A.C.I.T., Circle - 1, Hooghly, Hooghly V. Hooghly District Central Co-op. Bank Ltd., Hooghly

ITA 1512/KOL/2009

• Counselvise Citation: 151223514 RSA 2009
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2011
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 27-08-2009
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR LD
• Assessee Lawyers: S M SURANA LD
• Keywords: Reasonable cause; Assessment record; Tax effect
• Section: 143(3)

Judgement Text

I.T.A NO. 1512/KOL/2009-C--SVM 1 , C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA BEFORE HONBLE SRI B.R. MITTA L, JM & HONBLE SRI S.V MEHROTRA, AM () . . , ! . '.#$%, #& !' / I.T.A NO. 1512/KOL/2009 () *+ / ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX VS. M/S. HOOGHLY DISTRICT CENTRAL CIRCLE-1, HOOGHLY CO-OPERATIVE BANK LTD PAN: AACFH 98 55Q (-. /APPELLANT ) (/0-./ RESPONDENT ) -. / FOR THE APPELLANT : 1 / SHRI NIRAJ KUMAR, LD.CIT/DR /0-. / FOR THE RESPONDENT : 1 /SHRI S.M SURANA, LD. AR #2 / ORDER . '.#$%, #& SHRI S.V MEHROTRA, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (A)-XXXVII, KOLKATA DAT ED 21-04-2009 FOR THE ASSESSMENT YEAR 2006-07. 2. THE APPEAL FILED BY THE DEPARTMENT IS TIME BARR ED BY 54 DAYS FOR WHICH A CONDONATION OF PETITION BY WAY OF AN AFFIDAVIT HAS BEEN FILED BY THE REVENUE, WHEREIN SHRI CHANDRA PRAKASH BHATIA, ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-1, HOOGHLY, INTER-ALIA, HAS STATED AS UNDER :- 4. THAT THIS IS A MOFUSSIL OFFICE LOCATED ABOUT 4 OKMS. FROM KOLKATA; 5. THAT THE ASSESSMENT RECORDS FOR THIS A.Y. WERE DISPATCHED TO KOLKATA ON 27/7/9 AFTER GIVING APPEAL EFFECT PREPAR ING APPEAL SCRUTINY REPORT AND SUGGESTING SECOND APPEAL SO TH AT COUNTER COMMENTS THEREON ARE KINDLY OFFERED BY THE LD. ADDL . COMMISSIONER OF INCOME TAX, RANGE-I. HOOGHLY. 6. THAT, THESE RECORDS WERE SENT TO THE LD. CIT. K OLKATA-XX. KOLKATA ON 27/7/09 AFTER FURTHER PROCESSING AND COU NTER- COMMENTS OF THE LD. ADDI. COMMISSIONER OF INCOME TA X. RANGE-I. HOOGHLY 7. THAT THE UNDERSIGNED TOOK OVER THE ADDITIONAL C HARGE OF ACIT CIRCLE-I. HOOGHLY ON3/8/09. I.T.A NO. 1512/KOL/2009-C--SVM 2 8. THAT THE DECISION OF THE LD. COMMISSIONER OF IN COME-TAX. KOLKAIA-XX. KOLKATA TO FILE SECOND APPEAL IN THE CA SE WAS COMMUNICATED TO THE UNDERSIGNED ON 26/8/09 ALONGWIT H THE CONCERNED ASSESSMENT RECORDS. 3. AFTER CONSIDERING AVERMENTS MADE IN THE AFFIDAV IT, WE ARE OF THE OPINION THAT THE DEPARTMENT WAS PREVENTED BY REASONABLE CAUSE FROM PREFERRING THE APPEAL WITHIN THE STIPULATED PERIOD. WE, ACCORDINGLY, CONDONE THE DEL AY IN FILING THE APPEAL IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. WEST BENGAL INFRASTRUCTURAL & FINANCIAL CORPORATION LTD REPORTED IN 2011 [ 196 T AXMAN 321(SC) ] AND PROCEED TO DECIDE THE APPEAL ON MERIT.. 4. IN THIS APPEAL THE DEPARTMENT HAS TAKEN FOLLOWIN G GROUNDS OF APPEAL :- 1) IN THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE OBSERVATION OR ID. CIT(A)XXX VII, KOLKATA IS BAD IN LAW.. 2) IN THE FACTS AND IN THE CIRCUMSTANCES O THE CAS E. THE ONUS AS ON THE ASSESSEE TO PROVE THAT SUCH INCOME AS EXEMPT U/S 80P OF THE I ACT1961. 3) THAT THE TAX EFFECT IN THE ABOVE CASE ECEEDS TH E LIMIT PRESCRIBED BY INSTRUCTION NUMBER 1979 FOR FILING AN APPEAL BEFORE ITAT 4) ANY OTHER GROUND TO HE RAISED ATE TIME OF HEARI NG. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A CO-OPERATIVE BANK, FILED ITS RETURN OF INCOME ON 31/10/06 DECLARING TOTAL INCOME NIL AFT ER CLAIMING DEDUCTION U/S. 80P OF THE I.T ACT. DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT, THE ASSESSING OFFICER NOTICED FROM THE SCHEDULES OF STATEMENT OF A/CS FILED ALO NG WITH THE RETURN THAT THE ASSESSEE HAD EARNED THE FOLLOWING INCOMES:- 1. COMMISSION EXCHANGE BROKERAGE RS.22,12,033.79 2. OTHER RECEIPTS RS.24,44,475.05 RS.46,56,508.84 5.1 HE FURTHER NOTICED THAT THE ASSESSEE, INTER AL IA, HAD INCURRED THE FOLLOWING EXPENSES [ VIDE SCHEDULE-23]:- 1. PROVISION FOR OVERDUE INTT. RS.91,71,016.00 2. PROVISION FOR NPA RS.17,21,800.00 3. RESERVE & OTHER FUND[GRATUITY] RS.28,00,000.0 0 4. RESERVE & OTHER FUND[INCENTIVE] RS.13,75,000. 00 I.T.A NO. 1512/KOL/2009-C--SVM 3 5. RESERVE & OTHER FUND[ BENEFIT] RS. 6,03 0.00 6. RESERVE & OTHER FUND[ PACS DR. FUND) RS. 3 4,373.00 RS.1,51,08,219.00 5.2 THE ASSESSING OFFICER HAS TREATED THIS INCOME N OT BEING INCIDENTAL TO ASSESSEES BANKING ACTIVITIES AND DENIED THE DEDUCTION U/S.80 P(2)( C)(II) OF THE ACT. THUS, HE MADE AN ADDITION OF RS.1,97,14,727.84 BY ALLOWING A DEDUC TION OF RS.50,000/-. 6. BEFORE THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS), IT WAS CONTENDED THAT COMMISSION EXCHANGE BROKERAGE AND OTHER RECEIPTS W ERE EARNED IN THE COURSE OF CARRYING ON BANKING BUSINESS AND WERE ENTITLED FOR EXEMPTI ON U/S.80P. IN REGARD TO DISALLOWANCE OF EXPENSES, IT WAS CONTENDED THAT THE ASSESSING OFFI CER ASSESSED THE EXPENSES WITHOUT COMPUTING THE TOTAL INCOME BY SETTING OFF THE IN COME AND EXPENSES. 7. AFTER CONSIDERING THE ABOVE, THE LEARNED COMMISS IONER OF INCOME-TAX (APPEALS) HAS ALLOWED THE APPEAL OF THE ASSESEE, INTER-ALIA, OBS ERVING THAT THE AO HAS NOT GIVEN ANY REASONS FOR THIS CONCLUSION REGARDING NOT GRANTING EXEMPTI ON U/S.80P FOR THE OTHER INCOME AND ALSO FOR DISALLOWING THE EXPENDITURE SHOWN IN THE SCHED ULE. HE FURTHER OBSERVED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON R ECORD TO PROVE THAT THE ASSESSEE HAD EARNED INCOME OTHER THAN BY WAY OF BANKING BUSINES S. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITT ED THAT NEITHER THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) NOR THE ASSESS ING OFFICER HAVE EXAMINED THE ACTUAL NATURE OF RECEIPTS AND, THEREFORE, THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO CONSIDERATION OF THE ENTIRE ISSU E. HE ALSO RELIED ON THE DECISION OF THE HONBLE PATNA HIGH COURT IN THE CASE OF BIHAR RAJYA SAHAKARI BHOOMI VIKAS CO-OPERATIVE BANK LTD VS. CIT REPORTED IN (2009) [ 313 ITR 247 ( PAT), WHEREIN IT WAS HELD THAT RENTAL INCOME AND INCOME EARNED FROM INVESTMENT OF PF OF EMPLOYEES WAS NOT ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. 9. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITT ED THAT SIMILAR ISSUE WAS EXAMINED BY THE JURISDICTIONAL TRIBUNAL IN AY 2003-04 IN ASS ESSEES OWN CASE[ ITA NO.2004/KOL/2006 VIDE ORDER DATED 11 TH JANUARY 2007. HE SUBMITTED THAT COMMISSION EXCHANGE BROKERAGE WAS NOTHING, BUT THE COMMISSION EARNED BY THE BANK FOR ISSUING BANK DRAFTS TELEGRAPHIC TRANSFERS ETC. HE FURTHER REFERR ED TO PAGE NO.45 OF THE ASSESSEES PAPER I.T.A NO. 1512/KOL/2009-C--SVM 4 BOOK CONTAINING TO SCHEDULE NO.26 IN REGARD TO DET AILS OF OTHER RECEIPTS. THE SAME IS REPRODUCED BELOW :- SCHEDULE NO.26 OTHER RECEIPTS ACCOUNT CODE PARTICULARS POSITION AS ON 31/03/2006 (CURRENT YEAR) 31/03/2004 (PREVIOUS YEAR) 33101 INCOME FOR STATUTORY RF ADMISSION FEE 900.00 1,005. 00 33102 INCOME FOR STATUTORY RF NOMINAL MEMBERSHIP 200,140.00 123,010.00 33202 MISCELLANEOUS INCOME LOCKER RENT 1,402,044.00 1,066,234.00 33203 MISCELLANEOUS INCOME BANK GUARANTEE FEE 88,458.00 49,490.50 33204 MISCELLANEOUS INCOME SERVICE CHARGES 277,613.28 341,004.63 33209 MISCELLANEOUS INCOME OTHERS 475,319.77 340,328.42 GRAND TOTAL 2,444,475.05 1,92 1,972.55 9.1 THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER R EFERRED TO THE DECISION OF THE HONBLE PATNA HIGH COURT IN THE CASE OF BIHAR RAJYA SAHAKARI BHOOMI VIKAS CO -OPERATIVE BANK LTD (SUPRA) AND SUBMITTED THAT THE SAID DECISION IS NOT APPLIC ABLE BECAUSE THE IMPUGNED ITEMS THEREIN WERE ADMITTEDLY NOT INCIDENTAL TO BUSINESS ACTIVITY. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND H AVE PERUSED THE RECORD OF THE CASE. WE FIND THAT THE ASSESSEE HAD PREPARED ITS ACCOUNTS I N ACCORDANCE WITH III RD SCHEDULE TO THE BANKING REGULATIONS ACT. SPECIFIC CLASSIFICATION IN REGARD TO VARIOUS ITEMS HAS BEEN GIVEN IN THE SCHEDULE AND THE ACCOUNTS HAVE BEEN DULY CERTIF IED BY THE AUDITORS. THE SAME CANNOT BE DISPUTED. THEREFORE, IT CANNOT BE DISPUTED THAT THE COMMISSION EXCHANGE BROKERAGE WAS EARNED ON ACCOUNT OF BANKING BUSINESS ACTIVITY ONLY . 10.1 AS REGARDS OTHER RECEIPTS, WE FIND THAT THERE CANNOT BE ANY DISPUTE REGARDING INCOMES EARNED AS PER STATUTORY REQUIREMENTS. THEREFORE, IN COME FOR STATUTORY R.F ADMISSION FEE AND STATUTORY RF NOMINAL MEMBERSHIP WAS INCIDENTAL TO ASSESSEES BANKING BUSINESS ACTIVITIES. I.T.A NO. 1512/KOL/2009-C--SVM 5 10.2 AS FAR AS LOCKER RENT IS CONCERNED, THE SAME I S ALSO COVERED BY THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASES OF MEHSNA DIST RICT CENTRAL CO-OPERATIVE BANK LTD VS. ITO/GUJARAT CO-OPERATIVE BANK LTD VS. CIT REPORTED IN [ (2001) 251 ITR 522]. THE HONBLE SUPREME COURT HAS HELD THAT WHERE THE ASSESSEE, A CO-OPERATIVE BANK, DERIVED INCOME AS UNDER THE SAME QUANTIFY FOR DEDUCTION U/S.80P(2)(A )(I). (I) INCOME FROM UTILIZATION OF ITS FUNDS FOR STATUTORY RESERVES IS ELIGIBLE FOR DEDUCTION U/S. 80P(2(A)(I) ; (II) INCOME FROM HIRING OUT OF SAFE DEPOSITS VAULTS IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) ; AND (III) INCOME FROM THE INVESTMENT OF ITS VOLUNTARY RESERV ES OTHER THAN STATUTORY RESERVES IS EXEMPT U/S.80P(2)(A)(I) PROVI DED THAT RESERVE WAS UTILIZED IN THE COURSE OF ORDINARY BANKING BUSI NESS 10.3 AS FAR AS MISC. INCOMES FROM BANK GUARANTEE F EE AND SERVICE CHARGES ARE CONCERNED, THERE CANNOT BE ANY DISPUTE THAT THE SAME SPRINGS F ROM BANKING BUSINESS ACTIVITY OF ASSESSEE. AS FAR AS MISC. INCOME (OTHERS) IS CONCERNED, LEARN ED COUNSEL CLARIFIED THAT THE SAME IS ALSO FROM BANKING BUSINESS ACTIVITY. NOTHING HAS BEEN BR OUGHT ON RECORD ON THIS COUNT. THEREFORE, WE RESTORE THE MATTER TO THE FILE OF ASSESSING OFF ICER ONLY FOR THE PURPOSE OF VERIFYING THE DETAILS OF RS. 475319.77 ( AS PER DETAILS GIVEN AT P.45 OF THE PAPER BOOK REPRODUCED EARLIER) IN REGARD TO MISC. INCOME OTHERS AND IF HE FINDS THAT THE SAME IS DERIVED FROM BANKING BUSINESS ACTIVITY THEN ALLOW DEDUCTION U/S.80P(2)(A)(I). 10.4 AS FAR AS THE LEARNED DEPARTMENTAL REPRESENTAT IVES RELIANCE ON THE DECISION OF THE HONBLE PATNA HIGH COURT IN THE CASE OF IN THE CASE OF BIHAR RAJYA SAHAKARI BHOOMI VIKAS CO-OPERATIVE BANK LTD (SUPRA) IS CONCERNED, THE SAM E IS NOT APPLICABLE TO THE FACTS OF THE CASE, BECAUSE IN THIS CASE THE SOURCE OF INCOME AS EARNED BY THE ASSESSEE HAD NO CONNECTION WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. 10.5 AS FAR AS DISALLOWANCE OF EXPENSES IS CONCERN ED, THE SAME COULD BE MADE ONLY IF THERE WAS ANY INCOME, WHICH WAS NOT ELIGIBLE FOR DE DUCTION U/S.80P. HOWEVER, IN THE PRESENT CASE, WE FIND THAT THE ENTIRE RECEIPTS ARE ELIGIBLE FOR DEDUCTION U/S.80P AND, THEREFORE, THERE WAS NO QUESTION OF MAKING ANY ADDITION/DISALLOWANCE OF EXPENSES. I.T.A NO. 1512/KOL/2009-C--SVM 6 11. IN THE RESULT, THE REVENUES APPEAL [ITA NO.151 2/KOL/2009] IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. $ #2 &3# 4 3( 5 $6 7& 28-07-2011 ORDER PRONOUNCED IN THE OPEN COURT ON 28-07-2011 SD/- SD/- [ . . ] [ . '.#$% , #& ] ( B.R.MITTAL, JUDICIAL MEMBER) (S.V. MEHROTRA, ACCOUNTANT MEMBER ) (7&) DATED : 28-07-2011 *PP 89 (:; < /SR.P.S. #2 = /> ?#>*@- COPY OF THE ORDER FORWARDED TO: 1. -. /APPELLANT- A.C.I.T, CIR-1, ROOPMATI MAHAL, KHADI NA MORE, CHINSURAH, HOOGHLY. 2 /0-. / RESPONDENT : M/S. HOOGHLY DISTRICT CENTRAL CO-OP BANK LTD. NETAJI SUBHAS ROAD, P.O CHINSURAH, HOOGHLY. 3. 2(/ THE CIT, 4. 2( ()/ THE CIT(A), KOLKATA. 5. '5 /(/ DR, KOLKATA BENCHES, KOLKATA 0> // TRUE COPY , #2(3/ BY ORDER , $ !; /ASSTT. REGISTRAR