The Baramulla Central Coperative Bank Ltd, Kashmir V. The Dy. Commissioner of Income Tax, Srinagar

ITA 359/ASR/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0428 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-12-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 24-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL
• Keywords: Bonafide belief; Wrong claim; Bad and doubtful debts; Difference of opinion
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. N. K. CHOUDHRY, JUDICIAL MEMBER AND SH. O. P. MEENA ACCOUNTANT MEMBER I.T.A. NO. 359/ASR/2016 ASSES SMENT YEAR: 2007-08 THE BARAMULLA CENTRAL CO-OPERATIVE BANK LTD., NATIONAL HIGHWAY, BARAMULLA, KASHMIR [PAN: AAAAB 5145Q] V S. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3, SRINAGAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PADAM BAHL (C.A. ) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 19.12.2019 DATE OF PRONOUNCEMENT:19.12.2019 ORDER PER O. P. MEENA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), JAMMU DATED 29. 02.2016 FOR THE ASSESSMENT YEAR 2007-08. 2. THE GROUND NO. 1 TO 4 RELATES TO CONFIRM THE PEN ALTY U/S 271(1)(C) AMOUNTING TO RS.40,03,762/-. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSMENT WAS MADE U/S 143(3) ON 24.12.2009 ON A TOTAL INCOME OF RS.1,18,9 4,720/- BY DENYING DEDUCTIONS ON ACCOUNT OF ADDITIONAL PROVISION FOR B AD AND DOUBTFUL DEBTS ITA NO. 359/ASR/2016 (AY 2007-08) THE BARAMULLA CENTRAL COOP. B ANK LTD. V. DY. CIT 2 AMOUNTING TO RS.70,95,288/- AND DISALLOWANCE U/S 36 (I)(IV) AND 36(I)(VA) OF THE ACT. THESE ADDITIONS WERE CONFIRMED BY THE CIT AS WE LL AS ITAT PENALTY PROCEEDINGS U/S 271(1)(C) WERE ALSO INITIATED. AFTE R GETTING THE ORDER OF THE ITAT, THE CASE WAS FIXED FOR HEARING ON 22.05.2014 BU T THE ASSESSEE FAILED TO MAKE ANY COMPLIANCE THEREFORE THE AO IMPOSED PENALT Y OF RS.40,03,762/- U/S 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER B EFORE CIT (A). WHEREIN IT WAS SUBMITTED THAT THE ASSESSEE BANK CLAIMED A D EDUCTION OF RS.70,95,288/- IN RESPECT OF ADDITIONAL PROVISION FOR BAD & DOUBTF UL DEBTS. HOWEVER, THE ASSESSEE RESTRICTED THE CLAIM OF ADDITIONAL PROVISI ON TO THE GROSS TOTAL INCOME INSTEAD OF RESTRICTING IT TO THE AMOUNT OF ACTUAL P ROVISION MADE. THEREFORE, THE CLAIM OF DEDUCTION WAS MADE UNDER BONA-FIDE BELIEF THAT SAME WAS ALLOWABLE EXPENDITURE. THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF RELIANCE PETROPRODUCTS PVT. LTD. V. CIT & ORS. FOR HIS WRITTE N SUBMISSION HAS REPRODUCED IN THE PART ORDER. HOWEVER, THE CIT(A) WAS OF THE VI EW THAT IT IS NOT A CASE WHERE ALL THE PARTICULARS OF INCOME HAVE BEEN FURNI SHED, INSTEAD THIS IS A WRONG CLAIM OF DEDUCTION WHICH WAS PRIMA-FACIE TO BE WRON G. THE APPELLANT BEING A COOPERATIVE SOCIETY CANNOT ESCAPE FROM THE RESPONSI BILITY OF MAKING THE WRONG CLAIM OF DEDUCTIONS KNOWINGLY FULLY WELL THAT THESE DEDUCTIONS WERE AB-INITIO NOT ALLOWABLE UNDER THE ACT. THEREFORE, THE APPEAL OF THE ASSESSEE IS DISMISSED. 5. BEING AGGRIEVED THE ASSESSEE FILED THIS APPEAL BE FORE THIS TRIBUNAL. THE LD. COUNSEL SUBMITTED THAT THE CLAIM OF DEDUCTION O F RS.70,95,288/- IN RESPECT OF ADDITIONAL PROVISION FOR BAD & DOUBTFUL DEBTS WA S TO BE RESTRICTED THE ACTUAL PROVISION MADE AS AGAINST WHICH THE CLAIM WAS MADE AGAINST THE PROVISION TO THE GROSS TOTAL INCOME. SINCE THE ISSUE IS DEBATABL E ONE AND THIS IS MERE CLAIM OF DEDUCTION WAS NOT FOUND TO BE ALLOWABLE WHICH DO ES NOT FURNISH INACCURATE PARTICULARS OF INCOME. SIMILARLY, THE ASSESSEE HAS WRITTEN BACK BAD DEBT ITA NO. 359/ASR/2016 (AY 2007-08) THE BARAMULLA CENTRAL COOP. B ANK LTD. V. DY. CIT 3 AMOUNT OF RS.9,20,790/- WHICH IS ALLOWABLE AS PER BA NKING REGULATION ACT, HOWEVER THIS WAS TREATED AS CONCEALED BY THE AO. HO WEVER, THE SAME CANNOT BE TREATED AS CONCEALMENT IN NATURE, THEREFORE THE PENALTY HAS BEEN WRONGLY SUSTAINED BY THE CIT(A). LD. COUNSEL FURTHER SUPPORT ED HIS VIEW THAT PLACING THE RELIANCE ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF CIT V. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 (SC) WHERE IN IT WAS HELD THAT THE PENALTY OF U/S 271(1)(C) WAS MERELY IF IT IS IN CORRECT, INADMISSIBLE CLAIM HAS BEEN MADE IN THE RETURN AND TO THE ALL MATERIAL AND FACTS HAVING BEEN DISCLOSED IN THE RETURN OF INCOME. THE LD. COUNSEL PLACED REL IANCE ON THE FOLLOWING CASE LAWS: 1. COMMISSIONER OF INCOME TAX V. AJAIB SINGH AND CO . 253 ITR 630 (P&H) 2. COMMISSIONER OF INCOME TAX V. MEHTA ENGINEERS LTD . 300 ITR 308 (P&H) 3. COMMISSIONER OF INCOME TAX V. RELIANCE PETRO PROD UCTS PVT. LTD. 322 ITR 158 (SC). 4. PRICE WATER HOUSE COOPERS PVT. LTD. V. COMMISSIONE R OF INCOME TAX 348 ITR 306 (SC). 5. TATA IRON AND STEEL CO. LTD. D.V BAPAT INCOME TAX OF FICER 101 ITR 292 (BOM). 6. PER CONTRA, THE LD. DR RELIED UPON THE ORDERS OF T HE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE PERUSAL OF THE ASSESSMENT ORDER REVE ALS THAT THE AO HAS MADE ADDITION ON THE BASIS OF FACTS DISCLOSED BY THE ASS ESSEE IN THE RETURN OF INCOME ITA NO. 359/ASR/2016 (AY 2007-08) THE BARAMULLA CENTRAL COOP. B ANK LTD. V. DY. CIT 4 AND ALSO DURING THE COURSE OF ASSESSMENT PROCEEDING S. THE CLAIM OF DEDUCTION OF RS.70,95,288/- IN RESPECT OF ADDITIONAL PROVISIO N FOR BAD & DOUBTFUL DEBTS WAS TO BE RESTRICTED THE ACTUAL PROVISION MADE AS A GAINST WHICH THE CLAIM WAS MADE AGAINST THE PROVISION TO THE GROSS TOTAL INCOM E. SINCE THE ISSUE IS DEBATABLE ONE AND THIS IS MERE CLAIM OF DEDUCTION W AS NOT FOUND TO BE ALLOWABLE WHICH DOES NOT FURNISH INACCURATE PARTICU LARS OF INCOME. SIMILARLY, THE ASSESSEE HAS WRITTEN BACK BAD DEBT AMOUNT OF RS .9,20,790/- WHICH IS ALLOWABLE AS PER BANKING REGULATION ACT. THUS, THE ADDITION IS MADE ON DIFFERENCE OF OPINION FROM THE POINT OF VIEW OF THE ASSESSEE. IT IS TRITE LAW THAT PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCE EDINGS FROM ASSESSMENT PROCEEDINGS. THE FINDING RECORDED IN THE ASSESSMENT ORDER IS NOT CONCLUSIVE FOR DECIDING THE IMPOSITION OF PENALTY. IT ONLY HAS A PE RSUASIVE VALUE. ANY FINDING RECORDED IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PENALTY HAS TO BE IMPOSED AUTOMATICALLY. EXPLANATION 1 TO SECTION 271 (L) (C) PROVIDES THAT THE PENALTY WOULD BE DEEMED TO ATTRACT WHERE IN RESPECT OF A FACT MATERIAL TO THE COMPUTATION OF INCOME EITHER NO EXPLANATION IS OFFER ED, OR EXPLANATION OFFERED IS FOUND TO BE FALSE. IN THIS CASE, THE ASSESSEE HA S OFFERED EXPLANATION, HOWEVER, THE SAME WAS NOT FOUND ACCEPTABLE BY THE A O. HOWEVER, THE EXPLANATION OFFERED WAS NOT FOUND TO BE FALSE AND AC CORDINGLY CLAUSE (A) OF EXPLANATION 1 DOES NOT COVER ITS CASE. CLAUSE (B) OF EXPLANATION 1 PROVIDES THAT WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATION AND FAILS TO PROVE ITA NO. 359/ASR/2016 (AY 2007-08) THE BARAMULLA CENTRAL COOP. B ANK LTD. V. DY. CIT 5 THAT SUCH EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS LEVIABLE. AS THE CLAIM O F PROVISION FOR BAD AND DOUBTFUL DEBTS WAS BASED ON METHOD OF ACCOUNTING AS PER BOOKING REGULATION, THEREFORE, IT CANNOT BE SAID THAT THERE WAS CONCEAL ED INCOME. THIS BEING THE FACTUAL POSITION, THEREFORE PENALTY U/S 271(1) (C) IS NOT LEVIABLE. JUST BECAUSE APPELLANTS EXPLANATION WAS NOT FOUND ACCEPTABLE BY THE AO, IT DOES NOT FOLLOW THAT THAT THE APPELLANT WAS UNABLE TO SUBSTANTIATE HIS EXPLANATION BY PROVIDING VARIOUS EVIDENCES AND JUDICIAL OPINIONS. EXPLANATION 1 DOES THEREFORE, NOT COVER THE CASE OF THE APPELLANT. BASED ON THE ABOVE FACTS OF THE CASE, IT CAN BE HELD THAT THE APPELLANT HAD MADE ALL THE NECESSARY DISCLOSURES ON A BONAFIDE BELIEF, WHICH IS NOT AGREEABLE TO THE AO, IT WILL N OT AUTOMATICALLY LEAD TO A CASE FOR PENALTY UNDER SECTION 271(1)(C) OF THE IT A CT, 1961. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE PENALTY IS NOT SUST AINABLE IN VIEW OF DECISION OF THE HONBLE SUPREME COURT IN CASE OF CIT V RELIANCE PETROPRODUCTS PVT. LTD. (322 ITR 158) (SC) HELD THAT MERELY BECAUSE THE ASSE SSEE HAS CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE BY THE REVENUE, PENALTY U/S. 271(1) (C) OF THE ACT CANNOT BE ATTRACTED. THE HON'BLE SUPREME COURT ALSO OBSERVED THAT MERE DISALLOWANCE OF CLAIM MADE BY THE ASSESSEE, CANNOT AMOUNT FURNISHING OF INACCURATE PA RTICULARS OF INCOME UNLESS, THE INFORMATION AS GIVEN IN RETURN OF INCOME WAS FO UND TO BE INCORRECT OR INACCURATE. SIMILARLY, THE HONBLE GUJARAT HIGH COU RT IN THE CASE OF NATIONAL ITA NO. 359/ASR/2016 (AY 2007-08) THE BARAMULLA CENTRAL COOP. B ANK LTD. V. DY. CIT 6 TEXTILE 249 ITR 125 (GUJARAT) HELD THAT ADDITION MADE IS NOT CONCLUSIVE, WHERE THE ASSESSEE HAS FURNISHED EVIDENCE; IT WAS HELD TH AT NO PENALTY IS LEVIABLE. THE OTHER VARIOUS DECISION OF TRIBUNALS AS WELL AS HIGH COURTS AS DISCUSSED ABOVE. IN THE LIGHT OF ABOVE DISCUSSION, THE PENALTY LEVIED AT RS.3,04,750 IS THEREFORE, DELETED. THIS GROUND OF APPEAL IS THEREF ORE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALL OWED. 9. THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.12.201 9. SD/- SD/- (N.K.CHOUDHRY) (O.P.MEENA) JUDICIAL MEMBER ACCOU NTANT MEMBER AMRITSAR: DATED: DECEMBER 19, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/ GUARD FILE OF ITAT. BY ORDER ASSISTANT REGISTRAR