The Tiruvannamalai District Central Co-op Bank Ltd., Tiruvannamalai V. ACIT, Vellore

ITA 226/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9265 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 18-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 08-02-2016
• Court: TRIBUNAL
• Department Lawyers: MRS JAYANTHI KRISHNAN
• Assessee Lawyers: K RAVI
• Keywords: Reopening of assessment; Share purchase agreement; Tangible material; Wrong claim; Bad and doubtful debts
• Section: 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , ! ' , # $% & [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ] ./ I.T.A.NO.226/MDS./2016 / ASSESSMENT YEAR :2007-08 THE THIRUVANNAMALAI DISTRICT CENTRAL CO-OPERATIVE BANK LTD., NO.9,6 TH STREET, GANDHI NAGAR, TIRUVANNAMALAI 606 602. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I, VELLORE. [PAN AAATT 4448 F ] ( '( / APPELLANT) ( )*'( /RESPONDENT) / APPELLANT BY : SHRI K.RAVI ADVOCATE /RESPONDENT BY : MRS.JAYANTHI KRISHNAN,CIT,DR / DATE OF HEARING : 18 - 05 - 201 6 / DATE OF PRONOUNCEMENT : 25 - 05 - 2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-13, CHENNA I DATED 04.12.2015 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS F OR ADJUDICATION. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE LAW, FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.226/MDS./2016 :- 2 -: 2. NOTICE U/S. 148 DATED 23/11/2012 IS BAD IN LAW A S IT WAS ISSUED WITHOUT ANY FRESH TANGIBLE MATERIAL. 3. NOTICE U/S. 143(2) DATED 07/03/2014 IS BAD IN LA W AS THERE WAS NO RETURN OF INCOME PENDING FOR ASSESSMENT AS ON 07/03 /2014. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE DENIAL OF EXEMPTION U/S. 10(34) IN R ESPECT OF DIVIDEND OF RS.28,30,555/- WITHOUT APPRECIATING THE FACT THAT SECTION 115-0 DOES NOT STIPULATE DIVIDEND DISTRIBUT ION TAX IN RESPECT OF CO-OPERATIVE SOCIETIES OR CO-OPERATIVE BANKS. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE INTERPRETATION GIVEN BY THE ASSESSING OFFICER TO RULE 6ABA OF INCOME TAX RULES, 1962 TO HOLD THAT ONLY FR ESH ADVANCES MADE DURING THE RELEVANT ASSESSMENT YEAR IS ELIGIBL E FOR THE PURPOSE OF COMPUTING AGGREGATE AVERAGE ADVANCES. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE LEVY OF INTEREST U/S.234A OF THE INCO ME TAX ACT, 1961 EVEN THOUGH THE ORIGINAL RETURN OF INCOME WAS FILED WITHIN THE DUE DATE FOR FILING RETURN OF INCOME. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A CO -OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING AND FLED RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 ON 28.10.2007 DECLARING NI L INCOME AFTER CLAIMING A LOSS OF ` 12,83,21,915/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT. LATER, THE ASSESSMENT WAS R EOPENED BY RECORDING REASONS FOR ESCAPEMENT OF INCOME BY THE A O AS FOLLOWS:- THE ASSESSEE BANK HAS ADDED BACK THE PROVISION FOR NPA OF ` 42,94,55,769/- TO NET PROFIT IN THE STATEMENT OF TO TAL INCOME, AGAINST THAT DEBITED IN ITS PROFIT AND LOSS ACCOUNT ` 43,21,51,066/-. IT HAS ALSO CLAIMED DIVIDEND INCOM E FROM TNPCB AND TCBD TO THE EXTENT OF ` 27,40,555/- AND ` 90,000/- AS EXEMPTED INCOME. FURTHER, THE ASSESSEE THE ASSE SSEE ALSO ITA NO.226/MDS./2016 :- 3 -: CLAIMED DEDUCTION OF ADVANCES TOWARDS RURAL BRANCHE S OF ` 24,92,27,514/-. IT IS SEEN THAT THE DEDUCTION IS N OT COMPUTED AS PROVIDED IN RULE 6ABA OF THE ACT. IN V IEW OF THE WRONG CLAIMS, THE AO REOPENED THE ASSESSMENT AND IS SUED NOTICE U/S.148 OF THE ACT. THE NOTICE U/S.148 OF THE ACT AFTER OBTAINING APPRO VAL U/S.147 OF THE ACT FROM JCIT, VELLORE ON 16.11.2002, WAS ISSUED ON 23.11.2012 TO THE ASSESSEE. DURING THE COURSE OF RE-ASSESSMENT PROCEE DINGS, THE ASSESSEE CLAIMED DEDUCTION U/S.10(34) IN RESPECT OF DIVIDEND RECEIVED. ACCORDING TO AO, THE DIVIDEND RECEIVED IS EXEMPT, I F IT HAD SUFFERED TAXES U/S.115-O OF THE ACT, THEN ONLY DIVIDEND WILL BE EXEMPT U/S.10(34) OF THE ACT. THE AO OBSERVED THAT THE NO MENCLATURE OF THE WORD DIVIDEND RECEIVED IS NOTHING BUT THE INTERE ST RECEIVED ON THE DEPOSITS HELD BY THE SOCIETY WITH THE TNPCB AND TC BD. ACCORDINGLY, THE AO DENIED THE EXEMPTION U/S.10(34) OF THE ACT. 3.1 REGARDING CLAIM OF DEDUCTION U/S.36(1)(VIIA) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER THIS SECTION AT 7.5% AND FOR RURAL ADVANCES AT 10%. ACC ORDING TO AO, AS PER SECTION 36(1)(VIIA), IT IS ELIGIBLE FOR DEDUCTI ON AT 10% OF THE TOTAL ADVANCES MADE BY ITS RURAL BRANCHES. THE COMPUTATI ON OF DEDUCTION U/S.36(1)(VIIA) OF THE ACT WAS NOT IN ACCORDANCE WI TH RULE-6ABA OF INCOME TAX RULES, 1962. HE OBSERVED THAT THE ASSES SEE CARRIED THE ITA NO.226/MDS./2016 :- 4 -: FIGURES OF CLOSING BALANCE AS ON 31.03.2006 TO 01.0 4.2006 AND THE ADVANCES GIVEN FOR THE MONTH OF APRIL, 2006 TO MARC H, 2007, CUMULATIVELY WORKED OUT, WHICH IS INCORRECT. THE AS SESSEE HAS NOT WORKED OUT THE ADVANCES OF THE RURAL BRANCHES AS PE R RULE 6ABA, WHICH RESULTED IN DISALLOWANCE OF ` 12,49,97,880/-. AGAINST THESE TWO ADDITIONS, THE ASSESSEE WENT IN APPEAL BEFORE THE L D.CIT(A). ON APPEAL, THE CIT(A) CONFIRMED THE ADDITIONS MADE BY THE AO. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE FIRST GROUND IS WITH REGARD TO REOPENING OF ASSESSMENT, AND ALSO ISSUANCE OF NOTICE U/S.143(2) OF THE ACT. BUT WE FIND THAT THESE GROUNDS ARE NOT EMANATED FROM THE ORDER OF CIT(A) A ND ALSO LD.A.R IS NOT PUT ANY ARGUMENT TO SUPPORT THESE GROUNDS. ACC ORDINGLY, THESE GROUNDS ARE DISMISSES AS IT IS NOT EMANATED FROM TH E ORDER OF CIT(A). 5. NOW, COMING TO THE ADDITION ON ACCOUNT OF DENYI NG OF EXEMPTION TO DIVIDEND INCOME RECEIVED OF ` 28,30,555/- U/S.10(34) OF THE ACT. THE LD.A.R PLEADED THAT THE AO WRONGLY PUT IT AS A DIVIDEND INCOME RECEIVED FROM TNPCB AND TCBD . ACCORDING TO HIM, THIS DIVIDEND INCOME WAS FROM THESE TWO ORGANIZATIONS AND IT IS F ROM M/S. THE THIRUVANNAMALAI DISTRICT CENTRAL CO-OPERATIVE BANK LTD., AND HE PLEADED THAT THE ISSUE MAY BE REMITTED TO THE FILE OF AO FOR FRE SH CONSIDERATION FOR WHICH THE LD.D.R COULD NOT RAISE ANY OBJECTION. ITA NO.226/MDS./2016 :- 5 -: 6. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE O PINION THAT THERE IS CONTENTION REGARDING THE PERSON FROM WHOM THE ASSES SEE HAS RECEIVED DIVIDEND. HENCE, EVIDENCES BROUGHT ON RECORD SHOWI NG THAT SHARE CERTIFICATE ISSUE FROM M/S.THE TAMILNADU STATE APE X CO-OPERATIVE BANK LTD., IS NOT COVERING THE ENTIRE AMOUNT OF INVESTME NTS BY THE ASSESSEE IN RESPECT OF THIS ISSUE. HENCE, THE ISSUE IS REMITTE D TO THE FILE OF AO WITH A DIRECTION TO THE ASSESSEE TO PLACE NECESSARY EVIDEN CE TO SHOW THAT THE DIVIDEND RECEIVED BY THE ASSESSEE IN TERMS OF SEC.1 0(34) OF ACT. ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF AO FOR FRESH CONSIDERATION. 6.1 THE NEXT GROUND FOR OUR CONSIDERATION IS WITH REGARD TO APPLICABILITY OF RULE 6ABA OF INCOME TAX RULES,1962. AT THE TIME OF HEARING, LD.A.R SUBMITTED THAT THIS ISSUE WAS CONSIDERED BY THIS TR IBUNAL IN THE CASE OF DCIT VS. MADURAI DISTRICT CENTRAL CO-OPERATIVE BANK LTD. , REPORTED IN [2014] 51 TAXMANN.COM 194 (CHENNAI-TRIB.) WHEREIN HELD AS FOL LOWS:- 6. THIS ISSUE OF COMPUTING THE DEDUCTION TOWARDS TH E PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER RULE 6ABA OF THE I .T.RULES, 1962, WAS CONSIDERED BY THE ITAT, CHENNAI C BENCH IN THE CASE OF CITY UNION BANK LTD. IN IT APPEAL NOS.1485/ MDS/2007 AND 1507/MDS/2007 THROUGH THEIR ORDER DATED 30TH OC TOBER, 2009. IN PARAGRAPH 8 OF THE SAID ORDER, THE TRIBUNA L HAS CONCLUDED ON THE ISSUE IN THE FOLLOWING MANNER: WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD. WE HAVE PERUSED RULE 6ABA OF THE INCOME- TAX RULES, 1962. AS PER THE SAID RULE, THE AGGREGATE AV ERAGE ADVANCES MADE BY THE RURAL BRANCHES HAVE TO BE COMP UTED BY TAKING THE AMOUNTS OF ADVANCES MADE BY EACH RURAL , ,RANCH AS ITA NO.226/MDS./2016 :- 6 -: OUTSTANDING AT THE END OF THE LAST DAY OF EACH MONT H COMPRISED IN THE PREVIOUS YEAR. THUS, IT IS CLEAR THAT THERE IS NO PROVISION TO CONSIDER ONLY THE ADVANCES MADE DURING THE YEAR UNDER CONSIDERATION. IT IS THE FUNDING OF THE ASSESSING O FFICER THAT THE ASSESSEE HAS FURNISHED THE WORKING AS PER RULE 6ABA . IT IS NOT IN DISPUTE THAT THE WORKING IS AS PER RULE 6ABA BUT THE ASSESSING OFFICER SEEMS TO HAVE INTERPRETED THE PRO VISION NOT WARRANTED BY LAW. THEREFORE, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) ALLOWING THE DE DUCTION TO THE ASSESSEE. IN THE LIGHT OF THE ORDER OF THE TRIBUNAL AS STATED ABOVE, WE HOLD THAT THE COMPUTATION MADE BY THE ASSESSEE IS A S PER LAW AND THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS RIG HTLY UPHELD THE COMPUTATION MADE BY THE ASSESSEE AGAINST THE DEDUCTION TOWARDS PROVISION FOR BAD AND DOUBTFUL DE BTS. AS SUCH, WE FIND THAT THE APPEALS FILED BY THE REVENUE ARE LIABLE TO BE DISMISSED. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF A SSESSEE BY PLACING RELIANCE ON THE ABOVE ORDER OF THE TRIBUNAL. 7. REGARDING THE ISSUE OF LEVY OF INTEREST U/S.234 A OF THE ACT, IT IS CONSEQUENTIAL AND MANDATORY IN NATURE AND TO BE COM PUTED ACCORDINGLY WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. ITA NO.226/MDS./2016 :- 7 -: 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON MAY, 2016, AT CHENNAI. SD/ - SD/ - ( . . . ! ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! ' ) (CHANDRA POOJARI) # / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED: 25 TH MAY, 2016 K S SUNDARAM %&'' ()'*) / COPY TO: ' 1 . / APPELLANT 4. ' + / CIT 2. / RESPONDENT 5. ),-' . / DR 3. ' +'/! / CIT(A) 6. -0'1 / GF %&'' ()'*) / COPY TO: ' 1 . / APPELLANT 3. ' +'/! / CIT(A) 5. ),-' . / DR 2. / RESPONDENT 4. ' + / CIT 6. -0'1 / GF