The DCIT, Alappuzha V. M/s. The Alleppey District Co-op Bank Ltd, Alappuzha

ITA 452/COCH/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4417 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 21-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA NANU AMBAT
• Keywords: Rectification of order; Bad and doubtful debts
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJAR I, AM & SHRI GEORGE GEORGE K, JM ITA NO. 452 /COCH/201 6 : ASST.YEAR 2007 - 2008 THE DY.COMMISSIONER OF INCOME - TAX, CIRCLE 1 ALLEPPEY. VS. M/S.THE ALLEPPEY DISTRICT CO - OPERATIVE BANK LTD. P.B.NO.104 ALLAPPUZHA - 688 001. PAN : AAAAT1275B. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.SWAPNA NANU AMBAT RESPONDENT BY : --- NONE --- (ADJOURNMENT APPLICATION REJECTED) DATE OF HEARING : 13 .03.2018 DATE OF PRONOUNCEMENT : 15 .03.2018 O R D E R PER GEORGE GEORGE K., JM THIS APPEAL AT THE INSTANCE OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) DATED 21.07.2016 . THE RELEVANT ASSESSMENT YEAR IS 2007 - 2008. 2. THE GROUNDS RAISED READ AS FOLLOWS: - THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), KOTTAYAM IN SO FAR AS THE POINTS STATED BELOW ARE CONCERNED, IS OPPOSED TO LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D ELETING THE DISALLOWANCE OF NPA PROVISIONS AND OTHER RESERVES OF RS. 2,60,85, 652/ - . ITA NO. 452 / COCH /201 6 . THE ALLEPPEY DISTRICT CO - OP.BANK LTD. 2 3. THE LD. CIT (A) HAS ALSO ERRED IN HOLDING THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS BEYOND THE PURVIEW OF SECTION 154 OF THE ACT. 4. THE LD. CIT (APPE ALS) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ONLY PROVISIONS AND RESERVES ADMISSIBLE TO BANKS INCLUDING CO - OPERATIVE BANKS ARE 'PROVISION FOR BAD AND DOUBTFUL DEBTS' U/S 36(1 )(VIIA) AND SPECIAL RESERVE PROVIDED U/S 36(1 )(VIII) OF THE I .T ACT. 5. TH E LD. CIT (A) OUGHT TO HAVE FURTHER NOTICED THE FINDING OF THE ASSESSING OFFICER THAT NO PROVISION FOR BAD AND DOUBTFUL DEBTS AND ALSO NO SPECIAL RESERVE AS ALLOWABLE U/S 36(1 )(VIIA) & (VIII) HAD BEEN CREATED BY THE ASSESSEE, AS EVIDENT FROM THE BALANCE S HEET FOR THE RELEVANT PERIODS. FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3 . BRIEF FACTS OF THE CASE ARE AS FOLLOW: - 3.1 THE ASSESSEE IS A CO - OPERATIVE BANK. FOR THE ASSESSMENT YEAR 2007 - 2008, ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT WAS COMPLETED VIDE ORDER DATED 16.12.2008, DETERMINING A LOSS OF RS.3,39,64,430. SUBSEQUENT IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAD DEBITED THE FOLLOWING AMOUNTS IN THE PROFIT AND LOSS ACCOUNT, WHICH ACCORDING TO THE A.O. WERE INADMISSIBLE AS PER THE PROVISIONS OF THE INCOME - TAX ACT, 1961. (I) NPA PROVISIONS RS.2,13,02,000 (II) OTHER RESERVES & PROVISIONS RS. 47,83,652 ------------------ TOTAL RS.2,60,85,652 ============= ITA NO. 452 / COCH /201 6 . THE ALLEPPEY DISTRICT CO - OP.BANK LTD. 3 3.2 THE ASSESSEE FILED OBJEC TION VIDE REPLY DATED 16.03.2011. HOWEVER, THE OBJECTION FILED BY THE ASSESSEE WAS REJECTED BY THE ASS ESSING OFFICER AND HE PASSED AN ORDER U/S 154 OF THE I.T.ACT (ORDER DATED 30.05.2015), WHEREIN NPA PROVISIONS AND OTHER RESERVES AND PROVISIONS WERE ADDED BACK TO THE TOTAL INCOME. FOR READY REFERENCE, THE ORDER OF THE ASSESSING OFFICER IN PASSING ORDER U/ S 154 READS AS FOLLOW: - ORDER U/S 154 ASSESSMENT U/S 143(3) WAS COMPLETED ON 16 - 12 - 2009 DETERMINING A ASSESSED LOSS OF RS.3,39,64,430/ - . THE PROFIT AND LOSS ACCOUNT WAS DEBITED WITH THE FOLLOWING PROVISIONS AND RESERVES WHICH ARE INADMISSIBLE AS PER T HE PROVISIONS IN INCOME - TAX ACT, 1961. NAA PROVISIONS 2,13,02,000 OTHER RESERVES AND PROVISIONS 47,83,652 THE ONLY PROVISIONS AND RESERVES ADMISSIBLE TO BANKS INCLUDING CO - OP BANKS ARE `PROVISIONS FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA) AND SPECIAL RESERVE PROVIDED U/S 36(1)(VIIA) OF THE IT ACT. AS PER THE BALANCE SHEET AS ON 31 - 03 - 2006 & 31 - 03 - 2007, THE ASSESSEE HAS NOT CREATED ANY PROVISIONS FOR BAD AND DOUBTFUL DEBTS DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2007 - 2008. SINCE NO PROVISIONS FOR BAD & DOUBTFUL DEBTS HAD BEEN CREATED AND THERE IS NO SPECIAL RESERVE IN THE BALANCE SHEET. NOTICE U/S 154 WAS ISSUED TO THE ASSESSEE ON 10 - 11 - 2010 SHOWING THE PROPOSED ADDITIONS. ASSESSEES AUTHORIZED REPRESENTATIVE APPEARED AND REPLY FILED. ASSESSEE S CONTENTIONS ARE FOUND TO BE NOT ACCEPTABLE. ACCORDINGLY THE ORDER U/S 143(3) IS REVISED AS UNDER: - LOSS ASSESSED AS PER ORDER U/S 143(3) RS.( - )3,39,64,430 ITA NO. 452 / COCH /201 6 . THE ALLEPPEY DISTRICT CO - OP.BANK LTD. 4 ADD : INCOME ESCAPED ASSESSMENT RS. 2,60,85,652 ------------------------- ACTUAL LOSS RS. 78,78,778 ============== 4. AGGRIEVED BY THE ORDER PASSED U/S 154 OF THE ACT, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) QUASHED THE RECTIFICATION ORDER PASSED U/S 154 OF THE I.T.ACT AND ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW: - 5. I FIND FROM THE ORDER U/S 154 OF THE I.T.ACT, PASSED BY THE A.O. ON 30 - 05 - 2013 THAT HE HAS MERELY REJECTED THE CONTENTIONS AS NOT ACCEPTABLE. THERE IS NO REASONING IN THE R ECTIFICATION ORDER, NOR EVEN A MENTION OF THE MISTAKE ALLEGED IN THE RECTIFICATION ORDER. MOREOVER, THE ISSUE OF WHETHER PROVISIONS AND RESERVES ARE ALLOWABLE OR NOT WILL DEPEND ON THE NATURE OF PROVISION OR RESERVE AND EACH MATTER HAS TO BE LOOKED INTO IN DETAIL AND INDEPENDENTLY. THIS WOULD REQUIRE DETAILED EXAMINATION OF THE MATTER AND SUCH ISSUES DO NOT COME AS GLARING MISTAKES WITHIN THE PURVIEW OF SECTION 154 OF THE IT ACT. THE SUPREME COURT IN THE CASE OF T.S.BALARAM, ITO VS. VOLKART BROTHERS 832 ITR 50 (SC) HAS CLEARLY LAID DOWN THAT MISTAKE APPARENT ON THE FACE OF THE RECORD MUST BE AN OBVIOUS AND A PATENT MISTAKE. IT IS HELD THAT MISTAKE APPARENT FROM THE RECORD CANNOT BE SOMETHING WHICH WOULD HAVE TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF REA SONING ON POINTS, ON WHICH THERE MAY BE CONCEIVABLY TWO OPINIONS. 6. FROM THE DISCUSSIONS ABOVE, IT IS CLEAR THAT THE APPELLANTS CASE DOES NOT FALL UNDER THE CATEGORY OF A `MISTAKE APPARENT FROM THE RECORDS. MOREOVER, THE AO HAS HARDLY MENTIONED WHAT IS THE EXACT MISTAKE IN THE ORDER PASSED U/S 143(3) OF THE I.T.ACT. I AM ITA NO. 452 / COCH /201 6 . THE ALLEPPEY DISTRICT CO - OP.BANK LTD. 5 UNABLE TO SUSTAIN THE ORDER U/S 154 AND IT IS HEREBY CANCELLED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED ON THE GROUNDS RAISED. 6. THE LEARNED AR HAS FILED AN ADJOURNMENT APPLICATION. HOWEVER, WE REJECTED THE SAME AND PROCEED TO DISPOSE OF THE CASE ON MERITS. 7. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIAL ON RECORD. NOTICE U/S 154 DATED 10.11.2010 WAS ISSUED TO THE ASSESSEE CALLING FOR ITS OBJECTION. IN RESPONSE TO THE NOTICE ISSUED U/S 154, THE ASSESSEE FILED DETAILED OBJECTION VIDE REPLY DATED 16.03.2011. IN THE SAID LETTER FILED BY THE ASSESSEE IT WAS POINTED OUT THAT THE NPA PROVISIONS WAS MADE AS PER THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE I.T.ACT. IT W AS BEEN SUBMITTED THAT AS PER SECTION 36(1)(VIIA), AN AMOUNT NOT EXCEEDING 10% OF THE AGGREGATE VALUE OF ADVANCE MADE BY THE RURAL BRANCHES IS ALLOWABLE AS PROVISION FOR BAD AND DOUBTFUL DEBT S IN RESPECT OF CO - OPERATIVE BANKS. THE DETAILS OF THE RURAL ADVANCES MADE AS ON 31.03.2007 ACCORDING TO THE ASSESSEE WAS RS.230.86 CRORE AND 10% OF THE SAME AMOUNTS TO RS.23.08 CRORE . THEREFORE, IT WAS SUBMITTED THAT THE TOTAL PROVISION MADE BY THE ASSESS EE UP TO 31.03.2007 AMOUNTING TO RS.15.35 CRORE AND THE ITA NO. 452 / COCH /201 6 . THE ALLEPPEY DISTRICT CO - OP.BANK LTD. 6 PROVISION FOR THE YEAR ASSESSMENT YEAR 2007 - 2008 BEING ONLY RS.2.13 CRORE WAS WELL WITHIN THE PERMISSIBLE LIMIT AND HENCE ALLOWABLE. THESE OBJECTION S RAISED BY THE ASSESSEE WERE TOTALLY BRUSHED ASIDE BY THE ASSESSING OFFICER , WHILE PASSING THE ORDER U/S 154 OF THE I.T.ACT. WE NOTICED THAT THE OBJECTIONS RAISED BY THE ASSESSEE ARE TO BE EXAMINED IN DETAIL AFTER REFERRING TO THE BALANCE SHEET AND OTHER RECORDS FURNISHED BY THE ASSESSEE. THE A.O. HAD CONV ENIENTLY IGNORED THE OBJECTIONS OF THE ASSESSEE AND PASSED THE RECTIFICATION ORDER. THE ONLY OBVIOUS AND PATENT MISTAKE THAT ARE APPARENT FROM RECORD CAN ONLY BE RECTIFIED U/S 154 OF THE I.T.ACT. IN THE INSTANT CASE, THE MISTAKES, IF AT ALL, THAT WAS SOUGH T TO BE RECTIFIED U/S 154, CAN BE DONE ONLY AFTER DETAILED EXAMINATION OF THE BOOKS OF ACCOUNT, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AND SUCH DETAIL EXAMINATION CANNOT BE MADE WHILE PASSING ORDER U/S 154 OF THE I.T.ACT. HENCE, WE ARE OF THE VIEW THAT THE CIT(A) HAS CORRECTLY QUASHED THE ORDER U/S 154 PASSED BY THE ASSESSING OFFICER. IT IS ORDERED ACCORDINGLY. 8 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 15 TH DAY OF MARCH, 2018 . SD/ - SD/ - ( CHANDRA POOJARI ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIA L MEMBER COCHIN ; DATED : 15 TH MARCH, 2018 . DEVDAS* ITA NO. 452 / COCH /201 6 . THE ALLEPPEY DISTRICT CO - OP.BANK LTD. 7 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT 2. THE RESPONDENT. 3. THE PR. CIT KOTTAYAM . 4. THE CIT (A), KOTTAYAM . 5. DR, ITAT, COCHIN 6. GUARD FILE.