Krishna Sahakari Bank Ltd, Satara V. Income tax Officer, Satara

ITA 419/PUN/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0933 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-07-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 20-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Bad and doubtful debts; Set aside
• Section: 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 419 /PUN/201 7 / ASSESSMENT YEAR : 20 1 2 - 1 3 KRISHNA SAHAKARI BANK LT D., MALKAPUR, TAL - KARAD, DIST. SATARA - 415539 PAN : AA AAK2603A ....... / APPELLANT / V/S. THE INCOME TAX OFFICER, WARD 1, SATARA / RESPONDENT ASSESSEE BY : SMT. DEEPA KHARE REVENUE BY : SHRI S.P. WALIMBE / DATE OF HEARING : 09 - 07 - 202 1 / DATE OF PRONOUNCEMENT : 13 - 07 - 202 1 / ORDER PER PARTHA SARATHI CH AUDHU RY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. PR. CIT - 4 , PUNE , DATED 2 8 . 1 0.201 6 AS PER THE FOLLOWING GROUNDS OF APPEAL . 1 . THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.1,56,07,610/ - TOWARDS DISALLOWANCE OF DEDUCTION U/S 36(VIIA) 2 . THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.50000/ - TOWARDS PROVISION FOR STANDARD ASSETS. ITA NO . 419 /P UN / 201 7 KRISHNA SAHAKARI BANK LTD. 2 2. THAT AS PER THE GROUNDS OF APPEAL, THE MAIN GRIEVANCE OF THE ASSESSEE IS TWO - FO LD: FIRST CONFIRMATION OF DISALLOWANCE OF RS. 1,56,07,610/ - ON ACCOUNT OF BAD AND DOUBTFUL DEBTS AND SECOND CONFIRMATION OF DISALLOWANCE OF RS.5 LAKHS TOWARDS PROVISION FOR STANDARD ASSETS. THAT WITH REGARD TO THE FACTS INVOLVING BAD AND DOUBTFUL DEBTS, DU RING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND FROM THE COMPUTATION OF INCOME THAT THE ASSESSEE BANK HAD CLAIMED RS.16,75,210/ - BEING 7.5% OF TOTAL INCOME OF RS.2,23,36,143/ - AND RS.2,20,32,400/ - BEING 10% OF RURAL ADVANCES OF RS.22,03,24,000/ - U/ S 36(1)(VIIA) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS . THE AO FOUND FROM THE PROFIT AND LOSS ACCOUNT THAT THE PROVISION ON THIS ACCOUNT WAS MADE BY THE ASSESSEE OF ONLY RS.81 LA KHS. WHEN EXPLANATION WAS SOUGHT BY THE AO, THE ASSESSEE SUBMITTED THAT THE BANK HAD PROVISION OF RS.89 LAKHS ONLY FOR BAD AND DOUBTFUL DEBTS AND RS.5 LAKHS FOR STANDARD ASSETS. HENCE, IN ALL RS.94 LAKHS WAS DEBITED TO PROFIT AND LOSS ACCOUNT. IT WAS CO NTENDED BY THE ASSESSEE THAT THE PROVISION WAS MADE AS PER GUIDELINES OF RBI AT RS.94 LAKHS. THE AO VIDE PARAS 7.3 TO 7.7 OF HIS ORDER AFTER ANALYZING THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT AND ALSO DISCUSSING ABOUT THE CASE OF STATE BANK OF PAT IALA REPORTED IN 272 ITR 54 (HAR) HELD THAT IT WAS NOT IN DISPUTE THAT THE PROVISION FOR BAD AND DOUBTFUL DEBTS WAS MADE FOR RS.81 LAKHS AND THE SAME WAS DEBITED TO PROFIT AND LOSS ACCOUNT , W HEREAS THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.2,37,07,610/ - (RS .16,75,210/ - + 2,20,32,400/ - ) U/S 36(1)(VIIA) OF THE ACT IN THE COMPUTATION OF TOTAL INCOME. IT WAS CONTENDED BY THE AO THAT THE DEDUCTION SHOULD BE RESTRICTED TO THE AMOUNT OF SUCH PROVISION ACTUALLY CREDITED IN THE BOOKS OF ASSESSEE IN THE RELEVANT YEAR I.E. RS.81 ITA NO . 419 /P UN / 201 7 KRISHNA SAHAKARI BANK LTD. 3 LAKHS OR THE AMOUNT CALCULATED AS PER PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT I.E. RS.2,37,07,610/ - WHICHEVER IS LESS . THE AO ALSO REFERRED TO CBDT INSTRUCTION NO.17/2008 DATED 26.11.2008 AND THEREAFTER DISALLOWED THE EXCESS CLAIM OF BAD AND DOUBTFUL DEBTS OF RS.1,56,07,610/ - U/S 36(1)(VIIA) OF THE ACT. THAT ON THIS FINDING OF AO WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), AS EVIDENT AT PARA 6.3 OF HIS ORDER, THE LD. CIT(A) VENTURED INTO AREA WHICH WAS NOT ARISING FROM TH E DISCUSSION IN THE ASSESSMENT ORDER. THE LD. CIT(A) APPARENTLY IN HIS ORDER WENT ON DISCUSSING THE APPLICABILITY OF SECTION 36(1)(VIIA) OF THE ACT WHETHER THAT IS TO BE RESTRICTED ONLY TO BANKS HAVING RURAL BRANCHES OR EVEN OTHERWISE. THE LD. CIT(A) IN HIS DECISION OBSERVED AS FOLLOWS: 6.3.THE ONLY POSSIBLE REFERENCE IN LAW IS THAT DEDUCTION UNDER THE FIRST PART IS AVAILABLE TO ALL ASSESSES IRRESPECTIVE OF WHERE THE BRANCHES ARE LOCATED. IT WAS FURTHER CONTENDED THAT, THE INTERPRETATION THAT THE ENTI RE SECTION 36(1)(VIIA) IS APPLICABLE ONLY IN CASE OF RURAL ADVANCES IS ABSURD AND A BANK WITH EVEN ONE RURAL BRANCH WILL GET DEDUCTION OF 7.5% OF TOTAL INCOME INCLUDING ALL THE INCOME OF URBAN BRANCHES. THERE IS NO RATIONAL FOR ALLOWING THIS WHILE AT THE SAME TIME, EXCLUDING DEDUCTION FOR BANKS WITH ZERO RURAL BRANCHES. IT WAS ARGUED THAT THE INTERPRETATION RESULTS IN THE PROVISIONS BEING RENDERED DISCRIMINATORY. THE APPELLANT FURTHER, DISCUSSED, THE LEGISLATIVE HISTORY OF THE PROVISIONS OF SECTION 36(1) (VIIA) INTER ALIA HOLDING THAT IT IS CLEAR THAT ONE OF THE PROVISIONS IN SECTION 36(1)(VIIA) IS RESTRICTED TO BANKS HAVING RURAL BRANCHES, WHILE THE OTHER PROVISION IS NOT SO RESTRICTED. 3. THAT ON THIS BACKGROUND, THE LD. CIT(A) WENT ON ANALYZING THE C ASE LAWS, THEREFORE, THESE FACTS WERE NOT COMING OUT FROM THE ASSESSMENT ORDER. THIS FACT WAS SUBMITTED BY THE LD. AR AT THE TIME OF HEARING ALSO BEFORE US. THE LD. DR FAIRLY CONCEDED THAT THE FINDINGS OF LD. CIT(A) ARE ON SOME DIFFERENT PREMISE AND ARE NOT BASED ON THE FACTS AND ISSUES OF THE ASSESSMENT ORDER. THE LD AR SUBMITTED THAT THE MATTER MAY BE REMANDED TO THE FILE OF LD. CIT(A) FOR RE - ADJUDICATION AS PER THE FACTS ARISING FROM THE ASSESSMENT ORDER. THE LD. DR FAIRLY AGREED TO THE ITA NO . 419 /P UN / 201 7 KRISHNA SAHAKARI BANK LTD. 4 PROPOSITION P UT FORTH BY THE LD. AR OF THE ASSESSEE. AFTER HEARING THE PARTIES AND ON ANALYZING THE FINDINGS OF AO VIS - - VIS FINDINGS OF LD. CIT(A), WE ARE OF THE CONSIDERED VIEW THAT THE DECISION OF LD. CIT(A), THE VERY BASIS IS ON DIFFERENT PREMISE, FACTS AND ANALYS IS AND IS NOT ARISING FROM THE ASSESSMENT ORDER. AFTER HEARING SUBMISSIONS OF THE PARTIES, WE THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) AND REMAND THE MATTER BACK TO HIS FILE TO RE - ADJUDICATE AS PER LAW BASED ON FACTS AND ISSUES ARISING FROM THE ASSESS MENT ORDER ITSELF . 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE O PEN COURT ON 13 TH JULY , 202 1 . SD/ - SD/ - R.S. SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 13 TH JULY, 202 1 GCVSR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT 3. THE CIT (APPEALS) - 4, PUNE. 4. THE PR. CIT - 3, PUNE. 5. DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. // // TRUE COPY// / BY ORDER, / SR. PRIVATE SECRETARY , / ITAT, PUNE