MAT u/s 115JB Inapplicable to Banks: ITAT affirms Deletion of ₹305.49 Cr Penalty on Central Bank [Read Order]
ITAT upheld deletion of the ₹305.49 crore penalty on Central Bank of India, holding that MAT under Section 115JB does not apply to the bank, leaving no basis for penalty.
The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) dismissed the Revenue’s appeal and upheld the deletion of a penalty of ₹305,49,63,285 imposed on Central Bank of India, after holding that Minimum Alternate Tax (MAT) under Section 115JB is not applicable to the bank, rendering the penalty under Section 271(1)(c) unsustainable.
The case arose out of penalty proceedings linked to the disallowance of ₹14,31,45,93,495 of bad debts written off while computing book profits under Section 115JB for Assessment Year (AY) 2016–17.
The Assessing Officer (AO) had levied the massive penalty on the ground that the bank furnished inaccurate particulars by claiming this deduction in the MAT computation.
Central Bank of India had originally filed its return declaring a business loss under normal provisions and book profits under Section 115JB.
During assessment, the Assessing Officer (AO) recomputed income and book profits and later initiated penalty proceedings, treating the bad-debt claim under MAT as a concealment of income, ultimately levying ₹305,49,63,285 under Section 271(1)(c).
On appeal, the CIT(A) deleted the penalty after relying on the Special Bench decision of the ITAT in the bank’s own case for AY 2013–14, which held that “corresponding new banks” constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 are not covered by Section 115JB. Since MAT itself did not apply, the CIT(A) held that the disallowance forming the foundation of the penalty could not survive.
Before the Tribunal, the Revenue argued that it had appealed the Special Bench ruling before the High Court and filed the present appeal to maintain consistency. The assessee, on the other hand, pointed to the ITAT’s consolidated order dated 22-08-2025 for AY 2016–17, where the Tribunal had already applied the Special Bench decision and held that Section 115JB does not apply to the bank.
The Bench comprising Vikram Singh Yadav (Accountant Member) and Anikesh Banerjee (Judicial Member) noted that the quantum proceedings had conclusively settled the issue in favour of the assessee, MAT was inapplicable for the assessee, tax on book profits could not be levied, and therefore, the very basis for the penalty ceased to exist.
The Tribunal observed that once Section 115JB does not apply, the disallowance made while computing book profits becomes irrelevant, and the question of levy of penalty under Section 271(1)(c) no longer survives.
Upholding the CIT(A)’s decision, the ITAT dismissed the Revenue’s appeal and confirmed that the penalty of ₹305.49 crore stood rightly deleted. The appeal was accordingly dismissed.
The assessee was represented by Nitesh Joshi, while Virabhadra S. Mahajan appeared for the Revenue.Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
