M/s. District Co-Operative Bank Ltd., Saharanpur V. DCIT, Saharanpur

ITA 1739/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6325 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 23-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Keywords: Bad and doubtful debts; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. KUL BHARAT, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 1739/DEL/2017 : ASSTT. YEAR : 2012-13 M/S DISTRICT CO-OPERATIVE BANK LTD., RAILWAY ROAD, SAHARANPUR, UTTAR PRADESH-247001 VS DCIT, SAHARANPUR-247001 (APPELLANT) (RESPONDENT) PAN NO. A A AAD5431D ASSESSEE BY : SH. GAURAV BANSAL, CA REVENUE BY : SH. PRAKASH DUBEY, SR. DR DATE OF HEAR ING: 27 . 0 7 .20 2 1 DATE OF PRONOUNCEMENT: 17 .08 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), MUZAFFAR NAGAR, DATED 24.01.2017 WHEREIN THE APPEAL FILED BY THE AS SESSEE AGAINST THE ORDER PASSED BY THE LEARNED DEPUTY COMM ISSIONER OF INCOME TAX, SAHARANPUR, UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) ON 17.03.2016 WAS DISMISSED . PROVISION FOR BAD AND DOUBTFUL DEBTS: 2. THE LD. CIT (A) PASSED THE ORDER ON THE SAME DAT E AGAINST THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2013-14 WHICH STANDS ADJUDICATED BY THE CO-ORDINATE BENCH O F ITAT IN ITA NO. 1739/DEL/2017 DISTRICT CO-OPERATIVE BANK LTD. 2 ITA NO. 1740/DEL/2017 VIDE ORDER DATED. FOR THE SAK E OF READY REFERENCE, THE ORDER OF THE ITAT IS REPRODUCED HERE UNDER: 4. THE FIRST GROUND OF APPEAL IS AGAINST THE ADDITION OF RS.3,55,92,239/-. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS CLAIMED D EDUCTION ON PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) OF THE ACT BEING 10% OF INCREMENTAL ADVANCES OF RURAL BRAN CHES OF RS.2,97,86,800/- WAS CLAIMED AND 7.5% OF INCOME WAS CLAIMED FOR PROVISION FOR DOUBTFUL DEBT. THEREFORE, TOTAL DEDUC TION CLAIMED BY THE ASSESSEE WAS RS.3,55,92,239/-. THE LEARNED ASSESSIN G OFFICER NOTED THAT AS PER THE ANNUAL ACCOUNTS OF THE ASSESSEE THA T THE PROVISION FOR BAD AND DOUBTFUL DEBTS WAS NOT PROVIDED AND, TH EREFORE, HE ISSUED A SHOW CAUSE NOTICE. THE ASSESSEE SUBMITTED THAT THE INTENTION OF THE PROVISO IS IN THE FORM OF INCENTIV E PROVIDED TO THE ASSESSES AS ENGAGED IN BANKING BUSINESS TO PROMOTE RURAL BANKING. THE ASSESSEE ALSO RELIED UPON CIRCULAR NO. 258 DATE D 14.07.1979 WHEREIN THE INTENTION TO GRANTING SUCH DEDUCTION. I T WAS FURTHER STATED THAT ASSESSEE DOES NOT HAVE TO PROVE BEFORE MAKING THE ABOVE PROVISION THAT SAME HAS BECOME BAD. IT WAS, THEREFO RE, SUBMITTED THAT THE CLAIM OF DEDUCTION IS ALLOWABLE AS LAID DO WN IN RULE 6ABA OF THE INCOME TAX RULES. THE LEARNED ASSESSING OFFICER NOTED THAT PROVISIONS OF SECTION 36(1)(VIIA) IS A RESTRICTIVE CLAUSE LIMITING THE DEDUCTION TO THE EXTENT OF 10% OF ADVANCES AND 7.5% OF INCOME. IT WAS FURTHER HELD THAT THE PASSING OF ENTRIES ARE RE QUIRED TO AFFECT THE PROFIT AND LOSS ACCOUNT. HE FURTHER RELIED ON THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIA N BANK LTD. THUS THE ASSESSING OFFICER DISALLOWED THE ABOVE DEDUCTIO N STATING THAT ASSESSEE DOES NOT HAVE RIGHT TO CLAIM THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT BY DEDUCTING THE REQUIRED SU M FROM THE TOTAL INCOME WITHOUT PASSING ENTRIES OF PROVISION THROUGH BOOKS OF ACCOUNTS. ON APPEAL BEFORE THE LEARNED CIT (APPEALS ) THE ASSESSEE REITERATED THE ABOVE SUBMISSIONS. HE DISMISSED THE CLAIM OF THE ITA NO. 1739/DEL/2017 DISTRICT CO-OPERATIVE BANK LTD. 3 ASSESSEE FOR THE SIMILAR REASONS. THIS IS CHALLENGE D AS PER GROUND NO. 1 OF APPEAL. 5. WE HAVE CAREFULLY CONSIDERED THE REASONS GIVEN B Y THE ASSESSING OFFICER AND THE LEARNED CIT (APPEALS). IT IS APPARE NT THAT THE CO- OPERATIVE BANKS ARE ALSO ELIGIBLE FOR THE ABOVE DED UCTION. THE ONLY REASON FOR WHICH THE CLAIM OF THE ASSESSEE IS DISAL LOWED IS BECAUSE ASSESSEE HAS NOT MADE ANY PROVISION IN THE BOOKS OF ACCOUNTS. HOWEVER, BEFORE THE LEARNED CIT (APPEALS) ASSESSEE HAS SUBMITTED A COPY OF THE REVISED PROFIT AND LOSS ACCOUNT AND BAL ANCE SHEET DATED 26.12.2016 AS ON 31.03.2012 PREPARED AFTER THE APPR OVAL OF AGM IN SUPPORT OF THE ABOVE CLAIM. THE LEARNED CIT (APPEAL S) HAS FAILED TO CONSIDER THE FACT THAT IN THE REVISED PROFIT AND LO SS ACCOUNT SUCH CLAIM WAS ALREADY MADE. THEREFORE, IT IS REQUIRED T O BE CONSIDERED BY THE LOWER AUTHORITIES THAT WHEN ASSESSEE HAS SUBMIT TED THE REVISED ANNUAL ACCOUNTS WHICH ARE DULY APPROVED BY THE AGM WHETHER THE ASSESSEE HAS SATISFIED THE REQUIREMENT OF THE PROVI SIONS OF SECTION 36(1)(VIIA) OF THE ACT. AS APPARENT FROM THE RECORD THAT ANNUAL ACCOUNTS WERE REVISED ON 26.02.2016, WHEREAS THE OR DER WAS PASSED UNDER SECTION 143(3) OF THE ACT ON 17.03.2016. THER EFORE, SUCH ACCOUNTS NATURALLY COULD NOT HAVE BEEN BEFORE THE A SSESSING OFFICER. THE LEARNED CIT (APPEALS) ALSO DID NOT CONSIDER THE FACT THAT WHETHER SUCH A REVISION OF ACCOUNTS IS VALID OR NOT. IN VIE W OF THIS WE SET ASIDE THE WHOLE ISSUE AS PER GROUND NO. 1 OF THE AP PEAL BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE WHETHER TH E ASSESSEE HAS MADE THE PROVISION CORRECTLY OR NOT. THE ASSESSEE I S DIRECTED TO PRODUCE SUCH ACCOUNTS ALONG WITH ALL ITS SUBMISSION S BEFORE THE ASSESSING OFFICER WHO IS DIRECTED TO EXAMINE THE CL AIM OF THE ASSESSEE AFRESH AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 3. THE ISSUE BEFORE US FOR THE INSTANT YEAR IS AKIN TO THE ISSUE ALREADY BEEN DEALT IN THE EARLIER YEAR AS MENTIONED ABOVE. HENCE, WE HEREBY REMAND THE MATTER TO THE FILE OF T HE ASSESSING ITA NO. 1739/DEL/2017 DISTRICT CO-OPERATIVE BANK LTD. 4 OFFICER TO EXAMINE THE PROVISIONS WITH REFERENCE TO THE FINAL ACCOUNTS OF THE ASSESSEE. 4. THE APPEAL OF THE ASSESSEE ON THIS GROUND IS TRE ATED TO BE ALLOWED. DIFFERENCE IN THE P&L ACCOUNT AND COMPUTATION OF IN COME: 5. THE OTHER ISSUE RAISED BY THE ASSESSEE RELATES T O CONFIRMING OF THE DIFFERENCE BETWEEN THE PROFIT AS PER THE P&L ACCOUNT AND THE PROFIT DECLARED IN THE COMPUTATION OF INCOME. IT WAS SUBMITTED OWING TO THE ADJUSTMENTS IN THE BRANC H ACCOUNTS OF 11 BANKS, THE NET PROFIT GOT ADJUSTED AGAINST TH E PROFIT SHOWN IN THE P&L ACCOUNT. IT WAS SUBMITTED THAT THE BALAN CE SHEET FOR THE ASSESSMENT YEAR 2013-14 SHOWS THE ACCUMULATED P ROFIT BY TAKING INTO CONSIDERATION OF THE PROFIT OF THE EARL IER YEAR. THE LD. CIT (A) HELD THAT THE ASSESSEE FAILED TO SUBMIT THE RECONCILIATION STATEMENT WHEREAS THE CONTENTION OF THE ASSESSEE BEFORE THE TRIBUNAL WAS THAT THE ASSESSEE HAS DULY SUBMITTED THE RECONCILIATION STATEMENT AS PER THE MEMORANDUM OF CHANGES. THE SAME HAS BEEN DULY ENCLOSED AT PAGE NO . 5 OF THE PAPER BOOK REFLECTING THE CONTRACTION OF RS.29,55,7 51/-. THE AO IS DIRECTED TO VERIFY THE SAME WITH REGARD TO BOOKS OF ACCOUNTS BEFORE ACCEPTING THE RECONCILIATION. IN THE RESULT, THE APPEAL OF THE ASSESSEE ON THIS GROUND IS ALLOWED. ITA NO. 1739/DEL/2017 DISTRICT CO-OPERATIVE BANK LTD. 5 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/08/2021. SD/- SD/- (KUL BHARAT) ( DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 17/08/2021 *SUBODH KUMAR, SR. PS* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR