2019 (6) TMI 867 - AT - Income Tax

Penalty u/s 271(1)(c) - reduction of eligible claim of bad and doubtful debts u/s 36(1)(viia) - HELD THAT - The action of the assessee being bonafide and the issue being debatable, the larger claim of deduction per se cannot be bracketed in the league of concealment of particulars of income or furnishing inaccurate particulars of income . It is not in dispute that all the relevant facts were on record to enable the AO to formulate the opinion on the issue. See VALIMKBHAI H. PATEL. 2005 (7) TMI 35 - GUJARAT HIGH COURT . This being so, there was no justification to invoke the provision of Section 271(1)(c) in the facts of the case. CIT(A) in our view has rightly concluded the issue in favour of the assessee and against the Revenue notwithstanding the fact that he has not assigned any reason and passed a perfunctory order while doing so. We must say at this juncture that the CIT(A) ought to have given some elementary reasons however brief it may be while determining the issue to enable higher appellate forum to understand the perspective. The ultimate conclusion of the CIT(A) however cannot be faulted in the instant case. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Interpretation of Section 36(1)(viia) regarding deduction for bad and doubtful debts.

Issue-Wise Detailed Analysis:

1. Deletion of Penalty Imposed under Section 271(1)(c) of the Income Tax Act, 1961:

The Revenue challenged the CIT(A)'s action in deleting the penalty of ?31,59,030/- imposed by the AO under Section 271(1)(c) of the Act. The AO had imposed the penalty due to the partial denial of the deduction claimed by the assessee under Section 36(1)(viia). The AO restricted the deduction to ?2,38,96,000/- as written off in the P&L account and rejected the remaining claim of ?1,00,73,786/-. The CIT(A) concurred with the assessee's detailed submission, which argued that mere disallowance of a claim does not amount to furnishing inaccurate particulars or concealment of income, and thus, does not attract penalty provisions. The CIT(A) relied on various judicial precedents, including the Supreme Court's decision in CIT vs. Reliance Petro Products Pvt. Ltd., which held that a mere claim disallowed does not attract penalty under Section 271(1)(c). The Tribunal upheld the CIT(A)'s decision, noting that the issue was debatable and the assessee had disclosed all material facts, thus negating any basis for penalty imposition.

2. Interpretation of Section 36(1)(viia) Regarding Deduction for Bad and Doubtful Debts:

The assessee, a Primary Cooperative Agricultural Society, claimed a deduction of ?3,39,69,786/- under Section 36(1)(viia) of the Act. The AO restricted this to ?2,38,96,000/- based on the statutory tax audit report. The assessee argued that it was entitled to a higher deduction of 10% of average advances, irrespective of the book claim in the P&L account. The assessee relied on the ITAT's decision in the case of Syndicate Bank, which supported the view that the deduction under Section 36(1)(viia) is not limited to the provision made in the accounts but is a specific statutory deduction. The Tribunal noted that in the assessee's own case for AY 2009-10, a similar penalty was deleted by the ITAT, and the decision was upheld by the Hon’ble Gujarat High Court. The Tribunal concluded that the larger claim of deduction was a debatable issue and not a case of concealment or furnishing inaccurate particulars. Thus, the Tribunal found no justification for invoking Section 271(1)(c) of the Act.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order to delete the penalty imposed under Section 271(1)(c) of the Act. The Tribunal emphasized that the issue was debatable, and the assessee had disclosed all relevant facts, thereby negating any basis for penalty imposition. The Tribunal also noted the need for CIT(A) to provide elementary reasons in its order, although the ultimate conclusion was found to be correct.