D.b. Income Tax Appeal v. M/S Chittorgarh Kendriya Sahakari Bank Limited

D.B. INCOME TAX APPEAL NO.77/2013CIT, Udaipur Vs. M/s Chittorgarh Kendriya Sahakari Bank Limited DATE OF ORDER:17[th] October 2013. HON'BLE MR. JUSTICE DINESH MAHESHWARIHON'BLE MR. JUSTICE P.K. LOHRA Mr.K.K.Bissa for the appellant <><><> BY THE COURT: Having heard the learned counsel for the appellant andhaving perused the material placed on record, we are satisfiedthat no substantial question of law is involved in this appealfiled by the revenue under Section 260-A of the Income TaxAct, 1961 [‘the Act’] against the order dated 17.12.2012passed in ITA No.387/JU/2011 by the Income Tax AppellateTribunal, Jodhpur Bench, Jodhpur [‘the ITAT’] for theassessment year 2007-08. The sum and substance of the matter could be noticedin the following: The assessee is a co-operative society,engaged in the business of banking and providing creditfacilities to its members and public in general. The assesseehad earlier been claiming, and was being allowed, deductionunder Section 80P(2) of the Act for being eligible therefor. Theassessee also claimed the similar deduction for theassessment year 2007-08, which has not been allowed by theAssessing Officer [‘the AO’] due to change in law, whereby theassessee was rendered ineligible for this deduction. It appears that the assessee filed its original return forthe assessment year 2007-08 on 30.10.2007, declaring totalincome at Rs.3,90,26,699/- while claiming deduction ofRs.50,000/- under Section 80P(2)(c)(ii). Subsequently, arevised return was filed by the assessee on 13.12.2007,declaring income of Rs.82,88,771/-. In this revised return, inaddition to the claim of deduction under Section 80P(2)(c)(ii)amounting to Rs.50,000/-, the assessee also claimed furtherdeduction of Rs.3,07,37,988/- under section 80P(2)(d) of theAct. However, on being informed by the AO after scrutinyabout amendment of Section 80P, the assessee filed re-revised return on 29.12.2009, seeking to withdraw the claim ofabove deduction. The AO found the re-revised return not avalid one; and completed the assessment on total income ofRs.3,90,76,700/-, disallowing both the claims of deductionunder Section 80P(2)(c)(ii)) and 80P(2)(d) made in the firstrevised return. During the assessment proceedings, penaltynotice was also issued with reference to such claims ofdeduction, requiring the assessee to show cause as to whypenalty under Section 271(1)(c) should not be imposed on itfor alleged concealment of particulars of income/furnishing ofinaccurate particulars of income. The assessee submitted that in essence, it was atechnical error, which occurred due to amendment of theprovisions of Section 80P of the Act; and the mistake wassought to be rectified in the re-revised return. The assesseealso submitted that the penalty could be levied under Section271(1)(c) only in a case of deliberate concealment of particulars of income or deliberate furnishing of inaccurateparticulars, which had not been the case here. The AO,however, rejected the contentions of the assessee and heldthat the assessee had intentionally claimed inadmissibledeductions under Section 80P(2) to reduce the taxableincome; and proceeded to impose the penalty under Section271(1)(c) of the Act to the tune of Rs.93,70,460/-. In the appeal preferred by the assessee, the learnedCommissioner of Income Tax (Appeals), Udaipur [‘the CIT(A)’]was convinced that the claim of deduction by the assesseehad not been that of concealment of income or furnishing ofinaccurate particulars; and in the given fact situation, penaltyunder Section 271(1)(c) was not attracted. The CIT(A) foundthe case of the assessee bona fide and, accordingly, set asidethe order imposing penalty by his order dated 12.09.2011while observing, inter alia, as under:- In the appeal preferred by the assessee, the learnedCommissioner of Income Tax (Appeals), Udaipur [‘the CIT(A)’]was convinced that the claim of deduction by the assesseehad not been that of concealment of income or furnishing ofinaccurate particulars; and in the given fact situation, penaltyunder Section 271(1)(c) was not attracted. The CIT(A) foundthe case of the assessee bona fide and, accordingly, set asidethe order imposing penalty by his order dated 12.09.2011while observing, inter alia, as under:- “3.3.3. The making a claim of deduction under thelaw and its disallowance cannot be treated either asconcealment of income or furnishing inaccurate particularsof income as held by the Honourable Supreme Court in thecase of CIT Vs. Reliance Petro Products (P) Ltd in contextof disallowance of the claim regarding interest on loantaken by the assessee which was disallowed under section14A of the Act. It has been held that merely because theassessee claimed deduction of interest expenditure whichhas not been accepted by the Revenue, penalty undersection 271(1)(c) is not attracted and mere making theclaim which is not sustainable in law by itself, will notamount to furnishing inaccurate particulars regarding theincome of the assessee. Similarly, the Honourable HighCourt of Gujarat in the case of CIT Vs. Manibhai & Bros.(supra) it has been held that if an assessee wrongly claimssome deduction under a bona fide mistake, he cannot beconsidered liable for penalty. In the present case, theappellant has claimed deduction under section 80P whichwas surrendered by filing the revised return as soon as theA.O. confronted to the amendment made in section 80P(4) according to which such deduction is not allowable inthe case of the appellant. In view of above discussion, it is held that theexplanation filed for claim of deduction under section 80Pand its withdrawal by way of filing the revised return wasbonafide and does not fall in the category of concealment or furnishing inaccurate particulars of income.Accordingly, the penalty of Rs.93,70,500 levied undersection 271(1)(c) is cancelled.” The order aforesaid was questioned by the Revenue inITA No.387/JU/2011 before the ITAT. The ITAT agreed with theobservations and findings of the CIT(A) and dismissed theappeal by its impugned order dated 17.12.2012 while observing, inter alia, as under:- “6.Reverting to the facts of the case and afterconsidering the rival submissions, we have found that this isnot a fit case for levying penalty as in this case neither theassessee has concealed the particulars of income nor hasfurnished inaccurate particulars of income. This is simply acase of bonafide mistake which has occurred due to changeof law applicable in this year. The assessee had beenclaiming and was being allowed similar claims of deductionsin earlier Assessment Years also. After giving our thoughtfulconsideration to the facts of this case vis-a-vis the legalposition narrated above, we are of the considered opinionthat when a wrong claim is made under some bonafidemistake, that cannot be a ground for imposition of penaltyu/s 271(1)(c) of the Act. The assessee has been makingsimilar claim and the same were being allowed in earlierassessment years. Due to sudden change in law, this claimwas not allowed and the assessee also corrected its mistakeby filing a revised return, it is not a case of willful wrongclaim. Therefore, we do not find any mistake in the order ofthe ld.CIT(A) and confirm the deletion of impugned penalty.The appeal of the revenue deserves to be dismissed. We,dismiss the same.” The Revenue seeks to question the order so passed byITAT with the submissions that in the original return, no claimfor deduction was made but it was made by filing the revisedreturn and, thereafter, when confronted, the assesseeattempted to file a belated re-revised return. Thus, accordingto the Revenue, the finding of ITAT that it were a case of bonafide mistake, is not justified. It is contended that the attempt ofthe assessee to reduce the taxable income by claiminginadmissible deduction tantamount to furnishing of inaccurateparticulars of income and the AO had rightly imposed the penalty in this case. In our view, the submissions of the Revenue fall short ofmaking out a substantial question of law worth consideration. The assessee is a Co-operative Bank and had beenentitled to the deduction under Section 80P(2) of the Actbefore the year in question and had been allowed suchdeduction. It is no doubt true that in the original return for theyear in question, the assessee claimed deduction ofRs.50,000/- under Section 80P(2)(c)(ii)of the Act and in therevised return dated 13.12.2007, besides the above, theassessee also claimed deduction of Rs.3,07,37,988/- underSection 80P(2)(d) of the Act. However, with the amendmentin Section 80P and insertion of Sub-section (4) from01.04.2007, assessee was, admittedly, not entitled to suchdeductions. The assessee, a banking institution and a registered co-operative society, of course, ought to have been remainedvigilant while filing its return or revised return but, it remains afact that earlier, the deduction in question under Section 80P(2) was being allowed to the assessee, for being a co-operative society engaged in the business of banking andproviding credit facilities. It was by virtue of insertion of Sub-section (4) by Finance Act, 2006 with effect from 01.04.2007that the provisions of Section 80P were made inapplicable inrelation to any Co-operative Bank other than the PrimaryAgriculture Credit Society or Primary Co-operative Agricultureand Rural Development Bank. Apparently, the claim for thisdeduction in the assessment year 2007-08 had been a matter of bona fide mistake and could not have been taken to be acase of concealment of particulars of income or furnishing ofinaccurate particulars of income. In fact, when confronted withthe legal position, the assessee filed re-revised return, albeitbelatedly, withdrawing such claim of deduction. The Appellate Authorities i.e., CIT(A) and ITAT have, inour view, rightly examined the matter with reference to thedecision in CIT Vs. Reliance Petroproducts Pvt. Ltd.: (2010)322 ITR 158 wherein, the Hon'ble Supreme Court has, inter alia, held as under:- “……A mere making of the claim, which is notsustainable in law, by itself, will not amount to furnishinginaccurate particulars regarding the income of theassessee. Such claim made in the return cannot amountto inaccurate particulars.” The Appellate Authorities have also rightly taken intoconsideration that on being confronted with the legal position,the assessee attempted to correct the mistake by filing re-revised return. In the totality of circumstances of this case, theAppellate Authorities cannot be faulted in not finding it to be acase of making a willfully wrong claim by furnishing inaccurateparticulars. We find nothing of error or infirmity in the approachon the part of the Appellate Authorities leading to anysubstantial question of law. Accordingly and in view of the above, the appeal standsdismissed. (P.K. LOHRA),J. (DINESH MAHESHWARI),J.