The Seva Vikas Co.op. Bank Ltd., Pune V. Joint Commissioner of Income-tax,

ITA 442/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9171 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 13-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N C LAHOTI
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 442 /P U N/201 5 / ASSESSMENT YEAR : 20 11 - 12 THE SEVA VIKAS CO - OP. BANK LTD., SEVA BHAVAN, NEAR SADHU VASWANI GARDEN, PIMPRI, PUNE - 411017 PAN : AAATT1710G ....... / APPELLANT / V/S. JOINT COMMISSIONER OF INCOME TAX, RANGE 10, PUNE / RESPONDENT ASSESSEE BY : S HRI N.C. LAHOTI REVENUE BY : SHRI ACHAL SHARMA / DATE OF HEARING : 1 1 - 07 - 2017 / DATE OF PRONOUNCEMENT : 26 - 0 7 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 6, PUNE DATED 13 - 02 - 2015 FOR THE ASSESSMENT YEAR 201 1 - 12. THE ASSESSEE IN APPEAL HAS RAISED SOLITARY GROUND AGAINST DISALLOWANCE OF EXCESS P ROVISION FOR BAD AND DOUBTFUL D EBTS . 2 ITA NO . 442/PUN/2015, A.Y. 2011 - 12 2. SHRI N. C. LAHOTI APPEARING ON BEHALF OF THE ASSESSEE FILED WRITTEN SUBMISSIONS WHICH ARE AS UNDER : ASSESSEE IS A COOPERATIVE BANK DOING BANKING BUSINESS. AS PER PROVISIONS OF SECTION 36(1)(VII)(A) PROVISION FOR BAD AND DOUBTFUL DEBTS IS ALLOWED @7.5% OF TAXABLE PROFIT BEFORE DEDUCTION U/S. 36(1)(VII)(A). DEDUCTION IS ON CONDITION THAT PROVISION TO THE EXTENT DEDUCTION IS COMPULSORY. SUCH PROVISION CREATED ONCE SHALL BE UTILIZED FOR BAD DEBTS TO BE WRITTEN OFF. ACTUAL NPA MAY BE MORE OR LESS THAN THE PROVISION OR DEDUCTION. IF ACTUAL PROVISION IS MORE THAN THE DEDUCTION THEN EXCESS PROVISION WILL BE ADDED BACK TO INCOME. NOW QUESTION ARISES CAN ASSESSING OFFICER ADD SUCH PROVISION TO TAX BY ADDING TO INCOME OF ASSESSEE UNDER THE PRETEXT OF EXCESS PROVISION OF NPA. MORE PARTICULARLY WHEN SUCH PROVISION IS CREATED BY WAY OF TRANSFER OF RESERVES OR PROVISION MADE IN EXCESS THAN ALLOWED IN EARLIER YEARS. ASSESSING OFFICER HAVE ADDED RS.4857224/ - IN THE RETURNED INCOME BEING DIFFERENCE IN OPENING BALANCE IN EXCESS PROVISION OF NPA A/C AND CLOSING BALANCE IN EXCESS PROVISION OF NPA A/C DURING THE F Y 2010 - 11 I.E. ASSESSMENT YEAR 2011 - 12. ASSESSEE HAD TRANSFERRED RS.23094463/ - FROM RESERVE FOR BAD AND DOUBTFUL DEBTS CREATED OUT OF TAX PAID PROFITS TO PROVISION FOR BAD AND DOUBTFUL DEBTS. EXCESS PROVISION FOR BAD & DOUBTFUL DEBTS TRANSFERRED FROM ABOVE SAID A/C SHOULD NOT BE TAXED AGAIN. OTHERWISE SAME INCOME WILL BE TAXED TWICE. UNDER THE CIRCUMSTANCES YOU ARE REQUESTED TO DIRECT THE OFFICER TO DELETE THE ADDITION ON A/C OF EXCESS PROVISION OF NPA. SINCE ASSESSEE HAVE SUFFERED I TAX ON ABOVE SUM. ASSESSING OFFICER IS MISTAKEN WHILE ADDING TAXABLE INCOME WITHOUT PREJUDICE TO WHATEVER STATED HEREIN ABOVE THERE IS NO PROVISION UNDER INCOME TAX THAT PROVISION ONCE MAD E U/S. 36(1)(VII)(A) CAN BE ADDED IN THE INCOME OF THE ASSESSEE FOR ANY ASSESSMENT YEAR FOR THAT MATTER. 2.1 THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAD RAISED THE ISSUE REGARDING PROVISION FOR BAD AND DOUBTFUL DEBTS U/S. 36(1)(VII A ) O F THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) AS GROUND NO. 2 IN THE GROUNDS OF APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 3 ITA NO . 442/PUN/2015, A.Y. 2011 - 12 THE COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 8 PERHAPS DUE TO MISUNDERSTANDING OF THE PRAYER OF ASSESSEE O BSERVED THAT THE ASSESSEE DOES NOT WANT TO PRESS THE GROUND . IN FACT , THE ASSESSEE HAD MADE PRAYER NOT TO PRESS ADDITIONAL GROUND RAISED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE LD. AR CONTENDED THAT THE ISSUE WITH REGARD TO ALLOWABILITY OF BAD AND DOUBTFUL D EBTS FROM THE PROVISION CREATED IN THE BOOKS OF THE ASSESSEE IS COVERED IN FAVOUR OF ASSESSEE BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. JAIN CO - OPERATIVE BANK LTD. REPORTED AS 364 ITR 137. 3. ON THE OTHER HAND SHRI ACHAL SHARMA REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT A PERUSAL OF THE IMPUGNED ORDER WOULD SHOW THAT THE ASSESSEE HAD NOT PRESSED GROUND NO. 2 RELATING TO CLAIM OF DEDUCTION U/S. 36(1)(VII)(A) BEFORE THE FIRST APPELLATE AUTHORITY. NOW, THE ASSESSEE CANNOT RAISE THE SAME GROUND BEFORE THE TRIBUNAL. 4. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED T HE ORDERS OF THE AUTHORITIES BELOW . THE ASSESSEE IS AGGRIEVED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN NOT ADJUDICATING GROUND NO. 2 AND DISMISSING THE SAME AS NOT PRESSED. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE COMMISSIONER O F INCOME TAX (APPEALS) HAS NOT ADJUDICATED GROUND NO. 2 RAISED BY THE ASSESSEE BEFORE HIM ON THE PREMISE THAT THE SAME IS NOT PRESSED. THE GROUND NO. 2 RAISED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) READS AS UNDER : 4 ITA NO . 442/PUN/2015, A.Y. 2011 - 12 2. ASSESSING OFFICER ERRED WHILE ADDING RS.48,57,224/ - TO INCOME ON ACCOUNT OF EXCESS PROVISION ON NPA A/C AS APPEARING IN THE BALANCE SHEET. ASSESSEE HAS ON ITS OWN ADDED THE AMOUNT .DEBITED TO PROFIT & LOSS A/C TO INCOME IN COMPUTATION SHEET. WHAT IT CLAIME D AS' EXPENSE IS DEDUCTION U/S. 36(1)(VIIA) AS PER PROVISIONS' OF ACT WHICH HAS NOTHING TO DO WITH AMOUNT DEBITED TO P&L A/C AND APPEARING IN LIABILITY SIDE OF BALANCE SHEET EITHER UNDER HEAD PROVISION FOR BAD & DOUBTFUL DEBTS OR EXCESS PROVISIONS OF BAD & DOUBTFUL DEBTS. AS PER PROVISIONS OF INCOME TAX ACT WHILE WRITING OFF THE DEBTS FIRST AMOUNT SHOULD BE APPROPRIATED FROM BAD DEBTS ALLOWED U/S. 36(1)(VIIA) REMAINING AMOUNT IF ANY CAN BE CLAIMED AS EXPENSE U/S 36(2). ASSESSEE HAS NOT CONTRAVENED ANY PROV ISIONS. ASSESSING OFFICER HAS ADDED TO INCOME THE AMOUNT WHICH WAS NEVER ALLOWED AS EXPENSE. 5. THE LD. AR OF THE ASSESSEE HAS CONTENDED THAT PRIMA FACIE THE ASSESSEE HAS MERIT IN THE GROUND RAISED AND IS COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. JAIN CO - OPERATIVE BANK LTD. (SUPRA). IT HAS BEEN FURTHER CONTENDED THAT IN FACT IT WAS THE ADDITIONAL GROUND RAISED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH WAS WITHDRAWN/NOT PRESSED BY THE ASSESSEE. 6. WITHOUT GOING INTO THE MERITS OF THE GROUND RAISED BY THE ASSESSEE, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE FILE OF COMMISSIONER OF INCOME TAX (APPEALS) FOR DECIDING THE GROUND NO. 2 RAISED IN THE FIRST APPEAL. THE COMMISSION ER OF INCOME TAX (APPEALS) WHILE ADJUDICATING GROUND NO. 2 SHALL ALSO TAKE INTO ACCOUNT THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. JAIN CO - OPERATIVE BANK LTD. (SUPRA). THE COMMISSIONER OF INCOME TAX ( APPEALS) SHALL ALSO GRANT OPPORTUNITY OF HEARING TO THE ASSESSEE, IN 5 ITA NO . 442/PUN/2015, A.Y. 2011 - 12 ACCORDANCE WITH LAW. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE IN THE AFORESAID TERMS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATI STICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 26 TH DAY OF JULY, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 26 TH JULY, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 6, PUNE 4. THE PR. CIT - 5, PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE