Ferozepur Central Co Operative Bank Vs DCIT (ITAT Amritsar)
Section 271(1)(c): Genuine Expense Claimed in Wrong Year Cannot Invite Penalty—₹71.10 Lakh Deleted
A Timing Error, Not Inaccurate Particulars
The Amritsar ITAT has deleted a ₹71,10,000 penalty under Section 271(1)(c) imposed on a co-operative bank for claiming a genuine interest expenditure in the wrong assessment year.
The Tribunal found that the dispute concerned the year of deduction, rather than the genuineness or deductibility of the expenditure. The interest belonged to Assessment Year 2011-12 but had been claimed in Assessment Year 2012-13.
On these facts, the Tribunal treated the claim as a judgmental error and genuine mistake, holding that no case of furnishing inaccurate particulars of income had been established.
The decision also took account of the assessee’s voluntary correction after discovering the mistake and the fact that deduction had not been granted even in the year to which the expenditure belonged.
Interest of ₹2.30 Crore Disallowed as Prior-Period Expenditure
The assessee, a co-operative bank, filed its return on 30 September 2012, declaring a loss of ₹6,30,83,919 for Assessment Year 2012-13.
The expenditure claimed included ₹2,30,00,000 towards interest on borrowed funds.
During scrutiny, the Assessing Officer found that this interest did not pertain to the assessment year under consideration. He therefore disallowed the deduction.
The assessee challenged the disallowance before the first appellate authority but was unsuccessful. It subsequently carried the quantum dispute to the Tribunal.
Earlier Tribunal Order Recognised Deduction in the Correct Year
In its order dated 27 August 2019, in ITA No. 242/Asr/2018, the coordinate Bench agreed that the expenditure related to an earlier period.
Consequently, the disallowance for Assessment Year 2012-13 was sustained. However, the Tribunal granted the assessee liberty to approach the departmental authorities for allowing the expenditure in Assessment Year 2011-12, to which it related.
This distinction became significant in the penalty proceedings. The earlier order did not treat the interest as fictitious or inherently inadmissible. It recognised that the assessee could seek deduction in the appropriate year.
The present penalty order records that entitlement to the deduction was not disputed.
Deduction Denied, Followed by Penalty
Based on the disallowance, the Assessing Officer initiated proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income.
He imposed a penalty of ₹71,10,000, which the first appellate authority confirmed.
Before the Tribunal, the assessee submitted that the consequential deduction for Assessment Year 2011-12 had not been granted. According to its explanation, relief was refused on technical grounds because it had not approached the Department within the prescribed time.
In response to a query from the Bench, the assessee’s representative confirmed that deduction had not been allowed in Assessment Year 2011-12.
The Tribunal thus noted that the assessee had been denied deduction in both years, despite the genuine nature of the expense, and had additionally been subjected to penalty.
Genuine Mistake Did Not Establish a Penal Default
The Tribunal emphasised that the expenditure was genuine and that the assessee remained entitled to claim it in the correct assessment year.
The only mistake was claiming it in Assessment Year 2012-13 instead of Assessment Year 2011-12.
In these circumstances, the Tribunal held that the claim could be regarded as a judgmental error and genuine mistake, rather than furnishing inaccurate particulars.
It further noted that, after becoming aware of the mistake, the assessee had suo motu rectified it. These circumstances had also been appreciated by the coordinate Bench while deciding the quantum appeal.
Accordingly, the Tribunal deleted the penalty and allowed the appeal.
Quantum Disallowance Was Not Reversed
The present order concerns the penalty alone. It does not reverse the earlier disallowance of interest for Assessment Year 2012-13 or issue a fresh operative direction granting deduction for Assessment Year 2011-12.
The earlier quantum decision and the present penalty decision therefore address different questions: the former determined the appropriate year of deduction, while the latter examined whether the mistaken claim justified penalty.
With the penalty appeal allowed, the accompanying stay application became infructuous and was dismissed accordingly.
Author’s Comments
The decision illustrates why a sustained disallowance does not, by itself, establish furnishing of inaccurate particulars. The reason for the disallowance matters.
Here, the expenditure was genuine, its deductibility was accepted, and the controversy concerned timing. The voluntary correction further supported the Tribunal’s conclusion that the claim arose from a genuine mistake.
For similar disputes, the factual record should clearly establish the nature of the expense, the correct year, disclosure of the claim, and the circumstances of its correction. A wrong-year claim must be evaluated in that context.
The particularly striking feature was that the assessee had received no deduction in either year and was additionally penalised. Nevertheless, the Tribunal’s relief rested on the absence of a proved penal default.
An expense can belong to the wrong year without the particulars becoming inaccurate.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
Today the stay application, in S.A. No. 15/Asr/2026, listed before the Division Bench. In course of hearing, the parties agreed for disposal of the appeal itself. Accordingly, the Registry was directed to list the appeal along with present stay application.
2. The present appeal arises out of the order dated 30th June, 2026, of National Faceless Appeal Centre (NFAC), Delhi, pertaining to the assessment year 2012-13, confirming the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961 [in short “the Act”] alleging furnishing of inaccurate particulars of income.
3. Briefly stated, the assessee is a Cooperative Bank. For the assessment year under dispute, the assessee filed its return of income on 30th September, 2012, declaring loss of Rs.6,30,83,919/-, after set-off of various expenses, including the amount of Rs. 2,30,00,000/-, towards interest on borrowed funds. The return of income filed by the assessee was selected for scrutiny. In course of assessment proceedings, the Assessing Officer noticed that the amount of Rs.2,30,00,000/- claimed by the assessee as deduction towards interest payment does not pertain to the year under dispute. Accordingly, he disallowed assessee’s claim.
4. Though, the assessee contested the disallowance before the First Appellate Authority, however, it was unsuccessful. Whereas, matter was further agitated in appeal before the Income Tax Appellate Tribunal. While disposing of the appeal vide order dated 27th August, 2019, in ITA No. 242/Asr/2018, the Coordinate Bench, though agreed with the Departmental Authorities that the item of expenditure claimed as deduction pertained to the prior period, however, while sustaining the disallowance in the current assessment year, the Coordinate Bench, granted liberty to the assessee to make an application before the Departmental Authorities to allow the expenditure in the preceding assessment year, i.e., Assessment Year 2011-12.
5. Based on the disallowance made, the Assessing Officer initiated proceedings for imposition of penalty under Section 271(1)(c) of the Act for furnishing inaccurate particulars of income and ultimately passed an order imposing penalty of Rs. 71,10,000/-. The penalty so imposed was confirmed by the First Appellate Authority.
6. We have considered rival submissions and perused the materials on record. It is the case of the assessee that, despite directions of ITAT, consequential relief was not granted to the assessee in assessment year 2011-12 on technical grounds that the assessee has not approached the Department within prescribed time. Whereas, learned Departmental Representative (DR) strongly relied upon the observations of the Departmental Authorities.
7. Having considered rival submissions, we find that there is no dispute that the assessee is entitled to claim deduction. There is only a timing difference in respect of the claim, as, instead of assessment year 2011-12 assessee was claimed it in the current year. In fact, while deciding the quantum appeal of the assessee for the impugned assessment year, the Coordinate Bench has appreciated this fact and granted liberty to the assessee to make an application before the Departmental Authorities for allowing deduction in assessment year 2011-12, to which the expenditure relates. On a query from the Bench, learned counsel for the assessee has asserted that the assessee has not been granted deduction in assessment year 2011-12. The aforesaid facts reveal that the assessee has not only been denied the deduction in any of the assessment years though it was entitled to, but, in addition, has also been fastened with penalty under Section 271(1)(c) of the Act. There is no dispute that the claim of expenditure is genuine, hence, the assessee remains entitled to avail the deduction, if not in the impugned assessment year, but in assessment year 2011-12. Thus, there cannot be any case of furnishing inaccurate particulars of income, as it can be considered as a judgmental error and a genuine mistake on the part of the assessee while claiming the deduction in the impugned assessment year. In fact, after the assessee became aware of the mistake, it suo motu rectified it. These facts have been appreciated by the Coordinate Bench while deciding the quantum appeal.
8. In view of aforesaid, we have no hesitation in holding that no case of furnishing inaccurate particulars of income is made out. Accordingly, we are inclined to delete the penalty imposed under Section 271(1)(c) of the Act. Appeal stands allowed.
9. In view of our decision in the appeal, the stay application having become infructuous is, accordingly, dismissed.
10. In the result appeal is allowed and stay application is dismissed as infructuous.
(Order pronounced in the open court on 30/09/2026)
