The Phaltan Urban Co-Op. Bank ltd., Satara V. ACIT, Satara Cir., Satara

ITA 374/PUN/2010

• Counselvise Citation: 37424514 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA
• Keywords: Wrong claim
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 374/PN/10 (ASSTT. YEAR: 2006-07) PHALTAN URBAN CO-OP BANK LTD., .. APPELLANT THROUGH SUCCESSOR THE COSMOS CO-OP. BANK LTD., AMAR PLAZA, LAXMINAGAR, AT & PO. PHALTAN, DIST. SATARA VS. ASSTT. COMMISSIONER OF INCOME-TAX, .. R ESPONDENT SATARA CIR., SATARA APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SHRI S.K. AMBASTHA ORDER PER G.S.PANNU, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, PUNE DATED 1 7.12.2009 WHICH, IN TURN, HAS ARISEN FROM PENALTY ORDER DATED 08.05.2009 PASSED BY THE ASSESSING OFFICER PASSED UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2006-07. 2. THE SOLITARY ISSUED RAISED IN THIS APPEAL RELATES TO T HE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AMOUNTING TO RS 50,3 2,500/- FOR THE ASSESSMENT YEAR 2006-07. 2 3. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A CO-OPE RATIVE SOCIETY REGISTERED UNDER THE CO-OPERATIVE SOCIETIES ACT, 1960 CARRYING ON BANKING BUSINESS. FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSE E FILED RETURN OF INCOME DECLARING LOSS OF RS 62,99,716/-. THE ASSESSMENT WAS CO MPLETED BY THE ASSESSING OFFICER DETERMINING THE TOTAL INCOME AT RS. NIL AFTER MAKING VARIOUS ADDITIONS/DISALLOWANCE AND SETTING OFF OF THE BROUGHT F ORWARD BUSINESS LOSS FOR THE ASSESSMENT YEAR 2004-05 TO THE EXTENT OF RS 84,07,2 10/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FROM A PERUSAL OF THE COMPUTATI ON OF INCOME FILED BY THE ASSESSEE ALONG WITH THE RETURN, THE ASSESSING OFFICER F OUND THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS 1,25,04,356/- ON ACCO UNT OF SHORTFALL IN FIXED DEPOSITS AND OF RS 3,09,764/- ON ACCOUNT OF EXCESS PROVISION OF INTEREST RECEIVABLE. THE ASSESSING OFFICER OBSERVED THAT THERE WA S NO PROVISION IN THE ACT WHICH WOULD PERMIT THE ALLOWANCE OF SUCH TYPES OF DEDUC TION. AS THE ASSESSEE DID NOT FURNISH ANY EXPLANATION WITH REGARD TO THE A LLOWABILITY OF THESE AMOUNTS AS DEDUCTION, THE AMOUNTS WERE ADDED TO THE INCOME OF THE ASSESSEE BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER SECTIO N 143(3) OF THE ACT AND THE SAME WERE TREATED AS WRONG CLAIMS. SUBSEQUE NTLY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 27 1(1)(C) OF THE ACT AND IN THE COURSE OF SUCH PROCEEDINGS, INSPITE OF SEVERAL OPPORTUNI TIES GIVEN BY THE ASSESSING OFFICER, THE ASSESSEE SOCIETY FAILED TO FURNISH ANY E XPLANATION AND THEREFORE, IN THE ABSENCE OF ANY EXPLANATION FROM THE ASSESSEE, THE ASSESSING OFFICER HELD THE ASSESSEE LIABLE FOR PENALTY UNDER SECT ION 271(1)(C) OF THE ACT. RELYING ON THE EXPLANATION 4 TO SECTION 271(1)(C) OF T HE ACT, THE ASSESSING OFFICER LEVIED MINIMUM PENALTY OF RS 50,32,500/- UND ER SECTION 271(1)(C) OF THE ACT. BEING AGGRIEVED WITH THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CHALLENGED THE LEVY OF PENALTY IN AN APPEAL BEFORE T HE FIRST APPELLATE AUTHORITY. 4. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), IT WAS CONTENDED THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGISTERED UNDER THE CO-OPERATIVE SOCIETIES ACT, 1960 CARRYING ON BANKING BUSINESS AND IT IS REQUIRED TO FOLLOW 3 VARIOUS NORMS SPECIFIED BY RBI AND ALSO VARIOUS ACCOUNTING STANDARDS ISSUED BY ICAI. FOR THE YEAR UNDER APPEAL, THE STATUTORY AUDIT OR HAD POINTED OUT SOME ERRORS/DISCREPANCIES/OMISSIONS IN THE ANNUAL ACCOUNTS DRAWN BY THE ASSESSEE SOCIETY. IN ITS REPORT, THE STATUTORY AUDITOR SPECIFICALL Y MENTIONED THAT INTEREST ON FIXED DEPOSITS TO THE EXTENT OF RS 1,256,04,356/- WAS N OT PROVIDED FOR IN THE ACCOUNTS AND A SUM OF RS 3,09,764/- WAS EXCESS PROVIDED AS INCOME RECEIVABLE ON INVESTMENTS, WHICH NEEDED TO BE ADJUSTED. ACCORDING TO THE ASSESSEE, ONCE THE ERRORS/OMISSIONS WERE BROUGHT TO THE NOTICE OF ASSESSEE SOCIETY, THE ONLY THING TO BE DONE BY THE ASSESSEE SOCIETY WAS TO CORRECT THE POSITION OF TAXABLE INCOME BY MAKING APPROPRIATE CLAIMS IN THE BODY OF COMP UTATION OF INCOME ANNEXED TO THE RETURN OF INCOME. IN ORDER TO PORTRA Y THE CORRECT POSITION OF TAXABLE INCOME IN INCOME-TAX RETURN, THE ADJUSTMENTS WERE MADE IN THE BODY OF COMPUTATION STATEMENT, AND AS PER THE ASSESSEE, THE ENTR IES APPEARING IN COMPUTATION STATEMENTS WERE NOT DEDUCTIONS BUT ADJUSTME NTS MADE TO COMPUTE CORRECT TAXABLE INCOME. IT WAS FURTHER PLEADED THAT TH E ASSESSING OFFICER HAD NOT GONE THROUGH THE AUDIT REPORT GIVEN BY THE AUDITOR OF THE SOCIETY, WHICH MENTIONED THIS ERROR IN ACCOUNTS AND HE WAS NOT JUSTIFIE D IN IMPOSING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 6. AFTER CONSIDERING THE VARIED SUBMISSIONS OF THE ASSESSEE, THE COMMISSIONER OF INCOME-TAX (APPEALS) AFFIRMED THE PENA LTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT BY HOL DING AS UNDER: 6. AFTER CAREFUL CONSIDERATION, I AM NOT INCLINED TO ACCEPT THE CONTENTION OF THE APPELLANT. IT IS SEEN FROM THE ASSESSMENT ORDER THA T THE APPELLANT HAD NOT FURNISHED ANY EXPLANATION AGAINST THE SHOW CAUSE LETTER ISSUED BY THE AO REQUIRING THE APPELLANT TO EXPLAIN UNDER WHICH PROVISIONS OF THE I.T. ACT, THE AMOUNTS OF RS 1,25,04,356/- AND RS 3,09,764/- REPRESENTING IN FIXED DEPOSITS AND EXC ESS PROVISION OF INTEREST PAYABLE RESPECTIVELY HAD BEEN DEDUCTED FROM THE INCOME BY T HE APPELLANT. DURING PENALTY PROCEEDINGS ALSO, NO SUBMISSION HAS BEEN MADE BY AP PELLANT. EVEN BEFORE ME, THE APPELLANT HAS NOT BEEN ABLE TO REFER TO ANY PROVISI ONS OF LAW WHICH COULD JUSTIFY THE APPELLANTS CLAIM OF DEDUCTION OF SHORTFALL IN FIX ED DEPOSITS (RS 1,25,04,356) AND EXCESS PROVISION OF INTEREST PAYABLE (RS 3,09,764) FROM TH E TOTAL INCOME MADE IN THE RETURN OF INCOME. THUS, THERE IS NO DENYING OF THE FACT THAT THE APPELLANTS CLAIM OF DEDUCTION OF THE SAID AMOUNTS IS NOT SUPPORTED BY ANY PROVISIONS OF LAW. SINCE THERE IS NO CONTROVERSY WITH REGARD TO NON-ALLOWANCE OF DEDUCTION OF THE SA ID AMOUNTS, THERE COULD BE NO REASON FOR THE APPELLANT TO CLAIM DEDUCTION THEREFOR BUT F OR THE MALA FIDE INTENTION OF UNDER- DISCLOSING ITS INCOME. 7. THE APPELLANT HAS PLEADED EXONERATION FROM LEVY OF PENALTY BY STATING THAT THE DEDUCTIONS IN RESPECT OF THE SAID AMOUNTS HAVE BEEN CLAIMED IN THE COMPUTATION OF 4 INCOME IN ORDER TO MAKE ADJUSTMENTS IN THE TAXABLE INCOME IN PURSUANCE OF THE REPORT OF THE STATUTORY AUDITOR OF THE SOCIETY WHO HAS POINTE D OUT SOME ERRORS/DISCREPANCIES/OMISSIONS IN THE ANNUAL AMOUNT S DRAWN BY THE APPELLANT SOCIETY. HOWEVER, IT IS PERTINENT TO MENTION THAT NO ADJUSTM ENTS HAVE BEEN MADE Y THE APPELLANT IN THE ANNUAL ACCOUNTS AND THEREFORE, APPELLANTS C ONTENTION DOES NOT MERIT ACCEPTANCE. 8. I ALSO DO NOT SEE ANY FORCE IN THE CONTENTION OF THE APPELLANT THAT THE INCREASE IN INCOME OF THE APPELLANT SOCIETY WOULD NOT HAVE RESU LTED IN ANY POSITIVE TAXABLE INCOME AS THE ENTIRE INCOME OF THE APPELLANT SOCIETY IS EXEMP T U/S 80P AND THEREFORE, ANY ADJUSTMENT ON ACCOUNT OF INCOME WILL NOT ATTRACT TH E PROVISIONS OF SECTION 271(1)(C) AS THE INCREASED INCOME GOES TOWARDS DEDUCTION U/S 80P OF THE I.T. ACT. FIRSTLY, THERE IS O FINDING IN THE ASSESSMENT ORDER THAT THE TOTAL INCO ME OF THE APPELLANT QUALIFIES FOR DEDUCTION U/S 80P. SECONDLY, IN TERMS OF EXPLANATIO N 4 TO SECTION 271(1)(C), PENALTY IS ATTRACTED EVEN IN A CASE WHERE THE ASSESSED INCOME IS NOT POSITIVE. 9. IN VIEW OF THE AFORESAID, I HOLD THAT, ON THE FA CTS OF THE CASE, THE AO IS JUSTIFIED IN VISITING THE APPELLANT WITH THE PENAL PROVISIONS OF SECTION 271(1)(C) AND LEVYING PENALTY IN AN AMOUNT OF RS 50,32,500. ACCORDINGLY, THE ORDER U /S 271(1)(C) IS CONFIRMED. STILL AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFO RE US. 7. BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE HAS VEHEM ENTLY CONTENDED THAT THE FIRST APPELLATE AUTHORITY HAS MECHANICALLY CONF IRMED THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT. IT IS POINTED OUT THAT BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) ASSESSEE HA D FURNISHED A DETAILED EXPLANATION BRINGING OUT THE BACKGROUND IN W HICH TWO AMOUNTS WERE CLAIMED AS ADJUSTMENTS IN THE COMPUTATION OF INCOME ANN EXED WITH THE RETURN OF INCOME. IT WAS POINTED OUT THAT THOUGH THE ADJUSTMENTS IN THE COMPUTATION WERE NOT BASED ON ENTRIES MADE IN THE BOOKS OF ACCOUNT BUT TH E SAME WERE BASED ON THE REPORT OF THE STATUTORY AUDITORS AND SUCH REPORT WAS ATTACHED TO THE RETURN OF INCOME FILED. ON THE BASIS OF THE OBSERVATIONS OF THE STA TUTORY AUDITORS, IMPUGNED ADJUSTMENTS WERE REQUIRED TO BE MADE SO AS TO COMPUTE TH E CORRECT TAXABLE INCOME. THE LEARNED COUNSEL POINTED OUT THAT THOUGH D URING THE COURSE OF ASSESSMENT PROCEEDINGS SUCH FACTUAL ASPECTS COULD NOT BE BROUGH T OUT AND EVEN DURING THE COURSE OF PENALTY PROCEEDINGS BEFORE THE ASSE SSING OFFICER SIMILAR SITUATION CONTINUED, SO HOWEVER, BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) IN THE IMPUGNED PROCEEDINGS A DETAILED EXPLA NATION WAS BROUGHT OUT TO JUSTIFY THAT THE IMPUGNED ADJUSTMENTS WERE NECESSARY T O COMPUTE THE CORRECT TAXABLE INCOME AND THAT THE EXPLANATION WAS SUPPORTED BY THE REPORT OF THE STATUTORY AUDITOR. IT WAS POINTED OUT THAT THE COMMISSI ONER OF INCOME-TAX (APPEALS) HAS NOT APPRECIATED THE EXPLANATION RENDERED BY THE ASSESSEE ABOUT 5 THE NATURE OF THE IMPUGNED ADJUSTMENTS BUT HAS MECHANI CALLY UPHELD THE PENALTY PRIMARILY FOR THE REASON THAT THE DISALLOWANCES STOOD CONFIRMED IN THE QUANTUM ASSESSMENT PROCEEDINGS. IN THIS MANNER, THE LEARNED COUNSE L HAS SOUGHT TO ASSAIL THE PENALTY IMPOSED BY THE ASSESSING OFFICER IN THI S CASE IN TERMS OF SECTION 271(1)(C) OF THE ACT. 8. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE, HAS RELIED UPON THE ORDERS OF THE AU THORITIES BELOW IN SUPPORT OF THE CASE OF THE REVENUE. IT HAS BEEN POINTED OUT ON B EHALF OF THE REVENUE THAT IN THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ESTABLISHE D THAT THE ASSESSEE HAS MADE WRONG CLAIMS WITH REGARD TO THE IMPUGNED ADJUSTMENTS AND, THEREFORE, TO THAT EXTENT IN THE IMPUGNED PROCEEDING S THE ASSESSING OFFICER WAS QUITE JUSTIFIED IN INFERRING THAT THE ASSESSEE HAD FILE D INACCURATE PARTICULARS OF SUCH INCOME SO AS TO JUSTIFY LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THIS MANNER, THE PENALTY SUSTAINED BY THE COMMISSIONER O F INCOME-TAX (APPEALS) IS SOUGHT TO BE DEFENDED. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IT IS A TRITE LAW THAT IN ORDER TO INVOKE THE PENAL PROVISIONS OF SECTION 271(1)( C) OF THE ACT, IT IS REQUIRED TO ESTABLISH THAT THE ASSESSEE HAS EITHER CONCEALED THE PAR TICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS ALSO QUITE WELL SETTLED THAT IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT, IT IS OUGHT TO BE ESTABLISHED THAT THE CASE IS STRICTL Y COVERED BY THE PROVISION. WE MAY ALSO NOTICE HERE THAT THERE IS NO DISPUTE TO TH E PROPOSITION, AS HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF C IT V. RELIANCE PETROPRODUCTS P. LTD. 322 ITR 158 (SC), THAT IMPOSIT ION OF PENALTY WOULD DEPEND PRIMARILY UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT FROM WHICH IT CAN BE ASCERTAINED WHETHER THE ASS ESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME OR NOT. IT IS ONLY WH EN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE EXIGIBILITY TO PENALTY W OULD ARISE. 6 10. IN THE PRESENT CASE, AS PER THE REVENUE, THE ASSESSE E HAS FURNISHED INACCURATE PARTICULARS OF INCOME WITH REGARD TO TWO ADJ USTMENTS/DEDUCTIONS CLAIMED BY THE ASSESSEE IN THE COMPUTATION OF INCOME ATTA CHED TO THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR. FIRSTLY, THE ASSESSEE CLAIMED A DEDUCTION OF RS 1,25,04,356/- ON ACCOUNT OF A SHORTFALL IN THE PROVISION OF INTEREST PAYABLE ON FIXED DEPOSITS. SECONDLY, THE ASSESSEE HAD CLAI MED ADJUSTMENTS/DEDUCTION OF A SUM OF RS 3,09,764/- ON ACCOUNT OF EXCESS PROVISION OF INTEREST RECEIVABLE. BOTH THESE ADJUSTMENTS/DEDUCTIO NS HAVE BEEN FOUND TO BE IMPERMISSIBLE IN THE COURSE OF ASSESSMENT PROCEEDINGS AND TH US SUFFERED A DISALLOWANCE IN THE ASSESSMENT FINALIZED UNDER SECTION 143( 3) OF THE ACT VIDE ORDER DATED 21.11.2007. OSTENSIBLY, THESE ASPECTS HAVE B ECOME FINAL. BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE RE TURN OF INCOME WAS FILED AT A LOSS OF RS 62,99,716/- AND THE TOTAL INCOME WAS ALSO D ETERMINED AT NIL, AFTER ALLOWING SET-OFF OF THE BROUGHT FORWARD LOSSES. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE DID NOT FILE AN APPEAL AGAINST THE ADDITIONS MA DE SINCE THE RESULTANT ASSESSED INCOME WAS OF LOSS, WITHOUT ANY TAX LIABILITY. B E THAT AS IT MAY, THE ISSUE BEFORE US IS AS TO WHETHER THE ASSESSING OFFICER IS JUSTI FIED TO HOLD THAT THE AFORESAID TWO DISALLOWANCES MERIT AN INFERENCE THAT ASSESSE E HAD FILED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SE CTION 271(1)(C) OF THE ACT. 11. WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDI NGS CULMINATING IN AN ORDER UNDER SECTION 143(3) OF THE ACT DATED 21.11. 2007 AND ALSO IN THE COURSE OF PENALTY PROCEEDINGS CULMINATING IN ORDER UNDER SECTIO N 271(1)(C) DATED 8.5.2009 THE ASSESSEE DID NOT FURNISH ANY FACTUAL EXPLANA TION REGARDING THE NATURE OF THE TWO ADJUSTMENTS/DISALLOWANCES CLAIMED IN T HE RETURN OF INCOME. IN THE PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS INFERRE D FURNISHING OF INACCURATE PARTICULARS OF INCOME AGAINST THE ASSESSEE PRIMARI LY ON THE BASIS THAT TWO AMOUNTS SUFFERED DISALLOWANCE IN THE ASSESSMENT PROCE EDINGS, WHICH ACCORDING TO HIM, WERE WRONG CLAIMS. THE MOOT QUESTION I S AS TO WHETHER A 7 DISALLOWANCE IN THE ASSESSMENT PROCEEDINGS PER SE CAN BE CONCLU SIVE TO ESTABLISH CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF SUCH INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. IN OUR CONSIDERED OPINION, THE FINDINGS IN THE ASSESSMENT PROCEEDINGS CANNO T IPSO FACTO LEAD TO A CONCLUSION IN ALL CASES THAT ASSESSEE HAD CONCEALED OR FURNISHE D INACCURATE PARTICULARS OF INCOME. QUITE CLEARLY, PENALTY PROCEEDING S UNDER SECTION 271(1)(C) ARE DISTINCT THAN THE ASSESSMENT PROCEEDINGS, AS THE ORDER OF PENALTY UNDER SECTION 271(1)(C) IS A RESULT OF QUASI CRIMINAL PROCEEDINGS. THE BURDEN IS ON THE REVENUE TO ESTABLISH THAT THE DISPUTED AMOUNT REPRESEN TED INCOME FOR WHICH THE ASSESSEE HAD CONSCIOUSLY CONCEALED OR FURNISHED INACCURATE PART ICULARS OF INCOME. THE HONBLE SUPREME COURT IN THE CASE OF ANANT HARAM VEERASINGHAIAH & CO. V CIT 123 ITR 457(SC) HAS BROUGHT OUT THE DISTI NCTION AND HAS OBSERVED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE IN DEPENDENT PROCEEDINGS AND A FINDING IN THE ASSESSMENT PROCEEDINGS TH AT A PARTICULAR RECEIPT IS INCOME CANNOT AUTOMATICALLY BE ADOPTED AS A FINDING TO THAT EFFECT IN THE PENALTY PROCEEDINGS. NO DOUBT, THE FACTUM OF ASSESSMENT P ROCEEDINGS CONTAINING A FINDING THAT A PARTICULAR AMOUNT IS INCOME MAY CONSTITUTE GOOD EVIDENCE IN THE PENALTY PROCEEDINGS ALSO, BUT SUCH A FIN DING IN THE ASSESSMENT PROCEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR THE PURP OSES OF IMPOSING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. BEFORE A PENALTY CAN BE IMPOSED, THE ENTIRETY OF THE CIRCUMSTANCES MUST BE TAKEN INTO CONSIDERA TION AND A FINDING RECORDED THAT THE DISPUTED AMOUNT WOULD QUALIFY TO BE TREATED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INC OME BY THE ASSESSEE WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. 12. IN THIS BACKGROUND, NOW WE MAY EXAMINE THE CASE SET U P BY THE ASSESSEE WITH REGARD TO THE NATURE OF THE IMPUGNED DISALLOWA NCES. IN THE IMPUGNED PROCEEDINGS BEFORE THE COMMISSIONER OF INCOME-TAX (APPEA LS), THE ASSESSEE POINTED OUT THAT TWO ADJUSTMENTS WERE MADE IN THE COM PUTATION OF INCOME ANNEXED TO THE RETURN OF INCOME SO AS TO ARRIVE AT THE CORRECT TAXABLE INCOME. 8 CLEARLY THE ADJUSTMENTS WERE NOT MADE BY WAY OF BOOK E NTRIES AND IT HAS BEEN SUBMITTED THAT THE SAME WAS BASED ON THE REPORT OF THE STATUTORY AUDITORS, COPY OF WHICH WAS AVAILABLE BEFORE THE ASSESSING OFFICER. IN THE COURSE OF THE HEARING BEFORE US, COPY OF SUCH REPORT HAS ALSO BEEN PLACED ON RE CORD. AT PAGE 19 OF THE REPORT, IN PART - A, THE STATUTORY AUDITOR OBSERVES T HAT THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE CONTAINS AN INCORRECT PROVISION OF INTEREST RE CEIVABLE ON INVESTMENTS. IT IS OBSERVED THAT THE ASSESSEE HAS CHARGED EXCESS PROVISION TO THE EXTENT OF RS 3,09,764/- WHICH HAS RESULTED IN HIGHE R PROFIT. SIMILARLY AT PAGE 32 OF THE REPORT, THE STATUTORY AUDITOR HAS COMMENTED THAT THE PROVISION FOR INTEREST PAYABLE ON FIXED DEPOSIT WAS UNSATISFACTORY AND THAT IT HAS BEEN SHORT PROVIDED WHICH HAS RESULTED IN INCREASED PROFITABILITY TO THE EXTENT OF RS 1,25,04,356/-. QUITE CLEARLY, THE STATUTORY AUDITOR W HILE COMMENTING ON THE FINANCIAL ACCOUNTS OF THE ASSESSEE FOR THE IMPUGNED YEAR HA D MADE THESE OBSERVATIONS. IN ALL FAIRNESS, IF THE ASSESSEE HAD ACCEPTED S UCH REPORT OF THE AUDITORS, THE NECESSARY ADJUSTMENTS CERTAINLY WERE REQUIRE D TO BE CARRIED OUT IN THE ACCOUNTS ALSO. SO, HOWEVER, MERELY BECAUSE AN ENTRY HAS NOT BEEN MADE IN THE ACCOUNT BOOKS, THE SAME WOULD NOT DIS-ENTITLE THE ASSE SSEE FROM CLAIMING THAT SUCH ADJUSTMENT WAS A PERMISSIBLE ADJUSTMENT SO AS TO COMPUTE ITS CORRECT TAXABLE INCOME. WE MAY HASTEN TO ADD HERE THAT WE ARE NOT EVALUATING AS TO WHETHER OR NOT THE ADJUSTMENTS/DEDUCTIONS WERE PERMISSIBL E IN LAW OR NOT SINCE SUCH A CONTROVERSY HAS BEEN A SUBJECT MATTER OF ASSESSMENT PR OCEEDINGS WHICH HAS BECOME FINAL. WE ARE ONLY TRYING TO ASCERTAIN AS TO WHETHER IN THE RETURN OF INCOME SUCH ADJUSTMENTS WERE CLAIMED BY THE ASSESSEE ON ANY CR EDIBLE BASIS SO AS TO TEST THE BONA FIDES OF SUCH CLAIM MADE IN THE RETU RN OF INCOME. OSTENSIBLY, THE CLAIM HAS BEEN MADE ON THE BASIS OF THE REPORT OF T HE STATUTORY AUDITORS AND IT CANNOT BE TERMED AS MALA FIDE OR WITHOUT ANY CREDIBLE BASIS. WHETHER THE ADJUSTMENTS/DEDUCTIONS CLAIMED IN THE RETURN OF INCOME FO UND FAVOUR WITH THE REVENUE AUTHORITIES OR NOT IN THE SUBSEQUENT ASSESSMENT P ROCEEDINGS, IS NOT A SACROSANCT FACTOR TO DECIDE THE BONA FIDES OF SUCH CLAIM FOR THE PURPOSES OF 9 EXIGIBILITY TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN OUR CONSIDERED OPINION, IN THIS BACKGROUND OF THE MATTER, WHICH IS UNDISPUTEDLY EMERGING FROM RECORD, THE IMPUGNED CLAIMS MADE IN THE RETURN OF INCOME CANNOT B E SAID TO BE LACKING IN BONA FIDES. AS A CONSEQUENCE THEREOF, IN OUR VIEW, ME RELY BECAUSE A BONA FIDE CLAIM MADE IN THE RETURN OF INCOME HAS BEEN FOUND TO BE UNACCEPTABLE IN THE ASSESSMENT PROCEEDINGS, THE SAME CANNOT BE STATED TO BE FU RNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. IN FACT, THE HONBLE SUPREME C OURT IN THE CASE OF RELIANCE PETROPRODUCTS P. LTD (SUPRA) HAS OBSERVED THAT A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. THE AFOR ESAID PARITY OF REASONING LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS P LTD (SUPRA), IN OUR CONSIDERED OPINION, IS CLEARLY ATTRACTED IN THE INSTANT FACT-SITUATION. 13. WE MAY ALSO NOTE HERE THAT THE IMPUGNED DISALLOWA NCES HAVE BEEN SUFFERED IN THE ASSESSMENT PROCEEDINGS PRIMARILY IN THE ABSENCE OF ANY EXPLANATION FORTHCOMING FROM THE ASSESSEE WITH REGARD T O THE IMPUGNED AMOUNTS AND IT IS NOT A CASE WHERE ANY PARTICULARS SUPPLIED IN T HE RETURN HAVE BEEN FOUND TO BE FALSE OR ERRONEOUS ON FACTS. THE ADJUSTMENTS WERE BASED ON THE REPORT OF THE STATUTORY AUDITORS AND ITS MERE NON-ACCEPTANCE BY TH E ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS, IN OUR VIEW, WOULD NOT TRIG GER THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 14. IN VIEW OF THE AFORESAID DISCUSSION, IN THE FINAL AN ALYSIS, WE HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN CONCLUDING THAT TH E ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME QUA THE IMPUGNED ADJUST MENTS WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) SUSTAINING SUCH PENALT Y IS HEREBY SET 10 ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE P ENALTY OF RS 50,32,500/.- IMPOSED UNDER SECTION 271(1)(C) OF THE AC T. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . DECISION PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF AUGUST, 2011. SD/- SD/- (I.C. SUDHIR) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 26 TH AUGUST, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. THE ACIT SATARA CIR. SATARA 3. THE CIT(A)-III, PUNE 4. THE CIT-III, PUNE 5. THE D.R, A BENCH, PUNE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE