AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1248
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.... law." 2. The brief facts of the case are that the assessee is a cooperative bank doing banking business and it has filed its return of income declaring NIL income, by claiming deduction u/s 80P of the IT Act, 1961. During the course of assessment proceedings, the Assessing officer asked the assessee to justify its claim for deduction under section 80P of the Act and in response, the assessee filed its submission which however didn't find favour with the Assessing officer and he disallowed the claim of deduction. The penalty proceedings u/s 271(1)(c) for concealment and furnishing inaccurate particulars of income were also initiated separately. 3. Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) who allowed the claim of deduction u/s 80P to the assessee bank. The Revenue took the matter before the Tribunal who reversed the order of ld CIT(A) and sustained the disallowance of deduction u/s 80P of the Act. The Revenue thereafter, issued a fresh show-cause notice to the assessee u/s 271(1)(c) of the Act. The explanation offered by the assessee was not found satisfactory by the AO and he thereafter levied penalty of Rs. 4,20,00,000, being 100% of tax s....
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....ilable in the return of income, there was a case of furnishing of wrong particulars of income. The AO has not brought out any fact in the order to establish that the appellant had furnished inaccurate particulars of its income or had concealed particulars of its income. As held by the Apex Court in the case of Reliance Petro Products Pvt. Ltd. (322 ITR 158), mere making of a claim which is not sustainable in law, by itself, does not amount to furnishing of inaccurate particulars of income. The present case does not appear to a case of concealment of income or furnishing of inaccurate particulars of income. The penalty, therefore, appears to be uncalled for and is, accordingly, cancelled." 5. The ld DR vehemently argued the matter and relied on the order of the AO and submitted that the ld CIT(A) was not correct in deleting the penalty. He submitted that there has been change in the eligibility condition for deduction under section 80P of the Act and the explanation offered by the assessee was rightly not found acceptable in view of the change in the eligibility conditions and the fact that the same has been confirmed in the quantum proceedings by the Hon'ble ITAT. He accordingly ....
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....e societies, including agricultural marketing societies, agricultural processing societies, cooperative farming societies, primary agricultural credit societies or farmers service societies for agricultural purposes or agricultural operations or for other purposes connected herewith: (b) Granting of loans and advances particularly to artisans, small entrepreneurs, and persons of small means engaged in trade, commerce or industry or other productive activities within the modified area in relation to the regional rural bank. 10. It was submitted that the ld. AO in his order, rejected the plea of the respondent on the ground that, the word "Taluk" appearing in the proviso (4) to sec. 80P, covers only a tehsil and hence the fact that the bank has branches in different places of Rajasthan, restrains it from being a "Primary co-operative agricultural and rural development bank" as defined in the act, and thus held the respondent not eligible for deduction u/s 80P whereas the respondent profusely argued that the word 'taluk' means a Rajputana Jagirdari/Riyasat which was a state at that time. 11. It was further submitted that the ld. Assessing Officer has held that retail trade, self em....
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....on, unless false, will deserve acceptance for non levy of penalty whether otherwise acceptable for assessment or not. It is not that every addition warrants penalty. An income may be inferred from circumstances, so as to justify the addition but where there is no decisive evidence that the inferred income was actually received by the assessee, penalty cannot be justified. 14. The ld AR placed heavy reliance on the decision of Hon'ble Supreme Court in case of CIT vs. Reliance Petro products 322 ITR 158 (SC). The Hon'ble Supreme Court has categorically held that merely because the claim of the assessee was not accepted by the Assessing Officer, that by itself would not, in our opinion, attract the penalty under s. 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty under s. 271(1)(c. That is clearly not the intendment of the legislature. Reliance was further placed on decision of CIT vs. Suresh Chandra Mittal (251 ITR 9 (SC), wherein it has been held that , "it is well settled that under s. 271(1)(c), initial burden lies on the Revenue to establish that assessee....
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....fore it, the Court either believes it to exist or considers its existence so probable that a prudent man ought under the circumstances in particular case, to act upon the supposition that it exists. In juxtaposition, the expression 'not proved' denotes a fact is said to be 'not proved' when it is neither proved nor disproved." It was so held in CIT vs. Traders & Traders, 242 ITR 367 (Mad.) 15. It was further submitted that in the case of the respondent there is neither concealment of income nor furnishing of inaccurate particulars as the AO has disallowed the claim of Sec. 80P merely on difference of opinion as the respondent could not substantiate its plea satisfactorily. Based on above submissions and the submissions made before the ld. CIT(A) the respondent humbly prays that the penalty has been rightly deleted by the ld. CIT(A) and the said order may kindly be sustained. 16. We have heard the rival submissions and pursued the material available on record. The issue under consideration relates to levy of penalty u/s 271(1)(c) on account of denial of claim of deduction under section 80P of the Act. The penalty has been levied on account of furnishing inaccurate particulars of i....
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.... and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). if we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature." 18. In the instant case, it is not in dispute that the assessee has duly filed its return of income containing all relevant particulars of its income and the particulars of claim of deduction u/s 80P has been duly disclosed. The ld CIT(A) has also held that a perusal of the computatio....
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....Primary co-operative agriculture and rural development Bank as define in explanation (b) to sub-section (4) to section 80P of the Act. In order to address this contention, we refer to the amendment that has been brought in the statute and the explanation and the basis furnished by the assessee for claim of deduction u/s 80P of the Act. 21. By the Finance Act, 2006, sub-section (4) has been inserted after subsection (3) to Section 80P which reads as under: "(4) the provisions of this section shall not apply in relation to any cooperative Bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank: Explanation: For the purpose of this sub-section, (a) "a cooperative bank" and "Primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the banking regulation Act, 1949. (b) "Primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a Taluk and the principal object of which is to provide long term credit for agricultural and rural development activities." 22. The explanation and the basis for claim of deduction u/....
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....ts employees. We once again submit that these types of advances form a very small part of advance portfolio which mainly consist of agriculture/ rural advances. We again said that our main object are to provide advances for rural development and in rural areas situated in Talkuk for long term advance. 5. We further request that we have correctly claimed deduction u/s 80P of the Income Tax Act, 1961 as we fulfil both the conditions of explanation (b) to Section 80P(4) of the Income Tax Act, 1961 You are therefore, requested kindly allow the deduction u/s 80P of the Income Tax Act, 1961 and oblige.'' 23. We now refer to the findings of the ld CIT(A) in the quantum proceedings where the above said explanation of the assessee bank has been accepted and the claim of deduction u/s 80P was allowed. This acceptance of the explanation of the assessee bank by the ld CIT(A) atleast shows that the assessee has a basis for claim of deduction under section 80P and it is not a case that post amendment, the deduction u/s 80P is prima facie disallowable on reading of the amended provisions and which it has been claiming in the earlier years as well. The relevant findings of ld CIT(A) in his....
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....arming societies, primary agricultural credit societies or farmers' service societies, for agricultural purposes or agricultural operations or for other purposes connected therewith; b) the granting of loans and advances, particularly to artisans, small entrepreneurs and persons of small means engaged in trade, commerce or industry or other productive activities, within the notified area in relation to the Regional Rural Bank. As per explanation (b), it is clear that rural development bank means whose major activity relates to providing for long term credit for agriculture and rural development activities. Annual report of the bank gives category wise advances and area of operation, list of branches as list of branch wise advances was also submitted to the AO. Contention of the AR is considered. The appellant bank is a creation of Regional Rural Bank Act, 1976 and, therefore, it is established that it is a Regional Rural Development Bank. The objective of the Regional Rural Bank Act is granting of loans and advances, particularly to small and marginal farmers and agriculture labourers for agriculture purposes or agriculture operations or for other connected purposes. The othe....
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....ssee bank and the findings of the ld CIT(A). The relevant findings of the Coordinate Bench are contained in para 2.8 to 2.12 which are reproduced below: "2.8 We have heard both the parties. The issue before us is as to whether deduction u/s 80P is available to the assessee for the assessment year under consideration in view of insertion of Section 80P(4). It will be useful to reproduce Section 80P(4) of the Act as under:- ''4) The provisions of this section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation.--For the purposes of this sub-section,-- (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949) ; (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.'' 2.9 The CBDT issued Circular no. 319 dated 11-01-1982. The circular wh....
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.... 1961 from the assessment year 2007- 08 onwards 4. It has been brought to the notice of the Board that despite the amended provisions, some Regional Rural Banks continue to claim deduction u/s 80P on the ground that they are cooperative societies covered by Section 80P(1) read with Boards Circular No. 319 dated 11- 01-1092. 5. It is therefore, reiterated that Regional Rural Banks are not eligible for deduction u/s 80P of the Income Tax Act, 1961 from the assessment year 2007-08 onwards. Furthermore, the Circular No. 319 dated 11-01-1982 deeming any Regional Rural Bank to be cooperative society stands withdrawn for application with effect from assessment year 2007-08. The field officers may take note of this position and take remedial action, if required.'' 2.11 Section 22 of the Regional Rural Banks Act 1976 is reproduced as under:- ''For the purpose of the Income Tax Act, 1961 or any other enactment for the time being in force relating to any tax on income, profits or gains, a Regional Rural Bank shall be deemed to be a cooperative society.'' 2.12 Hence, the CBDT vide Circular no. 319 clarified that deduction u/s 80P(2)(a)(i) is to be allowed to Regional Rural Bank (RR....
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....to a Taluq. Thus requirement of explanation (b) of Section 80P(4) is not satisfied. Hence, we hold that the ld CIT(A) was not justified in directing the AO to allow deduction u/s 80P (4) of the Act." 25. If we examine closely the decision of the Coordinate Bench, it refers to CBDT Circular no. 319 dated 11.01.1982 which clarified that deduction u/s 80P(2)(a)(i) is to be allowed to Regional Rural Bank (RRB) by considering such banks as cooperative societies. It further held that the said beneficial circular is operative till the date it is withdrawn and recalled by subsequent Circular no. 6/2010 dated 20-09-2010. And thereafter, it was held that "In the instant case, the bank is confined to a Taluq but is also operating in the area comprising of a corporation" and finally, it was held that "Thus the assessee will have to be considered as Co-operative Society but the requirement of deduction u/s 80P(4) in respect of Primary Cooperative Agricultural and Rural Development is that the principal object of such concern is to provide long term credit for Agricultural Rural Development activities and the operation is confined to a Taluq. Thus requirement of explanation (b) of Section 80P(....