M/s. Sahakari Bhumi Vikas Bank Ltd., BHILWARA V. ITO, BHILWARA

ITA 24/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78251 (ITAT-JODHPUR)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-05-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: SUNIL PORWAL SHRI R L BIRLA
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 145; 263

Judgement Text

IN TH E INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 24 /J ODH /20 14 (A.Y. 2010 - 11 ) M/S SAHAKARI BHOOMI VIKAS BANK VS THE INCOME TAX OFFICER 8 - D - 1, R.C. VYAS COLONY WARD - 3 BHILWARA BHILWARA PAN : AAAAS 9964 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SH RI SUNIL PORWAL SHRI R.L. BIRLA DEPARTMENT BY : SHRI N.A. JOSHI - DR. DATE OF HEARING : 20 / 0 5 /201 4 . DATE OF PRONOUNCEMENT : 24/ 0 7 /201 4 . O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE ASSESSEE FOR A.Y. 2010 - 11 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) , AJMER , DATED 28 / 1 1 /20 1 3 . 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE - BANK FILED ITS RETURN OF INCOME (ROI) FOR A.Y. 2010 - 11 ON 14 / 1 0/ 2010 DECLARING TOTAL INCOME AT NIL. THE ASSESSEE CLAIMED DEDUCTION U/S 80P OF THE INCOME - TAX ACT, 1961 ['THE ACT', FOR SHORT] TO THE TUNE OF RS. 2 25,13,250/ - . THE ASSESSEE IS A PRIMARY LAND DEVELOPMENT BANK [CO - OPERATIVE SECTOR] WHO PROVIDES FINANCE, MAINLY IN AGRICULTURAL SECTOR. THE ASSESSEE BANK IS REGULATED BY THE STATE LAND DEVELOPMENT BANK, JAIPUR, WHICH, IN TURN, IS REGULATED BY NABARD AND IS REGISTERED UNDER THE RAJASTHAN CO - OPERATIVE SOCIETIES ACT, 2001. THIS BANK IS ESTABLISHED BY CENTRAL AND STATE GOVERNMENT JOINTLY UNDER SPECIAL LAW. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE BANK ENCLOSED A CHART DEPICTING NET PROFIT EARNED IN PAST TWO A.YS. ALON GWITH SUMMARY OF EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT FOR SOME YEARS , T HE ASSESSEE ALSO ENCLOSED PF CHALLAN PAID DURING THE YEAR ALONGWITH SUMMARY OF DETAILS REGARDING PF. PROVISIONS OF ESI ARE NOT APPLICABLE IN THIS CASE. ALL LOANS ARE GIVEN BY THE ASSESSEE BANK ARE SECURED AND SECURITY TAKEN FROM VARIOUS PERSON AS PER BANKING NORMS APPLICABLE TO COOPERATIVE SECTORS AND TO THE BANKS. USUALLY, SECURITY TAKEN IS THE AGRICULTURAL LAND AS LOANS ARE GIVEN MAINLY TO FARMERS. THE BANK DID NOT TAKE ANY UNSECURED LOAN DURING THE YEAR. THE ASSESSEE BANK HAS VARIOUS BRANCHES SPREAD IN DIFFERENT TEHSILS OF DISTRICT BHILWARA. DURING THE YEAR CREDIT FACILITIES PROVIDED BY THE BANK AND AGAINST WHICH INTEREST WAS RECEIVED FROM THE MEMBERS TO THE TUNE OF R S. 25,13,250/ - WHICH HAS BEEN CLAIMED AS EXEMPT U/S 80P OF THE A C T 3 WHICH WAS NOT ALLOWED BY THE A.O. AS WELL AS BY THE LD. CIT(A). NOW THE ASSESSEE IS IN SECOND APPEAL. 3. THE ASSESSEE IS REQUIRED TO FOLLOW THE STANDARDS AS PER RAJASTHAN STATE COOPERATI VE LAND DEVELOPMENT BANK LTD. [RSCLDB] AND INSTRUCTIONS ARE RECEIVED EVERY YEAR BY THE BANK UNDER THE GUIDANCE OF NATIONAL BANK OF INDIA REGARDING MAKING OF PROVISION OF NPA. THE ASSESSEE RECEIVED INSTRUCTION FOR MAKING NPA THROUGH LETTER NO. NPA/09 - 10/42 694 - 736 DATED 31.3.2010 FROM RSCLDB. THE ASSESSEE BANK HAS MADE PROVISIONS FOR NPA TO THE TUNE OF RS. 50 LAKHS IN ITS BOOKS OF ACCOUNT. IT HAS ALSO PRODUCED COPY OF VOUCHERS NOTE SHEET AND CALCULATION OF NPA REQUIRED TO BE PROVIDED FOR THE YEAR ENDED ON 31.3.2010. THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND RECOGNIZED NPA EVERY YEAR ACCORDING TO CONSISTENT SIMILAR BANK POLICY FOR YEAR TO YEAR. DETAILS REGARDING NPA MADE FOR LAST THREE YEARS WERE ALSO SUBMITTED. THIS PROVISION IS MADE TO EFFECT ACTUAL PROFIT OF THE ASSESSEE ACCORDING TO SECTION 28 TO 145 OF THE ACT. THE ASSESSEE HAS ADOPTED AS - 1 AND AS - II AND AS - I EMPHASIZES THAT THE ACCOUNTING POLICIES TO BE ADOPTED BY AN ASSESSEE SHOULD BE SUCH SO AS TO REPRESENT A TRUE AND FA IR VIEW OF THE STATE OF AFFAIRS. BUT THE A.O. 4 DECLINED TO ACCEPT THIS CLAIM OF NPA AND SO ALSO THE LD. CIT(A). NOW THE ASSESSEE IS IN SECOND APPEAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. WE HAV E FOUND THAT IN SIMILAR CASE FOR A.Y. 2010 - 11 IN ITA NOS. 73 & 74/JODH/2014 IN THE CASE OF M/S BHILWARA MAHILA URBAN COOPERATIVE BANK LTD. DECIDED ON 12.06.2014, WE HAVE HELD AS UNDER: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. FACTS APROPOS GROUND NO. 1 WHICH IS IN RELATION TO CONFIRMATION OF ADDITION OF RS. 26,40,400/ - MADE ON ACCOUNT OF PROVISION OF NON - PERFORMING ASSET [NPA] DEBITE D TO THE PROFIT AND LOSS ACCOUNT AND NOT ALLOWING THE SAME IN TERMS OF PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT ARE THAT INITIALLY THE A.O. HAD ALLOWED THIS AMOUNT BUT THE LD. CIT(A) HAS SET ASIDE THIS ISSUE U/S 263 OF THE ACT. AS PER THE ASSESSEE, TH IS PROVISION OF NPA WAS MADE AS PER THE ORDER OF THE RBI VIDE INSTRUCTION AT PARA 9.6 ISSUED BY IT AND BECAUSE THIS LIABILITY HAD CRYSTALLIZED AS A RESULT OF DECISION OF HON'BLE DEBT RECOVERY APPELLATE TRIBUNAL, DELHI, THEREFORE, THIS CLAIM OF NPA IS ALLOW ED. IN FACT, THIS AMOUNT 5 RELATES TO FORGED DRAFTS OF THE SAME AMOUNT. ONE OF THE REGULAR CUSTOMERS OF THE ASSESSEE BANK PRODUCED FIVE DEMAND DRAFTS OF STATE BANK OF INDIA [SBI] ON VARIOUS DATES WHICH WERE ALLOWED IN THE ORDINARY AND NORMAL COURSE OF BANK ING BUSINESS. BUT WHEN THE ASSESSEE BANK SENT THE ACCOUNT PAYEE DRAFTS FOR CLEARANCE, HOW IT WAS SUBSEQUENTLY DISCOVERED THAT THOSE DRAFTS WERE FORGED ONES AND THE DEBT RECOVERY TRIBUNAL [DRT], JAIPUR, IN ITS ORDER AWARDED IN FAVOUR OF SBI OF THIS ENTIRE AMOUNT WHEN THIS MATTER WAS TAKEN UP BEFORE IT. ON THE BASIS OF THE ORDER OF DRT, THE RBI SENT REPORT DATED 8.6.2006 IN WHICH IT WAS STATED THAT THE BANK IS NOT AT IN FAULT NOR IT WAS NEGLIGENT IN ITS ACTIONS AND THAT IN SUCH CASES, THE PAYING BANK [SBI I N THIS CASE] IS TO BE HELD PRIMARILY RESPONSIBLE IN CASE SUCH FORGED DRAFTS ARE ENCASHED. HOWEVER, IN VIEW OF THE DECISION OF THE DRT, THESE EXPENSES ARE TO BE DEBITED TO THE EXTENT OF ORIGINAL AMOUNT OF PAYMENTS OF DRAFTS BY MAKING A PROVISION TO THAT EX TENT [RS. 26,40,400/ - ]. BY ACTING UNDER THE ABOVE DIRECTION OF THE RBI, THE ASSESSEE BANK COMPLIED AND MADE PROVISION OF THIS AMOUNT BY DEBITING RS. 26,40,400/ - TO ITS PROFIT AND LOSS ACCOUNT. THE CASE OF THE ASSESSEE IS THAT SUCH TYPE OF EXPENSES CANNOT BE TREATED AS REGULAR EXPENSES LIKE PAYMENT OF SALARY, RENT ELECTRICITY, ETC. BUT ESSENTIALLY SUCH EXPENSES 6 INCURRED DURING THE COURSE OF BUSINESS ARE DEFINITELY INCIDENTAL AND CONNECTED WITH ORDINARY COURSE OF ASSESSEES BUSINESS. THE ASSESSEE FURTHER SUBMITTED THAT IT IS A REGISTERED COOPERATIVE SOCIETY WHOSE ACCOUNTS ARE SUBJECTED TO AUDIT BY THE CONCERNED AUTHORITIES INCLUDING CO - OPERATIVE DEPARTMENT OF THE GOVERNMENT. IT STATED THAT AS PER ITS AUDITED ACCOUNT, THE SURPLUS FOR THE YEAR IS RS. 30,50, 894/ - AFTER PROVIDING FOR NPA AND OTHER ADVANCES. IT STATED THAT THE SOCIETY IS GOVERNED BY THE PROVISIONS OF SECTION 36(1)(VIIA) AND 36(1)(VIII) OF THE ACT IN CASE OF ADVANCES WHERE PROVISIONS FOR BAD AND DOUBTFUL DEBTS ARE MADE, IN CASE OF BANKING BUSIN ESS THE BAD AND DOUBTFUL DEBTS ARE CALLED AS NPA. IN THIS REGARD THE ASSESSEE HAS RELIED ON THE MAIN PROVISIONS OF SECTIONS REFERRED TO ABOVE AND FINALLY PRAYED FOR ALLOWANCE OF THE SAME. THE CALCULATION OF THIS AMOUNT AS TO SHOW IT WAS ARRIVED AT IS AS UNDER: 1 NET PROFIT (AFTER PROVISION FOR NPA) (AS PER COMPUTATION) RS. 30,64, 102.00 2 PROVISION FOR NPA RS. 26,40,400.00 3 TOTAL PROFIT (FOR SECTION 36(L)(VIIA) (1+2) RS. 57,04,502.00 4 7 % OF TOTAL INCOME (AS CALCULATE AS PER S.NO. 3) RS. 4,27,838.00 5 TOTAL ADVANCES (A) DUE FROM ADVANCES (7,95,50,897.25+5,56,67,185.00) (B) INTEREST DUE TOTAL (A+B) RS. 1,35,218,082.25 RS. 46,43, 182.00 RS. 13,98,61,264.29 7 6 5% OF SUCH ADVANCES / ASSETS (REFER FOR ADVANCES AMOUNT IN S.NO. 5) RS. 69,93,063.00 7 TOTAL PROVISION TO ALLOW (4+6) RS. 74,20,901.00 8 PROVISION CLAIMED DURING THE YEAR RS. 26,40,000.00 9 FURTHER ASSESSES ENTITLED FOR SPECIAL RESERVE IN TERMS OF SECTION 36(1) (VIII) IN ADDITION TO ABOVE. 4.1 APART FROM THE ABOVE, THE ASSESSEE ALSO MADE THE FOLLOWING SUBMISSIONS: (1) 'EVERY BANK DURING OPERATIONS OF BANKING ACTIVITIES HAS TO MAKE CERTAIN ADVANCES AS PER IT'S OBJECTS, E.G. AGRICULTURAL ADVANCES, SME ADVANCES, HOUSING ADVANCES OR ANY OTHER ADV ANCES. ALL THESE ADVANCES FORMS 'DEBTS' OF BANKING BUSINESS & HAVE BEEN CLASSIFIED TO BE DISCLOSED UNDER THE HEAD 'LOAN & ADVANCES'. THUS ALL ADVANCES AS MADE IN TERMS OF BANKING BUSINESS ARE NOMENCLATURED AS 'LOANS & ADVANCES'. IT IS WORTH TO NOTE THAT THESE 'LOANS & ADVANCES' DO NOT INCLUDE 'CAPITAL ADVANCES'. ALL CAPITAL ADVANCES ARE SEGREGATED UNDER THE HEAD 'WORK IN PROGRESS AND CAPITAL COMMITMENTS' & ARE GROUPED UNDER THE HEAD FIXED ASSETS. 8 (2) AS PER RBI GUIDELINE EVERY BANK IS TO SEGREGATE THESE BUSINESS ADVANCES INTO 'STANDARD ASSETS' AND 'NON STANDARD ASSETS' AND 'BAD & DOUBTFUL ASSETS'. ACCORDING TO AGING OF INDIVIDUAL ADVANCES THE PROVISIONING AS SPECIFIED BY RBI ARE TO BE MADE IN CASE OF 'NON STANDARD ASSETS' AND 'DOUBTFUL ASSETS' THE DETAILS THEREOF ARE AS PER CHART FILED SEPARATELY. (3) SECTION 36(VIIA) OF INCOME TAX ACT, ALSO PERMITS SUCH PROVISIONING AS 'BUSINESS EXPENDITURE' SUBJECT TO CERTAIN RIDERS & TO A BANKING BUSINESS. (4) IN CASE OF ASSESSEE A CASE FILED BY SBI IN DEBT RECOVERY TRIBUNAL JAIPUR. THE CASE WAS IN RESPECT OF FIVE FORGED DRAFTS WORTH RS. 26.40 LAKHS DRAWN ON SBI, BHILWARA. THESE DRAFTS WERE COLLECTED BY ASSESSEE FOR IT'S CURRENT ACCOUNT HOLDER. THESE DRAFTS WE RE CLEARED BY SBI IN YEAR 2000 - 01 & CASE AGAINST ASSESSEE WAS LODGED IN THE YEAR 2003 - 04 SBI. THE DRT JAIPUR HAD DELIVERED JUDGMENT ON 07.05.2004 IN FAVOR OF SBI AND HAS THE BANK TO PAY THE SAID AMOUNT ALONG WITH INTEREST. NOW THE BANK HAS TO DRAT DEBT RECOVERY APPELLATE TRIBUNAL) NEW - DELHI AGAINST SUCH ORDER & HAS OBTAINED STAY FOR RECOVERY. 9 THUS THERE IS NO PAYMENT / CLAIM MADE BY ASSESSEE; ONLY A CONTINGENT LIABILITY OF RS. 26.40 LAKHS + INTEREST DUE THEREON IS ON ASSESSEE. THE PROVISI ONING IS MADE ON DEBTS. THE BANK AUTHORITIES HAVE RECOMMENDED A SEPARATE PROVISION J 'FOR THIS CLAIM BUT NO SUCH SPECIFIC PROVISION MADE. ' 4.2 AFTER CONSIDERING THE SAME THE LD. CIT(A) HAS CONCLUDED THAT THE ASSESSEE HAS NOT DEBITED THIS AMOUNT UNDER TH E PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT FOR NPA AS REQUIRED BY THE ACT AND THE PROVISION HAS BEEN CREATED FOR THE CONTINGENT LIABILITY ON ACCOUNT OF FORGED BANK DRAFTS. THEREFORE, HE HAS ALSO CONFIRMED THE IMPUGNED DISALLOWANCE BY DENYING CLAIM O F DEDUCTION U/S 36(1)(VIIA) OF THE ACT. HE HAS ALSO NOT ALLOWED THIS CLAIM U/S 36(1)(VIII) OF THE ACT BECAUSE THE ASSESSEE HAS NOT SHOWN THAT IT HAS FULFILLED THE REQUISITE CONDITIONS LAID DOWN THEREIN IN RESPECT OF CREATING SPECIAL RESERVED AND HAS NOT SHOWN THAT THE ASSESSEE IS CARRYING ON THE ELIGIBLE BUSINESS OF PROVIDING ONLY LONG TERM FINANCE OF NOT LESS THAN FIVE YEARS. ACCORDINGLY, HE HAS CONFIRMED THE ADDITION OF RS. 26,40,400/ - . 4.3 BEFORE US, BOTH THE PARTIES HAVE REITERATED THEIR ARGUMENTS IN LINE WITH THE ARGUMENTS TAKEN FOR AND AGAINST BEFORE THE LD. CIT(A). 10 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD INCLUDING THE ORDER OF THE AUTHORITIES BELOW. WE HAVE ALSO PERUSED THE WRITT EN SUBMISSIONS AND THE PAPER BOOK FILED BEFORE US. FROM THE RECORDS, WE HAVE FOUND IT FOR A FACT THAT THE ASSESSEE HAD DEBITED THIS PROVISION IN THE PROFIT AND LOSS ACCOUNT OF THE YEAR. ONCE CUSTOMER OF THIS ASSESSEE BANK NAMELY SHRI RAJ KUMAR JAIN PRES ENTED FIVE DEMAND DRAFTS OF SBI TO THE APPELLANT BANK AND THESE WERE SENT FOR CLEARANCE TO THE SBI WHO CLEARED THE SAME AND COLLECTION WAS CREDITED IN THE CUSTOMERS ACCOUNT. SUBSEQUENTLY, IT WAS DISCOVERED THAT THE BANK DRAFT WAS FORGED ONE . A CASE WAS FILED AGAINST THE SBI AS PER LAW AGAINST THE CONCERNED PARTIES. THE DRT, IN ITS ORDER HAS HELD THE BANK CHAIRMAN AND SHRI RAJ KUMAR JAIN AS LIABLE JOINTLY AND SEVERELY FOR PAYMENT OF RS. 37,75,080/ - ALONGWITH INTEREST THEREON. THE ASSE SSEE BANK WAS GIVEN LIBERTY TO RECOVER THE AMOUNT FROM SHRI RAJ KUMAR JAIN IF THE AMOUNT WAS PAID BY HIM TO THE SBI. THIS ORDER OF THE DRT WAS RENDERED ON 7.5.2004. REPORT DATED 16.10.2008 WAS PREPARED BY THE RBI [INSPECTION REPORT OF THE ASSESSEE BANK] WHICH STATED THAT THE ASSESSEE HAS MOVED THE DRAT, NEW DELHI AGAINST THE ORDER OF THE DRT, JAIPUR AND HAD OBTAINED STAY AGAINST THIS ORDER. IT IS TRUE THAT THE BANK BOARD HAS PASSED RESOLUTION ON 10.3.2007 ACCORDING TO WHICH, PROVISION WAS TO BE MADE FOR FORGED BANK DRAFT TO THE TUNE OF RS. 26,40,000/ - . THE INSPECTION REPORT DATED 16.10.2008 ALSO 11 SPEAKS ABOUT THE CREATION OF THIS PROVISION. THE RELEVANT PARA OF THE INSPECTION REPORT READS AS UNDER: 'HOWEVER, THERE WAS A CASE PENDING AGAINST THE BANK IN DEBT RECOVERY APPELLATE TRIBUNAL (DRAT), NEW DELHI. THE CASE WAS FILED BY STATE BANK OF INDIA IN RESPECT OF FIVE FORGED DRAFTS DRAWN ON SBI, BHILWARA AND COLLECTED BY THE BMUCB FOR ITS CURRENT ACCOUNT HOLDER, INVOLVING AN AMOUNT OF RS. 26.42 LAKH. THE SAID DRAFTS WERE CLEARED BY SBI, BHILWARA THROUGH CLEARING IN THE YEAR 2000 - 01. A CASE WAS LODGED IN 2003 - 04 BY THE SBI AGAINST THE BANK IN DRT JAIPUR FOR RECOVERY OF THE PAYMENT. DRT, JAIPUR HAD DELIVER ED JUDGMENT IN FAVOUR OF SBI AND ORDERED THE BANK TO PAY THE SAID AMOUNT ALONG WITH INTEREST TO SBI. THE BANK HAD MOVED DEBT RECOVERY APPELLATE TRIBUNAL (DRAT), NEW DELHI AGAINST THIS ORDER AND OBTAINED STAY AGAINST THIS DECISION. THE NEXT HEARING OF THI S CASE IS SCHEDULED FOR NOVEMBER 11, 2008. THE BANK HAS MADE PROVISION OF RS. 26.42 LAKHS FOR THE SAME. 5.1 FOR READY REFERENCE, WE WOULD LIKE TO EXTRACT SECTIONS 36(1)(VIIA) AND 36(1)(VIII) OF THE ACT AS UNDER: IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY 12 ( A ) A SCHEDULED BANK [NOT BEING 21 [* * *] A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON - SCHEDULED BANK 22 [OR A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK], AN AMOUNT 23 [NOT EXCEEDING SEVEN AND ONE - HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING 24 [TEN] PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER : 42 [( VIII ) IN RESPECT OF ANY SPECIAL RESERVE CREATED A ND MAINTAINED BY A SPECIFIED ENTITY, AN AMOUNT NOT EXCEEDING TWENTY PER CENT OF THE PROFITS DERIVED FROM ELIGIBLE BUSINESS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION (BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE) CARRIED TO SUCH RESERVE ACCOUNT: 5.2 TESTING THE APPLICABILITY OF THE ABOVE PROVISION TO THE FACTS OF THIS CASE, WE HAVE NOTICED THAT THE ABOVE PROVISION DEBITED IN THE PROFIT AND LOSS ACCOUNT OF RS. 26,40,000/ - IS AGAINST NPA OF 73,37,655/ - ELIGIBLE FOR 13 CLAIM U/S 36(1)(VIIA) OF THE ACT. THE PROVISION FOR RS. 26,40,400/ - IS THUS MADE WITH REGARD TO FORGED BANK DRAFTS. THIS FACT IS ALSO FORTIFIED FROM THE RESOLUTION PASSED BY THE MANAGEMENT OF THE BANK AS WELL AS INSPECTION REPORT OF THE RBI EXTRACTED ABOVE. WE DO NOT FIND ANY RELATION B ETWEEN THE TWO. THE DRT HAS GIVEN LEVERAGE TO THE ASSESSEE TO MAKE RECOVERIES FROM THE CUSTOMER SHRI RAJ KUMAR JAIN IN CASE IT PAYS THIS AMOUNT TO THE SBI. AT BEST, THIS PROVISION CAN BE STATED TO MEET THE CONTINGENT LIABILITY ARISING OUT OF FORGED BANK DRAFTS. THE ASSESSEE HAS PREFERRED APPEAL BEFORE THE APPELLATE AUTHORITY AND THE RESULT AND OUTCOME OF THAT WAS NOT BROUGHT TO OUR NOTICE EVEN AT THE TIME OF HEARING OF THIS APPEAL. THUS, IT CANNOT BE STATED THAT THE LIABILITY OF THIS AMOUNT HAS CRYSTALL IZED AS YET. THEREFORE, CLAIM OF DEDUCTION U/S 36(1)(VIIA) OF THE ACT CANNOT BE ALLOWED. HOWEVER, THIS CLAIM CAN BE CONSIDERED UNDER THE PROVISIONS OF SECTION 36(1)(VIII) OF THE ACT IN CASE THE ASSESSEE FULFILLS THE CONDITIONS LAID THEREIN IN RESPECT OF CREATING A SPECIAL RESERVE AND THE ASSESSEE CARRIED ON ELIGIBLE BUSINESS OF PROVIDING LONG TERM FINANCE OF NOT LESS THAN FIVE YEARS. IN THAT VIEW OF THE MATTER, THE ISSUE IS RESTORED TO THE FILE OF THE A.O. FOR MAKING INVESTIGATION INTO THE FACTS AS TO W HETHER THIS PROVISION APPLIES TO THIS ISSUE OR NOT. ACCORDINGLY, GROUND NO. 1 IS PARTLY ALLOWED. THEREFORE, RESPECTFULLY FOLLOWING OUR OWN ORDER IN ITA NO. ITA NO .73 & 74 /JODH/201 4 FOR A.Y S . A.Y S . 200 7 - 08 & 2009 - 10 , WE RESTORE THE ISSUE 14 TO THE FILE OF THE A.O. FOR MAKING INVESTIGATION INTO THE FACTS AS TO WHETHER THIS PROVISION APPLIES TO THIS ISSUE OR NOT AND ALLOW THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE FOR STATISTICAL PURPOSES . 5. IN THE RESULT, THE A PPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES . ORDER PRONOUNCE D IN THE OPEN COURT ON 24 TH JU LY , 201 4 . SD/ - SD/ - [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24 TH JULY , 2014. VL/ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT BY ORDER 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR