No Penalty u/s 271(1)(c) of Income Tax Act can be Imposed when Assessee Sufficiently Proved the Bonafides of Losses Claimed: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that if bona fides of the losses claimed are sufficiently proved by the assessee and the onus has been primarily discharged on the parameters of penalty proceedings. Thus the Bench upheld the decision of Commissioner of Income Tax (Appeals) [CIT(A)] in deleting the penalty imposed.

The assessee in this case is Sarva Haryana Gramin Bank. During the assessment proceeding the assessing Officer (AO) imposed penalty under Section 271(1)(c) of Income Tax Act, 1961 from ;

• Disallowance of Rs.2,31,17,869/- under Section 14A read with Rule 8D of the Income Tax Rules;
•  Disallowance of deduction of Rs.2,33,02,768/- in respect of amortization of premium paid at the time of purchase of securities over the remaining period of securities
• Disallowance of Rs.57,21,000/- on account of loss on sale of obsolete stationery and other petty items.

Aggrived by the order the assessee filed an appeal before the CIT(A), which reversed the penalty of Rs.1,79,17,819/-  imposed under Section 271 of Income Tax Act. The Revenue filed an appeal before the Tribunal against the order of the CIT(A).

The Departmental Representative (DR) adverted to the decision of the Co-ordinate Bench in the quantum proceedings in assessee’s own case for the Assessment Year 2015-16 and submitted that the ITAT has observed that the documentary evidences have been placed to support the bona fides of the claim but however the ITAT remitted the matter in the quantum proceedings to the file of the Assessing Officer to take cognizance of the documentary evidences.

Further he submitted that the claim towards loss on account of obsolete stationery arises owing to the fact that erstwhile Gurgaon Gramin Bank and erstwhile Haryana Gramin Bank were amalgamated into single bank namely, the assessee herein.

The Department Representative stated that the printed stationery in the name of erstwhile bank became obsolete and the management of the bank decided to dispose of such unusable stock of stationary and the resultant losses were booked in the ordinary course of business. Under the circumstances, it was pleaded that imposition of penalty under Section 271(1)(c) of the Income Tax Act is highly unjustified and undeserving.

The Tribunal Bench comprising of Saktijit Dey, Vice President and Pradip Kumar Kedia, Accountant Member noted that the assessee is a rural bank run by the professional management, the fact that the amalgamation has taken place resulting in the stationery becoming unusable and obsolete.

The Tribunal found that bona fides of the losses claimed are sufficiently proved. The onus that lay upon the assessee has been primarily discharged on the parameters of penalty proceedings and further it was noted that mere wrong claim by itself will not, ipso facto, invite imposition of penalty under Section 271(1)(c) of the Income Tax Act where the bona fides of the action of the assessee are beyond reasonable doubt.

The Bench held that it found merit in the plea of the assessee for exoneration from the clutches of penalty under Section 271(1)(c) of the Income Tax Act and thus endorsed the action of the CIT(A) and declined to interfere therewith.

Hence, the appeal of the Revenue was dismissed.

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