M/S BARODA RAJASTHAN KSHETRIYA GRAMIN BANK , AJMER V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, AJMER

ITA 1332/JPR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0735 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 28-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KARANI DAN
• Assessee Lawyers: AJAY SOMANI
• Keywords: Business income; Bad and doubtful debts; Set aside
• Section: 271(1)(c); 263

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1332/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 THE ACIT, CIRCLE-1, AJMER. CUKE VS. M/S BARODA RAJASTHAN KSHETRIYA GRAMIN BANK (ERSTWHILE RAJASTHAN GRAMIN BANK), 2343, PLOT NO., 2 ND FLOOR, VAISHALI NAGAR, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAAR 4349 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI KARANI DAN (JCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI AJAY SOMANI (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 06/08/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 07/08/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF DATED 07.09.2018 OF THE LD. CIT(A), AJMER ARISING FROM TH E PENALTY ORDER PASSED U/S 271(1)(C) OF THE I.T. ACT FOR THE ASSES SMENT YEAR 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- CANCELLING THE PENALTY LEVIED FOR DISALLOWANCE OF PROVISION FOR STANDARD ASSETS OF RS. 1,93,30,000/- WITHOUT GOING INTO MERITS OF THE CASE AND ONLY CONSIDERING THAT THE DISALLOWANCE HAS BEEN DELETED BY THE ITAT, JAIPUR. ITA NO. 1332/JP/2018 ACIT VS M/S BARODA RAJASTHAN KSHETRIYA GRAMIN BANK 2 2. CANCELLING THE PENALTY LEVIED FOR DISALLOWANCE P ROVISION FOR STANDARD ASSETS OF RS. 1,93,30,000 WITHOUT APPRECIA TING THE FACT THAT THE MISC. APPLICATION HAS BEEN FILED BY THE DE PARTMENT BEFORE THE HONBLE HIGH COURT, JAIPUR TO RECALL/REV IEW ITS ORDER DATED 24.04.2018 DISPOSING OFF THE APPEAL OF THE RE VENUE WITHOUT GOING INTO THE MERITS. 2. WE HAVE HEARD THE LD. DR AS WELL AS THE LD. AR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF RS. 1,93,30,000/- TOWARDS THE PROVI SION FOR STANDARD ASSETS AS WELL AS IN RESPECT OF DISALLOWANCE OF CAP ITAL LOSS OF RS. 7,000/. THE SAID ORDER OF PENALTY LEVIED U/S 271(1)(C) OF T HE ACT WAS CHALLENGED BEFORE THE LD. CIT(A) AND THE LD. CIT(A) DELETED TH E PENALTY LEVIED IN RESPECT OF DISALLOWANCE OF PROVISIONS FOR STANDARD ASSETS ON THE GROUND THAT IN THE QUANTUM APPEAL THE SAID ADDITION ITSELF WAS DELETED BY THE TRIBUNAL. AS REGARDS THE PENALTY AGAINST THE DISALL OWANCE OF CAPITAL LOSS THE SAME WAS CONFIRMED BY THE LD. CIT(A). AT THE OU TSET, WE NOTE THAT THE LD. CIT(A) HAS CONSIDERED THIS ISSUE IN PARA 4. 3 OF THE IMPUGNED ORDER IS AS UNDER:- 4.3 I HAVE GONE THROUGH THE PENALTY ORDER, STATEME NT OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAREFULLY. IT IS SEEN THAT PENALTY OF RS. 59,75,150/-WAS LEVIED BY THE AO IN RESPECT OF ITA NO. 1332/JP/2018 ACIT VS M/S BARODA RAJASTHAN KSHETRIYA GRAMIN BANK 3 FOLLOWING TWO ADDITIONS/ DISALLOWANCES MADE BY THE AO WHILE COMPLETING THE ASSESSMENT: (I) DISALLOWANCE ON ACCOUNT OF 'PROVISION FOR STANDARD- ASSETS RS. 1,93,30,000/- (II) DISALLOWANCE OF 'CAPITAL LOSS' RS. 7,000/- (I) AS FAR AS THE DISALLOWANCE OF 'PROVISION FOR ST ANDARD ASSETS' OF RS. 1,93,30,000/- IS CONCERNED, THE APPELLANT HA S CONTENDED THAT THE ITAT JAIPUR VIDE ITS ORDER DATED 04.09.201 7 (ITA NO. 982/JP/2015, A.Y. 2012-13) HAS DELETED THE DISALLOW ANCE MADE BY THE AO. I HAVE GONE THROUGH THE COPY OF THE ITAT 'S ORDER FILED BY THE APPELLANT. THE ITAT HAS DELETED THE DISALLOW ANCE OF RS. 1,93,30,000/- OBSERVING AT PARA 3.5 AS UNDER: '3.5 THE FACTS ARE IDENTICAL; THERE IS NO CHANGE IN TO FACTS AND CIRCUMSTANCES. IT IS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT THIS IS A SCHEDULED BANK THIS FACT IS NOT REBU TTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. THEREFO RE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH, WE HEREBY DIRECT THE AO TO DELETE THE DISALLOWANCE. THUS, THIS GROUND OF THE ASSESSEE'S APPEAL IS ALLOWED.' AS THE DISALLOWANCE OF RS. 1,93,30,000/- MADE BY TH E AO HAS BEEN DELETED BY THE ITAT, THEREFORE, THERE REMAINS NO JU STIFICATION FOR SUSTAINING THE PENALTY LEVIED BY THE AO U/S 271(1)( C) IN RESPECT OF SUCH DISALLOWANCE. ACCORDINGLY, THE PENALTY LEVIED BY THE AO IN RESPECT OF THE DISALLOWANCE OF PROVISION FOR STANDA RD ASSETS' OF RS. 1,93,30,000/- IS HEREBY CANCELLED. WITH REGARDS TO THE DISALLOWANCE OF CAPITAL LOSS OF RS. 7,000/- IS CONCERNED THE AO HAD MADE THE DISALLOWANCE OBSERVIN G AS UNDER: (II) CAPITAL LOSS OF PROFIT AND LOSS ACCOUNT IT IS SEEN THAT RS. 7000/- ON ACCOUNT OF LOSS ON SALE OF SFF I.E. SAFE FURNITURE AND FIXTURE ASSETS WAS ITA NO. 1332/JP/2018 ACIT VS M/S BARODA RAJASTHAN KSHETRIYA GRAMIN BANK 4 CLAIMED. THEREFORE VIDE LETTER DATED 20.02.2015 IT WAS SHOW CAUSED AS TO WHY RS. 7,000/- INCURRED ON SALE OF SFF ASSETS B E NOT DISALLOWED AND ADDED BACK TO TOTAL INCOME OF THE ASSESSEE BANK. IN COMPLIANCE VIDE SUBMISSION DATED 27.02.2015, THE ASSESSEE STATED TH AT LOSS ON SALE OF SFF OF RS. 7,000/- HAS INADVERTENTLY NOT BEEN ADDED BACK TO THE TOTAL INCOME. WE REGRET THE INADVERTENT LAPSE. THE ASSESSES'S SUBMISSION IS PERUSED AND DULY CONSI DERED AND ASSESSEE ITSELF HAS AGREED TO DISALLOW THE LOSS OF RS. 7,000 /- ON SALE OF SFF ASSETS. THE LOSS ON SALE OF ASSETS WOULD HAVE BEEN ADDED BA CK WHILE COMPUTING TOTAL INCOME IN THE COMPUTATION BUT THE SAME HAS NO T BEEN DONE. THEREFORE, LOSS OF RS. 7,000/- IS DISALLOWED AND AD DED TO THE TOTAL INCOME. PENALTY PROCEEDINGS 271(1)(C) ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME.' THE APPELLANT ITSELF HAS ADMITTED THAT IT HAD FILED INACCURATE PARTICULARS WITH RESPECT TO THE CAPITAL LOSS OF RS. 7,000/- BY CLAIMING THE SAME AS DEDUCTIBLE EXPENDITURE FOR THE PURPOSE OF COMPUTING BUSINESS INCOME AND THE APPELLANT HAS NOT FURNISHED ANY SUBMISSION ON THIS ISSUE. THEREFORE, I AM OF TH E CONSIDERED VIEW THAT THE APPELLANT HAD FILED INACCURATE PARTIC ULARS OF INCOME OF RS. 7,000/- BY CLAIMING THE CAPITAL LOSS AS DEDUCTI BLE EXPENDITURE WHILE COMPUTING THE BUSINESS INCOME. THEREFORE, THE PENALTY LEVIED BY THE AO U/S 271(1)(C) WITH RESPECT TO THE DISALLO WANCE OF CAPITAL LOSS OF RS. 7,000/- IS HEREBY CONFIRMED. THUS, IT IS CLEAR THAT THE PENALTY LEVIED BY THE A O IN RESPECT OF PROVISION FOR STANDARD ASSET HAS BEEN DELETED BY TH E CIT(A) BECAUSE THE ADDITION ITSELF WAS DELETED BY THIS TRIBUNAL IN THE QUANTUM APPEAL. THE LD. AR HAS FILED A COPY OF THE ORDER OF THIS TR IBUNAL DATED 04.07.2017 IN THE QUANTUM APPEAL IN ITA NO. 982/JP/ 2015 WHEREIN THE ITA NO. 1332/JP/2018 ACIT VS M/S BARODA RAJASTHAN KSHETRIYA GRAMIN BANK 5 TRIBUNAL HAS DELETED THE ADDITION MADE BY THE AO. T HE RELEVANT FINDING OF THE TRIBUNAL IN PARA 3.3 TO 3.5 ARE AS UNDER:- 3.3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT(A) DECIDED THIS IS SUE IN PARA 4.3 BY OBSERVING AS UNDER :- 4.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER, ST ATEMENT OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAR EFULLY. IT IS SEEN THAT THE PROVISIONS OF SEC. 36(1)(VII) ARE VER Y CLEAR AND UNAMBIGUOUS ON THIS ISSUE. THE DEDUCTION U/S 36(1)( VII) IS ALLOWABLE, SUBJECT TO CERTAIN CONDITIONS ONLY IN RE SPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY A SC HEDULED BANK. THE PROVISION MADE FOR STANDARD ASSETS IS NOT A PROVISION FOR BAD AND DOUBTFUL DEBTS, THEREFORE, I AM OF THE CON SIDERED VIEW THAT DEDUCTION IN RESPECT OF THE PROVISION MADE BY THE APPELLANT FOR STANDARD ASSETS IS NOT AN ADMISSIBLE DEDUCTION U/S 36(1)(VII). THEREFORE, THE DISALLOWANCE MADE BY THE AO IS HEREB Y CONFIRMED. 3.4 UNDER THE IDENTICAL FACTS, THE TRIBUNAL HAD DEC IDED THE ISSUE IN ITA NO. 240/JODH/2013 BY OBSERVING AS UNDER:- 10. AFTER CIRCUMSPECTING THE ENTIRE RECORDS VIS-- VIS THE ORAL SUBMISSIONS, WE 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 ABO VE AND ARE CONVINCED THAT THIS GROUND STANDS COVERED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL (SUPRA) IS REPRODUCED AS UNDER :- 8. NOW THE SECOND QUESTION WHICH ARISES FOR DETER MINATION BEFORE US IS WHETHER THE ASSESSEE HAS CREATED ANY RESERVE/PROVISION FOR BAD AND DOUBTFUL DEBTS? ITA NO. 1332/JP/2018 ACIT VS M/S BARODA RAJASTHAN KSHETRIYA GRAMIN BANK 6 THE AR HAS CONTENDED THAT THE ASSESSEE HAS CREATED PROVISIONS FOR BAD AND DOUBTFUL DEBTS UNDER THE NOMENCLATURE RESERVE FOR NPA. THE TERMINOLOGY RESERVE FOR NPA HAS BEEN US ED BY THE ASSESSEE IN ACCORDANCE WITH THE RBI DIRECTIONS. AS IS EVIDENT FROM THE ASSESSMENT ORDER, THE ASSESSEE HAS INDEED CREAT ED RESERVE FOR NPA. FOR CLAIMING BENEFIT UNDER THE PROVISIONS OF SECTION 36(1)(VIIA)(A) THE CONDITIONS TO BE SATISFIED IS: T HAT PROVISION FOR BAD AND DOUBTFUL DEBTS SHOULD HAVE BEEN MADE BY THE BANK ELIGIBLE TO CLAIM SUCH DEDUCTION. CO-OPERATIVE BANK S DO NOT STRICTLY FOLLOW THE PROVISIONS OF BANKING REGULATIO N ACT FOR THE PURPOSE OF MAINTAINING THEIR BOOKS OF ACCOUNTS. IN OUR CONSIDERED OPINION, THE ASSESSEE HAS CREATED PROVIS IONS FOR BAD AND DOUBTFUL DEBTS MAY BE UNDER DIFFERENT NOMENCLAT URE. THIS WILL NOT DIS-ENTITLE THE ASSESSEE FOR CLAIMING DEDU CTION UNDER THE PROVISIONS OF SECTION 36(1)(VIIA(A). THE PURPOSE FO R CREATION OF RESERVE FOR NPA IS SAME I.E., CREATING PROVISION TO WARDS BAD AND DOUBTFUL DEBTS. IN VIEW OF THE ABOVE, 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. 3.5 THE FACTS ARE IDENTICAL; THERE IS NO CHANGE INT O FACTS AND CIRCUMSTANCES. IT IS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT THIS IS A SCHEDULED BANK. THIS FACT I S NOT REBUTTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T HE COORDINATE BENCH, WE HEREBY DIRECT THE AO TO DELETE THE DISALL OWANCE. THUS, THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. ITA NO. 1332/JP/2018 ACIT VS M/S BARODA RAJASTHAN KSHETRIYA GRAMIN BANK 7 THUS, IN VIEW OF THE FACTS THAT THE ADDITION ITSELF WAS DELETED BY THE TRIBUNAL IN THE QUANTUM APPEAL THE PENALTY LEVIED B Y THE AO U/S 271(1)(C) OF THE ACT WOULD NOT SURVIVE. ACCORDINGLY , WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD . CIT(A) QUA THIS ISSUE. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/08/2019 SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 07/08/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT, CIRCLE-1, AJMER. 2. IZR;FKHZ@ THE RESPONDENT- M/S BARODA RAJASTHAN KSHETRIYA GRAM IN BANK (ERSTWHILE RAJASTHAN GRAMIN BANK), AJMER. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1332/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR