Raiganj Central Cooperative Bank Ltd., Uttar Dinajpur V. J.C.I.T Range - 2,Jalpaiguri., Jalpaiguri

ITA 49/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91902 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 08-01-2013
• Court: TRIBUNAL
• Department Lawyers: DILIP KUMAR RAKSHIT
• Assessee Lawyers: N C MONDAL
• Keywords: Rectification of order
• Section: 143(3); 147; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI B. P. JAIN, AM ] I.T.A NO. 895 /KOL/20 12 ASSESSMENT YEAR : 200 7 - 0 8 & I.T.A. NO.49/KOL/2013 ASSESSMENT YEAR: 2009 - 10 RAIGANJ CENTRAL COOPERATIVE BANK LTD. VS. JOINT COMMISSIONER OF INCOME - TAX, (PAN:AAAAR6191E) RANGE - 2, JALPAIGURI ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 0 7 .0 4 .2015 DATE OF PRONOUNCEMENT: 07 . 04 . 2015 FOR THE APPELLANT: SHRI N. C. MONDAL, FCA FOR THE RESPONDENT: S HRI DILIP KUMAR RAKSHIT, JCIT , SR. DR, ORDER PER SHRI MAHAVIR SINGH, JM: TH E S E APPEAL S BY ASSESSEE ARE ARISING OUT OF SEPARATE ORDER S OF CIT(A) , JALPAIGURI IN APPEAL NO. 125/JAL/CIT(A)/JAL/11 - 12 DATED 21.05.2012 AND APPEAL NO.10/JAL/CI T(A)/JAL/12 - 13 DATED 30 . 11 .20 12 . ASSESSMENT FOR AY 2007 - 08 WAS FRAMED BY ACIT, CIRCLE - 2, JALPAIGURI U/S. 147/143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER R EFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 28.12.2011 AND ASSESSMENT FOR AY 2009 - 10 WAS FRAMED BY JCIT, RANGE - 2, JALPAIGURI , U/S. 143(3) OF THE ACT FOR ASSESSMENT YEAR 200 4 - 0 5 VIDE HIS ORDER DATED 27 .12.20 1 1 . 2. FIRST WE TAKE UP ITA NO. 895/K/2012. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN UPHOLDING THE ACTION OF AO IN CHANGING THE STATUS OF ASSESSEE FROM COOPERATIVE SOCIETY TO COMPANY. 3 . WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. NOW, BEFORE US, LD. COUNSEL FOR THE ASSESSEE COULD NOT DEMONSTRATE HOW THE ASSESSEE S STATUS IS THAT OF COOPERATIVE SOCIETY INSTEAD OF COMPANY. LD. COUNSEL FOR THE ASSESSEE STATED THAT IN THE ORIGINAL ASSESSMENT FRAMED U/S. 143(3) OF THE ACT VIDE ORDER 2 ITA NO. 895 /K/201 2 & ITA NO.49/K/2013 RAIGANJ CENTRAL COOP. BANK LTD. AY S 200 7 - 0 8 & 2009 - 10 D ATED 07.08.2006 , WHEREIN ASSESSEE IS ASSESSED AS COOPERATIVE SOCIETY. WE HAVE GONE THROUGH THE ORIGINAL ASSESSMENT ORDER FRAMED U/S. 143(3) OF THE ACT DATED 07.08.2006 WHEREIN THE STATUS OF THE ASSESSEE WAS ASSESSED AS COOPERATIVE SOCIETY. WE HAVE ALSO G ONE THROUGH THE IMPUGNED ASSESSMENT ORDER FRAMED BY AO U/S. 147 READ WITH SECTION 143(3) OF THE ACT WHEREIN THE STATUS OF THE ASSESSEE IS TAKEN AS COMPANY WITHOUT ANY BASIS. CHANGE OF STATUS IS NOT PERMISSIBLE UNDER THE LAW UNLESS AND UNTIL A COGENT REASO NED ORDER IS PASSED ON THE SAME. HERE, THE ASSESSEE S CHANGE OF STATUS FROM A COOPERATIVE SOCIETY TO COMPANY IS WITHOUT ANY BASIS. HENCE, WE RESTORE THE STATUS OF THE ASSESSEE AS COOPERATIVE SOCIETY AND THIS ISSUE OF ASSESSEE S APPEAL IS ALLOWED. 4. TH E NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN UPHOLDING THE RECTIFICATION ORDER PASSED BY AO DISALLOWING THE PROVISIONS FOR OVERDUE INTEREST AND PROVISION FOR STANDARD ASSETS INVOKING THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 2 TO 4: 2. THAT THE LD. CIT (APPEALS) - JALPAIGURI, HAS ERRED IN LAW AND ON FACTS OF THE CASE BY UPHOLDING THE CURTAILMENT OF DEDUCTION U/S. 36(L)(VIIA) OF THE INCOME TAX ACT, 1961 AND THEREBY ENHA NCING THE ASSESSMENT IGNORING ACTUAL DEDUCTIONS ALLOWED IN ORIGINAL ASSESSMENT ORDER DATED 28/12/2011 U/S.143(3)/147 OF THE INCOME TAX ACT, 1961 WITHOUT ANY SHOW CAUSE NOTICE FOR ENHANCEMENT OF THE ASSESSMENT AND AS SUCH THE IMPUGNED ORDER IS VOID AND ILLE GAL. 3. THAT THE LD. CIT (APPEALS) - JALPAIGURI, HAS ERRED IN LAW AND ON FACTS OF THE CASE BY UPHOLDING THAT PROVISION FOR OVERDUE INTEREST OF RS.61,78,989/ - AND PROVISION FOR STANDARD ASSETS OF RS.5,54,456/ - CANNOT BE ALLOWED AS THE APPELLANT IS FOLLOWING MERCAN TILE SYSTEM OF ACCOUNTING WITHOUT CONSULTING THE PROVISIONS OF THE STATUE I.E. THE BANKING REGULATION ACT, 1949 AND THE RULES AND REGULATIONS AND GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA, WHICH IS THE CONTROLLING AUTHORITY OF THE APPELLANT AND THE AP PELLANT IS STATUTORILY REQUIRED TO FOLLOW SUCH RULES, REGULATIONS AND GUIDELINES. 4. THAT THE LD. CIT (APPEALS) - JALPAIGURI, HAS ERRED IN LAW AND ON FACTS OF THE CASE BY DIRECTING THE A.O. TO VERIFY AGAIN THE ELIGIBILITY OF DEDUCTION U/S.36(1)(VIIA) OF TH E INCOME TAX ACT, 1961 WHICH HAS ALREADY BEEN VERIFIED AND ALLOWED BY THE A.O. IN ORIGINAL ASSESSMENT U/S.143(3)/147 OF THE INCOME TAX ACT, 1961. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND OF THE CASE. THE AO MADE DISALLOWANCE OF OVERDUE INTEREST PROVISION OF RS.61,78,989/ - AND ALSO PROVISION FOR STANDARD ASSETS OF RS.5,54,456/ - FOR THE REASON THAT THE ASSESSEE IS FOLLOWING MERCANTI LE SYSTEM OF ACCOUNTING WHILE PASSING ORDER U/S. 154 OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE DISALLOWANCE FOR THE REASON THAT PROVISION FOR OVERDUE INTEREST 3 ITA NO. 895 /K/201 2 & ITA NO.49/K/2013 RAIGANJ CENTRAL COOP. BANK LTD. AY S 200 7 - 0 8 & 2009 - 10 CAN BE ALLOWED ONLY WHEN THE SAME WOULD BE HELD AS BAD IN SUBSEQUENT YEARS AND PROVISION FOR STANDARD ASSETS IS A SIMPLE PROVISION, HENCE NOT ALLOWABLE. HE RECORDED THE FOLLOWING FINDING IN PAGE 4 AS UNDER: THUS, REMAIN THE DISALLOWANCES ON ACCOUNT OF OVERDUE INTEREST PROVISION OF RS.61,78,989/ - AND P ROVISION FROM STANDARD ASSET OF RS.5,54,456/ - . ACTUALLY, THESE TWO AMOUNTS ARE NOT ALLOWABLE AS PER THE ACT. IN MERCANTILE SYSTEM OF ACCOUNTING, PROVISION FOR OVERDUE INTEREST CAN BE ALLOWED ONLY WHEN THE SAME OR ANY PART OF THE SAME WOULD BE BAD IN SUBS EQUENT YEARS. EQUALLY, THE PROVISION FOR STANDARD ASSET IS ALSO A SIMPLE PROVISION WHICH IS NOT ALLOWABLE. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 6. WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BANKING AND REGULATED BY THE BANKING REGULATION ACT, 1949. THE ASSESSEE IS MAINTAINING ITS BALANCE SHEET AND P & L ACCOUNT AS REQUIRED BY BANKING REGULATIONS ACT. THE ASSESSEE STATUTORILY REQUIRED TO PREPARE ITS BALANCE SHEET AND P&L ACCOUNT AND AS PER SAID GUIDELINES NPAS WHERE INTEREST HA S NOT BEEN REALIZED IN CASH AS A PRUDENTIAL NORM, IT IS NOT DEBITING THE SAID ACCOUNT BY INTEREST ACCRUED IN SUBSEQUENT QUARTERS AND TAKING THIS INTEREST AMOUNT AS INCOME OF THE BANK AS THE SAID INTEREST HAS NOT BEEN REALIZED. IN CASE OF ASSESSEE, IF INTE REST IS DEBITED TO BORROWED ACCOUNT BUT FOR ANY REASON INTEREST HAS NOT ACTUALLY REALIZED, ACCOUNT IS TO BE TREATED AS NPA AS PER THE GUIDELINES ISSUED BY RBI. IN THAT EVENTUALITY, THE AMOUNT IS UNREALIZED, THE UNREALIZED INTEREST SO TAKEN TO INCOME SHOUL D BE REVERSED BY DEBITING TO THE P&L ACCOUNT AND CREDITING TO OVERDUE INTEREST RESERVE ACCOUNT. IT WAS THE CLAIM OF THE ASSESSEE THAT DURING THE YEAR UNREALIZED INTEREST TAKEN TO INCOME HAS BEEN REVERSED BY DEBITING THE P&L ACCOUNT AND CREDITING TO PROVIS ION FOR OVERDUE INTEREST ACCOUNT FOLLOWING THE GUIDELINES ISSUED BY RBI. WE FIND THAT THIS ISSUE IS HIGHLY DEBATABLE AND IT CANNOT BE ADJUDICATED WHILE ACTING U/S. 154 OF THE ACT. THE AO SHOULD HAVE MADE DISALLOWANCE ONLY WHILE FRAMING REGULAR ASSESSMENT OR REASSESSMENT, WHICH WAS MADE PRIOR TO RESORTING TO THIS RECTIFICATION. THIS DISALLOWANCE CANNOT BE MADE WHILE ACTING U/S. 154 OF THE ACT REASON BEING TH IS IS NOT A PRIMA FACIE MISTAKE IT IS A HIGHLY DEBATABLE ISSUE. IN TERM OF THE ABOVE, WE ALLOW THIS ISSUE OF ASSESSEE S APPEAL. 4 ITA NO. 895 /K/201 2 & ITA NO.49/K/2013 RAIGANJ CENTRAL COOP. BANK LTD. AY S 200 7 - 0 8 & 2009 - 10 7. COMING TO ITA NO. 49/KOL/2013 FOR AY 2009 - 10 . IN THIS APPEAL ALSO, ASSESSEE HAS RAISED SIMILAR GROUNDS AS IN ITA NO. 895/ K/2012 FOR AY 2007 - 08 . SINCE WE HAVE ALLOWED THE GROUNDS OF APPEAL OF ASSESSEE IN ITA NO. 895/K/2012 , CONSEQUENTLY, FACTS AND ISSUES BEING IDENTICAL IN THIS YEAR ALSO, THIS APPEAL OF ASSESSEE IS ALSO ALLOWED. 8 . IN THE RESULT, BOTH THE APPEAL S OF ASSE SSEE ARE ALLOWED. 9 . ORDER IS PRONOUNCED IN THE OPEN COURT . SD/ - SD/ - ( B. P. JAIN ) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 7 TH APRIL , 201 5 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT RAIGANJ CENTRAL COOPERATIVE BANK LTD., UKILPARA, RAIGANJ, DIST. UTTAR DINAJPUR, PIN 733134 . 2 RESPONDENT ACIT, CIR - 2, JALPAIGURI . 3 . THE CIT (A), JALPAIGURI 4. 5. CIT JALPAIGURI DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .