Deputy Commissioner of Income-tax, V. The Nshik Road Deolali Vyapari Sahakari Bank Ltd., Nashik

ITA 328/PUN/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6945 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 27-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H B NINAWE
• Assessee Lawyers: P S SHINGHATE
• Keywords: Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , ! ' , #$ BEFORE SHRI R.K PANDA, AM AND SHRI VIKAS AWASTHY,JM / ITA NO. 328/PUN/2015 #% & '& / ASSESSMENT YEAR : 2008-09 DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1 NASHIK. ....... APPELLANT % / V/S. THE NASHIK ROAD, DEOLALI VYAPARI SAHAKARI BANK LTD., KALPAWRIKSHA ASHANAGAR, NASHIK ROAD, PIN-422 101 PAN :AAAAT4688C / RESPONDENT REVENUE BY : SHRI H.B NINAWE ASSESSEE BY : SHRI P.S SHINGHATE / DATE OF HEARING : 16.03.2017 / DATE OF PRONOUNCEMENT : 17.03.2017 ( / ORDER PER VIKAS AWASTHY, JM THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE O RDER OF COMMISSIONER OF INCOME TAX (APPEAL)-I, NASHIK DATED 30.01.2 015 FOR THE ASSESSMENT YEAR 2008-09 DELETING PENALTY LEVIED U/S 271 (1) (C) OF THE INCOME TAX ACT, 1961, (HEREINAFTER REFERRED TO AS THE ACT). 2 ITA NO. 328/PUN/2015 ASSESSMENT YEAR: 2008-09 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE RE CORD ARE: THE ASSESSEE IS A CO-OPERATIVE BANK. THE ASSESSEE FILED ITS RE TURN OF INCOME IN THE ASSESSMENT YEAR 2008-09 ON 14.10.2008 DEC LARING INCOME OF RS.2,71,61,445/-.DURING THE COURSE OF SCRUTINY ASSE SSMENT, THE ASSESSING OFFICER MADE FOLLOWING ADDITIONS/ DISALLOWANCES: 1) DEDUCTION CLAIMED ON ACCOUNT OF INVESTMENT FLUCTUATION FU ND RS.20 LAKHS. 2) PROVISION FOR CASH SHORTAGE DUE TO MISAPPROPRIATION R S. 22 LAKHS. 3) FRINGE BENEFIT TAX (FBT) CLAIMED AS EXPENDITURE RS.67,587/-. THE ASSESSING OFFICER LEVIED PENALTY U/S 271 (1) (C) OF THE ACT IN RESPECT OF THE AFORESAID ADDITIONS/ DISALLOWANCES. AGGRIEVED BY THE ORDER LEVYING PENALTY DATED 30.03.2013, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEAL). THE FIRST AP PELLATE AUTHORITY VIDE IMPUGNED ORDER DELETED THE PENALTY IN RESP ECT OF ALL THE THREE ADDITIONS. AGAINST THE FINDINGS OF COMMISSIONER OF INCOM E TAX (APPEAL), NOW THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI H.B NINAWE REPRESENTING THE DEPARTMENT SUBMITTED THAT ADDITIONS MADE DURING THE COURSE OF ASSESSMENT HAVE BEE N UPHELD BY THE TRIBUNAL. THE ASSESSEE CHALLENGED THE ADDITION IN ITA NO. 1499/PN/2011 BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 30.05.2013 HAS UPHELD THE ADDITION IN RESPECT OF CASH SHOR TAGE DUE TO MISAPPROPRIATION OF FUND. THE ADDITION MADE ON OTHER GROUND S WAS ALSO ACCEPTED BY THE ASSESSEE. THE ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS U/S 271 (1) (C) OF THE ACT AS THE AS SESSEE HAS FAILED TO FURNISH CORRECT INFORMATION IN THE RETURN OF INCOME. THE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN COMING TO THE 3 ITA NO. 328/PUN/2015 ASSESSMENT YEAR: 2008-09 CONCLUSION THAT THE ASSESSEE HAD NO MALA-FIDE INTENTION IN CLAIMING SAID EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. IF IT WAS BONA-FIDE MISTAKE, THE ASSESSEE COULD HAVE RECTIFIED THE SAME BY FILING REVISED RETURN OF INCOME. THE COMMISSIONER OF INCOME TAX (APPEAL) H AS ERRED IN DELETING PENALTY IN RESPECT OF ADDITION MADE ON ACCOUNT OF INVESTMENT FLUCTUATION FUND BY PLACING RELIANCE ON THE DECISIO N OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT V/S. R ELIANCE PETRO PRODUCTS PVT LTD, 322 ITR 158. THE ASSESSEE COULD HAVE MADE DISALLOWANCES AND COMPUTED CORRECT INCOME IN THE REVISED RETURN OF INCOME. THE ASSESSEE HAS EVADED TAX BY CLAIMING EXCESS E XPENDITURE WITH MALA-FIDE INTENTION. THE LD. DR VEHEMENTLY DEFENDED THE ORDER OF LEVYING PENALTY U/S 271 (1) (C) OF THE ACT AND PRAYED FOR S ETTING ASIDE OF THE IMPUGNED ORDER. 4. ON THE OTHER HAND, SHRI P.S. SHINGHATE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT PENALTY WAS LEVIED BY ASSES SING OFFICER IN RESPECT OF THREE ADDITIONS MADE DURING ASSESSMENT PROCE EDINGS. THE FIRST ADDITION IS IN RESPECT OF INVESTMENT FLUCTUATION FUND. WHE THER INVESTMENT FLUCTUATION FUND CAN BE CLAIMED AS EXPENDITURE OR NOT IS A DEBATABLE ISSUE. THE ASSESSEE HAD CLAIMED THE SAME AS E XPENDITURE WITHOUT ANY MALA-FIDE INTENTION. THE LD. AR FURTHER SUBMITTED THAT THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT V/S. R ELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA) HAS HELD THAT A MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FUR NISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSEE MAY HAVE M ADE BONA- FIDE MISTAKE IN CLAIMING THE SAID AMOUNT AS EXPENDITURE WHICH MAY BE DISALLOWED BUT NO PENALTY IS CALLED FOR. 4 ITA NO. 328/PUN/2015 ASSESSMENT YEAR: 2008-09 THE SECOND ADDITION WAS IN RESPECT OF CASH SHORTAGE AR ISING OUT OF MISAPPROPRIATION OF FUNDS. THE DISPUTE WITH REGARD TO THE SAID CLAIM WAS THE YEAR OF CLAIM. THE LD. AR SUBMITTED THAT WHERE TH E DISPUTE IS WITH REGARD TO YEAR OF ALLOWABILITY OF CLAIM, NO PENALTY IS LEVIA BLE. AS REGARDS CLAIM OF FBT AS EXPENDITURE IS CONCERNED, IT WAS A N INADVERTENT BONA-FIDE MISTAKE. THE ASSESSEE IS A CO-OPERA TIVE BANK AND THERE WAS NO INTENTION FOR UNJUST ENRICHMENT BY CLAIM ING FBT AS EXPENDITURE. THE LD. AR PLACED RELIANCE ON THE DECISION OF HO NBLE SUPREME COURT OF INDIA IN THE CASE OF PRICE WATERHOUSE C OOPERS PVT. LTD. V/S. CIT REPORTED AS 348 ITR 306. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE DEPARTMENT HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INC OME TAX (APPEAL) IN DELETING THE LEVY OF PENALTY IN RESPECT OF ADDITIONS MADE ON ACCOUNT OF INVESTMENT FLUCTUATION FUND, CASH SHORTAGE DUE TO MISAPPROPRIATION AND FBT CLAIMED AS EXPENDITURE. IT IS AN U NDISPUTED FACT THAT ASSESSEE HAS ACCEPTED THE ADDITIONS MADE ON ACCOUNT OF ALL ABOVE THREE COUNTS. THE COMMISSIONER OF INCOME TAX (APP EAL) HAS DELETED THE LEVY OF PENALTY IN RESPECT OF INVESTMENT FLUCTUA TION FUND AND CLAIMED OF FBT BY PLACING RELIANCE ON THE DECISION OF CI T V/S. RELIANCE PETRO PRODUCTS PVT LTD (SUPRA). 6. THE ASSESSEE HAD CLAIMED PROVISION FOR INVESTMENT FLUCTU ATION FUND RS. 20 LAKHS. DURING COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE HAS VOLUNTARILY OFFERED THE SAME FOR TAXATION. R .B.I MASTER CIRCULAR DATED 01.07.2013 GIVES DETAILS OF CLASSIFICATION AND VA LUATION OF VARIOUS SECURITIES HELD UNDER VARIOUS CATEGORIES SUCH A S HELD TO 5 ITA NO. 328/PUN/2015 ASSESSMENT YEAR: 2008-09 MATURITY, AVAILABLE FOR SALE AND HELD FOR TRADE. THE R.B.I ALS O GIVES DETAILS OF INVESTMENT FLUCTUATION RESERVE, INVESTMENT RESER VE ACCOUNTS. THE ASSESSEE HAS GIVEN ALL RELEVANT DETAILS IN ITS RETURNED OF INCOME. HOWEVER, THE ASSESSEE HAD INADVERTENTLY CLAIMED PROVISION FOR INVESTMENT FLUCTUATION FUND UNDER MISTAKEN BELIEF. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF RELIAN CE PETRO PRODUCTS PVT LTD V/S. CIT HAS HELD THAT; MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDI TURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVEN UE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDE R SECTION 271 (1) (C) . IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CAS E OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSI NG OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECT ION 271 (1) (C) . THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. THUS, IN VIEW OF THE CASE AND THE DECISION OF HONBLE APE X COURT, WE DO NOT FIND INFIRMITY IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEAL) IN DELETING PENALTY ON THIS GROUND. 7. THE SECOND ADDITION ON WHICH PENALTY HAS BEEN DELETED , IS SHORTAGE OF CASH ARISING OUT OF MISAPPROPRIATION OF FUNDS. UNDISPUTEDLY, THERE WAS MISAPPROPRIATION OF FUNDS TO THE TUNE OF RS. 22 LAKHS BY BANK STAFF IN THE YEAR 2004 AND THE SAME W AS SHOWN AS CASH SHORTAGE IN THE BALANCE SHEET. THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF THE ASSESSEE AS THE LOSS HAD NOT O CCURRED DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER AP PEAL. THE ASSESSING OFFICER HELD THAT THE LOSS CAUSED BY EMBEZZLEMEN T OF FUNDS HAD OCCURRED DURING FINANCIAL YEAR 2004-05 AND THE ASSES SEE HAD REGISTERED FIR IN 2004 ITSELF. IT IS APPARENT THAT THE EMB EZZLEMENT HAS COME TO THE KNOWLEDGE OF ASSESSEE IN 2004. EMBEZZLEMENT AMOUNT COULD NOT BE RECOVER IN FINANCIAL YEAR 2004-05 HENCE THE SAID AMOUNT 6 ITA NO. 328/PUN/2015 ASSESSMENT YEAR: 2008-09 IS NOT ALLOWABLE IN THE ASSESSMENT YEAR 2008-09. WE FIND T HAT WHILE MAKING DISALLOWANCE, THE ASSESSING OFFICER HAS NOT RAISED ANY SUSPICION OVER THE LOSS SUFFERED BY ASSESSEE. THE EXPENDIT URE WAS DISALLOWED AS THE ASSESSEE HAS CLAIMED THE SAME IN WRONG ASSESSMENT YEAR. IT IS A WELL SETTLED LAW THAT WHERE EXPENDITURE HAS BEEN CLAIMED IN THE WRONG YEAR, IT CAN BE ADDED BACK TO THE INCOME R ETURNED BUT NO PENALTY IS LEVIABLE ON SUCH ADDITION. 8. THE THIRD ADDITION ON WHICH PENALTY IS LEVIED, IS DISALLOWANC ES OF FBT CLAIMED AS DEDUCTION. IT IS THE CASE OF THE ASSESSEE THAT FBT PAID WAS INADVERTENTLY CLAIMED AS EXPENDITURE. THE HONBLE SUP REME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT LTD (SUPRA) DELETED THE PENALTY LEVIED U/S 271 (1 ) (C ) WHERE THE ASSESSEE A MULTID ISCIPLINARY MANAGEMENT CONSULTANCY SERVICE CLAIMED DEDUCTION IN RESP ECT OF PROVISION TOWARDS PAYMENT OF GRATUITY, THOUGH IN STATEME NT IT WAS INDICATED THAT THE SAID PROVISION IS NOT ALLOWABLE. PENALTY P ROCEEDINGS U/S 271 (1) (C ) WERE INITIATED FOR FURNISHING INACCURATE PARTIC ULARS OF INCOME. THE HONBLE APEX COURT HELD THAT NOTWITHSTANDING THE FACT THAT THE ASSESSEE IS A REPUTED FIRM AND HAS GREAT EXP ERTISE, IT IS POSSIBLE THAT THE ASSESSEE COULD MAKE SILLY MISTAKE. THE P ENALTY WAS DELETED HOLDING THE CLAIM OF ASSESSEE AS BONA-FIDE AND INAD VERTENT MISTAKE. IN THE PRESENT CASE, THE ASSESSEE IS A BANK. CLAIMING PAYMENT OF FBT AS EXPENDITURE IS AN ERROR ARISING OUT OF LAXITY. 9. THUS, IN VIEW OF THE FACTS OF CASE AND DECISIONS OF THE HONBLE SUPREME COURT OF INDIA REFERRED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL) IN DELETING PENALTY. 7 ITA NO. 328/PUN/2015 ASSESSMENT YEAR: 2008-09 ACCORDINGLY, IMPUGNED ORDER IS UPHELD AND APPEAL OF THE DE PARTMENT IS DISMISSED BEING DEVOID OF ANY MERIT. 10. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 17 TH DAY OF MARCH, 2017. SD/- SD/- ( /R.K PANDA) ( ! ' /VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; !' / DATED : 17 TH MARCH, 2017. SB ()*#+,!-!'+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (A)-I, NASHIK. 4. THE CIT, NASHIK. #$ %&' () , * () , + +,- , / DR, ITAT, B BENCH, PUNE. 6. './01 / GUARD FILE. 23456789 *: / BY ORDER, /ASSISTANT REGISTRAR * () , / ITAT, PUNE 8 ITA NO. 328/PUN/2015 ASSESSMENT YEAR: 2008-09