RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD,JAIPUR V. ACIT/DCIT CIRCLE-6, JAIPUR

ITA 1488/JPR/2024

AI Insights

The case involves the Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., which appealed against the penalty imposed by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The penalty was levied for alleged concealment of income and furnishing of inaccurate particulars related to interest on advances to staff and miscellaneous income, which were disallowed under section 80P of the Income Tax Act. The Tribunal examined whether the imposition of the penalty was justified, considering the disclosures made by the assessee and the nature of the disputed income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397893 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Other Referred Cases: CIT v. Reliance Petroproducts Pvt. Ltd., CIT v. Suvira Pearls, CIT v. Samson Perinchery, CIT v. Atul Mohan Bindal, CIT v. Smt. P.K. Noorjahan
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAUTAM SINGH CHOUDHARY
• Assessee Lawyers: SANJAY KUMAR GIYA
• Keywords: Set aside; Question of law; Wrong claim
• Section: 143(3); 142(1); 271(1)(c); 14A

Judgement Text

" vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 1488/JPR/2024 fu/kZkj.k o\"kZ@Assessment Years : 2013-14 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Post Box No. 55, Nehru Sahakar Bhawan, Bais Godown, Jaipur. cuke Vs. The ACIT/DCIT, Circle-6, Jaipur. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAAR5761J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Sanjay Kumar Giya, CA. jktLo dh vksj ls@Revenue by : Shri Gautam Singh Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 03/04/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 03/06/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of ld. CIT(A), National Faceless Appeal Centre (NFAC) Delhi dated 16.10.2024 passed under section 250 of the I.T. Act, 1961, for the assessment year 2013-14. 2 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. 2. The assessee has raised the following grounds of appeal :- “1. The learned CIT (A) has erred on facts and in law in confirming the imposition of penalty u/s 271(1)(c). 2. The appellant craves to alter, amend and modify any found of appeal.” 3. The brief facts of the case are that the assessee is a Co-operative Society and is carrying on the business of providing credit facilities to its members. The assessee had filed its return of income for the assessment year 2013-14 on 31.03.2014 declaring total income of Rs. Nil, after claiming deduction under section 80P. The assessee has maintained regular books of accounts, which were duly audited under section 44AB of the IT Act, 1961 and audit report in Form No. 3CA & 3CD were furnished. The case of the assessee was selected for scrutiny and notice under section 143(2) of the IT Act, 1961 was issued on 04.09.2014. Notices under section 142(1) along with questionnaire were issued on 18.02.2015 and 03.08.2015. In response to the notices, the assessee furnished the Books of account, bank statements and other details as required by the AO. Thereafter, the AO completed the assessment under section 143(3) on 29.02.2016 at a total income of Rs. 1,30,280/- by disallowing the deduction under section 80P in respect to the interest on advances given to staff amounting to Rs. 30,05,845/- and miscellaneous income of Rs. 12,255/- (total of both taxable after proportionate 3 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. deduction of expenses Rs. 1,30,280) on the ground that granting of advance to staff cannot be considered imperative to the business of the society. Simultaneously, the AO initiated penalty proceedings under section 271(1)(c) of the IT Act, 1961. In response to the notice issued by the AO on 19.02.2019, the assessee filed reply on 25.02.2019 stating “ that in the computation of the aforesaid assessment year, it is clearly mentioned that the treatment on interest on advances to staff is a disputed matter and the assessee has not considered the same as income”.The reply of the assessee has been considered but could not found it acceptable. The AO accordingly after considering the facts and circumstances of the case, levied penalty of Rs. 40,432/- under section 271(1)(c) of the IT Act, 1961 being 100% of amount of tax sought to be evaded. 4. Aggrieved by the order of the AO, the assessee preferred appeal before the ld. CIT (A). The ld. CIT (A) upheld the decision of the AO and confirmed the levy of penalty. 5. Aggrieved by the order of the CIT(A), the assessee preferred appeal before the us on the grounds mentioned herein above. The ld. AR of the assessee has submitted his written submission as under :- “The assessment of the aforesaid assessee has been framed by not allowing deduction u/s 80P of Interest on advances to staff and miscellaneous income. 4 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. Interest on advances to staff is considered to be a necessary support to the main activities of the bank and therefore termed as a “ancillary income” of the assessee. It is a disputed matter among several courts and for the purpose of brevity of this appeal, they are not mentioned here. Addition of miscellaneous income was deleted by learned CIT (Appeals) and therefore penalty was reduced accordingly. Interest on advance to staff was held exempt u/s 80P earlier by Hon’ble ITAT in assessee’s own case for AY 2004-05 and 2005-06 but later on, reversed the decision due to Rajasthan High Court order vide dated 04.09.2008 in case of Sirohi Sahakari Bhoomi Vikas Bank Ltd. As per computation of the above mentioned assessment year submitted to Income Tax department and to assessing officer, it is clearly mentioned that treatment on interest on advances to staff is a disputed matter since long. (copy of computation enclosed at Paper Book on Pg. no. 4-6). Even after addition of Rs. 30,05,845/-, the total taxable income comes to Rs. 68,025/- after allowing proportionate expenditure. The assessee has not filed appeal before the higher authorities as the tax impact was very less and the assessee would have incurred much higher cost for the legal expense even though here were high chances of the case being in the favor of the assessee. It is to mention that no concealment was made on the part of the assessee as everything has been properly disclosed in the computation and it is a legal dispute. Penalty under section 271(1)(c) can only be imposed if there is concealment of income or 5 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. furnishing of inaccurate particulars of income by the assessee. Mere legal findings or differences of opinion on interpretation of law do not justify impositionof penalty. The assessee has acted in good faith and disclosed all material facts necessary for assessment. The disallowance of the claim in the assessment proceedings could not be the sole basis for levying penalty under section 271(1)(c) of the Act. There was no mala fide intention to evade tax. The word “particulars” used in the section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in various cases that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. In this regard, the observations made by the Supreme Court in Sree Krishna Electricals v. State of Tamil Nadu (2009) 23 VST 249 are highly relevant. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court therefore, observed : “So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant’s account books. Where certain items which are not included in the turnover are disclosed in the dealer’s own account books and the assessing authorities include these items in the dealer’s turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside.” 6 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return. Furthermore, it is important to note that the assessee had already provided the Assessing Officer with the balance sheet and Profit & Loss (P&L) statement during the assessment proceedings. The interest on advances to staff was clearly reflected in the P&L statement, which was submitted for review. Therefore, there has been no concealment of facts by the assessee, and the disclosure made in the return was transparent and in good faith. As such, there is no basis for alleging any default on the part of the assessee in terms of concealment of income or providing inaccurate particulars. Reliance in this connection is placed on the following cases :- CIT v. Reliance Petroproducts Pvt. Ltd.(2010) 322 ITR 158 (SC) The Supreme Court held that mere making of a claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. CIT v. Suvira Pearls (20190 415 itr 597 (Delhi) The Delhi High Court held that where all facts were disclosed by the assessee, but the claim was not acceptable in law, it would not amount to furnishing inaccurate particulars of income. The court emphasized that there must be a conscious act or omission on the part of the assessee to attract penalty. CIT v. Samson Perinchery (2017) 392 ITR 4 (Bombay) The Bombay High Court ruled that where the assessee had disclosed all facts material for computation of income, the mere fact that such a claim was not acceptable would not justify imposition of penalty for furnishing inaccurate 7 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. particulars. The court stressed on the difference between “making an incorrect claim” and furnishing inaccurate particulars.” CIT v. Atul Mohan Bindal (2009) 317 ITR 1 (SC) The Supreme Court held that where there is no finding that any details supplied by the assessee in its return were incorrect or erroneous or false, there is no question of imposing penalty. CIT v. Smt. P.K. Noorjahan(1999) 237 ITR 570 (SC) The Supreme Court held that where the question of law was debatable, penalty cannot be imposed. In the light of the above arguments and case laws, it is respectfully submitted that the penalty imposed under section 271(1)(c) is not justified and should be deleted. The assessee has not concealed any income or furnished inaccurate particulars. The penalty has been imposed merely based on legal findings and issuance of a High Court order. Therefore, it is prayed that the Hon’ble ITAT may be pleased to delete the penalty and allow the appeal.” 6. On the other hand, the ld. DR supported the orders of the Revenue authorities. 7. We have heard the rival submissions, perused the material on record and gone through the orders of the lower authorities. We have also considered the judicial pronouncements cited by both the parties. On perusal of the case file, we find that during the year under consideration, the assessee has earned interest income of Rs. 30,05,845/- and miscellaneous income of Rs. 12,255/- totaling to Rs. 8 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. 30,18,100/- from advances given to staff members. The AO while completing the assessment, after allowing proportionate expenses (subject to disallowance of OD interest) of Rs. 28,87,817/- disallowed the deduction under section 80P to the extent of Rs. 1,30,280/- of the following income and making additions to the total income : (a) Interest on advance to the staff of Rs. 30,05,845/-, (b) Miscellaneous Income of Rs. 12,255/- and not allowing deduction under section 80P(2)(c) of Rs. 50,000/-, observing that staffs are not the member of the assessee society, lending money to them and earning interest thereon is not the primary activity of the assessee. Similarly, miscellaneous income has also not been derived from providing credit facility to its members and hence, not eligible for deduction under section 80P. The AO held that granting of advance to staff cannot be considered imperative to the business of the society and denied deduction under section 80P. The AO initiated penalty proceedings. During penalty proceedings, in compliance to letter dated 19.02.2019 issued by the Assessing Officer, the assessee submitted reply dated 25.02.2019 which has been reproduced at page 1 & 2 of the penalty order, as under : “ this is in reference to notice no. DCIT/C-6/JPR/2018-19 dated 19.02.2019. “ 2. That in the computation of the aforesaid assessment year, it is clearly mentioned that the treatment on interest on advances to staff is a disputed matter and the assessee has not considered the same as income.” 9 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. The AO without considering the reply of the assessee in proper perspective, held that the assessee has concealed the income of Rs. 1,30,845/- and liable for penalty under section 271(1)(c) of the IT Act, 1961 and levied penalty of Rs. 40,432/- being 100% of amount of tax sought to be evaded. 7.1 On perusal of the return of income as well as computation filed by the assessee, we find no fault in the particulars submitted by the assessee. Before the AO, the assessee has already submitted that in the computation of the aforesaid assessment year, it is clearly mentioned that the treatment on interest on advances to staff is a disputed matter and the assessee has not considered the same as income.” The assessee has also provided the Assessing Officer with the Balance Sheet and Profit & Loss account during the assessment proceedings. The interest on advances to staffs was clearly reflected in the Profit & Loss account. On perusal of the above details, we are of the view that the AO was not justified in observing that assessee has concealed income or furnished inaccurate particulars of income and levying penalty under section 271(1)(c) of the IT Act, 1961. 7.2 We rely on the principles laid down by the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC), wherein the Hon’ble Supreme Court has held as under: 10 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. “10. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word \"inaccurate\" has been defined as : \"not accurate, not exact or correct; not according to truth ; erroneous; as an inaccurate statement, copy or transcript.\" 11. We have already seen the meaning of the word \"particulars\" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. 12. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect ; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms ; (i) an item of receipt may be suppressed fraudulently ; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature. 11 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. 13. In this behalf the observations of this court made in Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings under the Tamil Nadu General Sales tax Act, the court had found that the authorities below had found that there were some incorrect statements made in the return. However, the said transactions were reflected in the accounts of the assessee. This court, therefore, observed (page 251) : \"So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities includes these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside.\" 14. The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its return. 15. The Tribunal, as well as, the Commissioner of Income-tax (Appeals) and the High Court have correctly reached this conclusion and, therefore, the appeal filed by the Revenue has no merits and is dismissed.” Looking to the totality of the facts and circumstances of the case, we direct to delete the penalty sustained by the ld. CIT(A).” 7.3 Therefore, we are of the opinion that said claim made under the provisions of the Act is disallowed by the AO would not attract the penalty provisions of Section 271(1)(c) of the Act. The Hon’ble Supreme Court in case of CIT vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) has held that where the information given by the assessee is not found to be incorrect, the assessee cannot be held guilty of furnishing inaccurate particulars of income for the purpose of levying the penalty U/s 271(1)(c) of the Act. The Hon’ble Supreme Court has also observed that merely making a wrong claim does not amount to furnishing 12 ITA No. 1488/JPR/2024 Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd., Jaipur. inaccurate particulars of income in the absence of finding that any detail by the assessee is incorrect or false. Accordingly, in view of the facts and circumstances of the case the penalty levied by the AO U/s 271(1)(c) of the Act is not sustainable and the same is deleted. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 03/ 06/2025. Sd/- Sd/- ¼ jkBkSM+ deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 03/06/2025 *Santosh vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Rajasthan Rajya Sahakari Bhoomi Vikash Bank Ltd., Jaipur. 2. izR;FkhZ@ The Respondent- ACIT/DCIT, Circle-6, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File { ITA No. 1488/JPRR/2024} vkns'kkuqlkj@By order, lgk;d iathdkj@Asst. Registrar "