JANAKALYAN SAHAKARI BANK LTD., MUMBAI V. ACIT 1(3)(1), MUMBAI

CO 298/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9597 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 06-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUSHIL KUMAR PODDUR
• Keywords: Bad and doubtful debts
• Section: 143(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT, AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.2666/MUM/2016 ASSESSMENT YEAR: 2011-12 DEPUTY COMMISSIONER OF INCOME TAX -1(3)(1), R. NO.540, 5 TH FLOOR AAYAKAR BHAVAN, M. K. ROAD, CHURCHGATE, MUMBAI-400020 / VS. M/S JANAKALYANSHAKARI BANK LIMITED 140, VIVEKDARSHAN, SINDHI SOCIETY, CHEMBUR, MUMBAI-400071 ( / REVENUE) ( !'#$% /ASSESSEE) P.A. NO. AACFJ6244R C.O. NO.298/MUM/2017 (ARISING OUT OF ITA NO.2666/MUM/2017) ASSESSMENT YEAR: 2011-12 M/S JANAKALYANSHAKARI BANK LIMITED 140, VIVEKDARSHAN, SINDHI SOCIETY, CHEMBUR, MUMBAI-400071 / VS. DEPUTY COMMISSIONER OF INCOME TAX -1(3)(1), R. NO.540, 5 TH FLOOR AAYAKAR BHAVAN, M. K. ROAD, CHURCHGATE, MUMBAI-400020 ( !'#$% /ASSESSEE) ( / REVENUE) P.A. NO. AACFJ6244R M/S JANAKALYAN SAHAKARI BANK LTD. ITA NO.2666/MUM/2017& C. O. NO.298/MUM/2017 2 / REVENUE BY SHRI SUSHIL KUMAR PODDUR- DR !'#$% / ASSESSEE BY SHRI VISHWASMEHENDALE & !' ( %) / DATE OF HEARING : 27/11/2018 ( %) / DATE OF ORDER: 19/12/2018 / O R D E R PER JOGINDER SINGH (VICE PRESIDENT) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 22/01/2016 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI AND THE ASSESSEE HAS PREFERRED CROSS OBJECTI ON. FIRST, WE SHALL TAKE UP THE APPEAL OF THE REVENUE, WHEREIN, THE FIRST GROUND RAISED PERTAINS TO ALLOWING DEDUCT ION OF RS.5,91,49,154/- UNDER SECTION 36(1)(VII) OF THE IN COME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. DURING HEARING, SHRI SUSHIL KUMAR PODDAR, LD. DR, INVITED OUR ATTENTION TO PARA-6.5 OF THE IMPUGN ED ORDER AND PARA-4.1 AND 4.4 OF THE ASSESSMENT ORDER. IT W AS POINTED OUT THAT IMPUGNED AMOUNT SHOULD BE OPENING BALANCE, THEREFORE, THE FINDING OF THE LD. COMMISSI ONER OF INCOME TAX (APPEAL) IS WRONG. ON THE OTHER HAND, SH RI M/S JANAKALYAN SAHAKARI BANK LTD. ITA NO.2666/MUM/2017& C. O. NO.298/MUM/2017 3 VISHWAS MEHANDALE, LD. COUNSEL FOR THE ASSESSEE CON TENDED THAT IT WAS DONE AS PER RBI NORMS FOR WHICH OUR ATT ENTION WAS INVITED TO PAGE-3 OF THE BALANCE SHEET, PAGE-27 & 28 OF THE PAPER BOOK INCLUDING SCHEDULE-B AND PAGE-5 OF T HE PAPER BOOK. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BANKING, DECLARED NIL INCOME IN ITS RETURN FILED ON 29/09/2011 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY, THEREFORE NOTICES UNDER SECTION 143(2) AND THEREAFT ER UNDER SECTION 142(1), ALONG WITH QUESTIONNAIRE WERE ISSUE D AND SERVED UPON THE ASSESSEE. THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FURNISHED THE DET AILS. THE LD. ASSESSING OFFICER OBSERVED THAT IN ITS PROF IT & LOSS ACCOUNT, THE ASSESSEE DEBITED NIL TOWARDS BAD DEBTS RESERVES OR BAD DEBTS HOWEVER IN THE COMPUTATION OF INCOME, THE ASSESSEE CLAIMED BAD DEBTS OF RS.5,91,49,154/- UNDER SECTION 36(1)(VII) OF THE AC T. THE M/S JANAKALYAN SAHAKARI BANK LTD. ITA NO.2666/MUM/2017& C. O. NO.298/MUM/2017 4 ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF BAD DEBT S. THE ASSESSEE MADE WRITTEN SUBMISSIONS DATED 20/12/2013. THE LD. ASSESSING OFFICER FOUND THAT THE ASSESSEE H AS NOT WRITTEN OFF THE BAD DEBTS IN THE PROFIT & LOSS ACCO UNT, THEREFORE, THE SAME IS NOT ALLOWABLE. IT WAS FURTHE R NOTED BY THE LD. ASSESSING OFFICER THAT THE ASSESSEE WAS HAV ING CREDIT BALANCE IN THE ACCOUNT PROVISION FOR BAD AN D DOUBTFUL DEBT ACCOUNT, WHEREIN, THE OPENING BALANC E WAS SHOWN AT RS.69,13,86,854/- AND CLOSING BALANCE AT RS.54,66,65,946/-. THE STAND OF THE REVENUE IS THAT THE BAD DEBT CAN BE ALLOWED ONLY TO THE EXTENT IF IT IS A WRITTEN OFF IN ITS ACCOUNTS. THE LD. ASSESSING OFFICER DISA LLOWED THE BAD DEBTS OF RS.5,91,49,154/-. ON APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THE BAD DEBT W AS HELD TO BE ALLOWABLE, ON THE GROUND THAT THE ASSESS EE HAS FULFILLED THE CONDITIONS PROVIDED UNDER SECTION 36( 1)(VII) OF THE ACT. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN M/S JANAKALYAN SAHAKARI BANK LTD. ITA NO.2666/MUM/2017& C. O. NO.298/MUM/2017 5 JUXTAPOSITION AND ANALYZED, WITHOUT GOING INTO TECHNICALITIES, IT HAS BEEN FOUND BY THE LD. COMMIS SIONER OF INCOME TAX (APPEAL) THAT THE ASSESSEE CLAIMED BA D DEBTS OF RS.5,91,49,154/- UNDER SECTION 36(1)(VII) AND WR ITTEN OF THE SAME AS IRRECOVERABLE BAD DEBTS IN ITS BOOKS OF ACCOUNTS. CONSIDERING THE TOTALITY OF FACTS AND IN VIEW OF THE AMENDMENT IN THE TAXATION LAWS WITH EFFECT FROM 01 ST APRIL, 1989, THE REQUIREMENT OF DEMONSTRATING THAT THE DEBTS HAS BECOME BAD HAS BEEN DISPENSED WITH AND ON LY REQUIREMENT REMAINS THAT IT SHOULD BE WRITTEN OFF IN BOOKS OF ACCOUNTS OF THE ASSESSEE, WHICH HAS BEEN F URTHER CLARIFIED BY CBDT CIRCULAR NO.551 DATED 23/01/1990. OUR VIEW FIND SUPPORT FROM THE RATIO LAID DOWN IN CIT V S BRILLIANT TUTORIALS PVT. LTD. 292 ITR 399 (MAD.), C IT VS MORGAN SECURITIES AND CREDITS PVT. LTD. (210 CTR 33 6)(DEL.), DCIT VS OMAN INTERNATIONAL BANK SAOG. (313 ITR 128)(BOM.), CIT VS STAR CHEMICALS (BOM.) PVT. LTD. 220 CTR 319 (BOM.), CIT VS GLOBAL CAPITAL LTD. 201 TAXATION 210 (DEL.), CIT VS M/S EXCEL FASHION PVT. LTD. (201 TAX ATION 216)(DEL), CIT VS AUTO METERS LTD. 292 ITR 345 (DEL .). SO M/S JANAKALYAN SAHAKARI BANK LTD. ITA NO.2666/MUM/2017& C. O. NO.298/MUM/2017 6 FAR AS, THE RELIANCE UPON THE DECISION IN KASHMIR T RADING COMPANY VS DCIT AND AHAMADABAD ELECTRICITY COMPANY LTD. (SUPRA), THE DECISION FROM HONBLE RAJASTHAN H IGH COURT AND GUJARAT HIGH COURT ARE CONCERNED, THE HON BLE APEX COURT, LATER ON, IN T.R.F. LTD. VS CIT 323 ITR 397 (SC), CONSIDERING THE PROVISION OF SECTION 36(1)(VI I), PRIOR TO APRIL, 1, 1989 AND POST AMENDMENT HELD THAT IT IS N OT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. MERE WRITTEN OFF IN ITS ACCOUNTS IS ENOUGH, THUS, FOLLOWING THE AFORESAID D ECISION FROM HONBLE APEX COURT, IN PRINCIPLE, WE AFFIRM TH E STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL), RES ULTING INTO DISMISSAL OF THIS GROUND OF THE REVENUE. 3. THE NEXT GROUND RAISED BY THE ASSESSEE PERTAINS TO DELETING THE ADDITION MADE BY THE ASSESSING OFFI CER FOR BAD AND DOUBTFUL DEBTS RESERVES AMOUNTING TO RS.11,16,02,000/- ON ACCOUNT OF RECOVERY OF NPA AND OVERDUE INTEREST RESERVES AMOUNTING TO RS.57,08,000 /- ON ACCOUNT OF RECOVERY OF OVERDUE INTEREST ON NPA IGNO RING THE M/S JANAKALYAN SAHAKARI BANK LTD. ITA NO.2666/MUM/2017& C. O. NO.298/MUM/2017 7 FINDING OF THE LD. ASSESSING OFFICER AND DISREGARDI NG THE NEXUS OF INTEREST INCOME DISCLOSED AND WORKED OUT O N NPA. 3.1. THE LD. DR CONTENDED THAT THERE IS NO FINDING BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) FOR WHI CH OUR ATTENTION WAS INVITED TO PARA-7.1 OF THE IMPUGNED O RDER BY ADVANCING ARGUMENTS WHICH IS IDENTICAL TO THE GROUN D RAISED. HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE E XPLAINED THAT WHATEVER WAS RECEIVED WAS OFFERED FOR TAXATION IN THE NEXT YEAR. 3.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SO FAR AS , FACTS ARE CONCERNED, THESE HAS BEEN MENTIONED IN THE ASSESSMENT ORDER AS WELL AS IN THE IMPUGNED ORDER. WE NOTE THAT THIS ISSUE HAS NOT BEEN EXAMINED PROPERLY AND EVEN THE ASSESSEE HAS NOT PRODUCED THE NECESSARY FA CTS BEFORE THE LD. ASSESSING OFFICER, THEREFORE, WE DEE M IT APPROPRIATE TO REMAND GROUND NO.2 & 3 (WHICH ARE INTERCONNECTED) TO THE FILE OF THE LD. ASSESSING OF FICER TO EXAMINE THE CLAIM OF THE ASSESSEE AFRESH. THE ASSES SEE IS M/S JANAKALYAN SAHAKARI BANK LTD. ITA NO.2666/MUM/2017& C. O. NO.298/MUM/2017 8 DIRECTED TO FURNISH THE NECESSARY EVIDENCE IN SUPPO RT OF ITS CLAIM BEFORE THE LD. ASSESSING OFFICER, FOR WHICH OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE. THUS, BOT H THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES, CONSE QUENTLY, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. 4. NOW, WE SHALL TAKE UP THE CROSS OBJECTION OF TH E ASSESSEE (298/MUM/2017), WHEREIN, DISALLOWING THE C LAIM OF BAD DEBTS AMOUNTING TO RS.5,91,49,154/- UNDER SE CTION 36(1)(VII) HAS BEEN RAISED. THIS GROUND OF THE REVE NUE HAS BEEN DISMISSED, THEREFORE, THIS CROSS OBJECTION OF THE ASSESSEE HAS REMAINED FOR ACADEMIC INTEREST ONLY. 5. SO FAR AS, THE BAD AND DOUBTFUL RESERVES ON ACCOUNT OF RECOVERY OF NPA AMOUNTING TO RS.11,16,02,000/- AND OVERDUE INTEREST RESERVES AMOUNTING TO RS.57,08,000/- ON ACCOUNT OF RECOVERY OF OVERDUE INTEREST ON NPA ARE CONCERNED, , WHILE DISP OSING OF THE APPEAL OF THE REVENUE, THESE INTERCONNECTED GRO UNDS WERE REMANDED BACK TO THE FILE OF THE LD. ASSESSING OFFICER M/S JANAKALYAN SAHAKARI BANK LTD. ITA NO.2666/MUM/2017& C. O. NO.298/MUM/2017 9 FOR FRESH ADJUDICATION, THEREFORE, BOTH THESE GROUN DS ARE DISMISSED AS IN-FRUCTUOUS. FINALLY, THE APPEAL OF THE REVENUE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES, WHEREAS, THE CROSS OBJECTION OF THE ASSESSEE ARE DISPOSED OFF AS INDICATED ABOVE. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT, AT THE CONCLUSION OF THE HEARING, IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES ON 27/11/2018. SD/- SD/- ( G. MANJUNATHA ) (JOGINDER SINGH) #$ / ACCOUNTANT MEMBER %&' /VICE PRESIDENT & ' MUMBAI; +! DATED : 19/12/ 2018 F{X~{T? P.S / ! , ()*+,-,.* / COPY OF THE ORDER FORWARDED TO : 1. -./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. 2 2 & 3% ( - ) / THE CIT, MUMBAI. 4. 2 2 & 3% / CIT(A)- , MUMBAI 5. 56 0 % !' , 2 -) -'7 , & ' / DR, ITAT, MUMBAI 6. 8# 9' / GUARD FILE. / BY ORDER, %/ (DY./ASSTT.REGISTRAR) , & ' / ITAT, MUMBAI,