2017 (12) TMI 633 - HC - Income Tax

Addition u/s 274 r.w.s 271(1)(c) - claim for deduction of bad and doubtful debts at the rate of 10% of the average advances made by the assessee s rural branches - Held that - Merely making of a claim which was not accepted or not acceptable to the Revenue would not tantamount to furnishing of inaccurate particulars so as to attract the provisions of section 271(1)(c) of the Act. In the facts of the present case, the entire penalty order is based upon the facts as placed by the assessee on the record. Thus, merely because the assessee had made a claim which came to be disallowed, the provisions of section 271(1) (c) of the Act would not be attracted. Under the circumstances, the Tribunal was wholly justified in holding that there was nothing to indicate that the assessee had furnished inaccurate particulars of income warranting imposition of penalty under section 271(1)(c) of the Act. See Commissioner of Income-tax v. Reliance Petroproducts (P) Ltd. 2010 (3) TMI 80 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues:
Challenge to deletion of penalty under section 271(1)(c) of the Income Tax Act for disallowance of deduction claimed by a cooperative bank under section 36(1)(viia) for bad and doubtful debts.

Detailed Analysis:

1. The appellant revenue challenged the order of the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot, questioning the deletion of penalty levied by the Assessing Officer under section 274 read with section 271(1)(c) of the Income Tax Act for disallowing a deduction claimed by a cooperative bank for bad and doubtful debts under section 36(1)(viia) of the Act for the assessment year 2009-10.

2. The Assessing Officer disallowed the deduction claimed by the bank, initiating penalty proceedings alleging furnishing of inaccurate particulars. The Commissioner (Appeals) confirmed the disallowance, leading to penalty imposition of ?25,00,000. The bank contended that the disallowance was based on disclosed particulars and not inaccurate information.

3. The Commissioner (Appeals) observed that the disallowance was based on the bank's understanding of the law, leading to a legally unsustainable claim, rather than inaccurate particulars. The Tribunal noted that the disallowance was not due to inaccurate particulars but based on the bank's disclosed facts, hence not warranting a penalty under section 271(1)(c) of the Act.

4. Citing the decision in Commissioner of Income-tax v. Reliance Petroproducts (P) Ltd., the Tribunal held that the mere disallowance of a claim does not amount to furnishing inaccurate particulars, thereby justifying the deletion of the penalty. The Supreme Court's ruling emphasized that a disallowed claim does not automatically attract penalty under section 271(1)(c) of the Act.

5. The Tribunal's order was deemed legally sound, with no legal infirmity justifying interference. Consequently, the appeal challenging the deletion of the penalty was summarily dismissed.

This detailed analysis of the judgment highlights the issues, arguments, and legal principles involved in the case concerning the penalty imposition for disallowance of a deduction claimed by a cooperative bank under the Income Tax Act.