The Pali Central Co Operative Bank Ltd., JODHPUR V. CIT-1, JODHPUR

ITA 156/JODH/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4798 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K DAS
• Assessee Lawyers: GAUTAM BAID
• Keywords: Depreciation; Audit objection; Bad and doubtful debts; Assessment record
• Section: 143(3); 142(1); 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY JUDICIAL MEMBER ITA NO.156/JODH/2015 ASSESSMENT YEAR:2010 - 11 THE PALI CENTRAL CO OPERATIVE BANK LTD. VS. THE CIT - 1 M/S MANISH SUKHANI & CO. (CA) INCOME TAX OFFICE, 104,ANCHAL COMPLEX, NEAR NMANIDHARI PAOTA C ROAD HOSPITAL, RESIDENCY ROAD, JODHPUR JODHPUR PAN NO. AAAAT0507A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. GAUTAM BAID RESPONDENT BY : SH. A.K. DAS DATE OF HEARING : 19/12/ 2016 DATE OF PRONOUNCEMENT : 20/12/2016 ORDER PER PARTHA SARATHI CHAUDHURY , JM THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE LD. CIT - 1 DT 16/03/2015, PASSED UNDER SECTION 263 OF THE ACT ON THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT - 1, JODHPUR ERRED IN TREATING THE ASSESSMENT ORDER AS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND DIRECTING THE ASSESSING OFFICER TO D ISALLOW THE PROVISION FOR STANDARD ASSETS AMOUNTING TO RS. 5,44,000/ - HOLDING THAT SUCH PROVISION IS NOT ALLOWABLE AS PROVISION FOR BAD DEBT ALLOWABLE UNDER SECTION 36(1)(VIIA) . 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT - 1, JODH PUR ERRED IN DENYING TO FOLLOW THE JUDGMENT OF JURISDICTIONAL ITAT JODHPUR BENCH IN THE CASE OF M/S NAGAUR URBAN CO - OPERATIVE BANK VS ACIT [ITA NO. 240/JODHPUR/2013 DATED 29/11/2013] WHICH IS ON THE IDENTICAL ISSUE AND LD. CIT BEING THE LOWER AUTHORITY IS BOUND TO FOLLOW THE JUDGMENT OF HONBLE TRIBUNAL. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT - 1, JODHOPUR ERRED IN HOLDING THAT WHILE FAMING ASSESSMENT DEDUCTION U/S 36(1)(VIIA) WAS ALLOWED WITHOUT ANY EXAMINATION OF CLAIM IN LI GHT OF RULE 6ABA. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT - 1, JODHPUR ERRED IN HOLDING AND DIRECTING THE LD. AO THAT WHILE COMPUTING THE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES AS PER RULE 6ABA ONLY THE FRESH LOAN ADVANCED DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR ONLY BE CONSIDERED AND NOT THE TOTAL OUTSTANDING AMOUNT OF LOANS AND ADVANCES. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, NECESSARY DIRECTION FOR REIMBURSEMENT OF COST OF APPEAL FEES ALONG WITH AUTHORIZED REPRESENTATIVE CHARGES MAY KINDLY BE GIVEN. 6. THE APPELLANT CRAVE LIBERTY TO ADD, AMEND, ALTER, MODIFY, OR DELETE ANY OF THE GROUND OF APPEAL ON OR BEFORE ITS HEARING BEFORE YOUR HONOUR. THAT THOUGH THE ASSESSEE HAS PREFERRED MULTIP LE GROUNDS OF APPEAL, THE CRUX OF THE ISSUE HEREIN IS MAINTAINABILITY OF ORDER PASSED BY THE LD. CIT UNDER SECTION 263 OF THE ACT AND WHETHER PROVISIONS FOR STANDARD ASSETS IS ALLOWABLE TO THE ASSESSEE. 2. THE BRIEF FACTS APPEARING IN THIS CASE ARE T HAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING ACTIVITIES. 3. THAT, THE RETURN WAS FILED ON 12/10/2010 DECLARING INCOME OF RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 27/09/2011. LATER ON A QUERY LETTER CALLING FOR INFORMATION UNDER SECTION 142(1) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 29/08/2012. THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED AS REQUIRED UNDER SECTION 44AB OF THE ACT AND WAS PRODUCED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. THE 3 BOOKS OF ACCOUNT WERE EXAMINED ON TEST CHECK BASIS AND AS AGAINST RETURNED INCOME OF NIL , T HE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT AND THE ASSESSED INCOME BEING RS. 63,44,299/ - . 4. WE HAVE PERU SED THE CASE RECORDS, THE RIVAL CONTENTION S HAVE ALSO BEEN HEARD AND THE FACTS AND CIRCUMSTANCES OF THE CASE DULY CONSIDERED. THE PAPER BOOK HAS BEEN FILED IN THIS CASE WHICH I S PLACED ON RECORD. 5. THAT AT THE TIME OF HEARING THE LD. AUTHORIZED REPRESENT ATIVE OF THE ASSESSEE FURNISHED A COPY OF A LETTER BY PRINCIPAL COMMISSIONER OF INCOME TAX - 1, JODHPUR WHEREIN THE RELEVANT PORTION ARE AS FOLLOWS: I AM DIRECTED TO SUBMIT THAT THE ASSESSMENT ORDER WAS PASSED U/S 143(3) ON 12/03/2013 BY ITO, WARD - 1, PALI. THE ASSESSMENT ORDER WAS AUDITED BY THE INTERNAL AUDIT PARTY AND OBJECTION WAS RAISED REGARDING ALLOWANCE OF PROVISION FOR STANDARD ASSETS OF RS. 5,44,000/ - AS EXPENDITURE, WHICH WAS ACCEPTED BY THE ITO, WARD - 1, PALI. CONSEQUENTLY, AS A REMEDIAL MEASURE P ROCEEDINGS U/S 263 WERE INITIATED BY ISSUE OF NOTICE DATED 23/02/2015 AND WHICH CULMINATED IN THE ORDER U/S 263 DATED 16/03/2015. NO EXPLANATION OF THE ITO, WARD - 1, PALI WAS SOUGHT NOR IT WAS PROVIDED. THE EXAMINATION OF THE RECORDS REVEAL THAT THE COPY O F ASSESSMENT ORDER, WHICH IS THE SUBJECT MATTER OF ORDER U/S 263 IS NOT AVAILABLE ON THE FILE. HOWEVER, IT IS ALSO APPARENT FROM THE RECORDS THAT SEPARATE FOLDER RELATING TO THE AUDIT OBJECTION IS MAINTAINED AND THAT THE ASSESSMENT RECORD OF THE ASSESSEE F OR A.Y. 2010 - 11 WAS SUBMITTED BY ITO, WARD - 1, PALI TO THE CIT - 1, JODHPUR ON 07/08/2014 AND THE SAME WERE RETURNED TO THE ITO, WARD - 1, PALI ON 25/09/2014. FROM THIS FILE REGARDING THE AUDIT OBSERVATION, IT IS APPARENT THAT THE CASE RECORDS WERE EXAMINED BY THE CIT - 1, JODHPUR. 6. THAT , ON PERUSAL OF THE AFORESAID LETTER, ON RECORD IT IS ABSOLUTELY CLEAR THAT THE VERY BASIS OF ORDER UNDER SECTION 263 OF THE ACT IS THE ASSESSMENT ORDER WHICH WAS NOT AVAILABLE IN THE FILE. THAT THEREFORE THE ORDER UNDER SECTION 263 OF THE ACT PASSED BY THE LD. CIT CANNOT SUSTAIN IN LAW AND AT THE VERY OUTSET THE 4 SAID ORDER BECOMES INVALID BECAUSE OF THE FACT THAT THAT THE ORDER OF THE AO WHETHER IT IS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS NOT BEEN DETERMINED IN THIS CASE IN THE VERY ABSENCE OF THE ASSESSMENT ORDER. 7. THAT, FURTHERMORE THE ISSUE WITH REGARD TO ALLOWABILITY OF PROVISION FOR STANDARD ASSETS AMOUNTING TO RS. 5,44,000/ - IS COV ERED BY THE DECISION OF COORDINATE BENCH OF ITAT, JODHPUR IN THE CASE OF M/S NAGAUR URBAN CO - OPERATIVE BANK VS. ACIT IN ITA NO. 240/JODHPUR/2013 DT 29/11/2013 AND IS IN FAVOUR OF THE ASSESSEE. THAT IN THE SAID CASE BASED ON IDENTICAL ISSUES AND SUBSTANTIA LLY SIMILAR FACTS SITUATION THERE WERE PROVISION FOR STANDARD ASSETS, FOR NPA, FOR IMPAIRED ASSET AND FOR INVESTMENT DEPRECIATION RESERVE. THAT WHILE GIVING RELIEF TO THE ASSESSEE THE COORDINATE BENCH OF ITAT , JODHPUR REFER RED TO THE CASE OF THE VELLORE D ISTRICT CENTRAL COOPERATIVE BANK LTD. VS. CIT(ITAT CHENNAI BENCH ) IN ITA NO. 914/MDS/2013 DT 17/07/2013. THE RELEVANT PORTION OF THE ORDER OF COORDINATE BENCH OF ITAT JODHPUR IN ITA NO. 240/JODHPUR/2013 IS AS FOLLOWS: 10. AFTER CIRCUMSPECTING THE ENTIRE RECORDS VIS - - VIS THE ORAL SUBMISSIONS, WERE 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 R EFERRED ABOVE 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 DETERMINATION BEFORE US IS WHETHER TH E ASSESSEE HAS CREATED ANY RESERVE/PROVISION FOR BAD AND DOUBTFUL DEBTS? 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 USED BY T HE ASSESSEE IN ACCORDANCE WITH THE RBI DIRECTIONS. AS IS EVIDENT FROM THE ASSESSMENT ORDER, THE ASSESSEE HAS INDEED 5 CREATED RESERVE FOR NPA. FOR CLAIMING BENEFIT UNDER THE PROVISIONS OF SECTION 36(1)(VIIA)(A) THE CONDITIONS TO BE SATISFIED IS; THAT PROVI SION FOR BAD AND DOUBTFUL DEBTS SHOULD HAVE BEEN MADE BY THE BANK ELIGIBLE TO CLAIM SUCH DEDUCTION. CO - OPERATIVE BANKS DO NOT STRICTLY FOLLOW THE PROVISIONS OF BANKING REGULATION ACT FOR THE PURPOSE OF MAINTAINING THEIR BOOKS OF ACCOUNTS. IN OUR CONSIDERED OPINION, THE ASSESSEE HAS CREATED PROVISIONS FOR BAD AND DOUBTFUL DEBTS MAY BE UNDER DIFFERENT NOMENCLATURE. THIS WILL NOT DIS - ENTITLE THE ASSESSEE FOR CLAIMING DEDUCTION UNDER THE PROVISIONS OF SECTION 36(1)(VIIA)(A). THE PURPOSE OF CREATION OF RESERVE F OR NPA IS SAME I.E., CREATING PROVISION TOWARDS 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 R BI GUIDELINES BECOME ALLOWABLE. 8. THAT THEREFORE, ON THE DISCUSSIONS AS HEREIN ABOVE WE QUASH THE ORDER PASSED BY THE LD. CIT - 1 UNDER SECTION 263 OF THE ACT . 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/ - SD/ - (B.P. JAIN) ( PARTHA SARATHI CHAUDHURY ) ACCOUN TANT MEMBER JUDICIAL MEMBER DATED : 20/12/2016 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. T HE DR