Case Law Details
CIT Vs The Cuddalore District Central Co-operative Bank Ltd (Madras High Court)
The substantial question of law framed by the Madras High Court was whether penalty u/s 271(1)(c) cannot be levied on the assessee, even though Assessee had claimed deductions u/s 36(1)(viia) among others which were not applicable to co-operative banks.
Assessee, a co-operative bank, had claimed deductions u/s 36(1)(viia), among others. AO imposed a penalty u/s 271(1)(c) for furnishing inaccurate particulars of income. CIT(A) deleted the penalty & the ITAT upheld the deletion. Revenue appealed to the High Court.
High Court relied on the Bombay HC ruling in Principal CIT v. ICICI Bank Ltd. [2024] 161 taxmann.com 454, where a similar penalty u/s 271(1)(c) was deleted for a bona fide deduction claim. Quoting CIT v. Reliance Petroproducts (SC), the Court reiterated that mere rejection of a claim does not amount to furnishing inaccurate particulars. Court held that the assessee’s claim, though ultimately disallowed, was bona fide & linked to business profits.
Thus no penalty u/s 271(1)(c) is leviable for a bona fide claim, even if disallowed later.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
On 21.09.2016, the Court was pleased to admit the appeals. The following substantial question of law was framed in both the appeals:
“Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the penalty under Section 271(1)(c) cannot be levied on the assessee, even though the assessee had claimed deductions under Section 36(1)(viia) among others which were not applicable to co-operative banks.”
2. In our view, as submitted by Shri. Sathiyanarayanan, the issue is squarely covered by the judgment of the Bombay High Court in Principal Commissioner of Income Tax v. ICICI Bank Ltd.1, to which, one of us was a Member (K.R. Shriram, CJ). It will be useful to re-produce paragraphs 3 and 4 of the said judgment, which read as under:
“3. Assessee challenged the assessment order before the Commissioner of Income Tax (Appeals) (CIT(A)) and thereafter before the ITAT. When assessee’s appeal was pending before the ITAT, the AO issued a notice to assessee under Section 271(1)(c) of the Act and the allegation was the additions made in the assessment order were a result of furnishing of inaccurate particulars of income or concealment of income by assessee. Assessee’s objections were rejected and the AO passed an order imposing penalty of Rs.48,86,23,673/- under Section 271(1)(c) of the Act. In the appeal filed by assessee, the CIT(A) deleted the penalty imposed by the AO. The Department challenged that order of CIT(A) before the ITAT and the ITAT upheld that finding of the CIT(A).
4. It is the case of revenue that in the return of income, assessee did not claim certain deductions, during the course of assessment proceedings. Assessee claimed such deductions and thereby has furnished inaccurate particulars of income. It is department’s case that only because assessee has offered income and not claimed deductions in the return of income would not absolve assessee from the liability of Section 271(1)(c) of the Act. The ITAT, in our view, correctly held that provisions of Section 271(1)(c) of the Act are not attracted. The ITAT was of the view and rightly so that assessee had made a bona fide claim under Section 36(1)(viii) as such deductions claimed is linked to the business profit. Only because there was variance in the deductions allowable due to change in determination of business profit, it cannot be said that assessee has furnished inaccurate particulars of income or concealed inaccurate particulars of income. As held by the Apex Court in Commissioner of Income Tax Vs. Reliance Petro Products Pvt Ltd. [[2010] 189 Taxmann 322/322 ITR 158 (SC)] if we accept the contention of revenue, then in case of every return where the claim sum is not accepted by the AO for any reason, assessee will invite penalty under Section 271(1)(c) of the Act. 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 assessee, such claim made in the return cannot amount to be inaccurate particulars.”
3. In the circumstances, the question of law is answered in favour of the assessee. Appeals are dismissed. There shall be no order as to costs. Consequently, the interim application is also dismissed.
Note:
1 [2024] 161 taxmann.com 454 (Bom.)
Author Bio
