• Counselvise Citation: 30724514 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 15-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DILIP KOTHARI
• Assessee Lawyers: PRAMOD SHINGHATE
• Keywords: Bonafide belief; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.307/PN/2012 ASSESSMENT YEAR : 200 5 - 0 6 DY. CIT, CIRCLE-I NASHIK VS. RAJLAXMI URBAN COOPERATIVE BANK LTD., HEAD OFFICE-1 ST FLOOR, SPACE COSMOS OLD AGRA ROAD, ASHOK STAMBH, NASHIK (APPELLANT) (RESPONDENT) PAN NO. AAFFR3676N APPELLANT BY: SHRI DILIP KOTHARI RESPONDENT BY: SHRI PRAMOD SHINGHATE DATE OF HEARING : 30-04-2013 DA TE OF PRONOUNCEMENT : 30-04-2013 ORDER PER R.S. PADVEKAR, JM:- THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNE D ORDER OF THE LD.CIT(A)-I, NASHIK FOR THE A.Y. 2005-06. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS IN THE 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.16,98,270/- IMPOSED ON ACCOUNT OF CLAIMING DEDUCTION W HICH WAS NOT ALLOWABLE UNDER SECTION 36 OF THE INCOME-TAX ACT. 2. 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 IN SPITE OF THE FACT THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS AND CONCEAL THE INCOME WITHIN THE MEANING OF EXPLANATION (1) OF SECTION 271(1)(C) OF THE INCOME-TAX ACT. 2. THE FACTS WHICH REVEALED FROM THE RECORD ARE AS UNDE R. THE ASSESSEE IS A CO-OPERATIVE BANK, ENGAGED IN THE BUSINESS OF BANKING. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE A.Y. 2 005-06 DECLARING TOTAL LOSS OF RS.46,46,536/-. DURING THE COURSE OF THE ASSE SSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT THE AS SESSEE HAS DEBITED PROVISIONS, UNDER THE FOLLOWING HEADS: 2 ITA NO. ITA NO.307/PUN/2012, RAJLAXMI URBAN COOPERATIVE BAN K LTD., NASHIK SL. NO. HEADS AMOUNT 1 NPA PROVISION RS.9,10,327/ - 2 PROVISION FOR GOVT. SECUR ITIES RS.42,42,594/ - 3 PROVISION FOR AUTHORIZATION OF GOVT. SECURITIES RS.2,81,600/ - TOTAL RS.54,34,521/ - 3. THE ASSESSING OFFICER MADE ADDITIONS OF ABOVE PROVISIONS AND ALSO INITIATED THE PENALTY PROCEEDINGS ON THE SAID ADDITION AND SOUGHT THE EXPLANATION OF THE ASSESSEE. THE ASSESSEE SUBMITTED BEFO RE THE ASSESSING OFFICER AS UNDER: (I) IT IS A MERELY TECHNICALLY ACCOUNTING MISTAKE BY THE AS SESSEE WHILE FOLLOWING RBI GUIDELINES, WHICH ARE MANDATORY. (II) THERE WAS NO DELIBERATE ATTEMPT TO CONCEAL THE INCOME BUT IT WAS DUE TO IGNORANCE OF THE PROVISION OF LAW. (III) WHERE THE BREACH FLOWS FROM BONAFIDE BELIEF PENALTY IS NOT LEVIABLE AND FOR CONCEALMENT TO LEVY PENALTY THERE SHOULD BE A DELIBERATE ACT. 4. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF VS. JCIT 291 ITR 519 (S C). THE ASSESSING OFFICER WAS NOT IMPRESSED WITH THE EXPLANATION OF THE ASSESSEE. IN THE OPINION OF THE ASSESSING OFFICER THE ASS ESSEES CASE IS COVERED IN THE SECOND LIMB OF SECTION 271(1)(C) I.E. FILING OF INAC CURATE PARTICULARS OF INCOME. THE ASSESSING OFFICER ALSO REJECTED THE PLEA OF THE ASSESSEE THAT THERE WAS NO INTENTIONAL OR DELIBERATE DEF IANCE OF LAW. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE AS NOT B ONAFIDE AND LEVIED THE PENALTY U/S.271(1)(C) OF RS.16,98,265/-. THE A SSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD.CIT(A). BEFORE T HE LD.CIT(A) THE ASSESSEE PLEADED THAT CONCEALMENT IS STILL AN IMPORTAN T PRE-REQUISITE U/S.271(1)(C) OF THE ACT. THE ASSESSEE PLACED THE RELIANCE ON THE D ECISION 3 ITA NO. ITA NO.307/PUN/2012, RAJLAXMI URBAN COOPERATIVE BAN K LTD., NASHIK IN THE CASE OF KANBAY SOFTWARE INDIA PVT. LTD. 22 DTR 481 (PUNE) AS WELL AS DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF C IT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 (SC). THE LD.CIT(A) A CCEPTED THE EXPLANATION OF THE ASSESSEE AND DELETED THE PENALTY. THE REASONING AND FINDING OF THE LD.CIT(A) ARE AS UNDER: 4.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE ASSESSMENT ORDER, THE PENALTY ORDER, THE RIVAL SUBMIS SIONS AND THE POSITION OF LAW AS WELL AS THE DECISIONS CITED BY THE A.O. AND THE APPELLANT. THE APPELLANT HAS DEBITED EXPENDITURE ON A CCOUNT OF PROVISIONS TO AUDITED PROFIT AND LOSS ACCOUNT TO THE EXTENT OF RS.54,34,521 /- AS PER GUIDELINES /DIRECTIONS OF R.B.I. T HE EXPENDITURE IS IN THE NATURE OF PROVISION FOR NON P ERFORMING ASSET, PROVISION FOR GOVT. SECURITIES AND PROVISION FOR AUT HORIZATION OF GOVT. SECURITIES. HOWEVER, IN COMPUTATION OF INCOME THE SA ID PROVISIONS REMAINED TO BE DISALLOWED BY THE APPELLANT WHILE ARRIVI NG AT LOSS TO BE CARRIED FORWARD AS PER THE PROVISIONS OF THE INC OME-TAX ACT, 1961. THE CO-OPERATIVE AUDITOR AS WELL AS THE TAX AUDITOR HAD NOT POINTED OUT THE SAID DISCREPANCY TO THE APPELLANT BANK. 4.4. FROM THE ABOVE PROVISION OF THE ACT, IT IS EVI DENT THAT FOR DECIDING THE ISSUE WHETHER PENALTY U/S. 271(L)(C) IS ATTRACT ED OR NOT, THERE HAS TO BE EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. ON PER USAL OF THE FACTS OF THE CASE, IT HAS BEEN NOTICED THAT THE APPE LLANT HAS FILED AUDITED PROFIT AND LOSS ACCOUNT WHEREIN THE CLAIM OF EXPENDITURE ON ACCOUNT OF PROVISIONS FOR NOH PERFORMIN G ASSET, GOVERNMENT SEC. AND AMORTIZATION OF GOVT. SEC. HAVE BEEN CLEARLY REFLECTED. HOWEVER, IN COMPUTATION OF INCOME FILED, T HE DISALLOWANCE OF EXPENDITURE HAS NOT BEEN MADE. THE AO MAD E ADDITIONS OF RS.54,34,521/- ON ACCOUNT OF PROVISIONS FOR NON PERFORMING ASSET, GOVERNMENT SEC. AND AMORTIZATION OF GOVT. SEC. THEREFORE, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAS NOT CONCEALED PARTICULARS OF INCOME OR HAS NOT FURNISHED INACCU RATE PARTICULARS OF SUCH INCOME. THE HON'BLE HIGH COURT OF ORISSA WHILE DECIDING THE SIMILAR ISSUE AS TO WHETHER THE PENALTY U/S. 271(L)(C) CAN BE LEVIED ON DISALLOWANCE OF CLAIMS OF EXPENDIT URE IN FAVOUR OF THE ASSESSEE IN THE CASE OF CIT VS. INDIAN METAL & FERRO ALLOYS LTD. 211ITR 35 (ORISSA) HAS MADE THE FOLLOWING OBSERVATI ON:- 'THE EXPRESSIONS 'HAS CONCEALED PARTICULARS OF INCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271(L)(C) OR ELSEWHERE IN THE ACT. ONE T HING IS CERTAIN THAT THESE TWO CIRCUMSTANCES ARE NOT IDENTICAL IN DETAILS ALTHOUGH THEY MAY LEAD TO THE SAME EFFECT, NAMELY KEEPIN G OF A CERTAIN PORTION OF INCOME. THE FORMER IS DIRECT AND THE LATT ER MAY BE INDIRECT IN ITS EXECUTION. THE WORD 'CONCEALED' IS DER IVED FROM THE LATIN 'CONCELARE' WHICH IMPLIES TO HIDE. WEBSTER IN HIS NEW INTERNATIONAL DICTIONARY EQUATES ITS MEANING 'TO HIDE OR W ITHDRAW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT; TO P REVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF. THE OFFENCE OF CONC EALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF I.T. AUTHORITIES.' THE HON'BLE ITAT, AHMEDABAD 'A' BENCH WHILE DECIDIN G THE SIMILAR ISSUE IN .FAVOUR OF THE ASSESSEE IN THE CASE OF DCIT VS. GUJARAT 4 ITA NO. ITA NO.307/PUN/2012, RAJLAXMI URBAN COOPERATIVE BAN K LTD., NASHIK STATE CO-OP. HSG. FINANCE CORPORATION LTD. (2010) 134 T TJ-07 (AND), HAS HELD THAT IF THE ASSESSEE HAS FILED ALL THE INFORMATION REGARDING CLAIMS OF EXPENDITURE IN THE RETURN OF INCOME, WH ICH ARE NOT FOUND TO BE FALSE OR INCORRECT, THEN EVEN IF TH E CLAIM OF EXPENDITURE IS DISALLOWED, PENALTY U/S.271(L)(C) IS NOT ATTRACTED. IN THE CASE UNDER APPEAL, THE APPELLANT HAS FURNISHED ALL T HE PARTICULARS / INFORMATION REGARDING PROVISIONS CLAIMED BY IT AND HAS NOT CONCEALED ANY PARTICULARS AND THE SAID PARTICULARS FILE D ARE ALSO NOT FALSE OR ERRONEOUS. IN VIEW OF THE ABOVE FACTS AND D ISCUSSION, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAS NO T CONCEALED PARTICULARS OF INCOME OR HAS NOT FURNISHED INACCU RATE PARTICULARS OF SUCH INCOME AND HENCE PENALTY U/S. 271(L )(C) IS NOT LEVIABLE FOR MERE DISALLOWANCE OF CLAIM OF EXPENDIT URE. 4.5. THE PENALTY U/S.271(1)(C) IS ALSO NOT JUSTIFIE D AS MERE MAKING OF CLAIM OF EXPENDITURE OR DEDUCTION WHICH IS NOT S USTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURA TE PARTICULARS OF INCOME. THIS PROPOSITION OF LAW IS SUPPORTED BY TH E FOLLOWING DECISIONS: I). CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. (2010) 230 CTR 320 (SC) II). CIT VS. SHAHABAD CO-OP. SUGAR MILLS LTD. (2011) 322 ITR 73 (P & H) III). CIT VS. MANIBHAI & BROTHERS (2007) 294 ITR 50 1 (GUJ.) 4.6. THE PENALTY U/S. 271(L)(C) IS ALSO NOT JUSTIFIED FOR THE REASON THAT THE DISALLOWANCE OF EXPENDITURE IS ELIG IBLE FOR DEDUCTION U/S. 80P(2)(A)(I) FOR THE YEAR UNDER APPEAL, AS THE APPELLANT IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING, IN THE ASSESSMENT ORDER U/S 143(3) DATED 18/12/2007 AFTER THE DISALLOWANCE OF RS.54,34,521/-, THE AO AL LOWED SET OFF OF PAST YEARS LOSSES AND ALSO ALLOWED DEDUCTION U/S 80 P(2)(A)(I) AND THE ASSESSED TOTAL INCOME WAS ARRIVED AT RS. NIL. T HEREFORE, EVEN IN THE CASE WHERE THE APPELLANT HAS POSITIVE INCOME ARID THE SAME HAS BEEN INCREASED DUE TO DISALLOWANCES OF EXPENDIT URE, THE SAME IS ENTITLED TO DEDUCTION U/S. 80P(2)(A)(I) AND HENC E PENALTY U/S. 271(L)(C) IS NOT LEVIABLE AS QUANTUM OF INCOME LIAB LE TO TAX DOES NOT CHANGE ON ACCOUNT OF DISALLOWANCES OF EXPENDITURE. THIS PROPOSITION OF LAW IS SUPPORTED BY FOLLOWING DECISI ONS: I). MAHAVIR NAGARI SAHAKARI PATSANSTHA LTD. VS. DCI T, REPORTED IN 74 TTJ 793 II). RAJARSHI SHAHU SAHAKARI BANK LTD., ITA NO. 933 /PN/2010 III). DCIT VS. GUJRAT STATE CO-OP. HOUSING FINANCE CORPORATION LTD. (2010) 134 TTJ 07 (AHD.) IV). DCIT VS. PATHANKAR PRIMARY CO-OPERATIVE DEVELO PMENT BANK LTD/ ITA NO.372(ASR) /2010 - III THIS CASE THE ASSE SSEE BANK HAS INCORRECTLY CLAIMED DEDUCTION U/S. 36(L)(VIIA) IN R ESPECT OF NPA ADVANCES AS BAD AND DOUBTFUL DEBTS AS PER RBI GUIDE LINES. THE HON'BLE ITAT OBSERVED THAT THOUGH THE CLAIM OF DEDU CTION IS INCORRECT, THE ASSESSEE CO-OPERATIVE BANK IS ELIGIBLE FOR DEDUC TION U/S.80P EVEN IN RESPECT OF DISALLOWANCE OF PROVISION FOR BA D DEBTS. THE HON'BLE ITAT HAS RELIED ON THE DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS P. LTD. (2010) 230 CTR 320 (SC) AND HAS HELD THAT PENALTY U/S. 271(L)(C) IS NOT LEVIABLE. THE FACTS OF THIS CASE ARE IDENTICAL WITH THE FACTS OF THE CASE UNDER APPEAL. 4.7. IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RESPECTFULLY FOLLOWING 'THE RATIO LAID DOWN BY VARIOUS DECISIONS REFERRED TO IN 5 ITA NO. ITA NO.307/PUN/2012, RAJLAXMI URBAN COOPERATIVE BAN K LTD., NASHIK PRECEDING PARAGRAPHS, IT IS HELD THAT THE A.O. IS N OT JUSTIFIED IN IMPOSING PENALTY U/S. 271(L)(C) OF RS.16,99,270/- O N REDUCED INCOME AT RS. NIL ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE. THE IMPUGNED PENALTY ORDER DATED 27/06/2008 IMPOSING PE NALTY OF RS.L6,98,270/- IS, THEREFORE, CANCELLED. THE AO IS DIRECTED ACCORDINGLY. 5. NOW THE REVENUE IS IN APPEAL BEFORE US. WE HAVE HEAR D THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE ISSUE IN CONTROVERSY IS IN NARROW COMPASS. THE ASSESSEE HAS MA DE CERTAIN PROVISIONS WHICH WERE DEBITED TO P & L A/C BUT IN THE COMPUTATION OF THE INCOME THOSE WERE NOT ADDED. IN THIS CASE, THERE IS NO DISPUTE THAT THE ADDITION MADE BY THE ASSESSING OFFICER WERE NOT CONTESTED IN THE APPEAL. ANOTHER FACT IS THAT SO FAR AS THE ASSESSMENT YEAR 200 5-06 IS CONCERNED, THE ASSESSEES ENTIRE INCOME HAD A BENEFIT OF DEDUCTION U /S.80P(2)(A)(I) OF THE ACT. WE FIND THAT THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS IN THE RETURN AND IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY WRONG PARTICULARS WERE DISCLOSED BY THE ASSESSEE. THE ONLY RE SERVATION OF THE ASSESSING OFFICER IS THAT THE ASSESSEE DID NOT ADD BACK THE DISALLOWABLE PROVISIONS WHILE COMPUTING THE TOTAL INCOME WHICH WAS IN FA CT THE DECLARED LOSS BY THE ASSESSEE. 6. IN OUR OPINION, THE PRINCIPLES LAID DOWN IN THE CASE OF R ELIANCE PETRO PRODUCT (SUPRA) ARE SQUARELY APPLICABLE IN THE PRES ENT CASE. MOREOVER, THE DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE OF DILIP N. SHROFF (SUPRA) NOW ALSO HOLDS GOOD LAW. THE ASSESSEES CASE CANNOT BE SAID TO BE THE CASE OF THE CONCEALMENT AS PER THE FACTS ON RECORD N OR IT CAN BE SAID THAT THE ASSESSEE HAS FILED ANY INACCURATE P ARTICULARS OF INCOME. UNDER THESE CIRCUMSTANCES IN OUR OPINION THE LD.C IT(A) HAS RIGHTLY DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER. WE DO NOT FIND ANY REASON TO INTERFERE WITH ORDER OF THE LD.CIT(A). A CCORDINGLY, THE SAME IS CONFIRMED. 6 ITA NO. ITA NO.307/PUN/2012, RAJLAXMI URBAN COOPERATIVE BAN K LTD., NASHIK 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN T HE OPEN COURT ON 30-04-2013 SD/- SD/- (R.K. PANDA) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER RK/PS PUNE, DATED: 30 TH APRIL, 2013 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) - I , NASHIK 4 THE CIT - I, NASHIK 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, PUNE