The ACIT, Cen. Cir.-2, JAMNAGAR V. M/s. The Jamnagar Peoples Co. Op. Bank Ltd., JAMNAGAR

ITA 325/RJT/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6640 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 26-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: ANKIT GOKANI
• Keywords: Bad and doubtful debts; Provision of bad debts
• Section: 263

Judgement Text

: : IN THE INCOME TAX APPELLATE TRIBUN AL: RAJKOT BENCH: RAJKOT BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI K. NAR ASIMHA CHA RY , JUDICIAL MEMBER ./ ITA NO S . 325 /R JT /201 5 AND 419/RJT/2014 / ASSESSMENT YEAR S : 2008 - 09 AND 2009 - 10 ACIT , CIRCLE - 3 , JAMNAGAR VS THE JAMNAGAR PEOPLES CO - OP. BANK LTD., DATTANI CHAMBERS, GRAIN MARKET, JAMNAGAR PAN : A A AJT0271C / (APPELLANT) / (RESPONDENT) REVENUE BY : SH RI AVINASH KUMAR , D.R ASSESSEE BY : SHRI ANKIT GOKANI , C . A / DATE OF HEARING : 22 / 03/2017 / DATE OF PRONOUNCEMENT: 24 /03/2017 / O R D E R PER SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER : THE DEPA RTMENT HAS FILED THE ABOVE APPEAL S AGAINST THE ORDER S OF LD.CIT(A) , JAMANAGAR DATED 06 / 04 / 201 4 AND 16/04/2014 F OR ASSESSMENT YEAR S 20 0 8 - 09 AND 2009 - 10 RESPECTIVELY . FIRST WE TAKE UP APPEAL NO.324/RJT/2015 (A.Y.2008 - 09) 2. THE BRIEF FACTS CULMINATING IN T O THE LEVYING OF PENALTY ARE THIS. THE ASSESSEE, A CO - OPERATIVE SOCIETY, IN THE RELEVANT YEAR, WAS ENGAGED IN THE BUSINESS OF BANKING . IT HAD FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.30,81,850/ - . ASSESSMENT WAS COMPLETED U/S.143(3) VIDE ORD ER DATED 07/12/2010, DISALLOWING CLAIM OF FRINGE BENEFIT TAX ON THE EXPENSES OF RS.7,583/ - ITA NO.325/RJT/2015 & 419/RJT/2014 A.Y. 2008 - 09 & 2010 - 11 - 2 - 3. THE ASSESSING OFFICER HAS OBSERVED THAT ASSESSMENT FOR ASSESSMENT YEAR 2009 - 10 HAD BEEN FINALIZED U/S.143(3) BY MAKING THE FOLLOWING ADDITIONS AS UNDER: 1. DISAL LOWANCE OF BAD DEBTS PROVISION FOR MATURED INVESTMENTS RETURN FROM MMCO FD I. 2. DISALLOWANCE OF RESERVE FOR SCHEDULE ASSETS RS.4,10,000/ - THE ASSESSING OFFICER FURTHER OBSERVED AS UNDER: IN RESPECT OF THE EARLIER A. Y. 2009 - 10, THE APPEAL OF THE ASSES SEE FILED BEFORE THE LD. CIT(A) WAS DISMISSED VIDE ORDER NO. CIT(A)/JAM/230/2011 - 12 DATED 24/04/2012 CHIEFLY ON THE BASIS OF AN APPLICATION DATED 24/04/2012 FILED BY THE ASSESSEE FOR WITHDRAWAL OF THE APPEAL. IN THE SAID APPLICATION, THE ASSESSEE CITED THE FOLLOWING REASONS FOR SEEKING WITHDRAWAL OF THE APPEAL: (I) GROUND NO. 1 OF APPEAL IS AGAINST DISALLOWANCE OF BAD DEBTS CLAIMED BY THE ASSESSEE OF RS. 46,33,771/ - ON ACCOUNT OF AMOUNT DEPOSITED WITH MADHAVPURA MERCANTILE CO - OP BANK LTD. THE ASSESSEE HAS WRIT TEN OFF THIS AMOUNT BY DEBITING IT TO PROFIT & LOSS ACCOUNT. HOWEVER CORRESPONDINGLY THE AMOUNT IS CREDITED IN BALANCE SHEET AND SHOWN AS PROVISION FOR MATURED INVESTMENT WRITTEN OFF UNDER THE HEAD PROVISIONS. THE ASSESSEE HAS PASSED THIS ACCOUNTING TREATM ENT FOR WRITE OFF AND CLAIMED DEDUCTION BECAUSE OF THE REASON THAT ON IDENTICAL FACTS AND CIRCUMSTANCES AND IDENTICAL ACCOUNTING TREATMENT, ASSESSEE WAS ALLOWED DEDUCTION FOR A.Y. 2008 - 2009 BY THE AO HIMSELF U/S 143(3). (II) ON DISALLOWANCE IN A.Y 2009 - 201 0 U/S. 143(3), THE ASSESSEE GOT IT VERIFIED FROM OTHER CHARTERED ACCOUNTANTS REGARDING DISALLOWANCE AND THE BANK WAS ADVISED THAT THE DEDUCTION MAY NOT BE AVAILABLE TO THE ASSESSEE BECAUSE OF THE PROVISIONING OF THE AMOUNT AND NOT WRITE OFF. THEREFORE, THE BANK HAS NOW BEEN ADVISED AS UNDER: - A. FOR A.Y. 2008 - 2009, TO REQUEST THE ASSESSING OFFICER, CIT FOR REVISION U/S. 263; B. FOR A.Y. 2010 - 2011, THE RETURN OF INCOME SHOULD BE REVISED BY WITHDRAWING THE CLAIM; C. BY WITHDRAWING THE APPEAL BEFORE YOUR HO NOUR FOR A.Y 2009 - 2010. IN VIEW OF THIS, WE REQUEST YOUR HONOUR TO KINDLY ALLOW US FOR WITHDRAWING THE APPEAL ON THIS GROUND. (III) GROUND NO. 2 OF APPEAL IS AGAINST PROVISIONING OF STANDARD ASSETS OF 0.25% MADE BY THE BANK OF RS. 4,10,000/ - . THIS PROVIS IONING IS MADE BASED AS PER THE DIRECTION OF THE RESERVE BANK OF INDIA FOR INCOME ACCRUAL AND PRUDENTIAL NORMS. IT HAS FURTHER BEEN ITA NO.325/RJT/2015 & 419/RJT/2014 A.Y. 2008 - 09 & 2010 - 11 - 3 - ADVISED TO THE BANK THAT NORMS FOR PROVISIONING ARE PRESCRIBED BY THE RESERVE BANK OF INDIA AND THEY ARE NOT APPLICABLE UNDE R THE INCOME TAX ACT. AND THERE IS NO DEDUCTION AVAILABLE OF THIS AMOUNT UNDER THE INCOME TAX ACT. IN VIEW OF ABOVE, THE APPELLANT HAS DECIDED TO NOT TO CONTEST THIS APPEAL. 4. IN VIEW OF THE ABOVE MENTIONED FACTS PROCEEDING S U/S.263 WERE INITIATED FOR A.Y. 2008 - 09 AND , ACCORDINGLY , AN ADDITION OF RS.30,89,180/ - WAS MADE IN RESPECT OF MATURED INVESTMENTS WHICH WERE NOT WRITTEN OFF IN THE BOOKS OF ACCOUNT AND DEDUCTION OF RS.2,00,000/ - WAS DENIED IN REGARD TO AMOUNT DEBIT ED IN PRO FIT AND LOSS ACCOUNT RES ERVE FOR STANDARD ASSE TS. THE PENALTY PROCEEDINGS WERE INITIATED FOR BOTH THE ADDITION S AND AFTER CONSI DERING THE DETAILED SUBMISSION S OF ASSESSEE PENALTY OF RS.10,16,500/ - WAS LEVIED. 5 . THE LD.CIT(A), DELETED THE PENALTY ON BOTH THE COUNTS. BEING AGGR IEVED DEPARTMENT IS IN APPEAL BEFORE US AND HAS ASSAILED THE DELETION OF PENALTY LEVIED BY THE ASSESSING OFFICER U/S.271(1) (C) OF RS.10,16,500/ - 6 . THE LD.DR SUBMITTED THAT ASSESSEE H AD CLAIMED DEDUCTION IN RESPECT OF BAD DEBTS WITHOUT WRITING OFF AMOUNT IN THE BOOKS OF ACCOUNT. HE SUBMITTED THAT IF THE CASE WAS NOT SELECTED FOR SCRUTINY THE AMOUNT WOULD HAVE REMAIN ED INTACT AGAINST DEBTOR AND ASSESSEE COULD CLAIM THE DEDUCTION IN SUBSEQUENT YEAR ALSO. HE , THEREFORE, SUBMITTED THAT ASSESSEE FURNISHED INACC URATE PARTICULARS OF ITS INCOME AND, THEREFORE, PENALTY IS LEVIABLE . 7 . LD.COUNCEL FOR THE ASSESSEE REFER RED TO PAGE 37 OF PAPER BOOK WHEREIN THE PROFIT AND LOSS ACCOUNT IS CONTAINED AND ALSO REFER RED SCHEDULED 16 OF OTHER PROVISION AT PAGE 42 OF PAPER BOOK. HE POINTED OUT THAT ASSESSEE HAD DEBITED THE AMOUNT AS PROVISION TOWARDS RESERVE ITA NO.325/RJT/2015 & 419/RJT/2014 A.Y. 2008 - 09 & 2010 - 11 - 4 - FOR MATURED INVESTMENT IN THE PROFIT AND LOSS ACCOUNT AND CORRESPONDING LIABILITY WAS SHOWN IN THE BALANCE SHEET UNDER THE PROVISIONS RESERVE FROM MATURED INVESTMENTS F OR RESERVE FROM MATURED INVESTMENTS . LD.COUNSEL REFERRED TO PAGE 43 OF PAPER BOOK WHEREIN MEMORANDA ACCOUNTS OF THE MADHAVPURA MERCANTILE CO - OP BANK LIMITED IS CONTAINED , WHEREIN , THIS ACCOUNT WAS SHOWN. HE SUBMITTED THAT SINCE MADHAVPURA MERCANTILE CO - OP. BANK BECAME BANKRUPT, THEREFORE, ASSESSEE HAD WRITTEN OFF THE AMOUNTS BUT IN ORDER TO KEEP THE BALANCE INTACT IT WAS SHOWN IN THE MEMORAND A ACCOUNTS. HE SUBMITTED THAT C L A IM WAS ACTUALLY ALLOWABLE, IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN CASE OF VIJAYA BANK. 8 . THE LD.COUNSEL FURT HER SUBMITTED THAT, IN ANY CASE, PENALTY IS NOT LEVIABLE IN VIEW OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAMBHAV MEDIA LTD., 3 3 TAXMANN .COM 97 (GUJARAT) AND THE DECISION OF HON'BLE SUPREME COU RT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., 322 ITR 158 (SC) BECAUSE ASSESSEE HAD DISCLOSED ALL RELEVANT FACTS BEFORE THE ASSESSING OFFICER AT THE TIME OF FILING OF RETURN OF INCOME. 9 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. THE FACTS ARE NOT DISPUTED. ASSESSEE ON ITS OWN CAME FORWARD AND REQUESTED FOR INITIATION OF SEC. 263 PROCEEDINGS FOR DISALLOWING THE ASSESSEE S CLAIM IN REGARD TO PROVISION DEBITED TO PROFIT & LOSS ACCOUNT IN RESPECT OF THE DEBT DUE FROM MADHAVPURA MERCANTILE CO - OP BANK LIMITED. THE ASSESSEE S CLAIM WAS NOT ALLOWABL E BECAUSE ASSESSEE HAD NOT RE DUCED THE FIGURE OF ADVANCES IN WHICH THE IMPUGNED AMOUNT WAS INCLUDED, RATHER KEPT THE SAID BALANCE INTACT AND MADE CORRESPONDING PROVISI ON WHICH WAS CLAIMED AS DEDUCTION. THIS TREATMENT IN ACCOUNT COULD NOT BE SAID TO BE WRITE OFF OF THE IMPUGNED AMOUNT AND, THEREFORE, THE ASSESSEE S CLAIM WAS NOT ALLOWABLE. ITA NO.325/RJT/2015 & 419/RJT/2014 A.Y. 2008 - 09 & 2010 - 11 - 5 - HOWEVER , IT CANNOT BE DISPUTED THAT ASSESSEE H AD FURNISHED ALL THE NECESSARY DET AILS IN REGARD TO FDR OF RS.4,20,47,179/ - PLACED WITH MADHAVPURA MERCANTILE CO - OP BANK LIMITED WHICH INCLUDED THE IMPUGNED AMOUNT . ASSESSEE S EXPLANATION THAT THE AMOUNT WAS KEPT INTACT IN THE BOOKS IS QUITE REASONABLE AND BONAFIED CONSIDERING THE OVERALL FACTS. AT BEST, THIS CAN BE SAID TO BE A CLAIM NOT SUSTAINABLE IN LAW. HOWEVER, THAT AUTOMATICALLY DOES NOT LEAD TO LEVY OF PENALTY. HON BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S LTD.(SUPRA) HAS HELD THAT MERE ADVANCING OF CLAIM NOT SUSTAI NABLE IN LAW DOES NOT IPSO FACTO LEAD TO LEVY OF PENALTY. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). 10 . AS FAR AS THE SECOND DISALLOWANCE OF RS.2,00,000/ - ON ACCOUNT OF RESERVE ON STANDARD ASSET IS CONCERNED, THE SAME WAS CLAIMED BASED ON RBI S DIRECTIVE. THIS ADDITION WAS ALSO MADE BECAUSE THE ASSESSEE HAD PROPOSED FOR REVISIONARY ACTION U/S 263. THE ASSESSEE S CLAIM WAS BASED ON RBI S DIRECTIVE, HOWEVER, ADMITTEDLY RBI S DIRECTIVE DO NOT GOVERN THE PROVISIO NS OF INCOME TAX ACT. THE LD.CIT(A) HAS ALSO POINTED OUT THAT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS. JCIT IN CIVIL APPEAL NO. 1337/2003 DATED 11.1.2010 , THE HON'BLE SUPREME COURT HAS ALSO UPHELD THIS VIEW. HE FURTHER POINTED OUT THAT THE RETURN OF INCOME WAS FILED BY ASSESS EE ON 39.9.2008 AND THE ISSUE GOT SETTLED ON 11.01.2010. THUS, PRIOR TO THIS DATE THE ISSUE WAS HIGHLY DEBATABLE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF TH E LD.CIT(A) BECAUSE ASSESSEE HAD DISCLOSED ALL NECESSA RY FACTS IN REGARD TO ITS CLAIM AND AT BEST, IT COULD BE SAID TO BE A CLAIM NOT SUSTAINABLE IN LAW. THE HON BLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCT PVT. LTD. 322 ITR 158 (SUPRA) HAS , INTER - ALIA , OBSERVED AS UNDER: WHERE THERE IS N O FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WI LL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS ITA NO.325/RJT/2015 & 419/RJT/2014 A.Y. 2008 - 09 & 2010 - 11 - 6 - REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 11. WE , THEREFORE, D O NOT FIND ANY REASONS TO INTERFERE WITH ORDER OF LD.CIT(A). RESPECTFULLY, FOLLOWING THE DECISION OF HON BLE SUPREME COURT , WE CONFIRM THE ORDER OF LD.CIT(A). 12 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. APPEAL NO.419/RJT/2014 (A.Y. 2009 - 10) 13 . AS THE FACTS IN THIS ASSESSMENT YEAR BEING IDENTICAL WITH THAT OF A.Y.2008 - 09, FOLLOWING OUR DECISION FOR A.Y.2008 - 0 9, W E DISMISS THE REVENUE S APPEAL FOR A.Y 2009 - 10 . 14 . IN THE RESULT, BOTH THE REVENUE S APPEAL S ARE DISMISSED. ORDER P RONOUNCED IN THE COURT ON 24 TH MARCH, 2017. SD/ SD/ - ( K. NAR ASIMHA CHA RY ) JUDICIAL MEMBER ( S.V. MEHROTRA ) ACCOUNTANT MEMBER AHMEDABAD, DATED 24 / 03 /20 17 * MANISH / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT - 2 . / RESPONDENT - 3 . / CONCERNED CIT /DIT 4 . - / CIT (A) - IV, RAJKOT 5 . , , / DR, I TAT, RAJKOT 6 . / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) / ITAT, RAJKOT