The Sardargunj Mercantile Co.Op.Bank Ltd., Anand V. The ACIT.,Anand Circle, Anand

ITA 2426/AHD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0275 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 31-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y P VERMA
• Assessee Lawyers: A C SHAH
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2426/AHD/2012 ASSESSMENT YEARS :2009-10 SARDARGANJ MERCANTILE CO.OP. BANK LTD. PO BOX NO. 94, SARDAR CHAMBERS, SARDARGANJ, ANAND 388001, DIST : ANAND V/S . THE ACIT, ANAND CIRCLE, ANAND PAN NO. A A AAS3182Q (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI A. C. SHAH, A.R. /BY RESPONDENT SHRI Y.P. VERMA, SR. DR /DATE OF HEARING 28.12.2012 /DATE OF PRONOUNCEMENT 15.02.2013 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHI CH HAS EMANATED FROM THE ORDER OF CIT(A)-IV, BARODA, DATED 08.08.20 12 FOR A.Y. 2009-10. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1,58,897/- IN INTEREST ON NPA ACCOUNT IN AS MUCH AS SUCH INTEREST HAS NOT ACCURED. ITA NO. 2426/AHD/12 A.Y. 09-10 PAGE 2 1.1 THE LEARNED CIT(A) HAS MISREAD THE SUPREME COUR T DECISION IN THE CASE OF UCO BANK 237 ITR 889 AND BOARD CIRCULAR DATED 09.10.1984. 1.2 THE APPELLANT SAYS AND SUBMITS THAT THE ASSESSE E IS A CO.OP. BANK AND CLASSIFIES THE NPA ACCOUNT AS PER RESERVE BANK OF INDIA GUIDELINES AND THAT AS PER THE RBI GUIDELINES, THE BANK IS NOT REQUIRED TO CHANGE INTEREST ON NPA ACCOUNT. HOWEVER, THE AS SESSEE BANK FOR THE PURPOSE OF ACCOUNTING DEBITS INTEREST RECEIVABL E ON NPA ACCOUNT AND CREDITS TO INTEREST ON NPA ANAMAT ACCOUNT. 2. THE APPELLANT IS A COOPERATIVE SOCIETY IN BANKIN G ACTIVITY. THE A.O. SCRUTINIZED THE CASE U/S. 143(3). IT WAS NOTICED T HAT THE APPELLANT HAD SHOWN INTEREST OF NPA AT RS. 1,45,95,852/- WHICH HAS BEEN SHOWN AS MUDAT VITI VYAJ ANAMAT ON CAPITAL AND LIABILITIES SIDE IN THE BALANCE SHEET AS ON 31.03.2009. OUT OF THE INTEREST OF RS.1,45,95,852/ - THE INTEREST OF RS.1,58,897/- WAS THE INTEREST FOR THE PREVIOUS YEA R RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION ON THE NPA ACCOUNT WHICH H AD BECOME NPA ACCOUNT WITHIN PERIOD OF THREE YEARS. THE APPELLAN T HAD NOT CONSIDERED THIS INTEREST OF RS. 1,58,897/- AS ITS INCOME. THE A.O. AS PER BOARDS CIRCULAR DATED 09.10.1984 AND HONBLE SUPREME COURT DECISION IN THE CASE OF UCO BANK V. CIT, 237 ITR 889 , THE APPELLANT OUGHT TO HAVE CONSIDERED THE ABOVE INTEREST OF RS.1,58,897/- AS ITS INCOME. THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLANT DURING THE COURSE O F ASSESSMENT PROCEEDING AND AFTER ANALYZING THE BOARDS CIRCULAR, HE MADE A DDITION OF RS. 1,58,897/- IN THE INCOME OF THE ASSESSEE. ITA NO. 2426/AHD/12 A.Y. 09-10 PAGE 3 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE CIT(A)-II, BARODA, WHO HAD CONFIRMED THE ADDITION. THE OPERATIVE PORTION OF THE ORDER IS AS UNDER: 3.4 I HAVE CONSIDERED THE REASONS FOR MAKING ADDIT ION OF RS.1,58,897/- ON ACCOFUNT OF INTEREST ON NPA AS MEN TIONED BY THE AO IN THE ASSESSMENT ORDER AS WELL AS THE ABOVE SUB MISSION OF THE APPELLANT. THE APPELLANT IN ITS ABOVE SUBMISSION H AS STATED THAT DURING THE YEAR HE HAD PROVIDED INTEREST ON NPA ACC OUNTS WHICH WAS CREDITED TO MUDAT VITI VYAJ ANAMAT AND SHOWN ON LIABILITY SIDE IN THE BALANCE SHEET. AS PER THE APPELLANT, IT IS NOT ITS INCOME AS IT IS NOT POSSIBLE TO RECOVER THE SAME. IT IS SUBMITTED BY THE APPELLANT THAT AS PER THE RBI GUIDELINES THERE IS NO INTEREST TO BE CHARGED ON NPA. IT IS FURTHER SUBMITTED BY THE APPELLANT THAT INCOME FROM NPA SHOULD BE RECOGNIZED ONLY WHEN IT IS ACTUALLY RECEI VED. BUT THE SUBMISSION OF THE APPELLANT IS NOT FOUND TO BE ACCE PTABLE. AS PER THE AO, IN THE CASE OF THE APPELLANT THERE WAS PROG RESSIVE TOTAL INTEREST OF RS. 1,45,95,852/- ON NPA ACCOUNTS WHICH WAS SHOWN AS MUDAT VITI VYAJ ANAMAT ON CAPITAL AND LIABILITY S IDE IN THE BALANCE SHEET AS ON 31/03/2009. AS PER THE AO, OUT OF THE INTEREST OF RS.1,45,95,852/-, THE INTEREST OF RS.1,58,897/- WAS INTEREST FOR THE PREVIOUS YEAR RELEVANT TO WITHIN THE PERIOD OF 3 YE ARS. I AGREE WITH THE VIEW OF THE AO THAT AS PER BOARDS CIRCULAR DAT ED 09/10/1984 AND ALSO IN VIEW OF THE DECISIONS OF THE HONBLE SU PREME COURT IN THE CASE OF UCO BANK, 237 ITR 889 , THE APPELLANT OUGHT TO HAVE CONSIDERED THE ABOVE INTEREST OF RS.1,58,897/- FOR THE YEAR UNDER CONSIDERATION. THIS IS IN VIEW OF THE FACT THAT TH IS INTEREST INCOME WAS ACCRUED TO THE APPELLANT DURING THE YEAR UNDER CONSIDERATION ON THE NPA ACCOUNT AND IT HAD CREDITED TO THE SAME IN THE BOOKS OF ACCOUNTS (I.E. SHOWN AS MUDAT VITI VYAJ ANAMAT ON CAPITAL) AND ITA NO. 2426/AHD/12 A.Y. 09-10 PAGE 4 LIABILITY SIDE IN THE BALANCE SHEET AS ON 31/03/200 9. ONCE THE APPELLANT HAS PASSED THE ENTRY IN THE BOOKS OF ACCO UNTS FOR ABOVE INTEREST OF RS.1,58,897/- AND IT IS SHOWN AS LIABIL ITY SIDE OF THE BALANCE SHEET, THEN PROVISIONS OF SECTION 43D OF TH E IT ACT CAN BE SAID TO BE APPLICABLE. IT IS ONLY WHEN NO ENTRY IS PASSED IN THE BOOKS OF ACCOUNTS FOR THIS AMOUNT OF INTEREST AND IT IS N OT SHOWN IN THE BALANCE SHEET, THEN IT CAN BE SAID THAT SUCH INTERE ST CANNOT BE ADDED TO THE TOTAL INCOME OF THE APPELLANT. HENCE IT CANNOT BE SAID THAT SUCH INCOME SHOULD BE OFFERED TO TAX ONLY WHEN IT IS ACTUALLY RECEIVED. CONSIDERING ALL THESE FACTS, I HOLD THAT THE AO HAS CORRECTLY MADE THE ADDITION OF RS.1,58,897/- IN THE CASE OF THE APPELLANT IN VIEW OF THE REASONS AS MENTIONED BY HI M IN THE ASSESSMENT ORDER AND THEREFORE, THE SAME IS CONFIRM ED. THUS, THE ABOVE GROUNDS OF APPEAL OF THE APPELLANT ARE HEREBY DISMISSED. 4. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT CONTENDED THAT THE ASSESSEE IS A COOPERATIVE BANK E NGAGED IN CARRYING ON BANKING BUSINESS. DURING A.Y. 2009-10, THE ASSESSE E PASSED BOOK ENTRY FOR INTEREST OF RS.1,58,897/- ON NPA ACCOUNT BY DEBITIN G TO TIME BARRED INTEREST RECEIVABLE ACCOUNT AND CREDITING TO PROVISION FOR T IME BARRED INTEREST. BOTH THE ACCOUNTS ARE REFLECTED IN THE BALANCE SHEET ON THE ASSETS SIDE AND LIABILITY SIDE. NO SUCH INTEREST IS CREDITED TO P&L ACCOUNT AS INCOME. HE FURTHER RELIED RBI MASTER CIRCULAR UPDATED 30.06.2007, WHEREIN IT WAS POLICY AS PER THE RBI GUIDELINE INCOME FROM NON PERFORMING ASSETS IS NOT RECOGNIZED ON ACCRUAL BASIS BUT IS BOOKED AS INCOME ONLY WHEN IT IS ACTUA LLY RECEIVED. THEREFORE, BANKS SHOULD NOT TAKE TO INCOME ACCOUNT INTEREST ON NON-PERFORMING ASSETS ON ITA NO. 2426/AHD/12 A.Y. 09-10 PAGE 5 ACCRUAL BASIS. HE FURTHER HAS DRAWN OUR ATTENTION ON THE PAGE NO.5 OF THE PAPER BOOK WHICH IS BALANCE SHEET FOR A.Y. 09-10 WH ICH SHOWS THAT THE APPELLANT HAD SHOWN THIS INTEREST PROVISION NPA IN ASSET SIDE AND LIABILITY SIDE AND NOT CREDITED IN THE P&L ACCOUNT. THE APPELLANT FURTHER ARGUED THAT UCO BANK V. CIT, 237 ITR 889, WHEREIN IT WAS HELD THAT THE QUESTION WHETHER INTEREST EARNED WHAT HAVE COME TO BE KNOWN AS STIC KY LOANS, CAN BE CONSIDERED AS INCOME OR NOT UNTIL ACTUAL REALIZATIO N, IS A QUESTION WHICH MAY ARISE BEFORE SEVERAL INCOME TAX OFFICER EXERCISING JURISDICTION IN DIFFERENT PARTS OF THE COUNTRY. UNDER THE ACCOUNTING PRACTICE, INT EREST WHICH IS TRANSFERRED TO THE SUSPENSE ACCOUNT AND NOT BROUGHT TO THE P & L A /C. OF THE COMPANY IS NOT TREATED AS INCOME. HE FURTHER ARGUED THAT IN CASE OF CIT VS. STATE BANK OF INDIA 262 ITR 662-668, WHEREIN HONBLE BOMBAY HIGH COURT HAS ANSWERED IN FAVOUR OR ASSESSEE AND AGAINST THE REVENUE. THEREF ORE, HE REQUESTED TO DELETE THE ADDITION. AT THE OUTSET, LD. SR. D.R. R ELIED UPON THE ORDER OF THE CIT(A) AND A.O. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT IS MAKING THE PROVISION OF I NTEREST AS PER THE GUIDELINES ISSUED BY THE R.B.I. HOWEVER, SAME HAS NOT BEEN CR EDITED IN THE P&L ACCOUNT AS IT WAS NOTIONAL HAD NOT RECEIVED ACTUALLY BY IT. SECTION 43 IS ALSO NOT APPLICABLE AS ASSESSEE HAS NOT CREDITED IN THE P&L ACCOUNT BUT SHOWN IN THE ASSETS AND LIABILITY SIDE IN THE BALANCE SHEET DIRE CTLY AND ALSO NOT RECEIVED ITA NO. 2426/AHD/12 A.Y. 09-10 PAGE 6 ACTUALLY. THUS, WE HAVE CONSIDERED VIEW THAT THE C IT(A) WAS NOT JUSTIFYING IN CONFIRMING THE ADDITION. ACCORDINGLY, THE ASSESSEE S APPEAL IS ALLOWED. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 15.02.2013 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;