The Nasik Deistrict Central Co.op. Bank Ltd., Nashik V. Assistant Commissioner of Income-tax,

ITA 174/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9273 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 174/PUN/2015 / ASSESSMENT YEAR : 2010-11 THE NASHIK DISTRICT CENTRAL COOPERATIVE BANK LTD., NEAR DWARKA CIRCLE, AGRA ROAD, NASHIK 422 001 PAN : AAAAT3794P . / APPELLANT V/S AC IT, CIRC LE - 1 , NASHIK . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI RAJEEV KUMAR, CIT / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-I, NASHIK DATED 17-12-2014 FOR THE ASSESSMENT YEAR 201 0-11. 2. ASSESSEE RAISED 7 GROUNDS AND THEY REVOLVE AROUN D THE CORE ISSUE OF TAXING OF INCOME OF RS.10,25,00,000/-. THIS AMOUNT RELATES TO THE PROVISION FOR BAD & DOUBTFUL DEBT RESERVE (BDDR). THE SAME WAS REVERSED DURING THE YEAR BY CREDITING IN THE PROFIT AND LOSS ACCOUNT. HOWEVER, IN THE COLUMN, THE ASSESSEE CLAIMED THE SAME AS AN ALLOWABLE DEDUCTION AS THE SAME IS OUTSIDE THE SCOPE OF SECTION 41(1) OF THE ACT. IN THE GROU NDS ASSESSEE RAISED ARGUMENTATIVE ONES STATING THAT THE SAID ADDITION I S NOT JUSTIFIED. ASSESSEE MENTIONED THAT THE CIT(A) ERRED IN TREATING THE ASS ESSEE AS A MANIPULATOR OF / DATE OF HEARING :11.07.2017 / DATE OF PRONOUNCEMENT: 11.07.2017 2 ITA NO.174/PUN/2015 ACCOUNTS OF THE BANK. FURTHER, IT IS ARGUED IN GRO UND NO.3 THAT ASSESSEE CLAIMS THAT NE NEVER EARNED THE SAME AS ACTUAL INCO ME, AND THEREFORE, TAXING THE SAME IS UNFAIR. FURTHER, IT IS INFORMED IN GRO UND NOS. 4 AND 5 THAT THE ASSESSEE DULY CREDITED THE SAID AMOUNT BY REVERSING THE PROVISION AND THE SAME IS CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCOME AS THE ASSESSEE IS ENTITLED TO DEDUCTION OF THE SAID AMOUNT. 3. BRIEFLY STATED RELEVANT FACTS OF THIS CASE INCLU DE THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BAN KING ACTIVITIES. IT FILED THE RETURN OF INCOME ON 15-10-2010 DECLARING TOTAL INCO ME OF RS.7,43,47,590/-. AO NOTICED THAT THE ASSESSEE CREDITED SUM OF RS.10, 25,00,000/- TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF RETURNED BACK FROM B DDR. HOWEVER, THE SAID AMOUNT IS REDUCED FROM THE TOTAL INCOME OFFERED TO TAX FOR THE A.Y. 2010-11. AS PER THE DISCUSSION GIVEN IN THE ASSESSMENT ORDER , AS PER THE ASSESSEE, THE SAID AMOUNT IS DEDUCTIBLE AS ASSESSEE NEVER CLAIMED BENEFIT IN THE PAST ON THIS ACCOUNT; WHEREAS AS PER THE AO THE INCOME CONSIDERE D AS A TAXABLE ONE IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE IS NOT ENTITLE D FOR DEDUCTION BY WAY OF REDUCING THE SAME IN THE COMPUTATION OF INCOME. 4. CIT(A) CONFIRMED THE VIEWS OF THE AO RELYING HEA VILY ON THE CIRCULAR ISSUED BY THE RBI RELATING TO NON-PERFORMING ASSETS (NPAS). THE CONTENTS OF PARA 6.4 IS RELEVANT IN THIS REGARD. CIT(A) DISMIS SED THE ARGUMENTS OF THE ASSESSEE BY STATING THAT THE ASSESSEE COMMITTED SER IOUS MANIPULATION IN ITS ACCOUNT AND CHEATED THOUSANDS OF DEPOSITORS BY WIND OW DRESSING ITS PROFIT AND LOSS ACCOUNT. RELEVANT LINES FROM THE SAID PAR AGRAPH NO.6.5 READ AS UNDER : 6.5 THE ABOVE REFERRED NABARDS LETTER ALSO PROVES THAT THE APPELLANT HAS NOT FOLLOWED THE PRESCRIBED NORMS IN REGARD TO BDDR , PROFIT & LOSS ACCOUNT AND OVERDUE INTEREST ACCOUNT. AS MENTIONED IN THE PRECEDING PARAS, THE APPELLANT HAS FAILED TO FURNISH ANY CONVINCING EXPL ANATION WITH REGARD TO THE BREAK-UP OR COMPOSITION OF RS.10,25,00,000/- THAT I T HAS SHOWN AS INCOME IN 3 ITA NO.174/PUN/2015 ITS PROFIT AND LOSS ACCOUNT. SINCE THE APPELLANT H AS SHOWN RS.10,25,00,000/- AS INCOME AND PASSED THE NECESSARY ENTRIES IN ITS B OOKS OF ACCOUNT, I AM OF THE OPINION THAT AO HAS CORRECTLY ADDED RS.10,25,00 ,000/- TO THE INCOME OF THE APPELLANT. THE APPELLANTS RELIANCE OF VARIOUS CASE LAWS IS MISPLACED. THE APPELLANT HAS COMMITTED A SERIOUS MANIPULATION IN I TS ACCOUNTS AND CHEATED THOUSANDS OF DEPOSITORS BY WINDOW DRESSING ITS PROF IT AND LOSS ACCOUNT. THE ADDITION OF RS.10,25,00,000/- IS, THEREFORE, CONFIR MED. GROUND NO.4 IS DISMISSED. 5. FROM THE ABOVE, IT IS EVIDENT THAT THE CIT(A) HA S NOT REALLY EXAMINED THE FACTS RELATING TO THE CONDITIONS SPECIFIED IN T HE PROVISIONS OF SECTION 41(1) OF THE ACT. THE REASONING GIVEN BY THE CIT(A) RELI ES HEAVILY ON THE DISCREPANCIES AND MANIPULATIONS OF THE BANK AND NOT ON THE APPLICABILITY OF THE RELEVANT PROVISION FOR TAXING THE SAID AMOUNT OF RS .10.25 CRORES. 6. AGGRIEVED WITH THE ABOVE VIEWS OF THE CIT(A) THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. 7. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE OBSERVATION OF THE AUDITORS, M/S. R.B. SHARMA AND COMPANY HAVE NO IMPACT SO FAR AS APPLICATION OF THE PROVISIONS OF THE INCO ME-TAX IS CONCERNED. THE COMPLAINT GIVEN BY THE AUTHORITIES TO THE CHAIRMAN, NABARD DATED 01-11-2014 HIGHLIGHTING THE IRREGULARITIES COMMITTE D AND THE MANIPULATIONS THEREOF, HAVE BEEN DULY ENQUIRED AND NOTHING ADVERS E HAS BEEN FOUND BY THE CONTROLLING BANK, I.E., NABARD. FURTHER, REFERRING TO THE CONCLUSIONS OF THE CIT(A) GIVEN IN PARA NO.6.5 LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THERE IS NO DISCUSSION ABOUT THE VIOLATION OF THE PROVISI ONS OF SECTION 41(1) OF THE ACT. THE FACTS RELATING TO NON AVAILING OF ANY BEN EFIT OR DEDUCTION SPECIFIED IN THE SAID PROVISIONS WERE NEVER PART OF DEBATE OR DI SCUSSION BY THE LOWER AUTHORITIES. IN SUCH A CASE, AS PER THE LD. AUTHOR ISED REPRESENTATIVE, THE ADDITION MADE BY THE AO IS UNSUSTAINABLE IN LAW. F URTHER, LD. COUNSEL ALSO BROUGHT OUR ATTENTION TO THE JUDGMENT OF HONBLE DE LHI HIGH COURT IN THE CASE OF CIT VS. JAIN COOPERATIVE BANK LTD. VIDE ITA NOS. 314 & 315/2012 DATED 4 ITA NO.174/PUN/2015 04-03-2014 AND SUBMITTED THAT THE FACTS OF THE PRES ENT ISSUE ARE IDENTICAL TO THE FACTS OF THE SAID CASE OF JAIN COOPERATIVE BANK LTD. IN SUPPORT OF THE SAME, HE READ OUT THE FACTS OF THE CASE FROM PARA N OS. 2 AND 3 OF THE SAID JUDGMENT (SUPRA). IT IS THE ARGUMENT OF THE LD. CO UNSEL FOR THE ASSESSEE THAT THE ASSESSEE DID NOT CLAIM ANY DEDUCTION OR BENEFIT WITH REFERENCE TO THE DEBTS SPECIFIED ABOVE AMOUNTING TO RS.10.25 CRORES. THUS, PROVISIONS OF SECTION 41(1) SHALL NOT APPLY. THEREFORE, NOTHING IS REQUIRED TO BE BROUGHT TO TAX ON ACCOUNT OF THIS AMOUNT. FAIRLY MENTIONING T HAT THE SAID JUDGMENT PROBABLY WAS NOT AVAILABLE TO THE FILE OF THE CIT(A ) FOR SAME REASON AS THE SAME IS DATED 04-03-2014 HE MENTIONED THAT THE MATT ER CAN BE REMANDED TO THE FILE OF CIT(A) FOR RE-LOOK INTO THE APPLICABILI TY OF THE SAID JUDGMENT OF THE HONBLE DELHI HIGH COURT TO THE FACTS OF THE PRESEN T CASE. 8. LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE DUTIFULLY RELIED ON THE ORDERS OF THE AO AND THE CIT(A). HOWEVER, HE MENTI ONED THAT THE SAID HONBLE DELHI HIGH COURT JUDGMENT IS EXISTING AT TH E RELEVANT POINT OF TIME THAT THE SAME WAS NOT CITED BY THE ASSESSEES REPRESENTA TIVE BEFORE THE CIT(A). 9. ON HEARING BOTH THE PARTIES AND PERUSING THE ORD ERS OF THE REVENUE, WITHOUT GOING INTO THE MERITS OF THE CLAIM OF THE A SSESSEE, AS DISCUSSED IN THE COURT, WE FEEL RELEVANT TO REMAND THIS ISSUE TO THE FILE OF THE CIT(A) FOR EXAMINING THE FACTS OF THE CASE AND COMPARING THE S AME TO THE CASE OF JAIN COOPERATIVE BANK LTD. (SUPRA). WE DIRECT THE CIT(A ) TO APPLY THE SAID RATIO, IF APPLICABLE, TO THE PRESENT CASE. CIT(A) SHALL GRAN T REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, ALL THE GROUNDS RAISED BY TH E ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 5 ITA NO.174/PUN/2015 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF JULY, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; DATED : 11 TH JULY, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. TH E CIT(A) - I, NASHIK 4. THE CIT - I, NASHIK 5 . DR, ITAT, A BENCH PUNE; 6 . / GUARD FILE.