ITAT deletes penalty of Rs. 300 Cr on Central Bank for of disallowance of bad debts written-of

The Income Tax Appellate Tribunal (ITAT), Mumbai, in its ruling, has upheld that section 115JB of the Income Tax Act does not apply to banks constituted as ‘corresponding new banks‘ under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

The assessee, Central Bank of India, filed its income tax return (ITR) for the AY 2016-17, declaring a business loss under the normal provisions of the Income Tax Act, 1961, at Rs 61,38,64,687 and income under section 115JB at Rs 2,49,17,75,702. In its revised ITR filed on 27.03.2018, the bank declared a total loss of Rs 73,43,78,031 and a book profit of Rs 2,48,49,40,847 as per section 115JB.

During the assessment, the Assessing Officer found that the bank had claimed a deduction for bad debts written off under section 115JB. This deduction was disallowed by the AO. Based on this, a penalty under section 271(1)(c) of the Income Tax Act amounting to Rs 3,05,49,64,285 was levied on the Central Bank of India.

The bank appealed before the CIT(A), which reviewed the matter and deleted the penalty. It cited the decision of the bank’s own case for AY 2013-14, where it was held that section 115JB, about Minimum Alternate Tax (MAT) on book profits, does not apply to this bank. This decision was challenged by the revenue before the Income Tax Appellate Tribunal (ITAT).

The Tribunal also agreed with the CIT(A)’s order, saying that section 115JB does not apply to it, so the penalty under section 271(1)(c) is not justified. The ITAT dismissed the Revenue’s appeal and deleted the penalty levied by the AO under section 271(1)(c) of the Act.