Pali Urban Co-operative Bank Ltd., PALI V. Pr. Commissioner of Income Tax, JODHPUR

ITA 119/JODH/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4748 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K DAS
• Keywords: Bad and doubtful debts
• Section: 142(1); 37; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SAR A THI CHAUDHURY JUDICIAL MEMBER ITA NO.119/JODH/2015 ASSESSMENT YEAR:2010 - 11 PALI URBAN CO - OPERATIVE BANK LTD. VS. PR. CIT MANDIA ROAD JODHPUR PALI PAN NO. AETPS2761K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAJENDRA JAIN RESPONDENT BY : SH. A.K. DAS DATE OF HEARING : 20/12/2016 DATE OF PRONOUNCEMENT : 22/12/2016 ORDER PER PARTHA SAR A THI CHAUDHURY , JM THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT - 1 PASSED UNDER SECTION 263 OF THE ACT DT. 19/02/2015 ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE PR. CIT IS NOT JUSTIFIED IN GIVING DIRECTION U/ 263 OF INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE PR. CIT IS NOT JUSTIFIED IN TREATING THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICE TO REVENUE. 3. THE HONBLE PR. CIT IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF RS. 767273/ - U/S 36(1)(VIIA) OR U/S 37 OF THE INCOME TAX ACT. 4. THE HONBLE PR. CIT IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF PROVISION FOR NON PERFORMING ASSETS MADE AS PER THE DIRECTION AND GUIDANCE OF RESERVE BANK OF INDIA. 2 5. YOUR APPELLANT CRAVES LEAVES TO ADD, DELETE AND CHANGE ANY GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. THE CRUX OF THE RELIEF CLAIMED ON THE GROUND OF APPEAL IS WHETHER THE ORDER PASSED UNDER SECTION 263 IS MAINTAINABLE AND WHETHER THE PROVISI ON FOR NON PERFORMING ASSETS (NPA) IS AN ALLOWABLE CLAIM. 2. THE BRIEF FACTS APPEARING IN THIS CASE ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING ACTIVITY. THE RETURN OF INCOME FOR AY 2010 - 11 WAS E - FILED ON 29/09/2010 DE CLARING TOTAL TAXABLE INCOME AT RS. 1,09,90,070/ - . THE SAME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT . THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY UNDER SECTION 143(2) WAS ISSUED AND SERVED ON ASSESSEE ON 26/08/2011 FIXING THE CASE FOR HEARING ON 1 4/09/2011. THIS WAS DULY SERVED ON THE ASSESSEE ON 06/09/2011. A NOTICE UNDER SECTION 143(2) AND A QUERY LETTER UNDER SECTION 142(1) DT. 04/04/2012 WERE ISSUED ON THE ASSESSEE REQUIRING DETAIL / INFORMATION AS PER THE ACT. THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND STATUTORY AUDIT REPORT DT. 20/09/2010 AND TAX AUDIT REPORT DT. 21/09/2010 IN FORM NO. 3CA AND 3CD AND REPORTS OF THE BRANCHES OF THE BANK AS REQUIRED UNDER SECTION 44AB OF THE ACT IN FORM NO. 3CB AND 3CD, WAS FILED ALONGWITH THE RETURN OF INCO ME. THE ASSESSMENT COMPLETED UNDER SECTION 143(3)OF THE ACT AND THE RETURNED INCOME DECLARED BY THE ASSESSEE WAS ACCEPTED. THAT THEREAFTER THE LD. CIT IN HIS ORDER UNDER SECTION 263 OF THE ACT HELD THAT THE CLAIM OF THE ASSESSEE OF RS. 7,67,273/ - IS NOT A LLOWABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 36(1)(VIIA)OR 36(1)(VII) OF THE INCOME TAX ACT. 3. WE HAVE PERUSED THE CASE RECORDS AND WE OBSERVE THAT ALL THE RELIEF CLAIMED IN THE GROUNDS OF APPEAL IN THIS CASE SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF HONBLE ITAT, JODHPUR IN CASE OF NAGAUR URBAN CO - OPERATIVE BANK LTD. VS. ACIT IN ITA NO. 240/JODH/2013 WHERE RELIEF WAS GRANTED TO THE ASSESSEE BY FOLLOWING THE DECISION OF HONBLE ITAT MADRAS BENCH IN THE 3 CASE OF VELLORE DISTRICT C ENTRAL COOPERATIVE BANK LTD. VS. CIT IN ITA NO. 914/MDS/ 2013 DT. 17/07/2013 , THE RELEVANT PORTION OF THE ORDER IS AS FOLLOWS: 10. AFTER CIRCUMSPECTING THE ENTIRE RECORDS VIS - - VIS THE ORAL SUBMISSIONS, WERE ARE OF THE CONSIDERED OPINION THAT GROUND NO.2 STANDS COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDER OF ITAT, CHENNAI BENCH AS DISCUSSED IN THE ABOVE EXCERPT. WE HAVE GONE THROUGH THE COPY OF THE TRIBUNAL ORDER REFERRED ABOVE AND ARE CONVINCED THAT THIS GROUND STANDS COVERED IN FAVOUR OF THE ASSESSE E. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL (SUPRA) IS REPRODUCED AS UNDER: 8. NOW THE SECOND QUESTION WHICH ARISES FOR DETERMINATION BEFORE US IS WHETHER THE ASSESSEE HAS CREATED ANY RESERVE/PROVISION FOR BAD AND DOUBTFUL DEBTS? THE AR HAS CONT ENDED THAT THE ASSESSEE HAS CREATED PROVISIONS FOR BAD AND DOUBTFUL DEBTS UNDER THE NOMENCLATURE RESERVE FOR NPA. THE TERMINOLOGY RESERVE FOR NPA HAS BEEN USED BY THE ASSESSEE IN ACCORDANCE WITH THE RBI DIRECTIONS. AS IS EVIDENT FROM THE ASSESSMENT ORD ER, THE ASSESSEE HAS INDEED CREATED RESERVE FOR NPA. FOR CLAIMING BENEFIT UNDER THE PROVISIONS OF SECTION 36(1)(VIIA)(A) THE CONDITIONS TO BE SATISFIED IS; THAT PROVISION FOR BAD AND DOUBTFUL DEBTS SHOULD HAVE BEEN MADE BY THE BANK ELIGIBLE TO CLAIM SUCH DEDUCTION. CO - OPERATIVE BANKS DO NOT STRICTLY FOLLOW THE PROVISIONS OF BANKING REGULATION ACT FOR THE PURPOSE OF MAINTAINING THEIR BOOKS OF ACCOUNTS. IN OUR CONSIDERED OPINION, THE ASSESSEE HAS CREATED PROVISIONS FOR BAD AND DOUBTFUL DEBTS MAY BE UNDER DI FFERENT NOMENCLATURE. THIS WILL NOT DIS - ENTITLE THE ASSESSEE FOR CLAIMING DEDUCTION UNDER THE PROVISIONS OF SECTION 36(1)(VIIA)(A). THE PURPOSE OF CREATION OF RESERVE FOR NPA IS SAME I.E., CREATING PROVISION TOWARDS BAD AND DOUBTFUL DEBTS. IN VIEW OF THE A BOVE, WE FIND THAT THE ASSESSMENT ORDER DATED 09/09/2010 IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE IMPUGNED ORDER OF CIT PASSED U/S. 263 IS SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. THEREFORE, BY RESPECTFULLY FOLLOWING THE RATIO DECIDENDI OF THE ABOVE TRIBUNAL ORDER WE ALLOW GROUND NO.(2) OF THIS APPEAL IN FAVOUR OF THE ASSESSEE. THESE PROVISIONS WHICH ARE IN LINE WITH THE RBI GUIDELINES BECOME ALLOWABLE. THAT ON SIMILAR ISSUE FOLLOWING THE AFORESAID DECISION OF THE COORDINATE BENCH OF ITAT, JODHPUR, REMEDY HAS BEEN GRANTED TO THE ASSESSEE IN THE CASE OF PALI CENTRAL CO OPERATIVE BANK LTD.VS.THE CIT - 1 IN ITA NO. 1 56/JODH/ 2015 DT. 20/12/2016. 4. THAT REGARDI NG THE CLAIM OF PROVISION OF NON PERFORMING ASSETS ( NPA ) THE SAME HAS BEEN DONE AS PER THE DIRECTION AND GUIDANCE OF THE RBI. THAT IT WAS BASED ON RBI CIRCULAR ON INCOME RECOGNITION, ASSETS CLASSIFICATION AND PROVISIONING PERTAINING TO ADVANCES. THAT ON T HESE DISCUSSIONS IN THIS CASE ALSO 4 WE FOLLOW THE DECISION OF COORDINATE BENCH OF ITAT, JODHPUR IN ITA NO. 240/JODH/2013. 5. WE QUASH THE ORDER OF THE LD. CIT UNDER SECTION 263 AND THE ASSESSEE GETS RELIEF IN ALL THE GROUNDS OF APPEAL. 6. BY FOLLOWING OUR E ARLIER DECISION GIVEN IN ITA NO. 1 56 /JODHPUR/2015, WE DECIDE THIS APPEAL IN FAVOUR OF THE ASSESSEE . 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/ - SD/ - (B.P. JAIN) ( PARTHA SARATHI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22/12/2016 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR