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TMI Blog2012 (6) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act, 1961 (in short, 'the Act') for the asst. yr. 2006-07. 2. Briefly stated, the facts of the case are that the assessee filed return of Income declaring loss of ₹ 93,31,795 on 31st Oct., 2006. However, the AO made the assessment under s. 143(3) of the Act vide order dt. 20th Oct., 2008 at a loss of ₹ 22,65,588. At the time of assessment, penalty proceedings under s. 271(1)(c) of the Act were initiated and notice under s. 274 r/w s. 271 of the Act was issued to the assessee for furnishing inaccurate particulars of loss. In response to show-cause notice, the assessee filed a reply on 3rd June, 2008 stating that the provision for NPA (non-performing assets) was made as per the RBI guidelines in respect of debts which had become sub-standard/bad and doubtful. It was also submitted by the assessee before the AO that the NPA was checked and verified by the auditors before finalizing the balance sheet. The entire income of the society was exempt under s. 80P of the Act, as the assessee is engaged in the business of providing credit facilities to its members. It was also submitted before the AO that though the provision for NPA was made and claimed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance of such provision for NPA would not have effect on the taxability of its income but the argument that there as no tax sought to have been evaded is not correct. The Expln. 4 (a) to s. 271(1)(c) dealing with the loss cases defines the tax sought to have been evaded which corresponds to the tax that would have been chargeable on the income in respect of which inaccurate particulars of income have been furnished had such income been the total income. As regards argument of conscious breach of law, the Hon'ble Supreme Court in the case of CIT v. Atul Mohan Bindal (2009) 225 CTR (SC) 248 : (2009) 28 DTR (SC) 1 : (2009) 317 ITR 1 (SC) has held that penalty under s. 271(1) (c) is neither a criminal nor quasi-criminal but a civil liability, albeit a strict liability and such liability being civil in nature, mens rea is not essential. The Explanation appended to s. 271(1)(c) indicates strict liability for giving inaccurate particulars while filing the return. However, the Hon'ble Courts have further held that a distinction and a false claim of deduction. Now it is only to be seen whether it was a bona fide mistake leading to wrong cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke and not a deliberate attempt to evade tax, the view taken by the Tribunal cannot be held to be perverse.' Similarly, the Hon'ble Gujarat High Court in the case of Manibhai Bros . ( supra ) has held that if an assessee claims some deduction under a bona fide mistake, he cannot be considered liable for penalty. The Hon'ble Supreme Court in the case of Reliance Petroproducts (P) Ltd. ( supra ) has held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. If this contention is accepted then in case of every return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty under s. 271(1)(c). That is clearly not the intendment of the legislature. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In the light of rationale laid down in the above judgment by the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia) that the deduction under the said section shall be allowed only to a scheduled bank. So in the first place, the assessee being not a scheduled bank could not be under any such belief that its NPA provision is allowable as deduction under this section. Further, the said sub-section further envisages allowing of an amount not exceeding seven and one-half per cent of the total income and an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank (scheduled bank). According to the learned Departmental Representative, the assessee was running into losses and had no income and was not entitled to deduction at all. This clearly proves that the particulars furnished by the assessee were patently inaccurate and also wilful and the learned CIT(A) has clearly erred in holding that the assessee had furnished incorrect claim and not furnished inaccurate particulars and no penalty is leviable in view of the judgment of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 189 Taxman 322. Shri Tarsem Lal, the learned Departmental Representative also relied on the decision of the Hon'ble Delhi Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of s. 36(viia) of the Act were not applicable to assessee's case as the primary co-operative agricultural development bank is explicitly excluded from claiming deduction on account of provisions for NPA. In the instant case, the AO has categorically stated in the penalty order that the claim made by the assessee was wrong/inadmissible. In the instant case, the learned CIT(A) correctly observed that it was a bona fide mistake leading to wrong claim of deduction. It is seen that the assessee has contended that the provision for NPA was made as per RBI guidelines in respect of which it has become sub-standard/bad and doubtful. The NPA provision was checked and verified by the auditor before finalizing the balance sheet. It is also seen that NPAs are classified and quantified as per guidelines of RBI by the banks in respect of cases where recovery becomes difficult. Hence, the provision for NPA is integral part of the business of banking wherein such provision more or less corresponds to the bad debts. In the instant case, the auditors have checked this aspect and finalized the balance sheet after claiming the deduction of provision for NPA in the P L a/c. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. In the case of CIT v. Manibhai Bros. [2007] 294 ITR 501 the Hon'ble Gujarat High Court held that the CIT(A) and the Tribunal having found that the assessee had no intention to conceal facts when it made incorrect claim of depreciation which was withdrawn by the assessee, penalty under s. 271(1)(c) was not leviable for making the wrong claim. 9. In the submissions of the learned Departmental Representative we do not see any merit. In the instant case, the AO categorically stated in the penalty order that The assessee has not discharged its onus that the wrong/inadmissible expenses is a bona fide mistake rather than done intentionally . The case of the AO is that the claim made by the assessee was wrong/inadmissible and the claim made by it was intentional. It is not the case of the AO that the claim made by the assessee was false. Therefore, the decision relied upon by the learned Departmental Representative of the Hon'ble Delhi High Court in the case of Escorts Finance Ltd. ( supra ) is not applicable to the facts of the present case. In our view, the Departmental Representative cannot improve upon the contention and categorical findings of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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