THE WARDHA DISTRICT CENTRAL CO-OP. BANK LTD.,WARDHA V. DCIT/ACIT CIRCLE-3, NAGPUR

ITA 11/NAG/2025

AI Insights

The case involves The Wardha District Central Co-operative Bank Ltd., which appealed against a penalty of Rs. 68,00,000 levied by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals). The penalty was imposed due to the disallowance of a provision for bad and doubtful debts claimed under section 36(1)(viia) of the Income Tax Act, 1961, which the bank argued was a legitimate claim. The Tribunal, referencing the Supreme Court's decision in CIT v/s Reliance Petroproducts Pvt. Ltd., concluded that a mere disallowance of a claim, without any finding of concealment of income or furnishing of inaccurate particulars, does not justify the imposition of a penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24171 (ITAT-NAGPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Other Referred Cases: CIT v/s Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY Y. MARATHE
• Assessee Lawyers: ALFIYA ROZIE
• Keywords: Set aside; Bad and doubtful debts
• Section: 271(1)(c)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI K.M. ROY, ACCOUNTANT, MEMBER ITA no.11/Nag./2025 (Assessment Year : 2009–10) The Wardha District Central Co–operative Bank Ltd. 1, Opp. Railway Station Wardha 442 001 PAN – AAAAT6426G ……………. Appellant v/s Asstt. Commissioner of Income Tax Wardha Circle, Wardha ……………. Respondent Assessee by : Ms. Alfiya Rozie Revenue by : Shri Abhay Y. Marathe Date of Hearing – 04/03/2025 Date of Order – 03/04/2025 O R D E R PER V. DURGA RAO, J.M. Appeal by the assessee is emanating from the impugned order dated 28/11/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2009–10. 2. The assessee has raised following grounds:– “1. Whether on the facts and circumstances of the case, the learned CIT-(A) was justified in affirming the order of the assessing officer in levying penalty u/s 271(1)(c) to the tune of Rs.68,00,000/-. 2. The Appellant craves leave to add or alter any other ground that may be taken at the time of the hearing.” 2 The Wardha District Central Co–operative Bank Ltd. ITA no.11/Nag./2025 3. While perusing the material available on record, we find that this is a case where the learned CIT(A) upheld the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 (\"the Act\") to the tune of ` 68 lakh on account of disallowance of provision for bad and doubtful debts pertaining to rural Branches of the Bank which are considered to be allowable under section 36(1)(viia) of the Act. The core issue that we need to adjudicate in this appeal is, whether or not the penalty imposed under section 271(1)(c) of the Act was justified on account of disallowances of certain claims made during the course of assessment proceedings and more specifically in this case where the assessee is a District Central Co–operative Bank and the claim is pertaining to the deduction claimed by the assessee under section 36(1)(viia) of the Act. Before us, the learned Authorised Representative for the assessee submitted that the assessee had itself suo–moto claimed certain deduction in view of the provisions of section 36(1)(viia) of the Act which, according to the assessee Bank is a legitimate claim. She vehemently argued that where the disallowance of an incorrect claim is made, no penalty is leviable, particularly when the issue emanates from interpretation of facts as to whether a particular Branch is Rural or Urban. In this regard, we find that the said issue is squarely covered by the judgment of the Hon’ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158 (SC), wherein the Hon’ble Supreme Court held that – “Section 271(1)(c) of the Act is only applicable when the conditions precedent stated therein are fulfilled, i.e., the Assessing Officer (AO) must be satisfied that an Assessee has concealed income or furnished inaccurate particulars of income and only then can penalty be levied. A mere making of a claim, which by itself, is not sustainable under law would not amount to furnishing of 3 The Wardha District Central Co–operative Bank Ltd. ITA no.11/Nag./2025 inaccurate particulars of income. Therefore, as a matter of fact, since there was no finding by any authority that the details submitted by the Assessee company were erroneous or false, no question of initiating penalty proceedings against the Assessee company would arise. Only the act of the Assessee company in claiming an expenditure in its ROI, whether such claim was acceptable or not to the revenue department, would, in isolation, not invite penalty under the provisions of section 271(1)(c) of the Act. 4. Keeping in view the overall facts and circumstances of the case and the arguments put forth by the learned A.R. for the assessee and the learned Departmental Representative, it emerges that the penalty imposed in this case is emanating from the disallowances made during the assessment proceedings pertaining to claim of deductions under section 36(1)(viia) of the Act. The jurisprudence on penalty vis-à-vis disallowance has already been settled in the landmark Judgment of Supreme Court in Reliance Petroproducts Pvt. Ltd. (supra), wherein it has been categorically held by the Hon’ble Supreme Court that no penalty can be levied on mere disallowance particularly when the explanation is bona fide. Consequently, penalty of ` 68 lakh levied by the Assessing Officer and confirmed by the learned CIT(A) is hereby directed to be deleted. Accordingly, the impugned order passed by the learned CIT(A) is hereby set aside by allowing the grounds of appeal raised by the assessee. 5. In the result, assessee’s appeal stands allowed. Order pronounced in the open Court on 03/04/2025 Sd/- K.M. ROY ACCOUNTANT MEMBER Sd/- V. DURGA RAO JUDICIAL MEMBER NAGPUR, DATED: 03/04/2025 4 The Wardha District Central Co–operative Bank Ltd. ITA no.11/Nag./2025 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Sr. Private Secretary ITAT, Nagpur "