Shree Kadi Nagrik Sahakari Bank Ltd., Kadi V. The Dy.CIT, Patan Circle, Mehsana

ITA 297/AHD/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7966 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 28-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: H V DOSHI
• Keywords: Notional interest
• Section: 143(3); 143(2); 119; 56

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER &SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./I.T.A. NO. 297/AHD/2019 ( / ASSESSMENT YEAR: 2014-15) SHREE KADI NAGRIK SAHAKARI BANK LTD. K.N.S. B HOUSE, GANJ BAZAR, KADI, GUJARAT-382715 / VS. DCIT MEHSANA CIRCLE, MEHSANA ./ ./PAN/GIR NO. : AAAAS8659J ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI H. V. DOSHI, AR / RESPONDENT BY: SHRI L. P. JAIN, SR. DR !' /DATE OF HEARING 24/08/2021 #$!' / DATE OF PRONOUNCEMENT 25/08/2021 %& /O R D E R PER AMARJIT SINGH - AM: THE APPEAL FILED BY THE ASSESSEE FOR A.Y. 2014-15, ARISE FROM ORDER OF THE CIT(A) GANDHINAGAR, AHMEDABAD DATED 07.01.2019, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), GANDHINAGAR, AHMEDABAD IN CONFIRMING THE ADDITION MADE UNDER SECTION 56 OF THE ACT OF RS. 34,95,154/- ON ACCOUNT OF LOCKER RENT ON PRESUMPTION BASIS. 3. THE FACT IN BRIEF IS THAT ASSESSEE HAS FILED RETU RN OF INCOME DECLARING TOTAL INCOME AT RS. 7,15,35,980/- ON 19.11.2014. THE CASE WAS SUBJECT TO SCRUTINY ITA NO. 297/AHD/2019(SHREE KADI NAGRIK SAHKARI BANK LTD. VS. DCIT) A.Y. 2014-15 2 ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSU ED ON 28.08.2015. DURING THE COURSE OF ASSESSMENT THE AO NOTICE THAT ASSESSEE HA S OBTAINED DEPOSIT AMOUNTING TO RS. 4,23,65,550/- FROM THE CUSTOMERS AGAINST THE ALLOTMENT OF SAFE DEPOSIT VAULTS (LOCKERS). THE LD. AO WAS OF THE VIEW THAT OTHER CO- OPERATIVE BANKS WAS CHARGING RENT FOR THE LOCKER AND THE SAME WAS OFFER ED FOR TAXATION. HOWEVER, THE ASSESSEE HAS NOT CHARGED RENT FOR THE LOCKER AND AL SO NOT GIVEN DETAIL OF INTEREST EARNED ON DEPOSIT RECEIVED AGAINST THE LOCKER FACIL ITY. THEREFORE, THE AO HAS ESTIMATED INTEREST ON THE DEPOSIT ON NOTIONAL BASIS @ 8.25% AND MADE ADDITION OF RS. 34,95,154/- TO THE TOTAL INCOME OF THE ASSESSEE . 4. AGGRIEVED ASSESSEE HAS FILED THE APPEAL BEFORE T HE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE REIT ERATING THE FACT STATED BY THE LD. AO. 5. WE HAVE HEARD BOTH THE SIDE AND PERUSED THE MATE RIAL ON RECORD. DURING THE COURSE OF ASSESSMENT THE AO NOTICED THAT ASSESSEE H AS NOT COLLECTED ANY RENT TOWARDS SAFE DEPOSIT VAULTS ALLOTTED TO ITS CUSTOME R AND DEPOSITS OF RS. 4,23,65,500/- WAS COLLECTED FROM CUSTOMERS AGAINST ALLOTMENT OF SAFE DEPOSIT VAULTS. THE ASSESSEE EXPLAINED THAT THESE INTEREST FREE DEPOSITS RECEIVED FROM SAFE DEPOSIT VAULTS(S) CUSTOMERS WAS USED IN THE BUSINES S OF BANKING. THE AO HAS NOT AGREED WITH THE SUBMISSION OF THE ASSESSEE, THEREFO RE, THE AO HAS COMPUTED NOTIONAL INTEREST ON SUCH DEPOSITS @ 8.25% AND MADE ADDITION OF RS. 34,95,154/- TO THE TOTAL INCOME OF ASSESSEE. DURING THE COURSE OF APPELLATE PROCEEDING BEFORE U S THE LD. COUNSEL VEHEMENTLY CONTENDED THAT IT HAS NOT PAID ANY INTER EST ON THE DEPOSIT AND NOT COLLECTED ANY RENT ON LOCKER, THEREFORE, NOTIONAL A DDITION CANNOT BE MADE. DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE HA S ALSO SUBMITTED PAPER BOOK COMPRISING COPIES OF PROFIT AND LOSS ACCOUNT, BALAN CE SHEET AND JUDICIAL PRONOUNCEMENTS RELIED UPON RELATING TO THE ISSUE CO NTESTED IN THIS APPEAL. ON THE PERUSAL OF THE COPY OF BALANCE SHEET PLACED IN THE PAPER BOOK IT IS NOTICED THAT ITA NO. 297/AHD/2019(SHREE KADI NAGRIK SAHKARI BANK LTD. VS. DCIT) A.Y. 2014-15 3 ASSESSEE HAS SHOWN THE AMOUNT OF SAFE VAULT DEPOSIT OF RS. 4,23,05,500/- IN THE LIABILITIES SIDE UNDER THE HEAD DEPOSITS CLAIMING T HAT SAME WAS INVESTED IN WORKING CAPITAL OF BANK FOR PROVIDING LOANS AND MAKING INVE STMENTS. IT IS ALSO SUBMITTED THAT INTEREST INCOME FROM LOAN AND INVESTMENT WAS R EFLECTED IN THE PROFIT AND LOSS ACCOUNT AND INCOME TAX RETURN WAS FILED AS PER PROFI T SHOWN IN THE PROFIT AND LOSS ACCOUNT. THE LD. COUNSEL HAS ALSO PLACED RELIA NCE WAS ON THE DECISION OF THE COORDINATE BENCH OF THE ITAT IN THE CASE OF CO-OP. BANK OF MEHSANA LTD. VS. DCIT IN ITA NO. 1261/AHD/2017 FOR A.Y. 2014-15 WHERE IN THE SIMILAR ISSUE ON IDENTICAL FACTS HAS BEEN ADJUDICATED IN FAVOUR OF T HE ASSESSEE. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVE WE HAVE GONE THROUGH THE ABOVE REFERRED DECISION OF THE COORDINATE BENCH OF THE ITAT AND THE RELEVANT PART O F THE SAME IS REPRODUCED AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAD PROVIDED LOCKERS TO THE CUSTOMERS AND COLLECTED SECURITY DEPOSITS AGAINST THE SAFE DEPOSIT VAULTS TO THE AMOUNT OF RS. 55,88,500/-. THE ASSES SEE HAD NOT CHARGED ANY RENT FOR THE LOCKERS FROM THE CUSTOMERS. HOWEVER THE ASSESSING OFFICER HAS CHARGED NOTIONAL INTEREST @ 8.25% ON THE AFORESAID LOCKERS DEPOSIT AMOUNT AND M ADE ADDITION OF RS. 4,61,051/- AS LOCKER RENT AS INCOME FROM OTHER SOURCES U/S. 56 OF THE I. T. ACT. THE LD. CIT(A) HAS RESTRICTED THE IMPUGNED ADDITION TO THE AMOUNT OF RS. 1,31,150/- H OLDING THAT INTEREST TO BE CHARGED ON DAY TO DAY BALANCE AS AGAINST THE TOTAL OUTSTANDING DEP OSIT. WE ARE OF THE OPINION THAT THERE IS NO BASIS OF CHARGING INTEREST ON THE SECURITY DEPOSIT TAKEN FOR PROVIDING LOCKERS BY THE BANK TO ITS CUSTOMERS SINCE THE BANK HAS NOT ACTUALLY CHARGED S UCH INTEREST ON LOCKERS GIVEN ON HIRE TO ITS CUSTOMERS. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF MEHSANA DISTRICT CENTRAL CO-OPERATIVE B ANK LTD. VS. ITO (2001) 119 TAXMAN 785 (SC) WHEREIN IT IS HELD THAT LOCKER RENT DERIVED BY ASSESSEE WAS INCOME FROM BUSINESS OF BANKING. IN THE LIGHT OF THE AFORESAID FACT AND FI NDINGS, WE DO NOT FIND ANY MERIT IN LEVYING LOCKER RENT ON NOTIONAL BASIS THEREFORE, WE ARE NOT INCLINED WITH THE DECISION OF THE LD. CIT(A). ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. AFTER CONSIDERING THE AFORESAID DECISION OF THE COORDINATE BENCH THERE IS NOTHING BEFORE US ON HAND DIFFERENT FROM THE ISSUE RAISED IN THE CASE CITED (SUPRA), SO AS TO TAKE A DIFFERENT VIEW ON THIS ISSUE. THERE FORE, SINCE THE ISSUE ON HAND BEING SQUARELY COVERED FOLLOWING THE PRINCIPLE OF C ONSISTENCY WE FIND MERIT IN THE SUBMISSION OF THE ASSESSEE AND ALLOW THE APPEAL OF THE ASSESSEE AS CHARGING OF NOTIONAL INTEREST IS NOT JUSTIFIED. ITA NO. 297/AHD/2019(SHREE KADI NAGRIK SAHKARI BANK LTD. VS. DCIT) A.Y. 2014-15 4 7. THE LD. COUNSEL HAS NOT PRESSED THE ADDITIONAL GR OUND FOR FRESH CLAIMS OF RS. 7,33,312/- MADE DURING ASSESSMENT PROCEEDINGS. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED AS NOT PRESSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNT ANT MEMBER AHMEDABAD: DATED 25/08/2021 TANMAY TRUE COPY / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. % / ASSESSEE 3. + ,! -! / CONCERNED CIT 4. -!- / CIT (A) 5. 123 ! ,, ' ,, 56%+% / DR, ITAT, AHMEDABAD 6. 38 9 / GUARD FILE. BY ORDER / %& , :/5 ' ,,56%+% < 1.DATE OF DICTATION ON 25.08.2021 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 25.08.2021 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 25.08.2021 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .08.2021 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR . P.S./P.S 25.08.2021 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25.08.2021 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER THIS ORDER PRONOUNCED IN OPEN COURT ON 25/08/2021