The Ratnakar Bank Ltd., Kolhapur V. Asst. CIT,Circle-2, Kolhapur

ITA 1366/PUN/2007

• Counselvise Citation: 136624514 RSA 2007
• Duration Of Justice: 4 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 23-10-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y A MABRUKAR
• Assessee Lawyers: S U PATHAK
• Keywords: Opportunity of being heard; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 1366/PN/07 (ASSTT. YEAR 2004-05) THE RATNAKAR BANK LTD. SHREE SHAHU MARKET YARD, KOLHAPUR .. APPELLANT PAN AABCT 3335M VS. ASSTT. COMMISSIONER OF INCOME-TAX, CIR. 2, KOLHAPUR .. RESPONDENT APPELLANT BY :SHRI S U PATHAK RESPONDENT BY :SHRI Y A MABRUKAR ORDER PER G S PANNU, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) KOLHAPUR D ATED 23.4.2007 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 15.12.2006 PASSED BY THE ASSESSING OFFICER UNDER SE C. 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTA INING TO THE ASSESSMENT YEAR 2004-05. 2. THE FIRST ISSUE RAISED IN THE CAPTIONED APPEAL R ELATES TO THE CONFIRMATION BY THE COMMISSIONER OF INCOME-TAX (APP EALS) OF DISALLOWANCE OF INTEREST OF RS 83,12,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PROPORTIONATE EXPENDITURE OF INTEREST RELATING TO TAX-FREE INVESTMENTS. 3. AT THE TIME OF HEARING, IT WAS A COMMON GROUND B ETWEEN THE PARTIES THAT THE ABOVE ISSUE STANDS COVERED BY THE DECISION OF THE TRIBUNAL, VIDE ORDER DATED 19.1.2010 IN ITA NO 287 & 288/PN/06 IN ITA 1366/PN/07 RATNAKAR BANK LTD. , KOLHAPUR 2 ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2002-03 AN D 2003-04, WHEREIN THE TRIBUNAL HAS SET ASIDE THE ORDERS OF TH E AUTHORITIES BELOW TO ADJUDICATE THE ISSUE IN VIEW OF THE JUDGME NT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO. LTD. V. DCIT 328 ITR 81 (BOM). FOLLOWING THE PRECEDENT, WE , THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON TH IS ISSUE AND RESTORE IT TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF THE FACTS AT THE RELEVANT POINT OF TIME AND AFTER TAKING INTO CONSIDERATION THE JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V. DCIT. THUS, THE ASSESSEE PARTLY SUCCEEDS ON THIS GROUND. 4. THE SECOND GROUND RELATES TO THE CLAIM OF DEDUCT ION FOR PROVISION FOR BAD AND DOUBTFUL DEBTS IN TERMS OF SE CTION 36(1)(VIIA) OF THE ACT. IN THE RETURN OF INCOME, THE ASSESSEE M ADE A CLAIM OF DEDUCTION ON ACCOUNT OF PROVISION CREATED FOR BAD A ND DOUBTFUL DEBT AMOUNTING TO RS 1,55,78,792/-, BEING 10% OF AVERAGE RURAL ADVANCES. THE RURAL ADVANCES WERE CLASSIFIED ON THE BASIS OF RURAL BRANCHES IDENTIFIED AS PER THE DATA OF THE CENSUS ( 1991). IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FOUN D THAT ON THE BASIS OF THE CENSUS 2001, SOME ADDITIONAL BRANCHES WERE ALSO LIABLE TO BE CLASSIFIED AS RURAL BRANCHES AND, AS A RESULT THEREOF, ADDITIONAL DEDUCTION ON ACCOUNT OF BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) CAME TO RS 40,12,701/-. THE ASS ESSING OFFICER DECLINED TO CONSIDER THE SAID CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD NOT REVISED ITS RETURN OF INC OME AND, THEREFORE, THE SAID CLAIM COULD NOT BE ENTERTAINED IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE (I) LTD. V. CIT 284 ITR 323 (SC). THE COMMISSIONER OF I NCOME-TAX (APPEALS) HAS ALSO DECLINED THE PLEA OF THE ASSESSE E ON THE GROUND ITA 1366/PN/07 RATNAKAR BANK LTD. , KOLHAPUR 3 THAT THE PROVISIONAL RESULTS OF CENSUS 2001 REFERRE D BY THE ASSESSEE DOES NOT CLEARLY ESTABLISH WHETHER THE BRA NCH POPULATION FIGURES HAVE BEEN PUBLISHED IN THE SAID DATA. HE, T HEREFORE, UPHELD THE STAND OF THE ASSESSING OFFICER THAT THE FIGURES OF CENSUS 2001 CANNOT BE TAKEN INTO CONSIDERATION FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY POINTED OUT THAT THE ASSESSING OFFICER WAS NOT JUST IFIED IN RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CA SE OF GOETZE (I) LTD. (SUPRA) IN ORDER TO DECLINE THE PLEA FOR T HE ADDITIONAL BENEFIT RAISED BY THE ASSESSEE. IT WAS POINTED OUT THAT THE CLAIM OF THE ASSESSEE WAS LIABLE TO BE EXAMINED IN THE LIGHT OF THE STATUTORY PROVISIONS, WHICH PERMIT A DEDUCTION IN RELATION TO AVERAGE ADVANCES MADE IN RURAL BRANCHES AND CANNOT BE REJEC TED ON MERE TECHNICAL OBJECTION OF NOT HAVING REVISED THE RETUR N OF INCOME. IT WAS POINTED OUT THAT SUBSEQUENT TO CLAIM MADE IN TH E RETURN OF INCOME, THE CENSUS (2001) DATA SHOW THAT CERTAIN MO RE BRANCHES WERE ENTITLED TO BE CLASSIFIED AS RURAL BRANCHES AN D, THEREFORE, THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT STOO D ENHANCED. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF T HE CASE OF THE REVENUE. 6. IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER WAS WRONG IN DECLINING TO ENTERTAIN THE ADDITIONAL CLAIM OF DEDU CTION UNDER SECTION 36(1)(VIIA) OF THE ACT BY RELYING ON THE JU DGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (I) LTD . (SUPRA). THE PRESENT CLAIM IS NOT A FRESH CLAIM, INASMUCH AS THE ASSESSEE HAS ONLY ATTEMPTED TO REWORK ITS CLAIM UNDER SECTION 36 (1)(VIIA) OF THE ACT, AS MADE IN THE RETURN OF INCOME. THEREFORE, TH E INSISTENCE OF ITA 1366/PN/07 RATNAKAR BANK LTD. , KOLHAPUR 4 THE ASSESSING OFFICER FOR FILING OF A REVISED RETUR N OF INCOME IN THE PRESENT CASE IS NOT JUSTIFIED, INASMUCH AS THE ASSE SSEE MERELY RECOMPUTED ITS CLAIM ALREADY MADE IN THE ORIGINAL R ETURN OF INCOME AND, THEREFORE, THE PARITY OF REASONING IN THE CASE OF GOETZE (I) LTD. (SUPRA) IS INAPPLICABLE IN THE INSTANT CASE. THEREF ORE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL ADMIT THE REVISED CLAIM AND EXAMINE THE SAME IN ACCORDANCE WITH LAW. NEEDLE SS TO MENTION, THE ASSESSING OFFICER SHALL ALLOW THE ASSE SSEE A REASONABLE OPPORTUNITY OF BEING HEARD AND THEREAFTE R PASS AN ORDER AFRESH ON THIS ASPECT IN ACCORDANCE WITH LAW. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, AS ABOVE. THE ABOVE DECISION WAS PRONOUNCED IN THE OPEN COUR T ON CONCLUSION OF THE HEARING IN THE PRESENCE OF BOTH T HE PARTIES ON 24 TH JANUARY, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G.S. PA NNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE DATED: 24TH JANUARY, 2011. COPY TO:- 1) RATNAKAR BANK LTD, KOLHAPUR 2) THE ACIT CIR. 2 KOLHAPUR 3) THE CIT (A) KOLHAPUR 4) THE CIT I KOLHAPUR. 5) THE DEPARTMENTAL REPRESENTATIVE, B BENCH, ITAT, PUNE. BY ORDER TRUE COPY ASST. REGISTRAR, I.T.A.T., PUNE B . ITA 1366/PN/07 RATNAKAR BANK LTD. , KOLHAPUR 5