Asst. Comm. of Income-tax, Circle-3, Nanded V. Nanded Zilla Sahakari Krushi Gramin Bank Ltd., Nanded

ITA 1134/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9972 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS VINITA MENON
• Keywords: Tax effect
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI R.K. PANDA, AM ITA NO. 1134/PN/2011 (ASSESSMENT YEAR: 2007-08) ASSTT. CIT CIR. 3, NANDED .. APPELLANT VS. NANDED ZILLA SAHAKARI KRISHI GRAMIN BANK LTD., NEAR I.T.I., NANDED PAN AAATN 5087 E RESPONDENT APPELLANT BY: MRS. VINITA MENON RESPONDENT BY: SHRI PRASANNA JOSHI DATE OF HEARING: 21-9-2012 DATE OF PRONOUNCEMENT: 28-9-2012 ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)- AURANGABAD DATED 28-6-2011 FOR A.Y. 2007 - 08 CANCELLING THE PENALTY U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 1,84,51,370/-. 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY AND DERIV ES INCOME FROM BANKING BUSINESS. RETURN OF INCOME WAS FILED BY THE ASSESSEE DECLARING TOTAL INCOME AT RS. NIL. CASE WAS SELECTED FOR SCRUTINY AND AN ORDER U/S 143(3) WAS PASSED ASSESSING TOTAL INCOME AT RS. NIL . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O OBSERVED THAT THE BANK HAS CREDITED INTEREST ON INVESTMENT MADE OUT OF RESERVE FUND DIRECTLY TO THE RESERVE FUND ACCOUNT OF RS. 6,03,597/-. THE ABOVE INCOME WAS NOT ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT AND CREDITED DIRECTLY TO THE RESERVE FUND 2 ITA NO 1134/PN/11 NANDED ZILLA SAH. KRISHI GRAMIN BANK A.Y. 2007-08 ACCOUNT. SINCE THE ABOVE RECEIPTS ARE REVENUE RECE IPTS LIABLE TO BE CHARGED TO INCOME-TAX THE SAME WERE TA XED ACCORDINGLY AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON THIS POINT, THE A.O INITIATED PENALTY AND LEVIED MINIMUM PENALTY OF RS. 1,84,51,360/- U/S 271(1)(C) OF THE ACT. 3. ON APPEAL, THE CIT(A) CANCELLED THE PENALTY BY OBSERVING AS UNDER: 7. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS OF THE A.O., AND THE APPELLANT. ON PERUSAL OF THE SAME, IT HAS BEEN NOTICED THAT THE APPELLANT BANK HAS VIRTUALLY CLOSED ITS BUSINESS AND IS ON THE VERGE OF LIQUIDATION. THE A.O HAS MADE THE ADDITION OF RS. 6,03,08,597/- HOLDING THAT THE BANK HAS CREDITED INTEREST ON INVESTMENT MADE OUT OF RESERVE FUND AND HAS EARNED INTEREST OF RS. 6,03,08,597/- WHICH HAS BEEN DIRECTLY CREDITED TO RESERVE FUND ACCOUNT. THIS FINDING OF THE A.O IS FACTUALLY INCORRECT AS THE AR OF THE APPELLANT HAS CORRECTLY POINTED OUT THAT THE APPELLANT HAS INVESTED ONLY RS. 31,73,804/- OUT OF RESERVE FUND ACCOUNT AND THERE IS NO POSSIBILITY OF EARNING INTEREST INCOME OF RS. 6,03,08,597/- FROM THE SAID ALLEGED INVESTMENT. THE LD. AR OF THE APPELLANT HAS POINTED OUT THAT THE UNJUSTIFIED AND INCORRECT ADDITION HAS NOT BEEN CONTESTED IN APPEAL AS THE BUSINESS OF THE BANK HAS BEEN VIRTUALLY CLOSED AND THERE WAS NO TAX EFFECT DUE TO THE SAID INCORRECT ADDITION. FURTHER IT HAS ALSO BEEN BROUGHT TO MY NOTICE BY THE LD. AR OF THE APPELLANT THAT THE BANK HAS MADE BOOK ENTRIES FOR THE INTEREST ACCRUED ON BORROWERS ACCOUNTS WHICH ARE NPA TO THE TUNE OF RS. 5,36,75,620/- AND CREDITED THE SAME TO PROFIT AND LOSS ACCOUNT AND HAS DEBITED AN AMOUNT OF RS. 6,03,08,597/- ON ACCOUNT OF IRRECOVERABLE INTEREST ON NPA ACCOUNTS WHICH INCLUDES THE INTEREST CREDITED TO THE PROFIT AND LOSS ACCOUNT ON NPA ACCOUNTS OF BORROWERS TO THE TUNE OF RS. 5,36,75,620/- AND THE REMAINING AMOUNT IS TOWARDS IRRECOVERABLE INTEREST ELATED TO EARLIER YEARS. THE APPELLANT HA S FURTHER POINTED OUT THAT THE ENTRIES MADE BY HIM IN THE BOOKS OF ACCOUNTS ARE AS PER GUIDELINES ISSUED BY RESERVE BANK OF INDIA AND THE SAID ENTRIES ARE INCONSONANCE WITH THE ACCOUNTING STANDARD NOTIFIED BY CBDT ON 25-1-1996 U/S 3 ITA NO 1134/PN/11 NANDED ZILLA SAH. KRISHI GRAMIN BANK A.Y. 2007-08 145(2) OF THE ACT. THE APPELLANT HAS ALSO CORRECTLY POINTED OUT THAT MOST OF THE ACCOUNTS OF THE BORROWERS ARE NPA AND PRINCIPAL AMOUNT OF LOAN ITSELF IS NOT RECOVERABLE. 7.1 IN VIEW OF THE ABOVE FACTS AND DISCUSSION, CONTENTIONS RAISED BY THE APPELLANT AND THE DECISIONS RELIED ON BY THE LD. AR OF THE APPELLANT, I AM OF THE CONSIDERED VIEW THAT THE AO IS NOT JUSTIFIED IN LEVYING PENALTY OF RS. 1,84,51,370/- U/S 271(1)(C) OF THE ACT. THE A.O IS DIRECTED TO CANCEL THE PENALTY OF RS. 1,84,51,370/-. 4. WE HAVE BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE DO NOT FIND ANY INFIRMITY WITH THE REASONED ORDER OF THE CIT(A) WHO HAS DELETED THE PENALTY IN QUESTION FOR ABOVE REASO N. THE SAME IS ACCORDINGLY UPHELD. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2012. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 28 TH SEPTEMBER 2012 ANKAM COPY TO:- ASSESSEE DEPARTMENT THE CIT (A) AURANGABAD THE CIT AURANGABAD THE D.R. B BENCH, I.T.A.T., PUNE. BY ORDER //TRUE COPY// SR. P.S. I.T.A.T., PUNE 4 ITA NO 1134/PN/11 NANDED ZILLA SAH. KRISHI GRAMIN BANK A.Y. 2007-08