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2022 (3) TMI 848 - HC - Income TaxPenalty u/s 271(1)(c) - deduction under Section 80P - Claim denied on the ground that the respondent/assessee is not a Cooperative Society registered under the U.P. Cooperative Societies Act,1912 - HELD THAT - The appellant had come into existence for development and growth of agricultural sector. This finding of fact has not been disputed in the present appeals. Assessing authority,itself has recorded a finding that the respondent-assessee came into existence w.e.f. 31.03.2008, after amalgamation of the two Regional Rural Banks (RRB) i.e. Baroda Eastern U.P. Gramin Bank and Baroda Western Gramin Bank. It has not been disputed that by virtue of deeming provision under Section 22 of the Regional Rural Banks Act, 1976, the respondent/assessee is deemed cooperative society. As perused the impugned common order of the Tribunal arising from the assessment order and we do not find any legal infirmity in it. So far as the impugned common order of the Income Tax Appellate Tribunal arising out of the penalty order under Section 271(1) (c) of Income Tax Act, 1961 is concerned, we find that the Tribunal has recorded a finding of the fact that there is no evidence of concealment of income. Tribunal has concluded that the appellant had made a legitimate claim for exemption under section 80P(2)(a)(i) which was purely a legal in nature and even on rejection of such a claim, no penalty is leviable. The case of the appellant RRB is even on a better footing as all the five appeals for the corresponding assessment years have been allowed by us on merits therefore, in terms of our four separate orders of date We have perused the impugned common order of the Income Tax Appellate Tribunal arising from the penalty orders under Section 271 (1) (c) of the Act and we find that it also does not suffer from any legal infirmity. Matter is also concluded by the findings of the fact. No substantial questions of law
Issues Involved:
1. Deduction under Section 80P of the Income Tax Act, 1961. 2. Applicability of Section 22 of the Regional Rural Banks Act, 1976. 3. Overriding effect of the Regional Rural Banks Act, 1976. 4. Withdrawal of Circular No. 319 by the Central Board of Direct Taxes. 5. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961. Detailed Analysis: 1. Deduction under Section 80P of the Income Tax Act, 1961: The primary issue was whether the respondent, a Primary Cooperative Agricultural and Rural Development Bank, was entitled to claim deductions under Section 80P of the Income Tax Act, 1961. The assessing authority denied this claim, arguing that the respondent was not a Cooperative Society registered under the U.P. Cooperative Societies Act, 1912, and hence not eligible for the deduction. The Tribunal, however, found that the respondent was entitled to the deduction, as the Regional Rural Banks Act, 1976, deemed it a cooperative society. 2. Applicability of Section 22 of the Regional Rural Banks Act, 1976: Section 22 of the Regional Rural Banks Act, 1976, stipulates that a Regional Rural Bank shall be deemed a cooperative society for the purposes of the Income Tax Act, 1961. The Tribunal held that this provision was not overridden by the insertion of sub-section (4) to Section 80P, which was introduced by the Finance Act, 2006. The Tribunal emphasized that the respondent continued to enjoy the exemption under Section 80P(2)(a)(i) despite the insertion of sub-section (4). 3. Overriding effect of the Regional Rural Banks Act, 1976: Section 32 of the Regional Rural Banks Act, 1976, provides that the provisions of this Act shall have effect notwithstanding anything to the contrary in any other law. The Tribunal interpreted this to mean that the Regional Rural Banks Act, 1976, overrides the Income Tax Act, 1961, including the newly introduced sub-section (4) of Section 80P. The Tribunal concluded that the respondent continued to be deemed a cooperative society and was entitled to the deduction under Section 80P. 4. Withdrawal of Circular No. 319 by the Central Board of Direct Taxes: The assessing authority argued that Circular No. 319, which allowed the deeming provision of a cooperative society, was withdrawn by Circular No. 6/2010, effective from the assessment year 2007-08. The Tribunal, however, held that the status of a cooperative society was conferred by the Regional Rural Banks Act, 1976, and not by Circular No. 319. Therefore, the withdrawal of the circular did not affect the respondent's claim for exemption. 5. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961: The Tribunal found no evidence of concealment of income by the respondent. It held that the respondent had made a legitimate claim for exemption under Section 80P(2)(a)(i), which was purely legal in nature. Consequently, the Tribunal concluded that no penalty was leviable under Section 271(1)(c). The Tribunal's findings on this matter were upheld, and the penalty orders were set aside. Conclusion: The High Court upheld the Tribunal's findings, concluding that the respondent was entitled to the deduction under Section 80P of the Income Tax Act, 1961. The Court found no legal infirmity in the Tribunal's orders and dismissed the appeals, stating that no substantial questions of law were involved. The judgment reaffirmed the overriding effect of the Regional Rural Banks Act, 1976, and the legitimacy of the respondent's claim for exemption.
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