Income Tax Officer Ward- Seoni, Seoni V. Jila Sahkari Kendriya Bank Maryadit, Seoni

ITA 100/JAB/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3253 (ITAT-JABALPUR)
• Duration Of Justice: 3 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 07-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Reason to believe
• Section: 43D; 191

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI SANJAY ARORA, HON’BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON'BLE JUDICIAL MEMBER I.T.A. Nos. 97, 99 & 100/JAB/2018 (Asst. Years: 2009-10, 2013-14 & 2014-15) C.O.Nos.05 & 07/JAB/2018 (arising out of I.T.A. Nos. 97 & 100/JAB/2018) (Asst. Years : 2009-10 & 2014-15) Revenue by : Shri Shravan Ku. Gotru, CIT-DR Assessee by : Shri B.Ganguly, Advocate Date of hearing : 20/04/2022 Date of pronouncement : 29/04/2022 O R D E R Per Bench This is a set of three Appeals by the Revenue and two Cross Objections (COs) by the assessee in respect of its’ assessments for three years, being assessment years (AYs.) 2009-10, 2013-14 & 2014-15. The issues arising being Income Tax Officer Ward, Seoni. vs. Jila Sahkari Kendriya Bank Maryadit, Seoni, Sahkari Bhavan, Near Bus Stand, G.N. Road, Seoni, Distt. Senoni (M.P.) [PAN : AAAAJ 2044G] (Appellant) (Respondent) Jila Sahkari Kendriya Bank Maryadit, Seoni, Sahkari Bhavan, Near Bus Stand, G.N. Road, Seoni, Distt. Senoni (M.P.) [PAN : AAAAJ 2044G] vs. Income Tax Officer Ward, Seoni. (Appellant/Cross Objector) (Respondent) ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 2 common, these were heard together, and are being accordingly disposed of per a common order. 2. The only issue arising in these appeals and COs, save an additional issue for AY 2009-10, is the maintainability of the provision for bad and doubtful debts, as well as for overdue interest, as claimed by the assessee, a cooperative bank, per its’ returns of income for the relevant years. The details of the claims are as under: (Amount in Rs. lacs) A.Y. P1 P2 Total (P1 + P2) P3 P1A 2009-10 643.74 262.57 906.31 764.25 - 2013-14 514.00 381.23 895.23 1698.91 8.00 2014-15 442.82 755.44 1198.26 1899.66 12.15 P1 Provision for bad and doubtful debts P1A Provision against standard assets (forming part of P1) P2 Provision for overdue interest on NPA A/cs P3 Deduction eligible u/s. 36(1)(viia) The figures afore-tabulated are admitted. For each of the years under reference, the Assessing Officer (AO) disallowed the provision for bad and doubtful debts to the extent it related to standard assets. Inasmuch as the corresponding debts (assets), i.e., against which the provision is being claimed – which is as per the provisioning norms prescribed by the Reserve Bank of India (RBI), its’ regulator, are ‘standard assets’ (i.e., debts considered good), the AO considered the provision there-against by the assessee as a contradiction in terms. In his view, it was not more than a provision for a contingent liability, inadmissible u/s. 37(1). The second disallowance by the AO is qua provision for interest (P2). The same, in his view, has no basis in law, i.e., neither u/s. 36(1)(viia) nor u/s. 37(1), rejecting the assessee’s claim of the same being only in compliance of the income recognition norms stipulated by RBI, so that no unrealised interest on accounts characterised ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 3 as Non-Performing Assets (NPAs), again as per the norms prescribed by RBI, could be recognised as income. In appeal, the ld. CIT(A) allowed the assessee’s claims. As regards the former (P1A), the provision for bad and doubtful debts was well within that sanctioned by law (u/s. 36(1)(viia)), applicable to cooperative banks w.e.f. AY 2007-08. For the latter (P2), he relied on sec. 43D, which reads as under, i.e., in its relevant part, in accepting the assessee’s claim: 43D. Notwithstanding anything to the contrary contained in any other provision of this Act,— (a) in the case of a public financial institution or a scheduled bank or [a co- operative bank other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank or] a State financial corporation or a State industrial investment corporation, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the Reserve Bank of India in relation to such debts; (b) in the case of a public company, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the National Housing Bank in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank or the State financial corporation or the State industrial investment corporation or [a deposit taking non-banking financial company or a systemically important non-deposit taking non-banking financial company or] the public company to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier. Explanation.—For the purposes of this section,— (a) – (c)..... (d) "scheduled bank" shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36; (e) – (f) ... (g) "co-operative bank", "primary agricultural credit society" and "primary co- operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P; (h) the expressions "deposit taking non-banking financial company", "non- banking financial company" and "systemically important non-deposit taking non- ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 4 banking financial company" shall have the meanings respectively assigned to them in clauses (e), (f) and (g) of Explanation 4 to section 43B. (emphasis, by underlining & in italics, ours) Aggrieved, both the assessee and the Revenue are in appeal; the former by way of CO (for two out of the three years). 3. Before us, the Revenue’s case qua both the disallowances made in assessment, since deleted by the first appellate authority, was the same as of the AO. The assessee’s grievance is that the ld. CIT(A), though accepted its’ additional ground, i.e., with reference to sec. 43D, had issued no finding qua sec. 36(1)(viia), i.e., the principal section under which the claim was pressed and, in its’ view, admissible. 4. We have heard the parties, and perused the material on record. 4.1 The provision against standard assets is as much a provision for bad and doubtful debts as any other. It is, rather, for this reason alone, i.e., that the asset for the diminution in the value of which (on account of unrealizability) provision is being made, is, as per the norms adopted, a standard asset, that a provisioning rate as low as 0.25% (or 0.4%) has been prescribed by RBI. As far as the Act is concerned, all that is relevant is that the provision made in books for bad and doubtful debts is to be allowed in full, subject to it not exceeding the sum worked out with reference to the formula specified in s. 36(1)(viia) (read with provisos thereto). Nothing more, and nothing less. Any loss arising on account of a bad debt is to be adjusted (set-off) against this provision, which is revisited each year-end, making good the shortfall therein, i.e., the provision outstanding in books, as worked out with reference to its assessment (as per the applicable norms) thereat. Alternatively, the provision as made (as at the year-end) is reversed in full on the first day of the following year, increasing the profit (or decreasing the loss) for that year to that extent, which is then made in full at the following year-end. Any bad debt arising during this, following, year is charged to the operating statement (P&L ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 5 A/c). Both the methods are equivalent and equally valid, yielding the same result. The disallowance in respect of provision qua standard assets has, in our view, been therefore rightly deleted by the ld. CIT(A). We decide accordingly. 4.2 Coming to the provision against overdue interest, i.e., the unrealized interest on NPA A/cs, provided for at the whole of the said interest, relief stands allowed by the ld. CIT(A) with reference to sec. 43D (supra). The words ‘a cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank or’, which apply to the assessee, stand inserted in the provision (s.43D) after the words ‘scheduled bank or’ by Finance Act, 2018, w.r.e.f. 01/04/2017. There is surprisingly no discussion in the impugned order in respect of the retrospective operation of the amendment by Finance Act, 2018, only which would make the said provision applicable to the assessee for the relevant years. This is precisely the Revenue’s grievance, claiming the amendment to be prospective, i.e., AY 2017-18 onwards. The assessee, on the other hand, claims it to be retrospective, i.e., since the inception of the provision by Finance Act, 1991, w.e.f. 01/04/1991. We see no reason for the said retrospective operation, or even w.e.f. 01/04/1999, whereat the provision was substituted by Finance Act, 1999. Why, Shri Ganguly, the ld. counsel for the assessee, would during hearing himself state of a different treatment for cooperative banks in view of the exemption to their profits u/s. 80P. In fact, the same words stand inserted in s. 36(1)(viia) by Finance Act, 2007, w.e.f. 01/04/2007, the date from which s. 80P(4) stands inserted (again) on the statute, excluding cooperative banks, and which are not claimed as retrospective! There was no reference to the Memorandum Explaining the Provisions of the relevant Finance Bill; Budget Speech, etc. explaining the amendment, which would throw light thereon, by Sh. Ganguly. There was, further, no explanation by him as to why the said amendment by Finance Act, 2018 was made retrospective from 01/4/2017, i.e., AY 2017-18 ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 6 onwards, as the provisions of Finance Act, 2018 would normally be applicable from 01/4/2019, i.e., AY 2019-20 onwards. That is, retrospectivity stands already provided by the Legislature to the said amendment, which the assessee, rather than explaining the same, urges us to ignore and extend it to 01/4/1991 (or 01/4/1999), without showing any, much less compelling, reason for the same. Even no unintended hardship stands brought to our notice, with the withdrawal of exemption u/s. 80-P to cooperative banks being from, as afore-noted, AY 2007-08. Why, even the parallel with sec. 80-P is, to our mind, not well-founded. This is as the same is a deduction provision, which is w.r.t. the profits and gains, i.e., as computed under the provisions of the Act, while s. 43D relates to the computation of those profits and gains; the two, thus, operate in different fields. Merely because the profit is subject to deduction on fulfilment of certain conditions, would not mean that same could be computed de hors the provisions of the Act. It is the real income, subject to the provisions of the Act, which is to be brought to tax, as explained in Poona Electric Supply Co. Ltd. v. CIT [1965] 57 ITR 521 (SC), wherein again there was a conflict between the income as per the Act, and that worked with reference to the mandate of the Regulator. The issue, it may be appreciated, is not if the assessee is a banking company or not, but if a ‘cooperative bank’, separately defined under the Act, is included within ambit of the provision for the relevant years. Section 80-P, for instance, was applicable to the cooperative banks as the assessee, only for that reason, and not because they were banking companies, which they continue to be. Continuing further, even granting applicability of sec. 43D, i.e., for the sake of argument, the same would be of little assistance to the assessee in the facts and circumstances of its’ case. This is as all that it says is for the interest being recognized as income for the year of credit or the year of receipt, whichever is earlier. The assessee having credited the interest income in its’ accounts for the relevant year/s, the same, even though not received, is to be, in terms of s. 43D ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 7 itself, regarded as the income for the relevant year/s, i.e., the year/s in which it stands recognized as income by crediting the same to its’ P&L A/c. This would also meet the assessee’s reliance on some decisions by Hon’ble Courts, referred to by ld. CIT(A), whose orders are sans any reference to this aspect of the matter. In fine, the claim is bizarre, and without reference to the legislative history of the provision, which stands amended retrospectively – so that there has been clearly due consideration of its retrospectivity, by FA, 2018; the provision itself, as well as the facts of the case. Reliance on sec. 43D, whichever way one may look at it, thus, does not therefore help the assessee’s case. 4.3 The assessee next claims that inasmuch as the total provision (P1 + P2) made in accounts does not exceed that exigible u/s. 36(1)(viia) (P3), the claim is admissible u/s. 36(1)(viia) itself, as the provision for overdue interest is also in the nature of provision for bad and doubtful debts. This is stated on the basis that the interest, on debit to the borrowers’ account, becomes part of the debt due therefrom. The argument, seemingly attractive, is found misconceived on scrutiny. It, rather, as we shall presently see, raises a serious issue. The unrealised interest on a NPA A/c, is, as per the accounting norms, to be debited not to the borrower (lendee)’s A/c, but to the ‘Interest Receivable A/c’, with a corresponding credit to the ‘Overdue Interest Reserve A/c’. Both are balance-sheet items, which stand to be reflected on its asset and liability side respectively, with no income implication. The interest received is accounted as income (of the year of receipt), with a simultaneous reversal of the interest receivable and overdue interest reserve accounts. For example, a receipt of Rs. 1,000 (say) from a NPA borrower, with an overdue (unpaid) interest of Rs. 5,000 (say), shall result in the following accounting entries: (Amount in Rs.) a) Bank A/c Dr. 1,000 To Interest Income A/c Cr. 1,000 ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 8 b) Overdue interest reserve A/c Dr. 1000 To Interest receivable A/c Cr. 1,000 The balance in the ‘overdue interest reserve’ and ‘interest receivable’ accounts at the year-end would thus be Rs. 4000 each. Where the interest (as per the loan agreement), being not realized, is, as per the accounting mandate, not accounted as income, as in the case above, there would be no occasion for either making a provision for overdue interest (on NPA A/cs), which is charged to the operating statement (P&L A/c), or debit the said interest to the Borrower’s A/c, to then claim it as a part of the debt due from him. Rather, where so, income having been already accounted for (as per the loan agreement), there would be no occasion to account it as such on receipt, whereat the amount would stand to be credited to the debtor (borrower)’s A/c, i.e., as recovery of debt. The income implication in the instant case, due to the provisioning for overdue interest, arises, as it appears to us, only due to the assessee not following the mandatory accounting prescription, which it claims to follow (refer written submissions before the ld. CIT(A) for AY 2014-15 – which was adopted as the lead year for the purpose of arguments at the time of hearing). The argument, even otherwise only partly valid for AY 2009-10 (refer Table at para 2), i.e., for Rs. 120.51 (262.57 - (906.31 – 764.25)) lacs, as the balance claim for Rs. 142.06 (i.e., 262.57 – Rs. 120.51) lacs, would in any case stand to be disallowed, thus, fails for all the years under reference. The assessee cannot for that reason fall back on sec. 36(1)(viia), which in fact is its’ main plank, as explained by Shri Ganguly, and the subject matter of its’ COs. It, in fact, gives rise to the question that if the overdue interest is, as claimed, indeed debited to the (NPA) borrowers’ accounts, the provision for bad and doubtful assets would get enhanced to the extent made on the said amount. That is, there would be a ‘double’ provision in respect of this interest sum, firstly, at 100% thereof (as provision for overdue interest) and, then, inasmuch as the interest forms part of the principal debt, per the provisioning norms following the RBI guidelines. This is the serious ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 9 consequence referred to hereinabove, as it results in provisioning against the said interest in excess of 100% thereof. We shall advert to this aspect, which impinges directly on the correct (amount of) claim in respect of provision for overdue interest, later. 4.4 On principle, we, nevertheless, consider the assessee’s case as liable to be accepted. The reason is simple. The provision (for overdue interest) only seeks to de-recognize unrealised interest income on NPA A/cs falling under different categories of sub-standard assets, for which provision (for non-realization of value) at different rates stands provided (as per the provisioning norms by RBI) and accepted. Where, then, one may ask, is the question of interest arising on these accounts, i.e., except of course to the extent actually received? The Revenue has not disputed either the classification of the said accounts as NPAs, or of the interest under reference as having been not realised (as at the year-end). Accrual is a matter of fact, signifying the accrual of the right to receive. Intrinsic thereto is the concept of realization, so that wherever there is an uncertainty – which is justified on facts, as to its realisation, income cannot be said to have arisen/ accrued. Prudence, a fundamental accounting assumption (on which the accounts are prepared), advocates conservatism, so that an uncertainty of receipt, where justifiable on facts, would cause abeyance of the recognition of income. Reference in this context may be made to AS9 by ICAI, the regulatory accounting body in India. The law in the matter is well-settled, and for which one may refer to the decisions by the Apex Court, as in UCO Bank v. CIT [1999] 237 ITR 889 (SC); United Commercial Bank v. CIT [1999] 240 ITR 355; Godra Electricity Co. Ltd. v. CIT [1997] 225 ITR 746 (SC), to cite some, also relied upon by the assessee, wherein it stands clarified that accrual of income is to be judged in the light of the reality of the situation. There is thus no question of accrual of such interest income. ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 10 At the same time there is, however, as afore-noted (para 4.3), little clarity on the accounting treatment being given by the assessee. While that stated to be followed has no income implication, even as sought to be clarified and brought forth per the accounting entries that would stand to be passed, the accounting followed by the assessee, contrary to what it states, has income implication, which stands neutralized by making a provision for overdue interest, and which has been disallowed in assessment. It may, however, well be that the accounting entries passed by the assessee are to the same effect, toward which we may draw up some sample accounting entries, as indicated above, as under: (Amount in Rs.) A. Charge of interest a) Borrower A/c Dr. 5000 To Interest A/c Cr. 5000 (charge of interest in account of the borrower – classified as NPA, for a period, which would in turn be credited to the P&L A/c for the said period) b) P & L A/c Dr. 5000 To Provision for overdue Cr. 5000 interest (provision in respect of interest, being unrealized and qua a NPA borrower) B. Receip of interest a) Bank A/c Dr. 1,000 To Interest Income Cr. 1,000 (interest realized during the period) b) Provision for overdue interest Dr. 1,000 To Borrower A/c Cr. 1000 (reversal of provision for unrealized interest on being realized) 4.5 With a view to therefore verify if the assessee has followed the correct accounting prescription, i.e., in effect, as where interest is accounted as income on receipt, reversing the provision for overdue interest (having been already credited for the entire unrealized interest, which stands also debited to the borrower’s ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 11 account) and the debtor (receivable) account, i.e., to the extent of receipt, as we understand to be the case (as depicted per the accounting entries afore-stated), the matter is, accepting the assessee’s case in principle, restored to the file of the AO for the purpose. The AO shall confirm the same, with a view to ensure that there is no mismatch between what is being stated (by the assessee) and understood (by us), and which forms the basis of our decision, and what obtains in fact. The assessee shall of course be heard in the matter and, rather, obliged to exhibit it’s accounting treatment, as also its ultimate effect. The AO shall also verify the excess provision for overdue interest, if any, due to the debit of the unrealized interest to the (NPA) borrower’s accounts, i.e., by way of provision for bad and doubtful debts, which gets thus gets reflected in accounts as so, though is only a provision against the said interest included in the borrower’s due, and restrict the claim for such interest to 100% thereof (as at the year-end). It is imperative for the purpose that the provision for overdue interest for each year is quantified, adjusting it for the amount thereof which is reflected as provision for bad and doubtful debts. Going by the example adopted, assuming the relevant asset is a ‘doubtful asset’ qualifying for provision @ 50%, the total provision for overdue interest would as at the year-end would be Rs. 6000, i.e., Rs. 4000 reflected as such, and Rs. 2000 under the A/c head ‘Provision for bad & doubtful assets’, which would therefore also require being reduced to that extent. There may be a carry-over of such provision for unrealized interest, as where the same, pertaining to earlier years, remains unrealized as at the relevant year-end. The adjustment, nevertheless, is to be restricted to that relating to the current years’ interest, so that irrespective of the accounting entries passed in respect of the opening provision, it is only Rs. 4000, being the unrealized interest for the current year, which would stand to be allowed, disallowing the balance Rs. 2000 outstanding as provision for bad & doubtful debts. The assessee, assuming such to be the case, may do well to pass transfer entries, so that the correct position is reflected in accounts. There ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 12 could though be circumstances where the provision for overdue interest, eligible for being allowed or, correspondingly, disallowed, for a year, is also impacted by the opening provision, as where the same, instead of being adjusted (through receipt of interest), continues to obtain and, in fact, increased (as at the relevant year-end) due to re-categorization of the corresponding asset, as, say, from a ‘doubtful asset’ to a ‘loss asset’, qualifying for provision @ 100%, increasing the provision (on this unrealized interest) as at the year-end, going by the same example, from Rs. 2000 to Rs. 4000. This excess provision arising for the reason that unrealized interest on a doubtful asset stands accounted as income in the first place, would therefore need to be excluded. There could be a reverse case as well, as where an account is upgraded, reducing the provision now required in its respect. We understand all this to be no mean task, but the same has arisen directly as a result of, as it appears, a faulty accounting, inconsistent with the standard accounting prescription of not recognizing income on NPAs, so that the borrower account balance is not increased by this sum. The interest, though worked out, is kept in shadow accounts or in memoranda accounts. 4.6 The AO shall, upon due verification, decide in accordance with law, i.e., in conformity with what stands stated by us, per a speaking order, issuing clear and definite findings. We decide accordingly. 5. We may finally address the additional issue for AY 2009-10. The assessee challenges the re-assessment proceedings for this year on the ground of invalidity of the reasons recorded, which, as stated by Shri Ganguly, do not lead to any reason to believe escapement of income chargeable to tax to any person properly instructed on facts and in law. As observed by the Bench, this argument to be valid would have to be applicable to each of the three reasons recorded (at PB pg. 85) for reopening the assessment. ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 13 The first reason recorded is in respect of a sum of Rs. 643.74 lacs claimed as provision for bad and doubtful debts, comprising provision for bad and doubtful debts (i.e., toward principal debt due) and for overdue interest, at Rs.381.17 lacs and Rs. 262.57 lacs respectively. The AO states in the reason recorded that the same is not allowable u/s. 37(1). The same cannot be regarded as a valid reason inasmuch as a provision for bad and doubtful debts in case of a cooperative bank is deductible u/s. 36(1)(viia), so that any reason without reference to the said section cannot be a proper ground to entertain a reason to believe an excess claim qua the said provision and, thus, an escapement of income chargeable to tax on that basis. Further, the AO having not referred to the said section in his reason/s recorded, it is not permissible for us to travel thereto. The reason is, thus, not a valid ground to reopen the assessment. So, however, the sum admittedly includes Rs. 262.57 lacs, being the provision for overdue interest. The same is not admissible either u/s. 36(1)(viia) or u/s. 37(1). The assessee claims the same to be a part of the debt due, justifying provisioning in its respect as toward bad and doubtful debts and, in any case, equivalent to non-recognition of income on the interest (PB pgs. 87-92). The argument is self-contradictory inasmuch as only an amount accrued could form part of the debt/debt due, while the non-recognition of interest is only for the reason that the same has, in the given facts and circumstances, not accrued. Further, the claim of equivalence is a matter of verification, i.e., as to whether the accounting treatment by the assessee is indeed and, in effect, equivalent to not recognising the unrealized income on NPA borrower accounts at all. As explained in Raymond Woollen Mills Ltd. vs. ITO [1999] 236 ITR 34 (SC), what is material is a prima facie, honest reason to believe. That the amount believed to have escaped assessment has not been finally added in assessment is another aspect, a matter subsequent, but that would not operate to disturb the bona fide belief as to the escapement of income chargeable to tax for the relevant year, and on the basis of which reassessment stands initiated. Why, in the facts and circumstances of the ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 14 instant case, the said verification in fact survives even the assessment/s, with we, at the second appellate stage, considering it proper to restore the matter back for the purpose. Rather, inasmuch as it may result in extra provision against overdue interest, as is apparently so on the basis of the admitted facts (i.e., the said reason read with the figures for this year in Table at para 2 of this order), the provision for overdue interest may have to be disallowed, so that the accounting treatment followed is not, as claimed, equivalent, i.e., in effect. We may though hasten to add that we are not pre-determining the issue, nor be construed as having issued any finding in the matter, but are only justifying the reason recorded on that basis, i.e., as being a genuine reason, held bona fide. The said Ground is thus a valid ground for reopening, even if no disallowance on that count finally materializes in assessment (Central Provinces Manganese Ore Co. Ltd. v. CIT [1991] 191 ITR 662 (SC)). In fact, in our view, the provision for overdue interest disallowed in assessment (Rs.262.57 lacs), that may finally stand to be justified, as also explained hereinabove, is only toward the extra (additional) provision in its respect, i.e., to the extent the interest forms part of the borrowers’ principal balance and, thus, as provision there-against. The assessee’s challenge on this ground, therefore, fails, even as for the other two reasons we are in agreement with Sh. Ganguly as not being valid reasons, nor their sum considered for which the approval u/s. 151 stands obtained (PB pg. 86). We decide accordingly. 6. In the result, all the Appeals and CO (# 7/2018) are allowed for statistical purposes, and CO (# 5/2018) is partly allowed for statistical purposes. Order pronounced in open Court on April 29, 2022 Sd/- sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Dated: 29/04/2022 ITA Nos. 97, 99 & 100/JAB/2018 (AYs. 2009-10, 2013-14 & 2014-15) C.O.Nos. 05 & 07/JAB/2018 Jila Sahkari Kendriya Bank Maryadit 15 vr/- Copy to: 1. The Revenue: Income Tax Officer, Ward, Seoni 2. The Assessee: Jila Sahkari Kendriya Bank Maryadit, Seoni, Sahkari Bhavan, Near Bus Stand, G.N. Road, Seoni, Distt. Senoni (M.P.) 3. The Principal CI T-1, Jabalpur 4. The CI T( Appeals)-1, Jabalpur 5. The CI T-DR, I TAT, Jablapur 6. Guard File By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur