The Raddi Sahakar Bank Niyamitha , Dharwad V. Assistant Commissioner of Income TAx Circle-2(1), Hubli

ITA 2527/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8929 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-07-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 28-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISRA
• Assessee Lawyers: N O N E
• Keywords: Opportunity of being heard; Bad and doubtful debts; Set aside
• Section: 2

Judgement Text

ITA 2527/BANG/2017 THE RADDISAHAKARA BANK NIYAMITHA, DHARWAD IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.2527/BANG/2017 ASSESSMENTYEAR: 2014 15 THE RADDISAHAKARA BANK NIYAMITHA BANK ROAD DHARWAD PAN NO :AAAAT3297K VS. ACIT, CIRCLE-2(1), HUBLI APPELLANT RESPONDENT APPELLANT BY : N O N E RESPONDENT BY : SHRI PRIYADARSHIMISRA, D.R. DATE OF HEARING : 13.07.2020 DATE OF PRONOUNCEMENT : 31.07.2020 O R D E R PERB.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 24.7.2017 PASSED BY LD. CIT(A) HUBL I AND IT RELATES TO ASSESSMENT YEAR 2014-15. THE ASSESSE E IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN CONFIRMI NG THE DISALLOWANCE MADE BY THE A.O. IN RESPECT OF CLAIMS MADE ITA 2527/BANG/2017 THE RADDISAHAKARA BANK NIYAMITHA, DHARWAD PAGE 2 OF 7 U/S 36(1)(VIIA) & 36(1)(VIII) OF THE INCOME-TAX ACT ,1961 ['THE ACT' FOR SHORT]. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE EVEN THOUGH THE ADJOURNMENTS WERE GRANTED TO THE ASSESSE E ON THE EARLIER OCCASIONS AT THE SPECIFIC REQUEST OF TH E COUNSEL. HENCE, WE PROCEED TO DISPOSE OF THE APPEAL EX-PARTE , WITHOUT PRESENCE OF THE ASSESSEE. 3. WE HEARD LD. D.R. AND PERUSED THE RECORD. THE ASSESSEE IS A CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING. THE ASSESSEE HAD CLAIMED DEDUCTION TOW ARDS PROVISION FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA ) OF THE ACT. THE DEDUCTION IS ALLOWABLE, INTER-ALIA @ 10% OF THE AGGREGATE AMOUNT OF AVERAGE RURAL ADVANCES GIVEN BY THE ASSESSEE. THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.1,01,32,700/- AS 10% OF AVERAGE AMOUNT RURAL ADVANCES. THE A.O. NOTICED THAT AVERAGE AMOUNT OF RURAL ADVANCES OUTSTANDING AS AT THE BEGINNING AND END OF THE YEAR WAS RS.9.75 CRORES AND 10% OF THE SAME WORKED OUT TO RS.97,56,000/-. ACCORDINGLY, THE A.O. HELD THAT THE ITA 2527/BANG/2017 THE RADDISAHAKARA BANK NIYAMITHA, DHARWAD PAGE 3 OF 7 ASSESSEE HAS CLAIMED DEDUCTION IN EXCESS BY RS.3,76,000/- AND DISALLOWED THE ABOVE SAID AMOUNT. 4. THE ASSESSEE HAD ALSO CLAIMED DEDUCTION OF SPECI AL RESERVE U/S 36(1)(VIII) OF THE ACT @ 20% OF THE PRO FITS DERIVED FROM BANKING BUSINESS. THE AMOUNT CLAIMED BY THE ASSESSEE IS RS.18.54 LAKHS. THE A.O. COMPUTED THE AMOUNT OF DEDUCTION AT RS.9.11 LAKHS BY ADOPTING SO ME METHODOLOGY. ACCORDINGLY, HE DISALLOWED THE EXCESS CLAIM OF RS.9.42 LAKHS. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) CONFIRMED BOTH THE DISALLOWANCES CITED ABOVE BY OBS ERVING THAT THE ASSESSEE DID NOT FILE ANY WRITTEN SUBMISSI ON IN SUPPORT OF ITS CONTENTIONS. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 6. WE HEARD LD. D.R. AND PERUSED THE RECORD. THE FI RST ISSUE RELATES TO DISALLOWANCE MADE BY THE A.O. U/S 36(1)(VIIA) OF THE ACT. UNDER THE ABOVE SAID SECTI ON, THE TWO FOLD DEDUCTION IS ALLOWED TOWARDS PROVISION OF BAD AND DOUBTFUL DEBTS CREATED BY THE ASSESSEE, I.E., ( A) A SPECIFIED PERCENTAGE OF TOTAL INCOME AND (B) AN AMO UNT ITA 2527/BANG/2017 THE RADDISAHAKARA BANK NIYAMITHA, DHARWAD PAGE 4 OF 7 NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES. PROVISIONS OF RULE 6AB A PRESCRIBES THE METHODOLOGY FOR COMPUTING AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES. THE S AID RULE READS AS UNDER: 6ABA: FOR THE PURPOSES OF CLAUSE (VIIA) OF SUB-SECT ION (1) OF SECTION 36, THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF A SCHEDULED BANK SHALL BE COMPUTE D IN THE FOLLOWING MANNER, NAMELY:- (A) THE AMOUNTS OF ADVANCES MADE BY EACH RURAL BRANCH A S OUTSTANDING AT THE END OF THE LAST DAY OF EACH MONT H COMPRISED IN THE PREVIOUS YEAR SHALL BE AGGREGATED SEPARATELY; (B) THE SUM SO ARRIVED AT IN THE CASE OF EACH SUCH BRAN CH SHALL BE DIVIDED BY THE NUMBER OF MONTHS FOR WHICH THE OUTSTANDING ADVANCES HAVE BEEN TAKEN INTO ACCOUNT F OR THE PURPOSES OF CLAUSE (A); (C) THE AGGREGATE OF THE SUMS SO ARRIVED AT IN RESPECT OF EACH OF THE RURAL BRANCHES SHALL BE THE AGGREGATE AVERAG E ADVANCES MADE BY THE RURAL BRANCHES OF THE SCHEDULE D BANK. 7. A PERUSAL OF THE ABOVE SAID RULE WOULD SHOW THAT THE METHODOLOGY ADOPTED BY THE A.O. IN COMPUTING THE AVERAGE RURAL ADVANCES BY CONSIDERING ONLY OPENING AND CLOSING BALANCE OF THE YEAR IS NOT CORRECT, I.E., T HE SAME IS NOT IN ACCORDANCE WITH THE METHOD PRESCRIBED UNDER RULE 6ABA. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS IS SUE REQUIRES FRESH EXAMINATION AT THE END OF THE A.O. ITA 2527/BANG/2017 THE RADDISAHAKARA BANK NIYAMITHA, DHARWAD PAGE 5 OF 7 ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE L D. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FI LE OF THE A.O. WITH THE DIRECTION TO EXAMINE THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH THE METHODOLOGY PRESCRI BED IN RULE 6ABA. 8. THE NEXT ISSUE RELATES TO DEDUCTION CLAIMED U/S 36(1)(VIII) OF THE ACT. FROM THE SUBMISSIONS MADE BEFORE LD. CIT(A) IN THE STATEMENT OF FACTS AND GROUNDS OF APPEAL, WE NOTICE THAT THE ASSESSEE HAS BEEN COMPUT ING THE DEDUCTION BY FOLLOWING A PARTICULAR METHOD AND IT IS FOLLOWED CONSISTENTLY OVER THE YEARS. IT IS FURTHE R STATED THAT THE SAID METHOD OF WORKING HAS BEEN ACCEPTED B Y THE A.O. IN THE PAST. IT IS THE SAY OF THE ASSESSEE TH AT THE A.O. HAS CHANGED THE METHODOLOGY DURING THE YEAR UNDER CONSIDERATION, WHICH WAS NOT WARRANTED. ACCORDINGL Y, IT WAS CONTENDED THAT THE A.O. WAS NOT CORRECT IN CHAN GING THE METHODOLOGY. 9. THOUGH THE LD. CIT(A) HAS NOT GIVEN ANY OPINION ON THIS ISSUE, THE FACTS REMAINS THAT THE METHODOLOGY ADOPTED BY THE ASSESSEE OVER THE YEARS HAS BEEN ACC EPTED ITA 2527/BANG/2017 THE RADDISAHAKARA BANK NIYAMITHA, DHARWAD PAGE 6 OF 7 BY THE A.O. IN THE PAST. HENCE, WITHOUT FINDING AN Y FAULT WITH THE SAID METHODOLOGY AND WITHOUT SHOWING THAT THE SAME RESULTS IN ALLOWING DEDUCTION OF EXCESS AMOUNT U/S 36(1)(VIII) OF THE ACT, IT WOULD NOT BE PROPER ON T HE PART OF THE A.O. TO CHANGE THE METHODOLOGY. ACCORDINGLY, W E ARE OF THE VIEW THAT THIS ISSUE ALSO REQUIRES FRESH EXA MINATION AT THE END OF THE A.O. ACCORDINGLY, WE SET ASIDE T HE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE A.O. WITH THE DIRECTION TO EXAMINE THE CLAIM AFRESH BY DULY CONSIDERING THE METHODOLOG Y CONSISTENTLY FOLLOWED OVER THE YEARS. 10. NEEDLESS TO MENTION THAT THE ASSESSEE SHOULD BE PROVIDED ADEQUATE OPPORTUNITY OF BEING HEARD. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.2020. SD/- (PAVAN KUMAR GADALE ) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 31 ST JULY, 2020. VG/SPS ITA 2527/BANG/2017 THE RADDISAHAKARA BANK NIYAMITHA, DHARWAD PAGE 7 OF 7 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.