The Anand Peoples Co.-Op. Bank Ltd., Anand V. Dy. CIT, Anand Circle., Anand

ITA 2100/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6950 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 20-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: PRAMESH DOSHI
• Keywords: Business income; Principle of natural justice; Bad and doubtful debts
• Section: 143(3)

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./I.T.A. NO. 2100/AHD/2017 ( / ASSESSMENT YEAR:2014-15) THE ANAND PEOPLE CO-OP BANK LTD. PEOPLES PALACE, SOCIETY, SARDAR GUNJ ROAD, ANAND- 388001 / VS. DCIT ANAND CIRCLE, ANAND ./ ./PAN/GIR NO. : AAA AT2 812 9 ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PRAMESH DOSHI, A.R. / RESPONDENT BY: SHRI S. K. DEV, SR. DR !' /DATE OF HEARING 26/06/2019 #$!' / DATE OF PRONOUNCEMENT 31/07/2019 %& /O R D E R PER AMARJIT SINGH - AM: THE APPEAL FILED BY THE ASSESSEE FOR A.Y. 2014-15, ARISE FROM ORDER OF THE CIT(A)-4, VADODARA DATED 21.06.2017, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE BRIEF FACTS OF THE CASE IS THAT ASSESSEE HAS FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS. NIL ON 13.10.2015. TH E CASE OF THE ASSESSEE WAS SUBJECT TO SCRUTINY AND NOTICE UNDER SEC. 143(2) OF THE ACT WAS ISSUED ON 01.08.2016. THE ASSESSEE WAS ENGAGED IN THE BANKIN G BUSINESS, HOWEVER, NO BANKING ACTIVITIES WAS CARRIED OUT DURING THE YEAR UNDER CONSIDERATION AS THE ITA NO. 2100/AHD/2017 A.Y. 2014-15 2 ASSESSEE BANK WAS IN THE LIQUIDATION. FURTHER FACT S OF THE CASE ARE DISCUSSED WHILE ADJUDICATING THE GROUND OF APPEAL FILED BY THE ASSE SSEE AS UNDER:- 1. THE ASSESSING OFFICER AND LD. CIT(A), BARODA BO TH HAVE ERRED IN LAW IN CONSIDERING INCOME OF INTEREST RECEIVED ON ADVANCES RS. 9,88,,259/- AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME AS SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. 2. THE ASSESSING OFFICER AND LD.CIT(A), BARODA BOTH HAVE ALSO ERRED IN LAW IN DISALLOWING THE CLAIM OF BAD DEBTS OF RS. 1,35,000/ - WRITTEN OFF BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS DURING THE YEAR. 3. THE ASSESSING OFFICER AND LD. CIT(A), BARODA BOT H HAVE ERRED IN LAW IN APPLYING THE DECISION OF HONBLE ITAT IN RESPECT OF ASSESSEES OWN CASE FOR A.Y. 2009-10 BECAUSE THE FACTS OF THE CURRENT YEAR A.Y. 2014-15 ARE DIFFERENT FROM THAT OF A.Y. 2009-10 SO FAR AS SEC. 176(3A) OF THE I.T. ACT WAS NOT REFERRED BY THE ASSESSEE IN A.Y. 2009-10 WHILE THE CLAIM IS MADE UNDER THAT SEC TION IN CURRENT A.Y. 2014-15. 4. THE ORDER OF THE ASSESSING OFFICER IS ILLEGAL AG AINST THE NATURAL JUSTICE AND GOOD CONSCIENCE. 5. THE APPELLANT PRESERVES RIGHT TO ADD, ALTER OR A MEND ANY OR MORE GROUNDS OF APPEAL. GROUND NO. 1:- CONSIDERING INCOME OF INTEREST RECEIVED ON ADVANCE S RS. 9,88,259/- AS INCOME FROM OTHER SOURCES:- & GROUND NO. 3:- FOR NOT CONSIDERING PROVISION OF SEC. 176(3A) OF T HE ACT:- 3. DURING THE ASSESSMENT THE AO HAS THAT ASSESSEE H AS RECEIVED INTEREST ON ADVANCES AT RS. 9,88,259/-. THE AO HAS ASKED THE A SSESSEE TO EXPLAIN WHY NOT THE AFORESAID INTEREST ON ADVANCES SHOULD BE TREATED AS INCOME FROM OTHER SOURCES. THE ASSESSEE HAS RESPONDED THAT INTEREST INCOME OF R S. 9,88,259/- WAS PERTAINED TO AMOUNT RECEIVED FROM THE PARTICULAR BORROWER AGAINS T ITS OUTSTANDING BALANCE, THEREFORE, THE SAME CANNOT BE ASSESSEED AS INCOME F ROM OTHER SOURCES LOOKING TO THE PROVISIONS OF SEC. 176(3A) OF THE INCOME TAX ACT . THE AO HAS NOT AGREED WITH THE SUBMISSION OF THE ASSESSEE AND STATED THAT ON SIMILAR FACTS AND CIRCUMSTANCES IN THE ASSESSEES OWN CASE FOR A.Y. 2 009-10 THE AO HAS TREATED ITA NO. 2100/AHD/2017 A.Y. 2014-15 3 SIMILAR INCOME (I.E. INTEREST ON ADVANCE AND INTERE ST FROM BANKS) AS INCOME FROM OTHER SOURCES. 4. THE AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE TH E LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE. THE ASSESSEE HAS CLAIMED THE INTEREST INCOME OF RS. 9,88,259/- PERTAINING TO THE AMOUNT RECEIVED FROM THE BORROWER AGAINST ITS OUTSTANDING BALANCE. IN THIS REGARD, WE HAVE PERUSED THE PROVISION OF SEC. 176(3A) OF THE ACT. THE RELEVANT PART OF THIS PROVISION IS REPRODUCED AS UNDER:- WHERE ANY BUSINESS IS DISCONTINUED IN ANY YEAR, AN Y SUM RECEIVED AFTER THE DISCONTINUANCE SHALL BE DEEMED TO BE THE INCOME OF THE RECIPIENT AND CHARGED TO TAX ACCORDINGLY IN THE YEAR OF RECEIPT, IF SUCH SUM WOU LD HAVE BEEN INCLUDED IN THE TOTAL INCOME OF THE PERSON WHO CARRIED ON THE BUSINESS HA S SUCH SUM BEEN RECEIVED BEFORE SUCH DISCONTINUANCE. 5. IN VIEW OF THE ABOVE PROVISION OF SEC. 176(3A) I T IS CLEAR THAT THE INTEREST INCOME ON ADVANCES IS TO BE ASSESSEED AS BUSINESS I NCOME AND THE LOWER AUTHORITY HAS FAILED TO CONSIDER THE PROVISION OF SEC. 176(3A ) OF THE ACT WHICH DEAL WITH THE INCOME FROM DISCONTINUED OF BUSINESS. ACCORDINGLY, THE AFORESAID INCOME IS TO BE ASSESSEED AS INCOME FROM BUSINESS AND PROFESSION CO NSIDERING THE PROVISIONS OF SEC. 176(3A) OF THE ACT. IN THE LIGHT OF THE ABOVE FACTS AND FINDINGS WE AR E NOT INCLINED WITH THE DECISION OF THE LD. CIT(A), THEREFORE, THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS ALLOWED. GROUND NO. 2:- DISALLOWING THE CLAIM OF BAD DEBTS OF RS. 1,35,00, 000:- 6. DURING THE COURSE OF ASSESSMENT ON PERUSAL OF PR OFIT AND LOSS ACCOUNT THE AO NOTICED THAT ASSESSEE HAS CLAIMED INVESTMENT WRI TTEN OFF TO THE AMOUNT OF RS. 1,35,00,000/-. THE AO ASKED THE ASSESSEE TO JUSTIFY THE NATURE OF INVESTMENT WRITTEN OFF AND WHAT EFFORTS WERE MADE TO RECOVER T HE INVESTMENT WHICH WAS ITA NO. 2100/AHD/2017 A.Y. 2014-15 4 CLAIMED AS WRITTEN OFF. THE ASSESSEE RESPONDED THAT THE AFORESAID CLAIM OF INVESTMENT WRITTEN OFF IS PERTAINED TO THE FIXED DE POSIT MADE WITH SARVODAY CO- OPERATIVE BANK LTD., AHMEDABAD. SINCE THE SARVODAY CO-OPERATIVE BANK WAS UNDER LIQUIDATION AND THERE WAS NO PROBABILITY OF R ECOVERING THE SAID FIXED DEPOSIT AMOUNT FROM THE BANK, THEREFORE, THE IMPUGNED AMOUN T HAD BEEN WRITTEN OFF AS BAD DEBTS. THE AO HAS NOT AGREED WITH THE SUBMISSION OF THE ASSESSEE. THE AO WAS OF THE VIEW THAT ASSESSEES BANKING LICENCE FOR CARRYI NG ON BANKING BUSINESS IN INDIA WAS CANCELLED UNDER SEC. 22 OF THE BANKING REGULATI ON ACT, 1949 BY THE RESERVE BANK OF INDIA ON 25 TH OCTOBER, 2015, THEREFORE, THE ASSESSEE WAS NOT ENT ITLED TO CLAIM BAD DEBT. 7. THE AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE T HE LD. CIT(A). LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSUE. THE ASSESSEE HAD MADE INVESTMENT IN FIXED DEPOSIT WITH SARVODAY CO-OPERAT IVE BANK LTD., AHMEDABAD IN THE REGULAR COURSE OF BUSINESS. IT IS CLAIMED THAT THE INCOME FROM THE AFORESAID FIXED DEPOSIT PLACED WITH THE BANK HAD BEEN OFFERED AS INCOME REGULARLY IN THE EARLIER YEAR. SINCE THE SARVODAY CO-OPERATIVE WAS UNDER LIQUIDATION AND THERE WAS NO PROBABILITY OF RECOVERING THE SAID AMOUNT FROM T HE BANK, THEREFORE, THE ASSESSEE HAD WRITTEN OFF THE SAME AS BAD DEBT. DURING THE C OURSE OF APPELLATE PROCEEDING BEFORE US THE ASSESSEE HAS PLACED RELIANCE ON THE J UDICIAL PRONOUNCEMENTS IN THE CASE OF CIT VS. MORGAN SECURITIES 292 ITR 339, BDA LTD . VS. DCIT (2002) 125 TAXMANN 182 (MUM), NEW DEAL FINANCE INVESTMENT VS. DCIT 74 ITD 469 CIT VS. AHMEDABAD ELECTRICITY CO. LTD. 262 ITR 97. IT WAS ALS O SUBMITTED THAT AS PER THE PROVISION OF SEC. 36(2) OF THE ACT THE CLAIM OF BAD DEBT SHOULD BE ALLOWED. WE HAVE PERUSED THE ABOVE REFERRED JUDICIAL PRONOUNCEM ENTS AND GONE THROUGH THE PROVISION OF 36(2) OF THE ACT WHICH READ AS UNDER:- NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEB T OR PRAT THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSE E OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PRAT THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR OR ITA NO. 2100/AHD/2017 A.Y. 2014-15 5 REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY LENDING WHICH IS CARRIED ON BY THE ASSESSEE. 8. IN THIS REGARD, WE HAVE NOTICED THAT LD. CIT(A) H AS GIVEN SPECIFIC FINDING THAT ASSESSEE HAS NOT DEMONSTRATED WITH RELEVANT DE TAILS THAT AFORESAID DEPOSIT WAS MADE IN THE ORDINARY COURSE OF THE BUSINESS AND THE INCOME EARNED FROM SUCH DEPOSIT WAS SHOWN IN THE PRECEDING YEAR IN ITS TOTA L INCOME. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVE WE HAVE GONE THROUGH THE MATE RIAL ON RECORD AND OBSERVED THAT ASSESSEE HAS NOT DEMONSTRATED WITH ANY SUPPORT ING EVIDENCES THAT IT HAD SHOWN ANY INCOME EARNED FROM SUCH DEPOSIT IN THE PRECEDIN G YEARS. IN ORDER TO FACILITATE TO ADJUDICATE THE IMPUGNED ISSUE ON MERIT WE CONSID ER IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT(A) FOR ADJUDICATING AFRESH AFTER EXAMINATION AND VERIFICATION OF THE RELEVANT SUPPORTING DETAIL TO B E FURNISHED BY THE ASSESSEE. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. SD/- SD/- (SUDHANSHU SRIVASTAVA) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 31/07/2019 TANMAY TRUE COPY / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. % / ASSESSEE 3. '( ! )! / CONCERNED CIT 4. )! - / CIT (A) 5. *+, ! ( , ' ( , -.%'% / DR, ITAT, AHMEDABAD 6. ,/ 0 / GUARD FILE. BY ORDER / %& , 1 / - ' ( , -.%'% 2 THIS ORDER PRONOUNCED IN OPEN COURT ON 31/ 07/2019