Case Law Details
Khanpur Vibhag Madhyamik Shala Karmchari Dhiran & Grahak Sahakari Mandali Limited Vs ACIT (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT) in Ahmedabad has given a ruling favoring the assessee, an employee cooperative credit society. The ITAT stated that the penalty under section 271(1)(c) cannot be levied when no inaccurate particulars of income have been furnished by the assessee. The case in question was between Khanpur Vibhag Madhyamik Shala Karmchari Dhiran & Grahak Sahakari Mandali Limited Vs ACIT.
Analysis: The case centers on the assessee’s belief that the interest income earned on bank deposits also falls under the claim for deduction under Section 80P of the Income Tax Act. As per the Assessing Officer, there was no instance where the assessee has furnished inaccurate particulars of income. This led the ITAT to the decision that the penalty under section 271(1)(c) for providing inaccurate particulars of income is not applicable in this case. The Tribunal, however, dismissed the assessee’s additional argument on the validity of the order under Section 271(1)(c) due to the lack of a Document Identification Number.
Conclusion: The ruling underlines the necessity for the Revenue to clearly establish the furnishing of inaccurate particulars for a penalty under section 271(1)(c) to be applicable. In the absence of any such proof, as in this case, the ITAT held that the penalty provision cannot be triggered. This verdict is significant as it sets a precedent for similar cases and brings clarity on the circumstances under which the penalty under section 271(1)(c) can be imposed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee against order dated 14.10.2022 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2015-16.
2. The Assessee has raised the following grounds of appeal :-
“1. The order passed by Ld. CIT(A)-NFAC under section 250 of the I. T. Act 1961 is bad in law and in facts and liable to be quashed.
2. The Ld. CIT(A)-NFAC has erred on facts and in law in conforming levy of penalty of Rs.27,884/- under section 271(1)(c) of the I. T. Act”.
3. The assessee is an employee Co-operative Credit Society and engaged in the business of banking i.e. providing credit facilities to its members, accepting deposits from members and investing surplus fund with other financial Institutions when money not required immediately for lending purposes. The Assessing Officer observed that the assessee has shown deposit of Rs.73,20,536/- with banks in its Balance Sheet. The assessee has shown in Profit & Loss account, interest income of Rs.57,17,326/- as the assessee claimed deduction under Section 80P(2)(a)(i) of the Act amounting to Rs.12,25,412/- as interest income received from Baroda Guj. Gramin Bank & Bank of Baroda. The return of income was filed on 23.03.2016 declaring total income at Rs.NIL by the assessee. The Assessing Officer on the basis of Hon’ble Supreme Court’s decision in case of Totgars Cooperative Sale Society Limited vs. ITO (2010) 188 Taxman 282 (SC) and the decision of Hon’ble Gujarat High Court in the case of State Bank of India vs. CIT (2016) 72 Taxman.com 64, has allowed deduction under Section 80P(2)(a)(i) of the Act on income earned from members only and disallowed the claim of 80P(2)(a)(i) of the Act on the income i.e. interest earned from financial institutions. Subsequently, the Assessing Officer initiated penalty proceedings for furnishing inaccurate particulars of income by issuing notice under Section 274 read with a Section 271(1)(c) of the Act.. After taking cognisance of the assessee’s reply/details, the Assessing Officer imposed penalty of Rs.27,884/- under Section 271 (1)(c) of the Act for filing inaccurate particulars of income.
4. Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The Ld. AR submitted that for the purpose of levying penalty under Section 271(1)(c), the revenue has to point out furnishing of inaccurate particulars. Since the only document to furnish particulars is the return of income, penalty can be levied under section 271(1(c) only if there is furnishing of inaccurate particulars of income in the return of income filed by the assessee. The Ld. AR submitted that there is not even a finding in the order of the Assessing Officer and the CIT(A) that which particular disclosed in the return of income is inaccurate. Thus, the Ld. AR submitted that the penalty levied under Section 271(1)(c) is inappropriate and required to be deleted. The first point the ld. AR made out is that it is debatable issue whether the assessee is entitled to deduction under Section 80P on interest earned on fixed deposits from bank or not. The Ld. AR submitted that the reliance of Hon’ble Apex Court in the case of Totgar’s Co-operative Sales Society Limited (supra) is misplaced. The Ld. AR further submitted that the Hon’ble Supreme Court in case of CIT vs. Bangalore District Co-operative Central Bank Limited (1998) 99 taxman 404 (SC) wherein it is held that interest income on investment from spare funds is entitled to deduction under 80P of the Act. The Ld. AR relied upon the following decisions :-
1) (1998) 99 Taxman 404 (SC), CIT vs. Bangalore District Co-operative Central Bank Limited
2) (2001) 118 Taxman 321 (SC), CIT vs. Karnataka State Cooperative Apex Bank.
3) (2002) 123 Taxman 222 (SC), CIT vs. Ramanathapuram Dist Cooperative Central Bank Limited
4) (2012) 210 Taxman 263 (SC), CIT vs Nawanshahar Central Cooperative Bank Limited
5) 76 Taxman.com 99 (SC) Punjab State Co-operative Federation of House Building Society Limited vs. CIT
5.1 The second point the Ld. AR made out is related to penalty under Section 271(1)(c) of the Act wherein the Ld. AR submitted that deduction under Section 80P(2)(a)(i) of the Act is available to a co-operative society engaged in carrying on the business of banking or providing credit facilities to iis members. Various courts have taken a view that spare funds at the disposal of the society if invested appropriative than the interest income is entitled to deduction as it is also deemed to be used for the purpose of the business of the society. The assessee has not furnished any inaccurate particulars of income and, therefore, penalty levied under Section 271(1)(c) of the Act is not justifiable. The Ld. AR relied upon the decision of following decisions
1) (2010) 322 ITR 158 (SC)/(2010) 189 Taxman 322 (SC), CIT, Ahmedabad vs. Reliance Petroproducts (P) Ltd.
2) (2013) 40 com 283 (Punjab & Haryana), CIT vs. Pathankot Primary Co-operative Agriculture Development Bank Limited.
3) (2014) 41 com 11 (Rajasthan), CIT Vs. Chittorgarh Kendriya Sahakari Bank Limited.
4) (2022) 138 com 449 (Allahabad), PCIT vs. Baroda Uttar Pradesh Gramin Bank.
5) (2006) 99 TTJ 330 (Del ITAT), JCIT vs. Karnal Co-operative Sugar Mills Limited.
6) (2018) 100 com 162 (Delhi HC), PCIT vs. National Housing Bank.
7) (2014) 49 taxmann.com 573/(2015) 228 Taxman 66, New Holland Tractors (India) (P.) Limited vs. CIT.
5.2 The third issue ld. AR submitted that the additional ground relating validity of the order under Section 271(1)(c) of the Act . The Ld. AR submitted that the order levying penalty under Section 271(1)(c) of the Act dated 24.03.2020 does not bear Document Identification Number. Accordingly, the said order is a nullity. The Ld. AR relied upon the Circular No.19 dated 14.08.1919 wherein it is stated that any communication which is not in conformity with the said Circular shall be treated as invalid and shall be deemed to be never issued. The Ld. AR relied upon the following decisions:-
1) (1998) 97 Taxman 358 (SC), National Thermal Power Co. Ltd. vs.
2) (2022) 140 com 431 (Kolkata – Trib.), Tata Medical Centre Trust vs. CIT.
3) (2023) 146 taxmann.com 442 (Bangalore – Trib.), Dilip Kothari vs. PCIT.
6. The Ld. DR relied upon the Assessment Order, penalty order and the order of the CIT(A). The Ld. DR submitted that the intimation letter for penalty order under Section 271(1)(c) of the Act was issued on 15.05.2020 which is the system generated document and, therefore, attendance of the assessee related to Document Identification Number was not there is not justifiable. As regards to the debatable issue, the Ld. DR submitted that the interest received on Bank Statement by the Co-operative Society was never a debatable issue at all.
7. Heard both the parties and perused all the relevant material available on Firstly we will take up the contention of the Ld. AR relating to furnishing of inaccurate particulars. It is observed that the assessee has filed return of income and the Assessing Officer at no point of time has pointed out at which element concealment or furnishing of inaccurate particulars of income was there on record on the part of the assessee. The decision of Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd., 322 ITR 158 is an apt in the present case as the assessee is under bonafide belief that interest income earned on bank deposits is also coming under the purview of claim for deduction under Section 80P of the Act. Thus, the penalty under Section 271 (1)(c) of the Act fails on the count of furnishing inaccurate particulars of income. Therefore, the penalty does not survive.
8. As regards to debatable issue, the same does not need adjudication at this In respect of Documentation Identification Number which is an additional ground taken by the assessee. From the perusal of the records, it appears that system generated intimation has given the DIN and document number and, therefore, the same is not tenable on merit. Appeal of the assessee is thus partly allowed.
9. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open Court on this 17th day of May, 2023.
