M/S VINAYAK LOCAL AREA BANK LTD., Sikar V. DCIT, Sikar

ITA 456/JPR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62013 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-12-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 16-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHRI
• Assessee Lawyers: RAJEEV SOGANI CAAR
• Keywords: Depreciation; Bad and doubtful debts
• Section: 143(3); 37(1); 32; 147; 12

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL JAIPUR BENCH A, JAIPUR BEFORE S/SHRI R.K. GUPTA, JM AND SANJAY ARORA, AM I.T.A NO. 456/JP/2011 ASSESSMENT YEAR: 2002-03 VINAYAK LOCAL AREA BANK LTD. , TIRUPATI COMPLEX, STATION ROAD, SIKAR. [PAN: AABCV 1815G] VS. THE DY. CIT, CIRCLE, SIKAR. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI RAJEEV SOGANI, CA-AR REVENUE BY SHRI VINOD JOHRI, SR. DR DATE OF HEARING 16/04/2012 DATE OF PRONOUNCEMENT 11 /05/2012 O R D E R PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, JAIPUR (CIT(A) FOR S HORT) DATED 28-02-2011, DISMISSING THE ASSESSEE'S APPEAL CONTESTING ITS ASSESSMENT FOR THE ASSESSMENT YEAR (A.Y.) 2002-03 U/S. 147 READ WITH SECTION 143(3) OF THE INCOME TAX ACT , 1961 (THE ACT HEREINAFTER) BY THE ASSESSING OFFICER (AO) VIDE ORDER DATED 24-08-2007 FOR THE ASSESSMENT YEAR (A.Y.) 2002-03. 2. THE APPEAL RAISES TWO GROUNDS, BOTH OF WHICH WE SHALL TAKE UP IN SERIATIM. IT WOULD, HOWEVER, BE RELEVANT TO RECOUNT THE BACK-GRO UND FACTS OF THE CASE. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 195 6 ON 15-10-1999 ENGAGED IN THE BUSINESS OF BANKING, HAVING BEEN GRANTED LICENSE BY THE RESERVE BANK OF INDIA (RBI FOR SHORT) U/S. 22 OF THE BANKING REGULATION ACT, 1949 (B.R. ACT FOR SHORT) ON 28-07-2000. 2 THE SAID LICENSE WAS SUSPENDED BY THE RBI VIDE ITS ORDER DATED 29-09-2001, GOING ON TO CANCEL THE SAME U/S. 22(4) OF THE B.R. ACT ON 16-01 -2002. THESE PRIMARY FACTS ARE ADMITTED AND NOT DISPUTED. ACCORDINGLY, THE ASSESSE ES CLAIM FOR DEPRECIATION U/S. 32(1) OF THE ACT FOR RS. 17,63,138/- WAS RESTRICTED BY HA LF IN VIEW OF THE PROVISO TO SECTION 32(1) OF THE ACT; ITS ASSETS HAVING BEEN PUT TO USE FOR THE PURPOSE OF BUSINESS FOR A PERIOD OF LESS THAN 180 DAYS DURING THE RELEVANT PREVIOUS YEAR, AND DISALLOWANCE FOR RS. 8,81,569/- EFFECTED IN ITS RESPECT. THE SAME STOOD CONFIRMED IN APPEAL BY THE LD. CIT(A) FOR THE SAME REASON/S. 3. BEFORE US, IT WAS CONTENDED BY THE LD. AR, THE ASSESSEES COUNSEL, THAT THE PROVISO TO SECTION 32(1) IS NOT APPLICABLE, BEING SO ONLY F OR THE YEAR OF ACQUISITION OF THE RELEVANT ASSETS. FURTHER, THE LD. AR WOULD SUBMIT THAT THE A SSETS CONTINUED TO BE USED THROUGHOUT THE YEAR. WHAT HAD BEEN STOPPED BY THE RBI BY SUSPE NDING ITS LICENSE WAS ONLY FRESH BANKING BUSINESS, SO THAT THE ASSESSEE CONTINUED TO SERVICE ITS OLD DEPOSITS AS WELL AS COLLECT INTEREST ON OLD ADVANCES, PUTTING ITS ASSET S TO USE. WHY, THE REVENUE HAD TAXED THE ASSESSEES INCOME FOR THE ENTIRE YEAR ? THE LD. DR WOULD RELY ON THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE M ATERIAL ON RECORD. 4.1 WE FIND THE ASSESSEE'S CLAIM AS WHOLLY MAINTA INABLE IN RESPECT OF THE ASSETS ACQUIRED PRIOR TO THE RELEVANT PREVIOUS YEAR. THIS IS FIRSTL Y FOR THE REASON THAT EVEN GOING BY THE DATE OF SUSPENSION OF THE ASSESSEE'S OPERATIONS BY THE RBI ON 29-09-2001, THE ASSETS WERE IN USE FROM 01-04-2001 TO 28-09-2001, WHICH TOTALS TO A PERIOD OF 181 DAYS. AS SUCH, THE REVENUES CLAIM OF THE ASSETS HAVING BEEN PUT TO US E FOR A PERIOD LESS THAN 180 DAYS DURING THE RELEVANT PREVIOUS YEAR IS INCORRECT; IT BEING NOT DISPUTED THAT THE BANK WAS HOLDING A VALID LICENSE AND ENGAGED IN THE BANKING BUSINESS DURING THE YEAR UP TO 28-09- 2001. EVEN THIS, ASSUMING THAT THE RBIS COMMUNICAT ION DATED 28-09-2001 WAS SERVED ON THE BANK THE SAME DAY. SECONDLY, EVEN LEGALLY SP EAKING, THE LANGUAGE OF SECTION 32(1) IS CLEAR, SO THAT RESTRICTION AT HALF THE DEPRECIAT ION AS PER THE PRESCRIBED RATES, PER THE SECOND PROVISO THERETO, IS APPLICABLE ONLY FOR THE YEAR IN WHICH THE ASSET IS ACQUIRED OR 3 PUT TO USE FOR THE BUSINESS FOR THE FIRST TIME. THE ACT DOES NOT, AFTER THE AMENDMENT BY THE TAXATION LAWS (AMENDMENT AND MISCELLANEOUS PROVISIO NS) ACT, 1986 W.E.F. 01-04-1988, CONTEMPLATE THE ASSESSEE TO MAINTAIN A RECORD OF TH E USER OF THE ASSETS INDIVIDUALLY, ALLOWING DEPRECIATION ON A CLASS OF ASSETS AS A WHO LE, TERMING IT AS A `BLOCK OF ASSETS, FOR WHICH A PARTICULAR PERCENTAGE OF DEPRECIATION IS PR ESCRIBED. THE ASSESSEES CLAIM QUA ASSETS ACQUIRED AND PUT TO USE PRIOR TO THE COMMENC EMENT OF THE CURRENT YEAR IS, THEREFORE, UPHELD. 4.2 WITH REGARD TO THE ASSETS ACQUIRED DURING T HE RELEVANT PREVIOUS YEAR, THE ASSESSEES VERY ARGUMENT, I.E., WITH REFERENCE TO THE APPLICAB ILITY OF THE PROVISO TO S. 32(1), SUGGESTS ABSENCE OF SUCH ASSETS, WHICH THOUGH CANNOT BE A MA TTER OF PRESUMPTION, SO THAT WE PROCEED ON THE HYPOTHESIS OF SUCH ASSETS, AND WHICH WOULD EVEN OTHERWISE RENDER OUR ORDER COMPLETE. THE SECOND PROVISO TO SEC. 32(1) IS DEFINITELY APPLICABLE TO SUCH ASS ETS, THAT BEING PRECISELY WHAT HAS BEEN STATED BY US IN THE PRECEDING PARAGRAPH OF THIS ORDER. THE ASSESSEES ARGUMENT OF THE ASSETS HAVING CONTIN UED TO BE PUT TO USE EVEN AFTER 28/9/2001, CLEARLY A MATTER OF FACT, TAKEN BEFORE U S FOR THE FIRST TIME, WOULD ASSUME RELEVANCE. IN FACT, THE ASSESSEES CLAIM BEFORE THE FIRST APPELLATE AUTHORITY, I.E., THAT THOUGH ITS OPERATIONS WERE SUSPENDED, YET ITS ASSET S WERE KEPT IN A STATE OF READINESS FOR BEING USED, SO THAT THERE WAS A PASSIVE USER EVEN A FTER 28/9/2001, ENTITLING IT TO DEPRECIATION FOR THE ENTIRE YEAR, IS THOUGH A TACIT ADMISSION TO THE CONTRARY. FURTHER, THE ASSESSEES ARGUMENT IS SANS ANY MATERIAL, OR PRAYER FOR ADMISSION OF ADDITIONA L EVIDENCE. ALSO, THE ISSUE IS NOT AS STRAIGHT FORWARD AS APPEA RS TO BE, AND MAY INVOLVE THE APPLICATION OF EXPLANATION TO SEC. 37(1) OF THE ACT. UNDER THE CIRCUMSTANCES, WE HOLD THAT THE ASSESSEES CLAIM TO THE EXTENT IT RELATES TO ASSETS ACQUIRED DURING THE CURRENT YEAR WOULD BE SUBJECT TO THE SECOND PROVISO TO SEC. 32(1), THE DETAILS OF WHICH ASSETS AND THE IR USER WOULD BE FURNISHED BY THE ASSESSEE, WHERE NOT ALREA DY AVAILABLE WITH THE REVENUE. WE DECIDE ACCORDINGLY. 5. THE SECOND GROUND RELATES TO THE NON-ALLOWANC E OF THE ASSESSEE'S CLAIM QUA THE PROVISION FOR BAD AND DOUBTFUL DEBTS MADE U/S. 36(1 )(VIIA) OF THE ACT; THE ASSESSEE BEING 4 NOT A BANKING COMPANY AS AT THE END OF THE RELEVANT PREVIOUS YEAR, I.E., 31-03-2002. IN THIS REGARD, THE ASSESSEES CLAIM BEFORE THE LD. CI T(A) WAS THAT IT HAD PREFERRED AN APPEAL TO THE CENTRAL GOVT. U/S. 22(5) OF THE B.R. ACT AGA INST THE DECISION OF THE RBI, AND FOR RESTORATION OF ITS BANKING LICENSE, WHICH WAS ALLOW ED BY THE CONCERNED REGULATING AUTHORITY VIDE ITS ORDER DATED 14-09-2004, DIRECTIN G THE RBI TO RESTORE THE LICENSE GIVEN TO THE BANK WITH IMMEDIATE EFFECT. THE COPY OF THE SAI D ORDER, FURNISHED BY THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY VIDE ITS LETTE R DATED 14-10-2009 (PB PGS. 39-45), WAS NOT ADMITTED BY HIM AS THE SAME WAS FOUND BY HIM, O N THE BASIS OF A REMAND REPORT DATED 21/5/2010 BY THE AO, AS NOT SATISFYING THE CONDITIO N/S STIPULATED U/R. 46A(1) OF THE INCOME TAX RULES, 1963 (THE RULES HEREINAFTER). T HE SAID ORDER WAS ONLY WITH THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEE DINGS; RATHER, BEING WITH IT FOR ALMOST THREE YEARS AT THE RELEVANT TIME. AS SUCH, IT IS NO T UNDERSTOOD AS TO WHY THE SAME WAS NOT PRODUCED BEFORE THE AO. EVEN ON MERITS, IT IS AN AD MITTED FACT THAT THE ASSESSEES LICENSE WAS DIRECTED FOR RESTORATION WITH IMMEDIATE EFFECT, I.E., FROM 14-9-2004 ONWARDS, SO THAT THE LICENSE REMAINED CANCELLED AND THE OPERATIONS S USPENDED FOR THE PERIOD PRIOR THERETO, I.E., SINCE 29/9/2001. IN FACT, THE ASSESSEE MOVED A REVIEW PETITION WITH THE APPELLATE AUTHORITY TWICE EARLIER, TO NO AVAIL, BEING REJECTE D BY IT ON 13/9/2002 AND 23/12/2003. THE ASSESSEE-COMPANY WAS NOT A BANKING COMPANY AS AT TH E LAST DATE OF THE RELEVANT PREVIOUS YEAR, SO THAT IT COULD NOT BE ALLOWED ITS CLAIM FOR THE PROVISION FOR BAD AND DOUBTFUL DEBTS AS CLAIMED ON THE BASIS OF THE RBI GUIDELINES, WHIC H IS TO BE ON THE BASIS OF THE LOANS AND ADVANCES AS OUTSTANDING AS ON THE LAST DATE OF THE RELEVANT PREVIOUS YEAR. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 6.1 BEFORE US, THE LD. AR DREW OUR ATTENTION TO THE PROVISION OF SECTION 36A OF THE BANKING REGULATION ACT, 1949, WHEREIN, PER SUB-SECT ION (2) IT IS PROVIDED THAT WHERE LICENSE IS CANCELLED BY RBI U/S. 22, AND IF THE RBI IS SATISFIED THAT SUCH BANKING COMPANY HAS REPAID, OR MADE ADEQUATE ARRANGEMENTS FOR REPAY ING, ALL THE DEPOSITS ACCEPTED BY THE BANKING COMPANY, EITHER IN FULL OR TO THE MAXIMUM E XTENT POSSIBLE, IT MAY, BY A NOTICE PUBLISHED IN THE OFFICIAL GAZETTE, NOTIFY THAT THE BANKING COMPANY HAS CEASED TO BE A BANKING COMPANY WITHIN THE MEANING OF SAID ACT, AND THERE-UPON THE PROVISIONS OF THAT 5 ACT AS APPLICABLE TO A BANKING COMPANY SHALL CEASE TO APPLY TO IT, EXCEPT AS RESPECTS THINGS DONE OR OMITTED TO BE DONE BEFORE SUCH NOTIC E (VIDE S. 36A(2)). IN THE INSTANT CASE, THE SAID NOTIFICATION U/S. 36A WAS ONLY ON 21-09-20 02, SO THAT THE ASSESSEE-COMPANY WAS A BANKING COMPANY, I.E., FOR ALL INTENTS AND PURPOS ES, UP TO THAT DATE. IT IS ONLY THE PROVISIONS OF SECTIONS 11, 12(1), 17, 18, 24 AND 25 , WHICH WOULD NOT APPLY TO IT ON THE CANCELLATION OF ITS LICENSE U/S. 22 OF THE ACT. AN INDEX OF THE BANKING REGULATION ACT, 1949, PLACED ON RECORD, WAS ADVERTED TO BY THE LD. AR; THE TITLE OF THE VARIOUS SECTIONS, INDICATING THE CONTENT AND NATURE OF THE RELEVANT P ROVISIONS, BEING AS UNDER:- S.11 REQUIREMENT AS TO MAINTAIN PAID-UP CAPITAL AN D RESERVES S. 12 REGULATION OF PAID-UP CAPITAL, SUBSCRIBED CAP ITAL AND AUTHORISED CAPITAL AND VOTING RIGHTS OF SHAREHOLDERS S.17 RESERVE FUND S.18 CASH RESERVE S. 24 MAINTENANCE OF A PERCENTAGE OF ASSETS S. 25 ASSETS IN INDIA S. 29 ACCOUNTS AND BALANCE SHEET S. 30 AUDIT S. 31 SUBMISSIONS OF RETURNS S. 32 COPIES OF BALANCE SHEETS AND ACCOUNTS TO BE SENT TO REGISTRAR S. 33 DISPLAY OF AUDITED BALANCE SHEETS BY COMPANI ES INCORPORATED OUTSIDE INDIA S. 34 ACCOUNTING PROVISIONS OF THE ACT NOT RETROSP ECTIVE S. 34A PRODUCTION OF DOCUMENTS OF CONFIDENTIAL NAT URE S.35 INSPECTION S.35A POWER OF THE RESERVE BANK TO GIVE DIRECTIONS S.35B AMENDMENTS OF PROVISIONS RELATING TO APPOINT MENTS OF MANAGING DIRECTORS, ETC. AS WOULD BE APPARENT, HE CONTINUED, THE REQUIREMEN T AS TO ACCOUNT KEEPING AND BALANCE-SHEET, AS WELL AS ITS AUDIT; THE SUBMISSION S OF RETURNS; INSPECTION; POWERS OF RBI TO GIVE DIRECTIONS, ETC. WOULD CONTINUE TO BE APPLI CABLE TO SUCH BANKING COMPANY PRIOR TO THE DATE OF NOTIFICATION. IN FACT, THE GUIDELINES B Y THE RBI DIRECTING THE CLASSIFICATION OF ITS 6 ASSETS BY A BANKING COMPANY INTO VARIOUS CATEGORIES , IS ISSUED ONLY ON THE BASIS OF THE POWER DERIVED U/S. 35A OF THE B.R. ACT, WHICH IS AP PLICABLE TO THE COMPANY UP TO THE NOTIFICATION IN THE OFFICIAL GAZETTE U/S. 36A. THE ASSESSEE-COMPANY THUS CEASED TO BE A BANKING COMPANY ONLY ON 21-09-2002. ACCORDINGLY, TH E ASSESSEE'S CLAIM OUGHT TO HAVE BEEN ALLOWED. IN FACT, THIS PROVISION IS ONLY TO SA FEGUARD THE INTEREST OF THE DEPOSITORS AND PUBLIC AT LARGE, SO THAT INSPITE SUSPENSION/CANCELL ATION OF THE BANKING LICENSE OF A BANKING COMPANY, THE PROVISIONS OF THE BANKING REGULATION A CT CONTINUE TO APPLY THERETO TILL ITS NOTIFICATION IN THE OFFICIAL GAZETTE U/S. 36A(2). I N ANY CASE, THE ASSESSEE'S CLAIM U/S. 36(1)(VIIA) IS TO BE ALLOWED PROPORTIONATELY, I.E., FOR 9.5 MONTHS OF THE CURRENT YEAR UP TO THE DATE OF CANCELLATION OF LICENSE ON 16/01/2002. THE ASSESSEE HAS, ACCORDINGLY, SCALED DOWN ITS CLAIM FROM RS. 60.79 LACS TO RS.48,12,542/ -. ALTERNATIVELY, AND WITHOUT PREJUDICE, IT IS ALSO SUBMITTED THAT THE INCOME FRO M THE BANKING OPERATIONS HAVING BEEN TAXED IN SPITE OF THE LICENSE HAVING BEEN CANCELLED , THE DEDUCTION PERTAINING TO THE SAID BUSINESS MUST BE ALLOWED, AS IT IS ONLY THE TRUE PR OFIT THAT CAN BE SUBJECT TO TAX, PLACING RELIANCE ON THE FOLLOWING DECISIONS: DR. T.A. QUERESHI VS. CIT (2006) 287 ITR 547 (SC) CIT VS. PIARA SINGH (1980) 124 ITR 40 (SC) CIT VS. SRI RAM CHANDER (1986) 159 ITR 689 (P&H) VISHNU KUMAR SONI VS. CIT (1985) 155 ITR 34 (MP) 6.2 THE LD. DR, ON THE OTHER HAND, PLACED RELIA NCE ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. 7.1 WE FIRSTLY OBSERVE THAT THE ASSESSEE'S CLAIM U/S. 36(1)(VIIA) OF THE ACT IS APPLICABLE, AMONG OTHERS, TO A NON-SCHEDULED BANK, AS THE ASSES SEE. SECONDLY, AS THE ASSESSEE BASED ITS CASE BEFORE THE AUTHORITIES BELOW ON THE RESTOR ATION OF ITS LICENSE BY THE APPELLATE AUTHORITY, IT MAY THEREFORE APPEAR TO HAVE COMPLETE LY CHANGED ITS STAND BEFORE US, IT IS IN FACT NOT SO. THIS IS AS THE ASSESSEES CASE REMAINS ESSENTIALLY THE SAME, I.E., OF IT BEING A BANKING COMPANY FOR THE RELEVANT YEAR OR, AT LEAST FOR THE MAJOR PART THEREOF, WHILE THE 7 REVENUES CASE IS THAT THE MATTER BEING LEGAL, EITH ER THE ASSESSEE IS A BANKING COMPANY AS AT THE RELEVANT YEAR-END OR NOT, WITH IT BEING NOT DISPUTED THAT THE BANKING LICENCE STOOD CANCELLED WELL BEFORE THE END OF THE RELEVANT YEAR. 7.2 CLEARLY, THEREFORE, THERE IS NO DISPUTE THAT THE ASSESSEES CLAIM FALLS UNDER U/S. 36(1)(VIIA) ONLY, AND THE ISSUE CENTRES AROUND THE ASSESSEES EXIGIBILITY THERE-UNDER. CONTINUING FURTHER, THE PROVISO TO THE PROVISION AT THE OPTION OF THE ASSESSEE - WOULD BE APPLICABLE TO THE ASSESSEE, IN TERMS OF WHICH DEDUC TION BY WAY OF PROVISION IN RESPECT OF ASSETS CLASSIFIED AS DOUBTFUL OR LOSS ASSETS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY THE RBI IN THIS BEHALF, IS ADMISSIBLE, AT AN AMOUNT NOT EXCEEDING FIVE PER CENT OF THE AMOUNT OF SUCH ASSETS AS SHOWN IN THE BOOKS OF ACCOUNT OF THE BANK ON TH E LAST DATE OF PREVIOUS YEAR. WHAT WOULD BE RELEVANT, THEREFORE, ARE THE BA LANCES OF THE RELEVANT ASSETS AS OUTSTANDING AS AT THE YEAR-END. THE LANGUAGE OF THE STATUTE IS UNAMBIGUOUSLY CLEAR, AND THE RELIANCE BY THE ASSESSEE ON R. 6ABA OF THE RULE S, WHICH IS WITH REFERENCE TO COMPUTING THE AGGREGATE AVERAGE ADVANCES MADE BY TH E RURAL BRANCHES OF A SCHEDULED BANK, IS COMPLETELY MISPLACED. 7.3 THE DETAILS OF THE IMPUGNED CLAIM, WHICH A PPEAR AT PARA 2.1 OF THE ASSESSEE'S WRITTEN SUBMISSIONS, HOWEVER, ARE AS UNDER:- 1. PROVISION TOWARDS STANDARD ASSETS RS. 9,000/- 2. PROVISION TOWARDS SUB-STANDARD ASSETS RS. 12,3 0,000/- 3. REVERSAL OF PREVIOUS YEAR INTEREST RS. 8,40 ,000/- 4. PROVISION FOR INVESTMENT IN SHARE RS. 40,00, 000/- RS. 60,79,000/- AS IT WOULD APPEAR, THE PROVISION FOR RS. 48.49 LAC S, I.E., AS AGAINST ITEMS AT SERIAL NO. 1, 3 AND 4 ABOVE, IS NOT IN RESPECT OF EITHER BAD OR DOU BTFUL ASSETS, FOR THE PROVISION IN ITS RESPECT TO FALL U/S. 36(1)(VIIA) OF THE ACT, BUT, R ATHER, IN RESPECT OF, AND, ON THE CONTRARY, STANDARD ASSETS; REVERSAL OF PREVIOUS YEAR INTEREST ; AND PROVISION AGAINST INVESTMENT IN 8 SHARES RESPECTIVELY. STANDARD ASSETS ARE, BY DEFINI TION, PERFORMING ASSETS, AGAINST WHICH NO PROVISION IS ADVOCATED. FURTHER, EVEN IF SOME PR OVISION IS TO BE ACROSS ALL ASSETS, FOR WHICH REFERENCE TO THE CLASSIFICATION NORMS WOULD A LSO HAVE TO BE VISITED, SO AS TO INCLUDE `STANDARD ASSETS AS WELL, THE SAME COULD NOT POSSI BLY INCLUDE `INVESTMENTS AND `REVERSAL OF INTEREST. SEC. 36(1)(VIIA), FURTHER, ONLY MAKES REFERENCE TO THE RBI GUIDELINES FOR THE PURPOSE OF CLASSIFICATION OF ASSETS, AND NOT AS REG ARDS PROVISION, THE LIMIT FOR WHICH IS PRESCRIBED THEREUNDER. THE ASSESSEE'S CLAIM IN RESP ECT OF THESE ITEMS IS THUS NOT MAINTAINABLE, AT LEAST PRIMA FACIE . SO, HOWEVER, THOUGH IT IS PRIMARILY THE DUTY OF T HE ASSESSEE TO ESTABLISH ITS CLAIM/S, THE REVENUE HAS ALSO IN THE INSTANT CASE FAILED TO EXAMINE AND DETERMINE THE RELEVANT FACTS, I.E., WHETHER THE IMPUGNED CLAIM DOES INDEED QUALIFY U/S. 36(1)(VIIA); IT PROCEEDING ONLY ON THE BASIS T HAT THE SAID PROVISION IS INAPPLICABLE IN VIEW OF THE ASSESSEE, BEING NOT A BANKING COMPANY A S AT THE RELEVANT YEAR-END. THERE BEING THUS NO ADJUDICATION ON MERITS, UNDER THE CIR CUMSTANCES, WE ONLY CONSIDER IT FIT AND PROPER, AND IN THE INTEREST OF JUSTICE, THAT THE MA TTER WITH REGARD TO THE CLAIM FOR RS. 48.49 LACS IS RESTORED BACK TO THE FILE OF THE AO FOR FRE SH ADJUDICATION BY ISSUING CLEAR FINDINGS OF FACT, AND AFTER ALLOWING THE ASSESSEE A REASONAB LE OPPORTUNITY TO PRESENT ITS CASE IN THE MATTER. AS REGARDS THE ASSESSEE'S CLAIM FOR THE BALANCE RS . 12.30 LACS, THE SAME IS ADMITTEDLY IN RESPECT OF SUB-STANDARD ASSETS, WHICH ARE, AS WE UNDERSTAND, A CATEGORY OF ASSETS DIFFERENT FROM EITHER LOSS OR DOUBTFUL ASSET S AS PER THE GUIDELINES BY THE RBI, SO THAT THE ASSESSEES CLAIM IS AGAIN PRIMA FACIE NOT ADMISSIBLE, OR MAINTAINABLE ONLY TO THE EXTENT THE SUB-STANDARD ASSETS IN ITS PORTFOLIO INC LUDES LOSS OR DOUBTFUL ASSETS AS PER THE RBI NORMS, THE ONUS TO ESTABLISH WHICH IS ON THE A SSESSEE. TO THE EXTENT THE ASSESSEE IS UNABLE TO DO SO, I.E., PROVE THE SUB-STANDARD ASSET S TO BE EITHER LOSS OR DOUBTFUL ASSETS IN TERMS OF THE RBI GUIDELINES, THE ASSESSEE'S CLAIM B ECOMES UNMAINTAINABLE, AGAIN AT LEAST PRIMA FACIE , AS OBSERVED BY US HEREINABOVE IN RESPECT OF THE A SSESSEES CLAIM QUA THE OTHER THREE SUMS FOR RS. 48.49 LACS. THE MATTER QUA THE SAID ITEM IS ACCORDINGLY RESTORED BACK TO THE FILE OF THE AO, TO LIKEWISE ALLOW THE A SSESSEE A REASONABLE OPPORTUNITY TO PRESENT ITS CASE AND ADJUDICATE THE SAME AFRESH, IS SUING DEFINITE FINDINGS OF FACT. 9 COMING, NEXT, TO THE ASSESSEES CLAIM QUA THE SUB-STANDARD ASSETS FOR RS. 12.30 LACS, I.E., TO THE EXTENT IT IS ABLE TO EXHIBIT IT TO BE EITHER QUA A LOSS OR DOUBTFUL ASSET FOLLOWING THE CLASSIFICATION AS PER THE RBI GUIDELINES. THE P ROVISIONS OF LAW CANNOT BE A SUBJECT MATTER OF DISPUTE, AND NEITHER ARE THEY REQUIRED TO BE PROVED. SECTION 36A OF THE B.R. ACT READS AS UNDER: ` 36A. CERTAIN PROVISIONS OF THE ACT NOT TO APPLY TO CERTAIN BANKING COMPANIES. (1) THE PROVISIONS OF SECTION 11, SUB-SECTION (1) O F SECTION 12, AND SECTIONS 17, 18, 24 AND 25 SHALL NOT APPLY TO A BANKING COM PANY-- (A) WHICH, WHETHER BEFORE OR AFTER THE COMMENCEMENT OF THE BANKING COMPANIES (AMENDMENT) ACT, 1959 (33 OF 1959), HAS B EEN REFUSED A LICENCE UNDER SECTION 22, OR PROHIBITED FROM ACCEPT ING FRESH DEPOSITS BY A COMPROMISE, ARRANGEMENT OR SCHEME SANCTIONED BY A C OURT OR BY ANY ORDER MADE IN ANY PROCEEDING RELATING TO SUCH COMPROMISE, ARRANGEMENT OR SCHEME, OR PROHIBITED FROM ACCEPTING DEPOSITS BY VI RTUE OF ANY ALTERATION MADE IN ITS MEMORANDUM; OR (B) WHOSE LICENCE HAS BEEN CANCELLED UNDER SECTION 22, WHETHER BEFORE OR AFTER THE COMMENCEMENT OF THE BANKING COM PANIES (AMENDMENT) ACT, 1959 (33 OF 1959). (2) WHERE THE RESERVE BANK IS SATISFIED THAT ANY SU CH BANKING COMPANY AS IS REFERRED TO IN SUB-SECTION (1) HAS REPAID, OR HAS M ADE ADEQUATE PROVISION FOR REPAYING ALL DEPOSITS ACCEPTED BY THE BANKING COMPA NY, EITHER IN FULL OR TO THE MAXIMUM EXTENT POSSIBLE, THE RESERVE BANK MAY, BY N OTICE PUBLISHED IN THE OFFICIAL GAZETTE, NOTIFY THAT THE BANKING COMPANY H AS CEASED TO BE A BANKING COMPANY WITHIN THE MEANING OF THIS ACT, AND THEREUP ON ALL THE PROVISIONS OF THIS ACT APPLICABLE TO SUCH BANKING COMPANY SHALL CEASE TO APPLY TO IT, EXCEPT AS RESPECTS THINGS DONE OR OMITTED TO BE DONE BEFORE S UCH NOTICE . IN OUR VIEW THE ASSESSEE'S CLAIM WOULD BE MAINTAINA BLE. THE ASSESSEES CASE CLEARLY FALLS U/S. 36A(1)(B) OF THE BR ACT. ACCORDINGLY, THE PROV ISION OF SECTIONS 29, 30 AND 31, RELATING TO THE PREPARATION OF ACCOUNTS (FOR THE YE AR) AND THE BALANCE-SHEET (AS AT THE YEAR- END); THEIR AUDIT; AND SUBMISSION OF RETURNS BASED THEREON, WOULD CONTINUE TO APPLY TO THE ASSESSEE TILL THE NOTIFICATION U/S. 36A(2). THE ASS ESSEE-COMPANY IS THUS OBLIGED TO CLASSIFY ITS ASSETS ACCORDING TO THE RBI NORMS, AS ANY OTHER NON-SCHEDULED BANK, I.E., IRRESPECTIVE OF THE FACT THAT ITS BANKING LICENSE STOOD CANCELLE D BY THE RBI PRIOR TO 31-03-2002. WE 10 ARE AWARE THAT THE ASSESSEE HAS NOT RAISED ANY SUCH CLAIM BEFORE THE AUTHORITIES BELOW, SO THAT THERE IS NO FINDING BY THEM IN THE MATTER. SO, HOWEVER, THE SAME IS ONLY A LEGAL CLAIM, GOING TO THE ROOT OF THE MATTER. MERELY BECAUSE IT WAS NOT ABLE TO CANVASS THE LEGAL BASIS OF ITS CLAIM BEFORE THE AUTHORITIES BELOW, WOULD IN OUR VIEW NOT PRECLUDE THE ASSESSEE FROM DOING SO BEFORE A HIGHER APPELLATE AUTHORITY. THERE IS NO FINDING, HOWEVER, WITH REGARD TO THE DATE OF THE NOTIFICATION U/S. 36A(2) OF THE B.R. ACT IN THE ORDERS OF THE AUTHORITIES BELOW, THE SAME TO BE FAIR THERETO HAVI NG IN FACT NOT BEEN RAISED BEFORE THEM, AND IN FACT STANDS BROUGHT TO OUR NOTICE BY THE ASS ESSEE ONLY VIDE PARA 2.3 OF ITS WRITTEN SUBMISSIONS DATED 16-04-2012. AT THE SAME TIME, THE ISSUE QUA NOTIFICATION IS AND CANNOT BE A SUBJECT MATTER OF DISPUTE, BEING A MATTER OF P ROCEDURE, FOLLOWED BY THE RBI IN ADMINISTRATION OF THE BR ACT. THE REVENUE HAVING PR OCEEDED ON THE BASIS OF THE DATE OF CANCELLATION OF THE LICENCE AS BEING THE RELEVANT D ATE, THE SAME HAS BEEN SOUGHT TO BE MET BY THE ASSESSEE WITH REFERENCE TO THE PROVISIONS OF THE APPLICABLE LAW. TO THAT EXTENT, EVEN AS SOUGHT TO BE CLARIFIED EARLIER, THE ASSESSE E MAY NOT BE CONSIDERED AS HAVING RAISED A NEW, LEGAL PLEA, BUT ONLY AS SUBSTANTIATING ITS C ASE ON THE BASIS OF THE APPLICABLE LAW. SUBJECT TO THE CONFIRMATION OF THE NOTIFICATION AS HAVING BEEN MADE ONLY ON 21/9/2002, I.E., SUBSEQUENT TO 31/3/2002, UPON VERIFICATION AS DEEMED FIT BY THE AO, WE ALLOW THE ASSESSEE'S CLAIM IN RESPECT OF THE PROVISION IN RES PECT OF SUB-STANDARD ASSETS MADE IN THE SUM OF RS. 12.30 LACS TO THE EXTENT IT RELATES TO L OSS OR DOUBTFUL ASSETS AS PER THE RBI NORMS AND IS OTHERWISE CONSISTENT WITH THE PROVISIO N OF SEC. 36(1)(VIIA). THE MATTER IS RESTORED BACK TO THE FILE OF THE AO FOR VERIFICATIO N AND ISSUING APPROPRIATE FINDINGS IN ACCORDANCE WITH LAW AFTER HEARING THE ASSESSEE. 7.4 WE MAY, BEFORE PARTING WITH OUR ORDER, ONCE AGAIN CLARIFY THAT WE MAY NOT BE CONSTRUED AS HAVING ISSUED ANY FINAL FINDINGS IN TH E MATTER, BEING RATHER FOR MOST PART NOT A SUBJECT MATTER OF ADJUDICATION BY THE AUTHORITIES BELOW, BUT AS HAVING APPROVED THE ASSESSEES EXIGIBILITY U/S. 36(1)(VIIA) IN PRINCIPL E, ON THE BASIS OF THE ASSESSEE BEING A NON-SCHEDULED BANK, AND A BANKING COMPANY FOR ALL I NTENTS AND PURPOSES DURING AS WELL AS AT THE END OF THE RELEVANT YEAR. THE ADMISSIBILI TY OF ITS CLAIM THERE-UNDER WOULD IN ANY 11 CASE BE SUBJECT TO THE SATISFACTION OF THE OTHER CO NDITIONS OF THE PROVISION AND THE LIMIT ON QUANTUM AS SPECIFIED THERE-UNDER. WE DECIDE ACCORDI NGLY. 8. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (R.K. GUPTA) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: JAIPUR DATED: MAY 11 , 2012 *MISHRA COPY TO: 1. M/S. VINAYAK LOCAL AREA BANK LTD., SIKAR 2. THE DCIT, CIRCLE- SIKAR 3. THE CIT (APPEALS)-III, JAIPUR 4. THE CIT CONCERNED 5. D.R., I.T.A.T 6. GUARD FILE (ITA NO.456/JP/2011) BY ORDER AR, ITAT, JAIPUR BENCH, JAIPUR