ACIT, Pune V. M/s. Janseva Sahakari bank Ltd., Pune

ITA 132/PUN/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72193 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 14-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C SARANGI
• Keywords: Bad and doubtful debts; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.132/PUN/2013 (ASST. YEAR: 2007-08) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 11(1), PUNE APPELLANT VS. M/S. JANSEVASAHAKARI BANK LTD., 156, GANDHI CHOWK, HADAPSAR, PUNE 411 028. PAN:AAAAJ0620Q RESPONDENT APPELLANT BY : SHRI S.C. SARANGI RESPONDENT BY : NONE DATE OF HEARING : 24-09-2013 DATE OF PRONOUNCEMENT : 30-09-2013 ORDER PER R.S. PADVEKAR, JM: IN THIS APPEAL, REVENUE HASCHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(A)-I, PUNE DATED 24-08-2012 FOR THE A.Y. 20 07-08. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS IN T HE APPEAL. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A)IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (A) GROSSLY ERRED IN NOT TAKING ANY DECISION ON THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO THE ADDITION OF RS.82,70,000/- MADE IN THE ASSESSMENT ON ACCOUNT OF RECOVERY OF BAD DEBTS. 3. THE LEARNED COMMISSIONER OF INCOME TAX(A), HAVING H ELD THAT DURING APPEAL THE APPELLANT HAS SOUGHT TO SUBMIT T HE RELEVANT DETAILS WHICH CANNOT BE ENTERTAINED STILL VIRTUALL Y SET-ASIDE THE 2 ASSESSMENT TO THE FILE OF THE ASSESSING OFFICER, WH ICH IS NOT PERMISSIBLE UNDER THE STATUTE. 4. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER IS RESTORED. 3. THE BRIEFLY STATED FACTS ARE AS UNDER. THE ASSE SSEE IS A COOPERATIVE BANK. THE ASSESSEES CASE WAS REOPENED FOR THE A.Y. 2007- 08 BY ISSUING NOTICE U/S.148 OF THE I.T. ACT AND TH E ASSESSMENT HAS BEEN COMPLETED U/S.143(3)R.W.S. 147 OF THE I.T.ACT. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS CREDITED RS.82,70,000/- FROM BDDR TO PROFIT AND LOSS ACCOUNT AND DEDUCTED FROM T HE TOTAL INCOME. 4. THE ASSESSING OFFICER HAS SOUGHT THE EXPLANATION OF THE ASSESSEE. THE ASSESSEE HAS STATED BEFORE THE ASSESSING OFFICE R THAT EVERY YEAR THE BANK HAS TO PROVIDE THE BAD AND DOUBTFUL RESERVES ( BDDR) BY DEBITING IT INTO PROFIT AND LOSS ACCOUNT. IT IS A MANDATORY PR OVISION TO BE DONE BY FOLLOWING RBIGUIDELINES. THERE ARE VARIOUS PROVISI ONS, PROVISIONING CLASSES FOR STANDARD ASSETS, SUB-STANDARD ASSETS, D OUBTFUL ASSETS AND LOSS ASSETS. THESE PROVISIONS ARE MADE ON THE BASI S OF BUSINESS DONE FOR THE YEAR. IT WAS EXPLAINED THAT THE TOTAL PROV ISIONS IN THE BALANCE SHEET ARE VALUED ON TOTAL LOAN PORTFOLIO OF THE BAN K. IF THE TOTALPROVISIONS APPEARING IN BALANCE SHEET ARE IN E XCESS OF REQUIREMENT, ASSESSEE BANK HAS OPTIONED IN CREDITING EXCESS OF A MOUNT TO PROFIT AND LOSS ACCOUNT. 5. IT WAS FURTHER EXPLAINED THAT WITH BDDRDEBITED B Y THE ASSESSEE BANK TO PROFIT AND LOSS ACCOUNT IS ADDED BACK TO IN COME AND DEDUCTION ON THIS GROUND IS GOVERNED BY SEC.36(1)(VIIA) OF TH E ACT. THE ASSESSEE ALSO QUOTED RULE 6ABAAND STATED THAT AVERAGE ADVANC ES ARE TO BE CALCULATED CONSIDERING THE AMOUNT OF ADVANCES OUTST ANDING AT THE END OF EACH MONTH. THE ASSESSEE ALSO STATED THAT IN THE A .Y. 2007-08, THE ASSESSEE BANK HAS CREDITED RS.82,70,000/- TO PROFIT AND LOSS ACCOUNT FROM BDDR AND THE SAID AMOUNT IS NOT CONSIDERED FOR CALCULATING THE TAXABLE INCOME AS THE AMOUNT DEBITED TO PROFIT AND LOSS ACCOUNT FROM BDDR IS NOT ALLOWABLE DEDUCTION AND HAS TO BE ADDED BACK TO THE 3 INCOME FOR CALCULATING TAXABLE INCOME. ON SAME LIN E AMOUNT CREDITED TO PROFIT AND LOSS ACCOUNT IS DEDUCTED FROM NET PROFIT FOR DETERMINING THE TAXABLE INCOME. THE ASSESSING OFFICER WAS NOT CONV INCED WITH THE EXPLANATION OF THE ASSESSEE. THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS FAILED TO EXPLAIN AND PRODUCE DOCUMENT S FOR THE AMOUNT CREDITED RS.82,70,000/- TO PROFIT AND LOSS ACCOUNT WHICH IS AGAIN DEDUCTED FROM THE TOTAL INCOME. THE ASSESSING OFFI CER HAS THEREFORE ADDED BACK RS.82,70,000/- BY NOTING THAT THE SAME A DDITION IS MADE ON THE BASIS OF RECOVERY OUT OF ALL DEBTS IS ADDED BAC K TO THE TOTAL INCOME DECLARED BY THE ASSESSEE. 6. THE ASSESSEE HAS CHALLENGED THE ASSESSING ORDER BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER CONSIDERING THE EXPLA NATION BY THE ASSESSEE, DIRECTED THE ASSESSING OFFICER TO VERIFY FROM THE ASSESSMENT ORDERS AS WELL AS ASSESSMENT RECORD OF THE ASSESSEE WHETHER THE AMOUNTS WRITTEN BACK IN THE PROFIT AND LOSS ACCOUNT REPRESENT REVERSAL OF PROVISION EARLIER CREDITED WHICH WERE NEVER CLAI MED IN THE PROFIT AND LOSS ACCOUNT, THEN NO ADDITION CAN BE MADE. THE OP ERATIVE PART OF THE FINDINGS OF THE LD. CIT(A) IS AS UNDER: 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE LAW AS ARE APPARENT FROM THE RECORD. THE APPELLANT HAS CLAIMED THROUGH GROUND NO.2 THAT THE AMOUNT DEBITED IN THE PROFIT & LOSS ACCOUNT (BDDR (BAD & DOUBTFUL DEBTS) RESULTING INTO A PROVISION F OR BDDR, HAS ALWAYS BEEN ADDED BACK IN THE COMPUTATION, THEREFORE THE A MOUNT WRITTEN BACK FROM THIS PROVISION ON BEING HELD EXCESSIVE, TO THE P & L A/C.,ALSO CANNOT BE TREATED AS INCOME. IT IS NOTED THAT THE ASSESSING OFFICER HAS CALLED FOR THE RELEVANT INFORMATION FOR ARRIVING AT THE SATISFACTION ABOUT THE CORRECTNESS OF THIS CLAIM MADE BEFORE HIM, WHIC H WERE NOT SUPPLIED AND THEREFORE THE ASSESSING OFFICER ADVERSELY INFER RED THAT THE AMOUNT REPRESENTS RECOVERY FROM ACTUALLY WRITTEN OFF BAD A ND DOUBTFUL DEBTS. DURING APPEAL THE APPELLANT HAS SOUGHT TO SUBMIT TH E RELEVANT DETAILS WHICH CANNOT BE ENTERTAINED. HOWEVER CONSIDERING T HE CLAIM MADE THAT ADEQUATE OPPORTUNITY WAS NOT GRANTED, THE APPELLANT IS DIRECTED TO SUBMIT THE RELEVANT DETAILS BEFORE THE ASSESSING OF FICER AND THE ASSESSING OFFICER IS DIRECTED TO VERIFY IT FROM THE ASSESSMENT RECORDS AS WELL AS THE RECORDS OF THE APPELLANT AND IF IT IS F OUND THAT THE AMOUNTS WRITTEN BACK IN THE P & L A/C. REPRESENTS REVERSAL OF PROVISION EARLIER CREATED WHICH WERE NEVER CLAIMED IN THE P&L A/C. AS EXPENSE, THEN THE ADDITION CANNOT BE MADE. FOR STATISTICAL PURPOSES GROUND NO.2 CAN BE TREATED AS PARTLY ALLOWED SUBJECT TO THE ABOVE REMA RKS. 4 7. NOW, THE REVENUE IS IN APPEAL. WE HAVE HEARD TH E LD. DR. IN THIS CASE, THE LD.CIT(A)HAS GIVEN THE DIRECTION TO THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE WHETHER IN THE PRECEDING YEARS ALSO THE ASSESSEE WAS FOLLOWING THE SAME PRACTICE BY NOT CLAIMING THE DEDUCTION IN RESPECT OF BDDR. WE FAIL TO UNDERSTAN D HOW THERE IS A PREJUDICE TO THE REVENUE WHICH THE A.O. DIRECTED TO VERIFY CLAIM OF THE ASSESSEE. WE FIND NO MERIT IN THE APPEAL FILED BY THE REVENUE, ACCORDINGLY, ALL THE GROUNDS ARE DISMISSED. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED 30 TH SEPTEMBER, 2013 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A) I, PUNE 4) THE CIT-I, PUNE 5) THE DR, B BENCH, I.T.A.T., PUNE 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY ITAT PUNE BENCHES, PUNE