M/s. Bankura district central Co.Opetative Bank Ltd. , Bankura V. DCIT, CIR-3, Bankura. , Bankura

ITA 1479/KOL/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8296 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 04-03-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 28-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Cost of acquisition; Set aside
• Section: 250; 113

Judgement Text

आयकर अपीलीय अधिकरण कोलकाता 'बी' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA श्री राज े श क ु मार, ल े खा सदस्य एवं श्री अधिक े श बिजी, न्याधयक सदस्य क े समक्ष Before SRI RAJESH KUMAR, ACCOUNTANT MEMBER & SRI ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No.: 1479/KOL/2023 Assessment Year: 2013-14 M/s. Bankura District Central Co Operative Bank Ltd..............Appellant [PAN: AABAB 6253 G] Vs. DCIT, Circle-3, Bankura........................................................Respondent Appearances: Assessee represented by: Sh. Abhishek Bansal, A/R. Department represented by: Sh. P.P. Barman, Addl. CIT, Sr. D/R. Date of concluding the hearing : March 5 th , 2024 Date of pronouncing the order : March 11 th , 2024 ORDER Per Anikesh Banerjee, Judicial Member: The instant appeal of the assessee was filed against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [in brevity ld. 'CIT(A)'] dated 03.08.2022 passed u/s 250 of the Income Tax Act, 1961 (in brevity the ‘Act’) for assessment year 2013-14. The impugned order was emanated from the order of the ld. DCIT, Circle-3, Bankura (in brevity the ‘AO’) passed u/s 143(3) of the Act dated 28.03.2016. 2. When the matter was called for, ld. A/R pressed that the appeal was filed with a delay of 253 days. The assessee filed a condonation petition and placed that the delay was due to COVID pandemic and also the technical error I.T.A. No.: 1479/KOL/2023 Assessment Year: 2013-14 M/s. Bankura District Central Co Operative Bank Ltd. Page 2 of 8 of the e-mail controlled by the employees of the assessee. Ld. D/R had not made any objection about the condonation of delay. Accordingly, we accept the condonation petition and delay of 253 days is condoned and the matter is taken for adjudication. 3. The assessee has taken the following grounds of appeal: “1. For that the assessment order passed by the Ld. AO is bad in law as well as on facts. 2. For that the Ld. AO erred in taking the returned income at Rs. 10,53,31,180/- instead of Rs. 10,53,30,740/-- 3. For that the Ld. AO erred and disallowing Rs. 46,71,341/-amortization of premium paid on Govt. Securities whereas the said issue is fully covered by the decision of the Hon’ble ITAT, Kolkata in assessee’s own case for the Assessment Year 2007-08 in ITA No. lll/Kol/2013 decided on 12.12.2018. 4. For that the Ld. AO erred and disallowing Rs. 8,78,000/- transferred to Special Reserve which is fully allowable. 5. For that the Ld. AO erred and disallowing provision on NPAs Rs. 44,56,568/- which is allowable as held in the case of UCO Bank Ltd. v. CIT [1999] 104 Taxman 547/237 ITR 889 (SC) and PCIT v. Davangere District Central Co-Operative Bank Ltd. [2021] 129 taxmann.com 113 (Karnataka). 6. For that moreover there is mistake to the extent of Rs. 300/- while computing the taxable income. 7. For that the Ld. CIT(A) erred in dismissing the appeal ex-parte without providing proper opportunity of being heard. 8. For that even otherwise, the Ld. CIT(A) erred in dismissing the appeal ex- parte without deciding each issues and grounds by way of speaking order. 9. For that under the facts and circumstances of the case, the appellant be given relief as prayed for. 10. For that the appellant craves leave to add, alter or withdraw any ground(s) of appeal on or before hearing of the appeal.” 4. The brief fact of the case is that the assessee is a cooperative bank and during the assessment proceedings the addition was made in amortization of premium paid on Government securities amounting to Rs. 46,71,341/-, amount of Rs. 8,78,000/- transferred to special reserve and Rs. 44,56,568/- in relation to disallowing the provision on NPAs. The aggrieved assessee filed I.T.A. No.: 1479/KOL/2023 Assessment Year: 2013-14 M/s. Bankura District Central Co Operative Bank Ltd. Page 3 of 8 an appeal before ld. CIT(A). Ld. CIT(A) passed the exparte order and upheld the order of the AO. Being aggrieved the assessee filed an appeal before us. 5. Ld. A/R vehemently argued ground-wise which is as follows: Ground no. 3: 5.2. Ld. A/R first invited our attention in the relevant paragraphs of the assessment order where the addition related to premium paid to Government securities amounting to Rs. 46,71,341/- is confirmed. The relevant paragraph 3 of the assessment order is reproduced as below: “The assessee claimed amortization of premium paid on Government securities amounting to Rs.46,71,341/- and reduced its net profit from business. As per decision of the Hon'ble Supreme Court in the case of Vijaya Bank Ltd. Vs. Addl. CIT [1991]57 Taxmanl52 when a bank purchases securities under capital account at a price inclusive of any accrued interest, the entire purchase consideration is in the nature of capital outlay. Therefore, any interest element included in the purchase consideration is not allowable as expenditure against income accruing on those securities. In view of the aforesaid decision of the Hon'ble Apex court amortization of premium paid on Government securities amounting to Rs.46,71,341/- is not an allowable expenditure. On being asked to explain it as to why the aforesaid expenditure will not be disallowed the A/R of the assessee states that the aforesaid expenditure has been debited as per guidelines of Reserve Bank of India and CBDT's instruction. But the contention of assessee is not acceptable owing to following reasons: i. It failed to substantiate that the entire purchase including aforesaid expenditure is not in the nature of capital outlay; ii. There is no amendment in law in this regard. Hence the decision of the Hon'ble SC is final; In the light of above observation and after a careful consideration of the entirety of facts and circumstances of the case and aforesaid decision of the Hon'ble SC, amortization of premium paid on Government securities amounting to Rs.46,71,341/- has been disallowed and added back to income.” 5.3. Ld. A/R in argument further placed that the issue is duly covered by the order of the Coordinate Bench of the ITAT, Kolkata in ITA No. I.T.A. No.: 1479/KOL/2023 Assessment Year: 2013-14 M/s. Bankura District Central Co Operative Bank Ltd. Page 4 of 8 111/KOL/2023 dated 12.12.2018 in assessee’s own case. The relevant paragraph is reproduced as below: “5. We have heard the rival submissions and perused the material available on record including the Paper Book submitted by the assessee showing detailed calculation of amortization of premium paid on purchase of government securities held under HTM category. These details are enclosed in page 12 of the Paper Book. It is not in dispute that the assessee had claimed the amortization of government securities held under HTM category as deduction / allowance by including the same under the head depreciation on fixed assets. We find that the Central Board of Direct Taxes had issued instruction No. 17/ 2008 dated 26.11.2008 on the subject mentioned issue wherein it has been categorically mentioned that the investments held under HTM category need not be marked to market and are to be carried at acquisition cost unless these are more than face value, in which case the premium should be amortized over the period remaining to maturity. We find that the action of the assessee in the instant case is in consonance with the RBI Investment Valuation Guidelines dated 16.10.2000 and CBDT Instruction No. 17/ 2008 dated 26.11.2008. Hence there cannot be any infirmity in the action of the assessee in the facts of the instant case. Accordingly, we direct the Id. AO to delete the disallowance of Rs. 45,29,325/- while giving effect to this appellate order. Accordingly, ground raised by the assessee are allowed.” 5.4. Ld. D/R vehemently argued and fully relied on the order of the Revenue authorities. 5.5. We heard the rival submissions and considered the documents available in the record. Related to ground no. 3 for premium paid in Government securities, the issue is duly covered up by the order of the Coordinate Bench ITAT. We are not interfering this issue further. In our considered view, we set aside the appeal order and the addition amounting to Rs. 46,71,341/- is duly quashed. Accordingly, ground no. 3 is allowed. Ground no. 4: 6. In this ground the addition was made amounting to Rs. 8,78,000/- for transferring the special reserve. Ld. A/R invited our attention in assessment order para 4 which is reproduced as below: I.T.A. No.: 1479/KOL/2023 Assessment Year: 2013-14 M/s. Bankura District Central Co Operative Bank Ltd. Page 5 of 8 “4. Disallowance of special reserve deducted from profit: The assessee deducted Rs. 8,78,000/- under the head 'Special Reserve' from its profit which is not an expenditure and is not allowable. On being asked to substantiate it categorically in course of hearing vide order sheet dated 18.3.2016, the assessee failed to substantiate it by adducing cogent evidence as well as failed to put forward any plausible explanation in support of claim of deduction of Rs. 8,78,000/- under the head 'Special Reserve'. Claim of deduction of Rs. 8,78,000/- under the head ‘Special Reserve' is not allowable as per provisions of Income Tax Act. In view of above observations and after a careful consideration of the entirety of the facts and circumstances of the case claim of deduction of Rs. 8,78,000/- under the head 'Special Reserve' has been disallowed and added back to total income. Penalty proceeding u/s.271(1)(c) is initiated for furnishing inaccurate particulars of income on this issue separately.” 6.1. Ld. A/R further pressed that the issue is duly accepted and so the amount is allowable expenses. 6.2. Ld. D/R vehemently argued and fully relied on the order of the Revenue authorities. 6.3. We heard the rival submissions and considered the documents available in the record. The assessee claimed deduction under head Special Reserve amount to Rs. 8,78,000/-. Ld. AO confirmed the addition due to lack of evidence. The assessee placed that the expenses has proximity with Section 36(1)(vii) and the fact of the ld. AO is distorted fact. We consider both the arguments, and the issue was not adjudicated due to lack of evidence. In our considered view we remit back the matter to the file of the ld. AO. related to ground no-4. The ld. AO is directed to verify the contention of the assessee related claim of deduction of Rs. 8,78,000/- under the head 'Special Reserve'. The assessee should get reasonable opportunity to set aside proceeding. Accordingly, ground no. 4 is allowed for statistical purpose. I.T.A. No.: 1479/KOL/2023 Assessment Year: 2013-14 M/s. Bankura District Central Co Operative Bank Ltd. Page 6 of 8 Ground no. 5: 7. Ld. A/R in argument placed that the amount of Rs. 44,56,568/- which was added for disallowing the provision of NPAs. Ld. A/R invited our attention in assessment order para 5 which is reproduced as below: “The assessee deducted Rs. 44,56,868/- under the head 'Overdue Interest Reserve' from its profit which is not an expenditure and is not allowable. On being asked to substantiate it categorically in course of hearing vide order sheet dated 18.3.2016, the A/R of the assessee states in his submission Overdue Interest Reserve is unrealised interest on NPA accounts. The said interest could not be taken into account as per the prudential norm of the Reserve Bank of India. However, for our record purposes we credit the said unrealised interest of NPA accounts and again debit it through 'Overdue Interest Reserve' a/c in effect no impact is there on P/L a/c. The contention of the assessee is not acceptable as Rs. 44,56,868/- under the head 'Overdue Interest Reserve' had not been credited in Profit and Loss a/c. Moreover assessee is claiming provision for bad and doubtful debt for its NPA a/cs. Claim of deduction of Rs. 44,56,868/- under the head 'Overdue Interest Reserve' is not allowable as per provisions of Income Tax Act. In view of above observations and after a careful consideration of the entirety of the facts and circumstances of the case claim of deduction of Rs. 44,56,868/- under the head 'Overdue Interest Reserve' has been disallowed and added back to total income.” 7.1. Ld. A/R placed that the issue was duly covered in the order of UCO Bank vs. CIT [1999] 104 Taxman 547 (SC), PCIT vs. Davangere District Central Co-op. Bank Ltd. [2021] 129taxmann.com113 (Karnataka) and finally the order of the Coordinate Bench ITAT, Kolkata in the case of ACIT vs. Nadia District Cent Cooperative Bank Ltd. in ITA No. 1851/KOL/2012 order dated 01.08.2014. The relevant paragraph 4 is duly reproduced as below: “4. We find that this issue is squarely covered by the decision of Hon'ble Calcutta High Court in the case of CIT Vs. KICM Investment Ltd. in ITA No. 391 of 2007, which was duly affirmed by Hon'ble Supreme Court as reported in 310 ITR 4 (St.). Once the issue is settled by Hon'ble Supreme Court, we find no infirmity in the order of CIT(A). Moreover, it is seen from the grounds raised by revenue that only grouse of the revenue was that there is violation of the provision of Rule 46 of the Rules. We find nothing and once specific query from the bench Ld. Sr. DR could not state what is I.T.A. No.: 1479/KOL/2023 Assessment Year: 2013-14 M/s. Bankura District Central Co Operative Bank Ltd. Page 7 of 8 the violation. In such circumstances, and factually the issue is covered in favour of the assessee by jurisdictional High Court in the case of KICM Investment Ltd., supra, we confirm the order of CIT(A) and this appeal of revenue is dismissed.” 7.2. Ld. D/R vehemently argued and fully relied on the order of the Revenue authorities. 7.3. We heard the rival submissions and considered the documents available in the record. The addition related to the provision for NPA is duly covered by several judgments duly produced by the ld. A/R. Ld. D/R was unable to submit any contrary judgment during the hearing against the submission of assessee. The issue is squarely covered up by the order of ITAT, Kolkata in the case of Nadia District Cent Cooperative Bank Ltd. (supra). In our considered view, we are not interfering in the issue which is duly covered by the Hon'ble Supreme Court in the case of UCO Bank (supra). So, the appeal order is duly set aside and the addition made by the Ld. AO amounting to Rs. 44,56,568/- is quashed. Accordingly, ground no. 5 is allowed. 8. Ground nos. 1, 2, 7, 8, 9 & 10 are general in nature which needs no adjudication. 9. In the result, ITA No. 1479/KOL/2023 is allowed for statistical purpose. Order pronounced in the open Court on 11 th March, 2024. Sd/- Sd/- [Rajesh Kumar] [Anikesh Banerjee] Accountant Member Judicial Member Dated: 11.03.2024 Bidhan (P.S.) I.T.A. No.: 1479/KOL/2023 Assessment Year: 2013-14 M/s. Bankura District Central Co Operative Bank Ltd. Page 8 of 8 Copy of the order forwarded to: 1. M/s. Bankura District Central Co Operative Bank Ltd., Head Office Platinum Jubilee Building, Machantala, Bankura-722 101. 2. DCIT, Circle-3, Bankura. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata