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

ITA 1740/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4621 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 23-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N O N E
• Assessee Lawyers: MOHD SARFARAZ ASST
• Keywords: Non-deduction of tax; Bad and doubtful debts; TDS; Set aside
• Section: 143(3); 40(a)(ia); 194A

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI S UDHANSHU SRIVASTAVA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 17 40 /DEL/201 7 (ASSESSMENT YEAR: 20 1 3 - 1 4 ) DISTRICT CO - OPERATIVE BANK LTD. RAILWAY ROAD, SAHARANPUR 247 001 [U.P.] PAN : A AAAD5431D VS. DY. CIT , SAHARANPUR 2 47 001. UTTAR PRADESH . (APPELLANT) (RESPONDENT) REVENUE BY : N O N E. ASSESSEE BY: SHRI MOHD. SARFARAZ, ASST. DATE OF HEARING 06 / 1 1 /20 19 DATE OF PRONOUNCEMENT 03 /0 2 / 2020 O R D E R PER PRASHANT MAHARISHI , A. M. : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), MUZAFFAR NAGAR , DATED 24 .0 1 .201 7 WHEREIN THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, SAHARANPUR, UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) ON 17.03.2016 WAS DISMISSED. 2. THE BRIEF FACTS OF THE CASE IS THAT ASSESSEE IS A SOCIETY REGISTERED UNDER THE U.P. CO - OPERATIVE SOCIETY ACT AND DERIVES INCOME FROM BANKING. IT FILED ITS RETURN OF INCOME ON 26.09.2013 DECLARING INCOME OF RS.4,18,13,620/ - . THE ASSESSMENT U/S 143(3) OF THE AC T WAS PASSED BY THE ASSESSING OFFICER BY MAKING A DISALLOWANCE OF RS.3,55,92,239/ - U/S 36(1)(VIIA) OF THE ACT. F URTHER DISALLOWANCE OF RS.56,64,630/ - WAS ALSO MADE ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE ON INTEREST PAID ON FIXED DEPOSIT RECEIPTS . T HE DISALLOWANCE WAS MADE U/S 40(A)(IA) OF PAGE | 2 THE ACT . THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT RS.8,30,70,490/ - . THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT (APPEALS) WHO DISMISSED THE SAME AND, THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE U S. 3. A T THE TIME OF HEARING THE ASSESSEE MADE AN APPLICATION FOR ADJOURNMENT SEEKING FURTHER TIME. ON IDENTICAL GROUND THE ASSESSEE HAS SOUGHT ADJOURNMENT IN THE MONTH OF AUGUST, 2019. THEREFORE, THERE IS NO MERIT IN THE ADJOURNMENT REQUEST OF THE ASSESSEE AND THE SAME IS DISMISSED. 3.1 THE CASE OF THE ASSESSEE IS HEARD ON THE MERITS. THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS ALSO NOT PRESENT AT THE TIME OF HEARING. NO ADJOURNMENT APPLICATION WAS ALSO RECEIVED. 4. THE FIRST GROUND OF APPEA L IS AGAINST THE ADDITION OF RS.3,55,92,239/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS CLAIMED DEDUCTION ON PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) OF THE ACT BEING 10% OF INCREMENTAL ADVANCES OF RURAL BRANCHES OF RS.2,97,86,800/ - WAS CLAIMED AND 7.5% OF INCOME WAS CLAIMED FOR PROVISION FOR DOUBTFUL DEBT. THEREFORE, TOTAL DEDUCTION CLAIMED BY THE ASSESSEE WAS RS.3,55,92,239/ - . THE LEARNED ASSESSING OFFICER NOTED THAT AS PER THE ANNUAL ACCOUNTS OF THE ASSESSEE THAT THE PROVISION FOR BAD AND DOUBTFUL DEBTS WAS NOT PROVIDED AND, THEREFORE, HE ISSUED A SHOW CAUSE NOTICE. THE ASSESSEE SUBMITTED THAT THE INTENTION OF THE PROVISO IS IN THE FORM OF INCENTIVE PROVIDED TO THE ASSESSE S AS ENGAGED IN BANKING BUSINESS TO PROMOTE RURAL BANKING. THE ASSESSEE ALSO RELIED UPON CIRCULAR NO. 258 DATED 14.07.1979 WHEREIN THE INTENTION TO GRANTING SUCH DEDUCTION. IT WAS FURTHER STATED THAT ASSESSEE DOES NOT HAVE TO PR OVE BEFORE MAKING THE ABOV E PROVISION THAT SAME HAS BECOME BAD. IT WAS, THEREFORE, SUBMITTED THAT THE CLAIM OF DEDUCTION IS ALLOWABLE AS LAID DOWN IN RULE 6 ABA OF THE INCOME TAX RULES. THE LEARNED ASSESSING OFFICER NOTED THAT PROVISIONS OF SECTION 36 (1)(VIIA) IS A RESTRICTIVE CLA USE 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 REQUIRED TO A FFECT THE PROFIT AND LOSS ACCOUNT. HE FURTHER RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. THUS THE ASSESSING OFFICER DISALLOWED THE ABOVE DEDUCTION STATING THAT PAGE | 3 ASSESSEE DOES NOT HAVE RIGHT TO CLAIM THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT BY DEDUCTING THE REQUIRED SUM FROM THE TOTAL INCOME WITHOUT PASSI NG 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 ASSESSEE FOR THE SIMILAR REASONS. THIS IS CHALLENGED AS PER GROUND NO. 1 OF APPEAL. 5 . WE HAVE CAREFULLY CONSIDERED THE REASONS GIVEN BY THE ASSESSING OFFICER AND THE LEARNED CIT (APPEALS). IT IS APPARENT THAT THE CO - OPERATIVE BANKS ARE ALSO ELIGIBLE FOR THE ABOVE DEDUCTION. THE ON LY REASON FOR WHICH THE CLAIM OF THE ASSESSEE IS DISALLOWED 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 BALANCE SHEET DATED 26.12.2016 AS ON 31.03.2012 PREPARED AFTER THE APPROVAL OF AGM IN SUPPORT OF THE ABOVE CLAIM. THE LEARNED CIT (APPEALS) HAS FAILED TO CONSIDER THE FACT THAT IN THE REVISED PROFIT AND LOSS ACCOUNT SUCH CLAIM WAS ALREADY MADE. THEREFORE, IT IS REQUIRED TO BE CONSIDERED BY THE LOWER AUTHORITIES THAT WHEN ASSESSEE HAS SUBMITTED THE REVISED ANNUAL ACCOUNTS WHICH ARE DULY APPROVED BY THE AGM WHETHER THE ASSESSEE HAS SATISFIED THE REQUIREMENT OF THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. A S APPARENT FROM THE RECORD THAT ANNUAL ACCOUNTS WERE REVISED ON 26.02.2016 , WHEREAS THE ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT ON 17.03.2016. THEREFORE, SUCH ACCOUNTS NATURALLY COULD NOT HAVE BEEN BEFORE THE ASSESSING OFFICER. THE LEARNED CIT (APPEALS) ALSO DID NOT CONSIDER THE FACT THAT WHETHER SUCH A REVISION OF ACCOUNTS IS VALID OR NOT. IN VIEW OF THIS WE SET ASIDE THE WHOLE ISSUE AS PER GROUND NO. 1 OF THE APPEAL BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE WHETHER THE ASSESSEE HA S MADE THE PROVISION CORRECTLY OR NOT. THE ASSESSEE IS DIRECTED TO PRODUCE SUCH ACCOUNTS ALONG WITH ALL ITS SUBMISSIONS BEFORE THE ASSESSING OFFICER WHO IS DIRECTED TO EXAMINE THE CLAIM OF THE ASSESSEE AFRESH AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 5 . 1 IN THE RESULT, GROUND NO. 1 OF THE APPEAL IS ALLOWED, WITH ABOVE DIRECTIONS. 6. THE SECOND GROUND OF APPEAL IS THAT THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.56,64,630/ - ON INTEREST PAID ON FDRS. IN THE STATUTORY AUDIT REPORT PAGE | 4 IT WAS REPORTED THAT ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE AMOUNTING TO RS.5,66,461/ - ON PAYMENT OF INTEREST ON FIXED DEPOSITS TO ITS CUSTOMERS AS PROVIDED UNDER SECTION 194A OF THE ACT. THE ASSESSEE SUBMITTED THAT NO TAX IS REQUIRED TO BE DEDUCTED ON FIXED DE POSITS MADE BY AGRICULTURISTS. IT WAS STATED THAT THE BRANCHES COULD NOT FILE THE REQUISITE DECLARATION FORMS IN TIME TO THE OFFICE OF THE COMMISSIONER OF INCOME TAX, MUZAFFAR NAGAR. HOWEVER, BEFORE THE ASSESSING OFFICER THE ASSESSEE SUBMITTED THE COMPLE TE FORMS IN FORM NO. 15H AND 15G BEFORE THE ASSESSING OFFICER. ASSESSEE FURTHER SUBMITTED THAT INCOME OF THE DEPOSITORS ARE ALSO BELOW TAXABLE LIMIT. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE FOR THE REASON THAT ASSESSEE DID NOT SUBM IT ANY EVIDENCE WHETHER FORM NO. 15G AND 15H HAD BEEN SUBMITTED OR NOT. THE AO ALSO NOTED THAT THE AUDITOR OF THE ASSESSEE HAS ALSO STATED THAT TAX HAD NOT BEEN DEDUCTED TO THAT EXTENT. THE ASSESSING OFFICER FURTHER HELD THAT THERE IS NO EVIDENCE THAT WH EN THE INTEREST WAS CREDITED TO THE ACCOUNTS OF THE DEPOSITORS WHETHER SUCH F O RMS WERE AVAILABLE OR NOT. THUS, CONSIDERING THAT TAX HAS NOT BEEN DEDUCTED OF RS.5,66,461/ - HE DISALLOWED THE INTEREST PAID ON FDRS OF RS.56,64,430/ - . ON APPEAL BEFORE THE LEARNED CIT (APPEALS) ASSESSEE REITERATED THE SAME ARGUMENTS. THE LEARNED CIT (APPEALS) DISMISSED THE CLAIM OF THE ASSESSEE. 7. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE LOWER AUTHORITIES AS APPAR ENT FROM THE ORDERS THAT ASSESSEE DID FILE FORM NO. 15G AND 15H BEFORE THE ASSESSING OFFICER THOUGH THE SAME MIGHT NOT HAVE BEEN FILED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX, MUZAFFAR NAGAR OR MIGHT HAVE BEEN FILED LATE. THE ASSESSEE HAS ALSO STATE D THAT MOST OF THE FIXED DEPOSITORS ARE AGRICULTURISTS AND ARE HAVING INCOME BELOW THE TAXABLE LIMIT. MERELY BECAUSE THE ASSESSEE DID NOT FILE THE REQUISITE FORM BEFORE THE LEARNED CIT, MUZAFFAR NAGAR, IN TIME , IT CANNOT BE SAID THAT ASSESSEE HAS FAILED T O DEDUCT TAX AT SOURCE ON SUCH INTEREST PAYMENT. FURTHERMORE WITHOUT EXAMINING THOSE FORM NO. 15G AND 15H THE ASSESSING OFFICER ALSO COULD NOT HAVE HELD THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE ON INTEREST PAID TO SUCH PERSONS WHO HAVE FURNISH ED FORM NO. 15H AND 15G TO THE ASSESSEE. WITHOUT EXAMINING THE FACT S, NO DISALLOWANCE CAN BE MADE IN THE HANDS OF THE ASSESSEE. FURTHERMORE THE LEARNED CIT (APPEALS) ALSO DID NOT CARRY OUT SUCH AN EXERCISE. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASDIDE THIS PAGE | 5 GROUND OF APPEAL THAT TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO SUBMIT SUCH FORM NO. 15H AND 15G AND PROVE BEFORE THE ASSESSING OFFICER THAT NO TAX WAS REQUIRED TO BE DEDUCTED ON SUCH SUM. THE ASSESSEE IS ALSO DI RECTED TO SHOW THE BREAK - UP OF FAILURE TO DEDUCT TAX AT SOURCE OF RS.5,66,461/ - BEFORE THE ASSESSING OFFICER THAT SUCH TDS WAS NOT REQUIRED TO BE DEDUCTED. ASSESSEE IS AT LIBERTY TO RAISE THE CLAIMS FOR NON - DEDUCTION OF TAX AS WELL AS INCLUSION OF THE INT EREST INCOME IN THE RETURN OF INCOME OF DEPOSITORS FOR CONTESTING THE ABOVE DISALLOWANCE. THE ASSESSING OFFICER MAY EXAMINE THE DETAILS SO FURNISHED AND DECIDE THE ISSUE AFRESH. ACCORDINGLY GROUND NO. 2 OF THE APPEAL IS ALLOWED WITH ABOVE DIRECTION. 8. GROUND NOS. 3, 4 AND 5 ARE GENERAL OR CONSEQUENTIAL IN NATURE AND HENCE THEY ARE DISMISSED. 9. ACCORDINGLY APPEAL OF THE ASSESSEE IS ALLOWED, FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON : 03 /0 2 / / 2020 . SD/ - SD/ - ( S UDHANSHU SRIVASTAVA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 03 /0 2 / 2020 . *MEHTA* COPY FORWARDED TO : 1 . APP ELLANT 2 . RESPONDENT 3 . CIT 4 . CIT (A PPEALS ) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI