2016 (6) TMI 600 - HC - Income Tax

Penalty under section 271(A)(c) - difference in bad and doubtful debts claimed - Held that - The issue of the assessee s larger claim of deduction of bad and doubtful claims had to be resolved through opinion of the third member of the Tribunal. Clearly the issue of taxability was debatable. But apart from this the Tribunal found that there was no concealment of income on the part of the assessee. All facts were on record to enable the Assessing Officer to make addition if he was of the opinion that the claim made by the assessee was not sustainable in law. A bonafide raising of a wrong claim by itself would not give rise to penalty. Supreme Court in the case of Reliance Petroproducts Pvt.Ltd. (2010 (3) TMI 80 - SUPREME COURT ) held that where there is no concealment of particulars of income or the assessee has not furnished inaccurate particulars of income penalty cannot be imposed. It was held that submitting incorrect claims in law do not give rise to penalty proceedings. - Decided in favour of the assessee

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal erred in law in deleting penalty levied by the Assessing Officer under section 271(A)(c) of the Income-tax Act, 1961?

Analysis:
The case involved the respondent, a Co-operative bank, filing a return of income for the assessment year 2009-2010, claiming bad and doubtful debts of ?12.28 crores. The Assessing Officer restricted the deduction to ?3.50 crores and initiated penalty proceedings under section 271(A)(c) of the Income-tax Act, 1961. The Tribunal, through a third member opinion, resolved the quantum addition issue and deleted the penalty. The Tribunal found that the assessee disclosed all facts and the issue was debatable, citing the decision of the Supreme Court in Reliance Petroproducts Pvt. Ltd. The Tribunal held that no concealment of income occurred and canceled the penalty of ?2,71,31,636 levied by the Assessing Officer.

The Revenue contended that the assessee consistently claimed a much larger deduction under section 31(1)(viia) of the Act than the provision made for bad and doubtful debts. On the other hand, the assessee argued that there was no concealment of income, and the issue was debatable, justifying the penalty deletion. The Tribunal found no concealment of income on the part of the assessee, emphasizing that submitting incorrect claims in law does not warrant penalty proceedings, in line with the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd.

The Court referenced the case of Sambhav Media Ltd., where it was held that if the conduct of the assessee was bonafide and there was a genuine difference of opinion regarding the claim's allowability, penalty imposition was unwarranted. In this case, the Court found in favor of the assessee, stating that the issue of the larger deduction claim was debatable, and there was no concealment of income. Consequently, the Tax Appeal was dismissed, ruling against the Revenue and in favor of the assessee.