The DCIT, Anand Circle, Anand V. M/s. Anand Urban Co.-Operative Bank Ltd., Anand

ITA 1279/AHD/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2734 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 17-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L. P. JAIN
• Keywords: Notional interest; Liquidation; Bogus
• Section: 143(3)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 1279/AHD/2018 ( ASSESSMENT YEAR : 2015-16) THE DEPUTY COMMISSIONER OF INCOME-TAX ANAND CIRCLE, 204, 3 RD FLOOR, S. P. PATEL COMPLEX, NEAR OLD C. K. HALL, MAYFAIR RAOD, ANAND - 388001 / VS. M/S. ANAND URBAN CO- OPERATIVE BANK LIMITED ANAND URBAN CHAMBER, URBAN BANK ROAD, ANAND - 388001 ./ ./ PAN/GIR NO. : AADFA3041J ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI L. P. JAIN, SR.D.R. / RESPONDENT BY : SMT. ARTI N. SHAH, A.R. DATE OF HEARING 13/05/2021 !'# / DATE OF PRONOUNCEMENT 22/06/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-4, VADODARA (CIT(A) IN SHORT), DATED 27 .02.2018 ARISING ITA NO. 1279/AHD/18 [DCIT VS. M/S. ANAND URBAN CO-OPERATIVE BANK LTD.] A.Y. 2015-16 - 2 - IN THE ASSESSMENT ORDER DATED 28.12.2017 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2015-16. 2. THE GROUNDS OF APPEAL RAISED BY REVENUE READ AS UNDER: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER IN A SUPERFICIAL MANNER, WITHOUT CONDUCTING NECESSARY INQUIRIES AND EXAMINATION OF FACTS, AS EXPLAINED BY THE HON'B LE HIGH COURT IN JANSAMPARK ADVERTISING & MARKETING (P) LTD. 375 ITR 373 (DELHI), REGARDING THE OBLIGATION OF THE CIT(A) TO CONDUCT P ROPER INQUIRY. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS MADE TOW ARDS EXPENSES, WITHOUT EXAMINING THE EXPENSES CLAIMED, AND WITHOUT CONSIDERING THE REASONS GIVEN BY THE AO FOR MAKING THE DISALLOWANCE . 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS TOWARDS SUNDRY CREDITORS WITHOUT EXAMINING THE FACTS AND WITHOUT CONSIDERING THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS AND THE CREDITW ORTHINESS OF THE SUNDRY CREDITORS AND HAD ALSO FAILED TO RECONCILE T HE AMOUNTS. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD, CIT (A) ERRED IN DELETING THE ADDITIONS TOWARDS INTEREST WITHOUT EXAMINING THE FACTS AND WITHOUT CONSIDERING THE REA SONS GIVEN BY THE AO FOR MAKING THE ADDITION. 3. BRIEFLY STATED, THE ASSESSEE IS A CO-OPERATIVE B ANK WHICH WAS ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS CONST ITUENT MEMBERS. THE ASSESSEE FILED RETURN OF INCOME FOR AY 2015-16 IN QUESTION DECLARING TOTAL INCOME AT RS. NIL. THE ASSESSMENT ORDER WAS FRAMED UNDER S.143(3) OF THE ACT DETERMINING THE TOTAL INC OME AT RS.1,34,96,600/-. THE AO INTER ALIA DISALLOWED THE CLAIM OF EXPENSES AMOUNTING TO RS.13,80,827/-. THE AO FURTH ER MADE AN ADDITION OF RS.2,96,37,269/- ON ACCOUNT OF SUNDRY C REDITORS AND RS.76,44,274/- TOWARDS NOTIONAL INTEREST @12% ON LO ANS AND ADVANCES AS INTEREST INCOME. ITA NO. 1279/AHD/18 [DCIT VS. M/S. ANAND URBAN CO-OPERATIVE BANK LTD.] A.Y. 2015-16 - 3 - 3. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) TOOK NOTE OF THE DECISION TAKEN BY THE A O AND THE REPLY OF THE ASSESSEE THEREON AND CONSEQUENTLY REVERSED V ARIOUS DISALLOWANCES AND ADDITIONS MADE BY THE AO. THE RE LEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) IS EXTRAC TED HEREIN FOR READY REFERENCE: 4.3. I HAVE CONSIDERED THE SUBMISSION OF THE LD. A UTHORIZED REPRESENTATIVE AND ORDER OF THE ASSESSING OFFICER, FROM THE RECORD IT IS SEEN THAT IN A.Y.2012-13 AND 2014-15 ALSO SIMILAR E XPENSES WERE CLAIMED BY THE APPELLANT, HOWEVER, NO ADDITIONS WER E MADE BY THE ASSESSING OFFICER. I HAVE DISPOSED THESE APPEALS ON 23.09.2016 AND 25.05.2017 AND THESE FACTS ARE VERIFIABLE FROM THES E APPEAL FOLDERS. THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AUDITED AND THERE IS NO WHISPER IN THE ORDER OF THE ASSESSING OFFICER THAT THE EXPE NSES ARE BOGUS OR UNREASONABLE. SINCE, THERE IS NO SPECIFIC DEFECT PO INTED OUT BY THE A.O. IN THE BOOKS OF ACCOUNTS AND CONSIDERING PAST HISTO RY OF THE ASSESSEE AS WELL AS NATURE OF BUSINESS, THE AD-HOC ADDITION MAD E BY THE ASSESSING OFFICER IS DELETED. THIS GROUND OF APPEAL IS ALLOWE D. 5.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. AUT HORIZED REPRESENTATIVE AND ORDER OF THE ASSESSING OFFICER. THE A.R. OF THE APPELLANT HAS JUSTIFIED THAT THERE IS NO MISMATCH O R NON TALLYING WITH FIGURE OF SUNDRY CREDITORS OF RS.29,63,72,698/- AS STATED BY THE A.O IN HIS ORDER, HOWEVER, THE A.O HAS NOT VERIFY THE SAME FROM THE RETURN OF INCOME. FROM THE COPY OF THE P & L A/C AND B/S , TH E NET FIGURE SHOWN AT RS.29,63,72,698/- UNDER THE HEAD CURRENT LIABILI TIES AND PROVISIONS IN PARA (D)(I) OF THE RETURN. THE A.O FAILED TO VER IFY THE RETURN OF INCOME WHEN THE APPELLANT HAS CLEARLY MENTIONED THE SAID FIGURE OF SUNDRY CREDITORS. THERE IS FORCE IN THE ARGUMENT OF THE A.R. SINCE, THERE IS NO SPECIFIC DEFECT POINTED OUT BY THE A.O. IN TH E BOOKS OF ACCOUNTS AND CONSIDERING PAST HISTORY OF THE ASSESSEE AS WEL L AS NATURE OF BUSINESS, THE AD-HOC ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 6.3. I HAVE CONSIDERED THE SUBMISSION OF THE LD. AU THORIZED REPRESENTATIVE AND ORDER OF THE ASSESSING OFFICER. THE A.O. HAS SOME REASON FOR SELECTION OF ASSESSEE'S CASE FOR SCRUTIN Y AS LOW INCOME IN COMPARISON TO HIGH LOANS/ADVANCES/INVESTMENTS APPEA RING IN BALANCE SHEET. THE ASSESSEE HAS NOT EXPLAINED ANYTHING AND ACCORDINGLY INTEREST OF 12% ON THE ADVANCES/LOANS WAS CALCULATED. THE A. R. OF THE APPELLANT HAS VEHEMENTLY ARGUED THAT INCOME AND ADVANCES IS R ECORDED IN BOOKS AS AND WHEN PARTY APPROACHES THE BANK FOR SETTLEMEN T, SINCE THE BANK IS LIQUIDATED SINCE 2003-04, THE SYSTEM OF ACCOUNTING IS REGULARLY APPLIED AND FOLLOWED. FURTHER, PLEADED THAT THE INVESTMENT OF RS.1,94,50,000/- IS TOTALLY BAD AND NON RECOVERABLE, ENTIRE ASSET IS LOSS ASSET. RELIANCE IS PLACED IN THE CASE OF DHANKESHWARI COTTON MILLS LTD. VS CIT SUPREME COURT VIDE ORDER DATED 29.10.1954, THE HON' BLE SUPREME COURT HELD THAT 'IN MAKING AN ASSESSMENT U/S.23(3) OF THE INDIAN INCOME TAX ITA NO. 1279/AHD/18 [DCIT VS. M/S. ANAND URBAN CO-OPERATIVE BANK LTD.] A.Y. 2015-16 - 4 - ACT, THE INCOME TAX OFFICER IS NOT FETTERED BY TECH NICAL RULES OF EVIDENCES AND PLEADINGS AND HE IS ENTITLED ACT ON M ATERIAL WHICH MAY NOT BE ACCEPTED AS EVIDENCES IN A COURT OF LAW BUT THE INCOME TAX OFFICER IS NOT ENTITLED TO MAKE A PURE GUESS AND MA KE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL A T ALL. THERE MUST BE SOMETHING MORE THAN BARE SUSPICION TO SUPPORT THE A SSESSMENT U/S.23(3)'. THE A.O. HAS NOT MADE ANY ATTEMPT TO FIND OUT ANY D EFECT IN THE BOOKS OR DETAILS SUBMITTED BEFORE HIM, SIMPLY ARBIT RARILY APPLIED AN ESTIMATION FORMULA AND MADE ADDITION. SINCE, THIS I SSUE IS SQUARELY COVERED WITH THE ABOVE JUDGMENT, I AM OF THE CONSID ERED VIEW THAT THE ADDITION MADE ON AN ESTIMATION BASIS WILL NOT SURVI VE WHEN THE APPELLANT HAS DEMONSTRATED WITH FACTS AND FIGURES. THE A.O IS DIRECTED TO DELETE THE ADDITION MADE ON THIS COUNT. 4. AGGRIEVED BY THE REVERSAL ACTION OF THE CIT(A), THE REVENUE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED DR FOR THE REVENUE RELIED UPON THE O RDER OF THE AO AND CLAIMED THAT THE CIT(A) HAS DEALT WITH THE I SSUE IN A SUPERFICIAL MANNER WITHOUT CONDUCTING NECESSARY ENQ UIRY AND EXAMINATION OF FACTS AND HE OUGHT TO HAVE CARRIED O UT. IT WAS POINTED THAT THE DISALLOWANCES AND ADDITIONS WERE R IGHTLY CARRIED OUT HAVING REGARD TO LOW INCOME AND OTHER PECULIAR FACT S OF THE CASE. 6. THE LEARNED AR FOR THE ASSESSEE, ON THE OTHER HA ND BROADLY REITERATED THE FACTS SUBMITTED BEFORE THE LOWER AUT HORITIES AND JUSTIFIED THE CONCLUSION DRAWN BY THE CIT(A) IN FAV OUR OF THE ASSESSEE. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF LOWER AUTHORITIES. AS STATED , THE ASSESSEE, A CO-OPERATIVE BANK, IS IN THE PROCESS OF LIQUIDATION AND GOVERNMENT APPOINTED A LIQUIDATOR TO CONDUCT ITS DAY-TO-DAY AF FAIRS. AS FURTHER STATED, NO BANKING ACTIVITIES HAVE BEEN CARRIED OUT BY THE BANK SINCE INITIATION OF LIQUIDATION PROCEEDINGS. A REFERENCE HAS BEEN MADE TO ITA NO. 1279/AHD/18 [DCIT VS. M/S. ANAND URBAN CO-OPERATIVE BANK LTD.] A.Y. 2015-16 - 5 - THE COMMUNICATION DATED 22.03.2007 ISSUED BY THE RE SERVE BANK OF INDIA WHEREBY THE LICENSE TO CARRYING ON BANKING BU SINESS IN INDIA UNDER THE BANKING REGULATION ACT, 1949 WAS CANCELLE D AND THE ASSESSEE WAS DEBARRED FROM CARRYING ON BANKING BUSI NESS FORTHWITH. THE ACTIVITY OF BANKING THEREAFTER, AS STATED, IS T HUS RESTRICTED TO COLLECT ADVANCES OUTSTANDING AS ON DATE AND IT ALSO PASSIVELY EARNS INTEREST INCOME FROM DEPOSITS LYING WITH BANKS. 7.1 IN THIS BACKDROP, WE NOTICE FROM PARA 2 OF THE ASSESSMENT ORDER THAT THE AO HIMSELF ADMITTED THAT ASSESSEE HA S ATTENDED FROM TIME-TO-TIME AND DULY FURNISHED DETAILS/DOCUMENTS C ALLED FOR. IT WAS FURTHER ASSERTED BY THE AO THAT SUCH DETAILS/DO CUMENTS WERE VERIFIED, DISCUSSED AND PLACED ON RECORD. THE BOOK S OF ACCOUNTS, BILLS & VOUCHERS WERE ALSO STATED TO BE VERIFIED BY AO ON RANDOM TEST CHECK BASIS FOR LIMITED PURPOSES IN THE ONGOIN G LIMITED SCRUTINY THROUGH CASS. SUCH AVERMENTS RECORDED BY THE AO SU GGESTS THAT A REASONABLE DUE DILIGENCE WAS CARRIED OUT AND THE BL AME LABELED AGAINST THE CIT(A) FOR LACK OF ENQUIRY AND PASSING THE ORDER IN A SUPERFICIAL MANNER THUS, DOES NOT CARRY WEIGHT AND IS WITHOUT COGENT FOUNDATION. 7.2 THE CIT(A) RIGHTLY TOOK NOTE OF THE COMPARATIVE ANALYSIS OF LOANS AND ADVANCES ETC. QUA THE PRECEDING AY 2014-15 AS NOTED IN PARA 4 OF ITS ORDER AND HAVING REGARD TO THE SUBMIS SIONS MADE IN THIS REGARD, THE AD HOC DISALLOWANCE OF 10% AMOUNTING TO RS.13,80,827/- OUT OF TOTAL EXPENSES INCURRED AMOUNTING TO RS.1,38 ,08,279/- WAS RIGHTLY REVERSED. WE SEE NO REASON TO DISCREDIT TH E FINDINGS GIVEN BY THE CIT(A) AND RESTORE THE ACTION OF THE AO AS D EMANDED BY REVENUE. THE REASONS GIVEN BY THE CIT(A) ARE THAT THE EXPENSES INCURRED ARE COMPARABLE AND THERE IS NO ALLEGATION THAT EXPENSES ARE BOGUS FROM THE AO. HAVING REGARD TO PAST HISTORY AND IN THE ITA NO. 1279/AHD/18 [DCIT VS. M/S. ANAND URBAN CO-OPERATIVE BANK LTD.] A.Y. 2015-16 - 6 - ABSENCE OF ANY SPECIFIC DEFECT, THE CIT(A) RIGHTLY CONCLUDED THAT THE ACTION OF THE AO IS UNSUSTAINABLE ON FACTS. ME RELY BECAUSE THE EXPENSES INCURRED APPEARS EXCESSIVE QUA THE CORRESPONDING BUSINESS ACTIVITIES, IT CANNOT BE A GROUND FOR ADHOC DISALLOWANCE AS LONG AS THE EXPENSES INCURRED ARE COMMERCIALLY EXPEDIENT. WE THUS SEE NOT MERIT IN THE GRIEVANCE OF THE REVENUE IN THIS REGAR D. 7.3 AS REGARD THE ADDITION OF RS.2,96,37,269/- BEIN G 10% OUT OF SUNDRY CREDITS OF RS.29,63,72,698/-. THE CIT(A) FO UND FORCE IN THE CLAIM OF ASSESSEE FOR REVERSAL OF ADDITIONS ON THE GROUND THAT THERE IS NO MISMATCH OR NON-TALLYING WITH FIGURES OF SUND RY CREDITORS. THE REVENUE COULD NOT POINT OUT ANY SPECIFIC DEFECT IN THE ORDER OF THE CIT(A) IN ITS REBUTTAL BEFORE US. WE TOTALLY F AIL TO UNDERSTAND THE RATIONALE FOR DISALLOWANCE OF AD-HOC SUM OUT OF EXISTING SUNDRY CREDITORS IN THIS MANNER. HENCE, WE DECLINE TO INT ERFERE. 7.4 AS REGARDS ESTIMATION OF INTEREST INCOME OF RS. 76,44,724/- TOWARDS NOTIONAL INTEREST @12% ON LOANS AND ADVANCE S, WE NOTICE FROM THE ORDER OF THE CIT(A) THAT THE AO HAS NOT FO UND ANY JUSTIFICATION IN LOW INCOME IN COMPARISON TO CORRES PONDING HIGH LOANS / ADVANCES/ INVESTMENT IN SHARES. THE CIT(A) REVERSED THE ACTION OF THE AO TOWARDS ADDITION OF NOTIONAL INTER EST INCOME ON THE GROUND THAT INCOME ARISING FROM ADVANCES ARE DULY R ECORDED IN THE BOOKS AND THE POSITION IS TO BE VIEWED IN THE PECUL IAR FACTS OF THE CASE I.E. THE CANCELLATION OF BANKING LICENSE OF TH E ASSESSEE AND SETTLEMENT OF THE ADVANCES IS UNDER ONE TIME SETTLE MENT SCHEME (OTS) ETC. THE AD-HOC ESTIMATION OF INCOME ON OTS O F DOUBTFUL ADVANCES, IN ANY CASE, IS AGAINST THE DOCTRINE OF R EAL INCOME AND THUS CANNOT BE COUNTENANCED. WE THUS SEE NO PERCEP TIBLE REASON TO DISLODGE THE CONCLUSION DRAWN BY THE CIT(A) IN FAVO UR OF THE ASSESSEE. ITA NO. 1279/AHD/18 [DCIT VS. M/S. ANAND URBAN CO-OPERATIVE BANK LTD.] A.Y. 2015-16 - 7 - 7.5 HENCE, FOR THE REASONS NOTED ABOVE, WE SEE NO M ERIT IN ANY OF THE GROUNDS IN THE APPEAL OF THE REVENUE. 8. IN THE RESULT, ALL GROUNDS RAISED IN THE APPEAL OF REVENUE ARE DISMISSED. SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 22/06/2021 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 ) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 / *+#4 ) THIS ORDER PRONOUNCED IN OPEN COURT ON 22/06/20 21