JILA SAHAKARI BANK MARYDIT, Jabalpur V. INCOME TAX OFFICER WARD1(2),

ITA 231/JAB/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2250 (ITAT-JABALPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 28-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NEERAJ AGRAWAL
• Keywords: Opportunity of being heard; Bad and doubtful debts
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 231/JAB/2016 / ASSESSMENT YEAR : 2012-13 JILA SAHAKARI BANK MARYADIT, SAHAKARI SADAN, WRIGHT TOWN, JABALPUR (MP) PAN : AAAJJ 0118 J VS INCOME TAX OFFICER, WARD 1(2), JABALPUR / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI NEERAJ AGRAWAL, CA REVENUE BY : SHRI PD CHOUGULE, DR / DATE OF HEARING : 15/03/2018 / DATE OF PRONOUNCEMENT: 16/03/2018 / O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER:- THIS APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2012-13 IS DIRECT ED AGAINST THE ORDER OF THE CIT(A)-I, JABALPUR DATED 9 TH JUNE 2016 VIDE APPEAL NO.J/CIT/A/I/JBP/ITO/WARD/1(3)/JBP/079/2015-16, ARISING OUT OF O RDER UNDER SECTION 144/143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFT ER REFERRED TO AS THE ACT) DATED 27.03.2015 FRAMED BY THE ITO, WARD 1(2), JABALPUR . 2. WE FIND THAT PRESENT APPEAL IS TIME BARRED BY 17 DAYS. AN APPLICATION ALONG WITH AFFIDAVIT IS PLACED ON RECORD. WE HAVE PERUSE D THE APPLICATION WHEREIN THE ASSESSEE HAS MENTIONED ABOUT THE MEDICAL LE AVE TAKEN BY THE CEO OF THE BANK FOR CERTAIN PERIOD OF TIME DURING WHI CH THE APPEAL BEFORE THE TRIBUNAL WAS TO BE FILED. ON EXAMINING THIS FACT I N THE LIGHT OF JUDGMENT OF HONBLE APEX COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST. KATIJI & ORS, REPORTED IN (1987) 62 CTR 23, WE ARE OF THE CO NSIDERED OPINION THAT THE ASSESSEE HAD A SUFFICIENT CAUSE WHICH PREVENTED IT FROM FILING THE APPEAL WITHIN THE STATUTORY TIME LIMIT. WE, THEREFORE, IN THE INTERESTS OF JUSTICE, CONDONE THE DELAY OF 17 DAYS AND ADMIT THE APPEAL FOR ADJUDICATION. ITA NO. 231/JAB/2016 JILA SAHAKARI BANK MARYADIT VS. ITO AY : 2012-13 2 3. BRIEFLY STATED FACTS, AS CULLED OUT FROM THE RECORD, ARE THAT ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKIN G AND WORKING AS CENTRAL CO-OPERATIVE BANK. RETURN OF INCOME WAS FILED ON 30.11.2012 DECLARING INCOME OF RS.9,22,400/-. CASE SELECTED FOR SCRUT INY AND NOTICES UNDER SECTION 143(2) / 142(1) OF THE ACT WERE SERVED UPON T HE ASSESSEE. ON FEW OCCASIONS NONE APPEARED; ACCORDINGLY, THE LD. ASSES SING OFFICER PASSED AN EX-PARTE ORDER UNDER SECTION 144/143(3) OF THE ACT MAKING VARIOUS ADDITIONS ON THE BASIS OF FINANCIAL STATEMENTS AND AUDIT REPORT AVAILABLE ON RECORD. LEARNED ASSESSING OFFICER MADE A DISALLOWANCE U/S 40(A)(IA) OF THE ACT AT RS.8 LAKHS, DENIED THE BENEFIT OF CARRY FORWARD/ SET OFF OF LOSS OF RS.3,98,33,209/- AND DISALLOWED THE CLAIM OF PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS.3,05,30,820/-. INCOME ASSESSED AT RS.7,20,86,429/-. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A), BUT PARTLY SUCCEEDED. NOW, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING FOLLOWING GROUNDS OF APPEAL:- 1. LEARNED CIT(APPEAL) ERRED IN CONFIRMING THE ADDITION OF RS.3,05,30,820/- ON ACCOUNT OF PROVISION FOR AND DOUBTFUL DEBTS WHICH WERE PROVIDED IN ACCORDANCE WITH LAW AND ARE UNDER THE LIMITS PRESCRIBED U /S 36(1)(VIIA). 2. THE LEARNED CIT(APPEAL) ERRED IN ENHANCING THE INCOM E OF RS. 69180/- ON ACCOUNT OF PROVISION FOR BAD AND DEBTS WHICH WERE PROVIDED IN ACCORDANCE WITH LAW AND ARE UNDER THE LIMITS PRESCRIBED U/S 36(1)(VII A) AND THE SAME WERE ALLOWED BY THE ASSESSING OFFICER. 3. HE LEARNED CIT(APPEAL) ERRED IN CONFIRMING THE ADDITIO N OF RS.3,98,33,209/- ON ACCOUNT OF CARRY FORWARDS AND SETOFF OF LOSS, ON THE PRESUMPTION THAT SAME AMOUNT IS CLAIMED AS PROVISION F OR BAD AND DOUBTFUL DEBTS. HOWEVER AMOUNT WAS BAD DEBTS WAS ERRONEOUSLY STATED AT RS.3,98,33,209/- INSTEAD OF RS. 3,05,30,820/-. HENCE THE ORDER IS BAD IN LAW. 4. THE LEARNED CIT(APPEAL) WRONGLY CONCLUDED THAT THE ADDITIO N OF RS.800000/- ON ACCOUNT OF NON DEDUCTION OF LAX U/S 40(A)(IA) A LTHOUGH ASSESSING OFFICER HAS NOT PROVIDED ANY OPPORTUNITY OF BEING HEARD. ITA NO. 231/JAB/2016 JILA SAHAKARI BANK MARYADIT VS. ITO AY : 2012-13 3 5. THE LEARNED CIT(APPEALS) GROSSLY ERRED IN UNDERSTANDING THE FACTS OF THE CASE AND CONCLUDED THAT THE ASSESSMENT WAS DONE UNDER 143(3). 6. THAT THE ASSESSEE CRAVES LEAVE TO RAISE ANY OTHER GRO UND/S ON OR BEFORE THE DATE OF HEARING TO PROVE THAT THE ORDER OF THE CIT(APPEAL) IS BAD. 5. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE REQ UESTED FOR NOT PRESSING GROUND NO.4 RELATING TO DISALLOWANCE UNDER SEC TION 40(A)(IA) OF THE ACT AT RS.8 LAKHS. WE, THEREFORE, DISMISS GROUND NO.4 AS NOT PRESSED. 6. GROUND NOS. 1 & 2 RELATE TO CLAIM OF ASSESSEE TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS. BOTH THE LOWER AUTHORITIES HAV E DENIED THIS BENEFIT. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASS ESSEE IS A CENTRAL CO-OPERATIVE BANK AND AS PER THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT, IT IS ENTITLED TO MAKE A PROVISION FOR BAD AND DOUBTFUL DEBTS @ 7.5% OF THE TOTAL INCOME BEFORE MAKING ANY SUCH DEDUCTION AND ALSO A N AMOUNT OF 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCH ES. IT WAS CONTENTED THAT THE PROVISION MADE BY THE ASSESSEE IS M UCH LESS THAN THE PROVISION WHICH THE ASSESSEE COULD HAVE MADE AS PER THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. IT WAS FURTHER CONTENDE D THAT THE ALLEGED NOTE/COMMENT OF THE AUDITOR RELATES TO OVER STATEMENT OF PROFITS WHICH NOWHERE IS UNFAIR TO THE REVENUE AND BOTH THE LOWER AU THORITIES HAVE NOT INTERPRETED AUDITORS NOTE IN RIGHT PERSPECTIVE. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED SUPPORTIN G THE ORDER OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RE CORD PLACED BEFORE US. IN GROUND NOS. 1 & 2 ASSESSEE IS AGGRIEVED WITH THE DISALLOWANCE OF THE PROVISION FOR BAD AND DOUBTFUL DEBTS FOR RS.3,05, 30,820/- AS WELL AS ENHANCEMENT OF INCOME BY LEARNED CIT(A) BY RS.69,180/-. BEFORE MOVING AHEAD, WE WOULD FIRST LIKE TO PERUSE THE PROVISIONS O F SECTION 36(1)(VIIA) OF ITA NO. 231/JAB/2016 JILA SAHAKARI BANK MARYADIT VS. ITO AY : 2012-13 4 THE ACT, WHICH CONTEMPLATES THAT A SCHEDULED BANK NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDI A OR A NON-SCHEDULED BANK OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULT URAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, AN AMOUNT NOT EXCEEDING 7%OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDIN G 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPU TED IN THE PRESCRIBED MANNER FROM GOING THROUGH THE ABOVE PROVISION, IN OUR UNDERSTANDING OF LAW, WE FIND THAT THE ASSESSEE WHICH I S A CENTRAL CO- OPERATIVE BANK FALLS UNDER THE CATEGORY OF BANKS ENUMERAT ED IN THE ABOVE PROVISION. BANKING INDUSTRY HAS THE BUSINESS OF TAK ING AND PROVIDING ADVANCES. NORMALLY, ADVANCES ARE GIVEN TO A LARGE NUMBER OF PERSONS AND THE PROBABILITY OF DEBTS GETTING DOUBTFUL OR BAD IS REGULAR AND THEREFORE AS PER THE PROVISIONS OF LAW, THEY ARE ENTITLED TO CLAIM THE PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT OF THE PERCENTAGE AS MENTIONED ABOVE. IF THE TOTAL PROVISION EXCEEDS THE PERCENTAGE OF THE TO TAL INCOME OR AVERAGE ADVANCES MADE BY THE RURAL BRANCHES, THEN IN SUCH SITUAT ION ASSESSEE HAS TO PROVIDE COMPLETE EXPLANATION WITH SUPPORTING DOCUMEN TS. FROM PERUSAL OF THE ORDER OF THE LD. CIT(A), WHEREIN HE HAS TAKEN A V IEW THAT NO PROVISIONS PER SE COULD BE LEVELED AS VALIDATED PROVISION AND DED UCTION UNDER SECTION 36(1)(VIIA) OF THE ACT COULD BE APPLIED TO THEM. WE, HOWE VER, DO NOT AGREE WITH THE VIEW TAKEN BY THE LD. CIT(A) AND ARE OF THE C ONSIDERED OPINION THAT THE ASSESSEE WHICH IS A CENTRAL CO-OPERATIVE BANK, IS E LIGIBLE FOR CLAIMING THE PROVISION FOR BAD AND DOUBTFUL DEBTS MADE DURING THE YEAR FOR RS.3,05,30,820/- WHICH ARE WELL WITHIN THE PERMISSIBLE LIMIT PROVIDED IN SECTION 36(1)(VIIA) OF THE ACT. WE, THEREFORE, ARE OF TH E VIEW THAT THE ASSESSEE HAS RIGHTLY CLAIMED THE PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS.3,06,00,000/- WHICH IS WELL WITHIN THE PERMISSIBLE LIMIT PRESCRIBED UNDER ITA NO. 231/JAB/2016 JILA SAHAKARI BANK MARYADIT VS. ITO AY : 2012-13 5 SECTION 36(1)(VIIA) OF THE ACT. IN THE RESULT, GROUND NOS. 1 & 2 OF THE ASSESSEES APPEAL ARE ALLOWED. 8. APROPOS GROUND NO.3 RELATING TO ADDITION OF RS.3,98,33,209/- CONFIRMED BY THE LD. CIT(A) BY ACCEPTING THE FINDING OF THE LEARNED ASSESSING OFFICER RELATING TO NOT ALLOWING THE CARRY F ORWARDS AND SET OFF OF LOSS. DURING THE COURSE OF HEARING BEFORE US, LEARNE D COUNSEL SUBMITTED THAT THERE WAS A CONFUSION BEFORE THE LOWER AUTHORITIES WHICH HAVE ERRONEOUSLY STATED RS.3,98,33,209/- INSTEAD OF THE FIGURE OF PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS.3,05,30,820/-. IT WAS FURTHER CON TENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THERE WAS NO SUCH CARRY FORWARDS/SET OFF OF LOSS MADE BY THE ASSESSEE. IT WAS THEREFORE RE QUESTED THAT THE ISSUE MAY BE SENT FOR VERIFICATION TO THE ASSESSING OFFICER SO THAT THE ASSESSEE CAN SATISFY HIM ACCORDINGLY. LEARNED DEPARTMENTAL REPRESENT ATIVE RAISED NO OBJECTION IF THE ISSUE RAISED IN GROUND NO.3 IS SENT FOR RE-ADJUDICATION AFRESH. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RE CORD PLACED BEFORE US. IN GROUND NO.3 ASSESSEE IS AGGRIEVED WITH THE ADDITION OF RS.3,98,33,209/- ALLEGEDLY CLAIMED ON ACCOUNT OF CARRY FORWARDS AND SET OFF OF LOSS. DURING THE COURSE OF HEARING BEFORE THE TRI BUNAL, IT WAS STATED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THERE WAS NO SUCH CLAIM MADE BY THE ASSESSEE AND BOTH THE LOWER AUTHORITIES ERRED IN T REATING THIS FIGURE OF RS.3,98,33,209/- AS CARRIED FORWARDS AND SET OFF OF LOSS; WHERE AS ACTUALLY THERE IS NO SUCH CLAIM AT ALL. LOOKING TO THE REQUEST OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR PROVIDING ONE MORE OPPORTUNITY TO CLEAR THE CONFUSION AT THE END OF THE REVENUE AUTHORITIES, WE DEEM IT PR OPER TO SET ASIDE THE ISSUE RAISED IN GROUND NO.3 TO THE FILE OF THE ASSESS ING OFFICER WHO WILL EXAMINE THE COMPUTATION OF INCOME AS WELL AS INCOME TAX RETURN FILED BY THE ASSESSEE AND IN CASE ANY SUCH CLAIM OF CARRY FORWARDS AN D SET OFF OF LOSS IS ITA NO. 231/JAB/2016 JILA SAHAKARI BANK MARYADIT VS. ITO AY : 2012-13 6 NOT FOUND TO BE MADE BY THE ASSESSEE, THEN THE IMPUGN ED ADDITION OF RS.3,98,33,209/- NEEDS TO BE DELETED. GROUND NO.3 IS, THER EFORE, ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NOS. 5 & 6 ARE GENERAL IN NATURE WHICH NEEDS N O SEPARATE ADJUDICATION. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 16 TH MARCH, 2018 AT JABALPUR. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER JABALPUR; DATED 16/03/ 2018 *BIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, JABALPUR 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, JABALPUR