Mahamedha Urban Co-operative Bank Ltd., Ghaziabad V. DCIT, Circle- 1 , Ghaziabad

ITA 5017/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3294 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 17-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Rule of consistency; Source of fund; Onus to prove; Liquidation
• Section: 143(3); 133(6); 131; 37; 6; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: C NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.5017/DEL/2018 ASSESSMENT YEAR: 2014-15 MAHAMEDHA URBAN CO- OPERATIVE, BANK LTD. 36, NAI BASTI, GHAZIABAD PAN NO. AAAAM4437E VS. DCIT CIRCLE-1 GHAZIABAD (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER DATED 14/12/2017 PASSED BY THE LD. COMMISSIONER OF INCOME -TAX APPELLANT BY MS. SHRUTI DANG, ADVOCATE RESPONDENT BY SH. GAURAV PUNDIR, SR DR DATE OF HEARING 05 . 1 0.2021 DATE OF PRONOUNCEMENT 21 .10.2021 (APPEALS)-GHAZIABAD [IN SHORT THE LD. CIT(A)] FOR A SSESSMENT YEAR 2014-15, RAISING FOLLOWING GROUNDS: 1. THAT THE LEARNED CIT(APPEALS), GHAZIABAD IS IN ERRED IN LAW BY CONFIRMING THE ORDER OF DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, GHAZIABAD AND ON FACTS IN CONFIRMING THE ADDITION OF RS 3,02,27,000/- U/S 68 OF INCOME TAX ACT,1961 FOR ADDITION IN SHARE CAPITAL ONLY BY CONF IRMING THE REFERENCE OF RBI INSPECTION REPORT. 2. THAT THE LEARNED CIT(APPEALS), GHAZIABAD IS IN E RRED IN LAW BY CONFIRMING THE ORDER OF DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, GHAZIABAD IN ADDITION OF RS 44,7,618 /- FOR DISALLOWING THE EXPENDITURE U/S 37 ON PROPORTIONATE BASIS ON DIVERSION OF FUND ON THE BASIS OF RBI INSPECTION REPORT AND MISUNDERSTANDING OF CONCEPT OF NPA. 3. THAT THE LEARNED CIT(APPEALS), GHAZIABAD IS IN E RRED IN LAW BY CONFIRMING THE ORDER OF DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, GHAZIABAD AND ON FACTS IN CONFIRMING THE ADDITION OF RS. 87,74,000/- BY DISALLOWING THE EXPE NDITURE WITHOUT REJECTING THE ACCOUNTS, ONLY ON THE BASIS O F BY MAKING THE REFERENCE OF LAST YEAR'S ASSESSMENT ORDE R AND RBI INSPECTION REPORT, DESPITE AND IGNORING THE FAC TS THAT THE ASSESSEE HAS PROVIDED THE BOOKS OF ACCOUNT AND COMPLETE VOUCHERS WITH SUPPORT AND BILLS AND EXPLAI NED THE GENUINESS OF THE RELATED EXPENDITURE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESS EE IS A COOPERATIVE BANK, REGISTERED UNDER THE COOPERATIVE SOCIETY ACT, 1965 AND POSSESSES A LICENSE FOR FUNCTIONING AS BAN K FROM THE RESERVE BANK OF INDIA (RBI). THE ASSESSEE CARRIED O UT ACTIVITY OF ACCEPTING DEPOSITS FROM THE MEMBERS/PUBLIC, GRANTIN G LOANS AND BILLS/CHEQUE DISCOUNTING ETC. FOR THE YEAR UNDE R CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME ON 30/11/2014 DECLARING LOSS OF RS.25,75,330/-. THE RE TURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUT INY AND STATUTORY NOTICES UNDER THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT) WERE ISSUED AND COMPLIED WITH. DURING THE COUR SE OF ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTICE D THAT RESERVE BANK OF INDIA HAD CARRIED OUT INSPECTION OF THE ASSESSEE BANK FOR THE FINANCIAL YEAR ENDING ON 31/0 3/2012, 31/03/2013 AND 31/03/2014. BASED ON THE FINDING OF THE RBI REGARDING INTRODUCTION OF THE PAID-UP SHARE CAPITAL , REGARDING DIVERSION OF FUNDS THROUGH BAD LOANS AND NON GENUIN ESS OF EXPENSES, THE ASSESSING OFFICER ISSUED SHOWS NOTICE TO THE ASSESSEE ASKING TO EXPLAIN THE DISCREPANCIES. THE A SSESSEE IN HIS REPLY DENIED OF ANY DISCREPANCIES AND SUBMITTED THAT THE ASSESSEE HAS COMPLIED ALL THE PROVISIONS OF THE INC OME-TAX ACT AS WELL AS RBI. FOR VERIFICATION OF INTRODUCTION OF THE SHARES CAPITAL, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 133(6) OF THE ACT AND THEREAFTER ISSUED SUMMONS TO FOUR PERSONS, HOWEVER SUMMONS COULD NOT BE SERVED ON TWO PERSONS AND OTHER TWO PERSONS DENIED OF INVESTING IN SHARE CAPITAL OF THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER MA DE ADDITION FOR THE ENTIRE SHARE CAPITAL OF RS.3,02,27,000/-REC EIVED DURING THE YEAR UNDER CONSIDERATION IN TERMS OF SECTION 68 OF THE ACT. ON THE ISSUE OF THE DIVERSION OF THE FUND TOWARDS B AD LOANS, THE ASSESSEE SUBMITTED THAT THESE ARE NON-PERFORMING AS SETS (NPAS) FLAGGED BY THE RBI IN NORMAL COURSE OF THE B USINESS AND THEREFORE THERE WAS NO ILLEGALITY IN SAID LOANS. HO WEVER THE ASSESSING OFFICER FOLLOWING THE FINDING OF HIS PRED ECESSOR REJECTED THE CONTENTION OF THE ASSESSEE AND DISALLO WED PROPORTIONATE EXPENSES AMOUNTING TO RS.44,71,618/-. THE ASSESSING OFFICER ALSO DISALLOWED EXPENSES OF RS.58 .07 LAKHS, WHICH WAS NOTED BY THE RBI TEAM AS OVER INVOICED ON REPAIR OF OFFICE BUILDINGS, RS.27.60 LAKHS, WHICH WERE BASED ON THE DISCREPANCY IN VOUCHER AND CASH EXPENSES POINTED OU T BY THE RBI ON GENERATOR, TRAVELLING AND CONVEYANCE AND FOO D AND BEVERAGES; RS.3.07 LAKHS DUE TO DISCREPANCIES BY TH E RBI IN RESPECT OF PROFESSIONAL CHARGES. IN THIS MANNER TOT AL INCOME OF THE ASSESSEE WAS ASSESSED AT RS.4,61,47,948/-IN ASS ESSMENT ORDER DATED 27/12/2016 PASSED UNDER SECTION 143(3) OF THE ACT. 3. THE ASSESSEE PREFERRED APPEAL AGAINST THE ASSESS MENT ORDER BEFORE THE LD. CIT(A), WHO DISMISSED THE GROU ND OF THE ASSESSEE IN RELATION TO SHARE CAPITAL AND DIVERSION OF THE FUNDS, BUT ALLOWED PART RELIEF IN RESPECT OF DISALLOWANCE OF EXPENSES. 4. AGGRIEVED WITH THE FINDING OF THE LD. CIT(A), TH E ASSESSEE IS BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRO DUCED ABOVE. 5. BEFORE US, THE PARTIES APPEARED THROUGH VIDEOCON FERENCING FACILITY. THE WRITTEN SUBMISSION WAS FILED ON BEHAL F OF THE ASSESSEE THROUGH EMAIL. THE LEARNED CONSUL OF THE A SSESSEE SUBMITTED THAT THE LIQUIDATOR HAS BEEN APPOINTED BY THE APPROPRIATE AUTHORITY ON 31/08/2017 AND THE ASSESSE E SOCIETY IS UNDER LIQUIDATION PROCESS. THE LEARNED COUNSEL I NFORMED THAT SHE HAS BEEN APPOINTED BY THE LIQUIDATOR. 6. WITH REFERENCE TO GROUND NO.1 OF THE APPEAL, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT SHARE CAPITA L HAS BEEN OBTAINED BY WAY OF PROPER BANKING CHANNEL AND THERE FORE GENUINENESS OF THE SAME CANNOT BE DOUBTED. SHE FURT HER SUBMITTED THAT NO CROSS EXAMINATION HAS BEEN PROVID ED TO THE ASSESSEE AND THEREFORE MATTER MAYBE RESTORED BACK T O THE FILE OF THE ASSESSING OFFICER FOR PROVIDING OPPORTUNITY OF CROSS- EXAMINATION OF THE PERSONS, THOSE WHO DENIED OF INV ESTING IN SHARE CAPITAL OF THE SOCIETY. 7. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE O NUS WAS ON THE ASSESSEE TO PRODUCE THOSE ALLEGED SHAREHOLDE RS FOR CONFIRMATION OF INTRODUCTION OF THE SHARE CAPITAL D URING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE CANNOT SH IFT THIS BURDEN OF CROSS-EXAMINATION ON THE DEPARTMENT. THE LD. DR SUBMITTED THAT ASSESSEE DID NOT SEEK CROSS-EXAMINAT ION BEFORE THE AO AND SEEKING NOW AFTER A TIME PERIOD OF PASSI NG OF FIVE YEARS FROM PASSING OF THE ASSESSMENT ORDER. 8. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. 9. FACTS IN BRIEF QUA THE ISSUE IN DISPUTE ARE THAT RBI, IN ITS INSPECTION NOTED THAT DURING THE YEAR UNDER CONSIDE RATION, SHARE CAPITAL MONEY WAS RECEIVED FROM FOLLOWING FOU R PERSONS: 1 MR. KAWAL SINGH VILL. NALGADHA (NAYA DALLU PURA NOIDA) 25,00,000 2. MR. ASHOK KR. YADAV R-11/71, RAJ NAGAR, GHAZIABAD 90,00,000 3. MS. RAKESH KUMAR. HOME NO.40, VILLAGE SALARPUR KHADAR P.S. 39, NOIDA 25,00,000 CJEPK6727P 4. MR. JAGVEER H. NO.123, KHANPUR, KASANA NOIDA 160,00,000 10. THE ASSESSEE SUBMITTED THAT ALLEGED SHAREHOLDER S DEPOSITED THE FUND OUT OF COMPENSATION RECEIVED FRO M GOVERNMENT AUTHORITIES FOR ACQUISITION OF THE LAND. THE ASSESSING OFFICER DEPUTED INSPECTOR OF HIS OFFICE T O SERVE SUMMONS ON ABOVE FOUR PERSONS, IN ORDER TO ASCERTAI N THEIR IDENTITY AND CREDITWORTHINESS. THE SUMMONS COULD NO T BE SERVED ON SH. RAKESH KUMAR AND SH. JAGVEER, HOWEVER OTHER TWO PERSONS APPEARED BEFORE THE ASSESSING OFFICER A ND STATED ON THE OATH THAT THEY WERE NOT AWARE OF BEING SHARE HOLDERS OF THE ASSESSEE SOCIETY AND THEY WERE JUST ASKED TO SI GN THE FORM ON THE GROUND THAT THEY SHOULD GET HIGHER INTEREST ON THE MONEY DEPOSITED. THE ASSESSING OFFICER BROUGHT THES E OBSERVATIONS IN THE KNOWLEDGE OF THE ASSESSEE BY WA Y OF ORDER SHEET ENTRY DATED 22/12/2016. A COPY OF THE SAID OR DER SET HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN THE IMP UGNED ASSESSMENT ORDER. IN VIEW OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO DISCHARGE THE ONUS UNDER SECTION 68 OF THE ACT OF ESTABLISHING, IDENTITY, CREDITWORTHINESS AND GENUIN ENESS OF THE TRANSACTION, THE ASSESSING OFFICER MADE ADDITION OF RS.3,02, 27,000/-OBSERVING AS UNDER: HENCE, KEEPING IN OF THE ABOVE FACTS, IDENTITY, GENUINESS OF TRANSACTION AND CREDITWORTHINESS OF INDIVIDUAL CONTRIBUTOR COULD NOT ASCERTAINED IN RES PECT OF MR. KAWAL SINGH (RS.25,00,000/-), MR. ASHOK KUMAR YADAV (RS.90,00,000/-) MR. RAKESH KUMAR (RS. 25,00,000/- AND MR. JAGVEER (RS. 160,00,000). THE P LEAS THAT THE AMOUNT WAS RECEIVED FROM LAND COMPENSATION IS ALSO NOT SUPPORTED AS THE CHEQUES BEAR NAME OF SHRI HUKUM SINGH S/O HAYAT & SHRI ULKI S/O ANUCHAND, WHI CH ARE NOT THE PARTIES FROM WHOM SHARE CAPITAL HAS BEE N CLAIMED HAVE BEEN RECEIVED. THIS POINTS TO SERIOUS FRAUD COMMITTED BY BANK BY NOT ONLY MISGUIDING THE INVEST ORS BUT ALSO BY MISGUIDING THE DEPARTMENT AS THE PARTIE S HAVE SPECIFICALLY STATED ON OATH THAT THEY HAVE NOT PURC HASED ANY SHARES FROM THE BANK AND THE BANK HAS MISGUIDED THEM AND ALLOTTED SHARES IN THEIR NAME. SIMULTANEOU SLY IT IS SEEN THAT THERE OTHER NAMES ARE ALSO APPEARING A S PER RBI'S REPORT AND THE TOTAL SHARE CAPITAL RECEIVED F ROM THEM IS RS.2,27,00,000/- SINCE, THE OTHER AMOUNT AS PER RBI REPORT STATES THAT A SUM TOTAL OF RS.2,27,00,000/- HAS BEEN RECEIVED FROM THE RELATIVES OF CHAIRMAN AND TH E SOURCE OF FUNDS IS NOT ASCERTAINABLE, THIS AMOUNT I S ALSO BEING ADDED BACK AS PER THE CAPITAL INTRODUCED OUT OF BOOKS AND NOT SHOWN IN THE BALANCE SHEET. HENCE, TH E ALLEGED SHARE CAPITAL RECEIVED OF RS.300,00,000/- A ND RS.2,27,000/- IS BEING ADDED IN THE INCOME OF THE ASSESSEE U/S 68 OF THE INCOME-TAX ACT, 1961 AS THE GENUINENESS AND CREDITWORTHINESS IS NOT EXPLAINED. INITIATE PENALTY PRECEDING SEPARATELY 271(L)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. 11. ON FURTHER APPEAL THE LD. CIT(A), UPHELD THE AD DITION OBSERVING AS UNDER: 5.1.1 EXAMINATION OF FACTS REVEALS THAT RBI CONDUC TED INSPECTION OF THE BANK AND NOTED THAT SHARE CAPITAL MONEY FROM ABOVE FOUR SAID PARTIES AS DETAILED ABOVE HAS BEEN RECEIVED BY THE APPELLANT DURING THE YEAR. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE AO CONDUCTED ENQUIRIES IN RESPECT OF ABOVE FOUR PERSONS. DURING THE COURSE OF ENQUIRY THE ADDRESSES GIVEN IN RESPECT OF SHRI RAKESH KUMAR AND SHRI JAGVIR WERE FOUND TO BE INCOMPLETE AS THE SUMMONS COULD NOT BE SERVED UPON THEM AT THE ADDRESS GIVEN BY THE APPELLANT. SHRI ASHOK K UMAR YADAV AND SHRI KAWAL SINGH APPEARED BEFORE AO IN RESPONSE TO SUMMONS U/S 131 AND STATED THAT THEY AR E NOT THE SHARE HOLDERS OF THE BANK. HOWEVER THEY HAD GIVEN THE MONEY FOR MAKING FIXED DEPOSIT. THE APPELLANT W AS SPECIFICALLY CONFRONTED WITH THE FACTS THAT THE SUM MONS WERE ISSUED TO THE FOUR SHARE HOLDERS AT THE ADDRES S GIVEN BY THE APPELLANT AND THE FACT THAT THE STATEMENT WA S RECORDED ON OATH WHICH BELIED THE CONTENTION OF THE APPELLANT REGARDING SHARE APPLICATION MONEY. THE AO NOTED THAT THE CONTENTION OF THE APPELLANT THAT THE ABOVE SAID FOUR INVESTOR RECEIVED LAND COMPENSATION, WAS FOUND TO BE FACTUALLY UNSUPPORTED BY THE DOCUMENTS SUCH A S CHEQUES WHICH WERE ISSUED IN THE NAME OF A DIFFEREN T PERSON RATHER THAN THE ABOVE SAID APPLICANTS. CONSI DERING ABOVE FACTS IT IS HELD THAT THE GENUINENESS OF TRAN SACTION OF SHARE MONEY BY THE APPELLANT BANK COULD NOT BE PROV ED BY THE APPELLANT. THE APPELLANT FAILED TO DISCHARGE TH E PRIMARY BURDEN OF PROOF AND SHIFTED ONUS, AFTER AO HAVING ISSUED' SUMMONS U/S 131 TO THE ALLEGED APPLICANTS, U/S 68. THIS IS CLUBBED BY THE FACT THA T RBI HAS ALSO REPORTED VIOLATION OF RBI GUIDELINES IN TH IS REGARD. CONSIDERING THESE FACTS AND PROVISIONS OF SECTION 6 8 THIS GROUND OF APPEAL IS NOT MAINTAINABLE AND ACCORDINGL Y DISMISSED. 12. WE NOTICED THAT ADDITION HAS BEEN MADE BY THE A SSESSING OFFICER NOT MERELY ON THE BASIS OF THE STATEMENT OF THE ALLEGED SHAREHOLDERS BUT IN VIEW OF FAILURE ON THE PART OF THE ASSESSEE IN SUBSTANTIATING THE INGREDIENT OF SECTION 68 OF T HE ACT. THE ASSESSEE HAS FAILED TO PROVIDE COMPLETE ADDRESS AND PRODUCE THE TWO ALLEGED SHAREHOLDERS NAMELY RAKESH KUMAR AN D JAGVEER. THE CLAIM OF SOURCE OF FUND IN THE HANDS O F ALLEGED SHARE HOLDERS IS ALSO NOT BEEN FOUND CORRECT AS TH E ASSESSEE HAS NOT SUPPORTED ANY DOCUMENTS IN RESPECT OF THE L AND COMPENSATION RECEIVED BY THOSE ALLEGED SHAREHOLDERS . FURTHER, THE ASSESSING OFFICER DULY CONFRONTED THE STATEMENT OF TWO ALLEGED SHAREHOLDERS DURING THE COURSE OF THE ASSES SMENT PROCEEDING. WE NOTICED THAT NO CROSS-EXAMINATION WA S SOUGHT BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDING AN D FOR THE FIRST TIME THE ASSESSEE ASKED CROSS-EXAMINATION BEF ORE THE LD. CIT(A). THOSE PERSONS HAVE BEEN CLAIMED BY THE ASSE SSEE AS SHAREHOLDERS AND THUS ONUS WAS ON THE ASSESSEE TO P RODUCE BEFORE THE ASSESSING OFFICERS. IT IS ONLY WHEN THE ASSESSEE FAILED TO PRODUCE THOSE PERSONS, THE ASSESSING OFFI CERS ISSUED SUMMONS REQUESTING THEM TO APPEAR BEFORE HIM. WHEN SUMMONS WERE ISSUED TO THEM ON THE REQUEST OF THE A SSESSEE, THE ONUS WAS ON THE ASSESSEE TO BE PRESENT DURING R ECORDING OF THEIR STATEMENT BUT ASSESSEE IGNORED TO PRESENT BEF ORE THE AO. THE ASSESSEE DID NOT ASK CROSS EXAMINATION EVEN AFT ER CONFRONTING THE STATEMENT TO THE AUTHORISED REPRESE NTATIVE. THEREAFTER ASKING CROSS EXAMINATION BEFORE THE LD F IRST APPELLATE AUTHORITY IS NOT JUSTIFIED. AT ALL IF THE ASSESSEE IS OF THE VIEW THAT THOSE PERSON ARE REAL SHARE HOLDER, T HE ASSESSEE SHOULD HAVE PRODUCED THEM OR PRODUCE ANY AFFIDAVIT FROM THEM TO DISCHARGE HIS ONUS BUT NOTHING HAS BEEN DONE ON BEHALF OF THE ASSESSEE EXCEPT SEEKING CROSS EXAMINATION OF TH E PERSONS. WE ALSO NOTICE FROM RECORD THAT IN AY 2012-13, ALSO THE SHARE CAPITAL HAS BEEN ASSESSED U/S 68 AS UNEXPLAINED CAS H CREDIT, WHICH HAS BEEN UPHELD BY THE LD. CIT(A) AND ITAT (I TA NO.4213/D/2017), THOUGH EXPARTE. THERE IS NO INFORM ATION OF REQUEST FOR RECALLING THE ORDER OF ITAT BY THE ASSE SSEE. IN AY 2013-14, THE ASSESSEE HAS WITHDRAWN ITS APPEAL (ITA NO.5016/D/2018) FILED ON THE ISSUE OF ADDITION FOR SHARE CAPITAL OF RS. 62,00,000/-, DISALLOWANCE OF EXPENSE S OF RS.1,22,65,000/- RELATED TO LOAN DISBURSED IN VIOLA TION OF RBI GUIDELINES, DISALLOWANCE OF EXPENSES OF RS.1,42,56, 000/-. THE GROUNDS RAISED IN THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO GROUND RAISED IN ASSESSMENT YEAR 2013-14, EXCEPT CH ANGE OF AMOUNT. THUS IT IS EVIDENT THAT IN PRECEDING YEAR, THE ASSESSEE ITSELF HAS ADMITTED THE ADDITION MADE BY THE ASSESS ING OFFICER ON IDENTICAL GROUND, THEN IN VIEW OF RULE OF CONSIS TENCY, THE ASSESSEE IS NOT JUSTIFIED IN RAISING THE GROUNDS WI THOUT ANY VALID REASONS. 13. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND THE DISCUSSION ABOVE, WE UPHOLD THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GROU ND NO.1 OF THE APPEAL. 14. THE GROUND NO.2 OF THE APPEAL RELATES TO DISALL OWANCE OF EXPENDITURE OF RS.44,70,618/-IN TERMS OF SECTION 37 OF THE ACT ON PROPORTIONATE BASIS FOR DIVERSION OF THE FUND. 15. ACCORDING TO THE ASSESSING OFFICER, LOANS WERE ISSUED IN VIOLATION OF THE NORMS AND HENCE PROPORTIONATE COST CANNOT BE ALLOWED BECAUSE OF THE ILLEGALITY INVOLVED. THE ASS ESSING OFFICER RELIED ON THE FINDING OF HIS PREDECESSOR IN ASSESSM ENT YEAR 2013-14 AND ACCORDINGLY DISALLOWED PROPORTIONATE EX PENSES AMOUNTING TO RS.44,71,618/-. THE LD. CIT(A) UPHELD THE DISALLOWANCE OBSERVING AS UNDER: 5.2 GROUND NO. 2: THE APPELLANT HAS CHALLENGED THE DISALLOWANCE OF EXPENDITURE U/S 37 OF RS. 44,71,618 /- . DURING THE COURSE OF APPELLATE PROCEEDINGS IT HAS BEEN SUBMITTED THAT AO HAS WRONGLY INTERPRETED THE WORD 'DIVERSIONS'. AS PER RBI INSPECTOR'S REPORT TH E INSTANCE OF NON PERFORMING ASSETS DIVERSIONS WERE NOTED I.E. THAT NPA HAS BEEN CLASSIFIED DEVIATING F ROM THE STANDARDS AND NORMS PRESCRIBED BY RBI. ACCORDIN G TO THE APPELLANT DISALLOWANCE OF EXPENDITURE BY MAKING A REFERENCE TO RBI'S INSPECTION REPORT WITHO UT EVEN REJECTING THE BOOKS OF ACCOUNTS IS NOT TENABLE IN THE EYES OF LAW. IT HAS BEEN FURTHER ARGUED THAT TH ERE IS NO DIRECT AND INDIRECT LINK OF EXPENDITURE INCUR RED FOR BANKING ACTIVITIES AND CLASSIFICATION OF NPA. HOWEV ER IT IS NOTED THAT AO HAS OBSERVED THAT AN AMOUNT OF RS. 12.91 LAC ADVANCE TO EX. DIRECTOR SMT. MEENAKSHI GO EL WAS CLASSIFIED AS NPA BY THE BANK. SIMILARLY, AO NOTED THAT CREDIT HAS .BEEN EXTENDED TO SISTER CONC ERNS VIOLATING RBI'S GUIDELINES. CONSIDERING ABOVE FACTS , AO ESTIMATED EXPENDITURE NOT FOR WHOLLY AND EXCLUSIVEL Y BUSINESS PURPOSE. DURING THE COURSE OF APPELLATE PROCEEDINGS AR HAS ADMITTED THAT EXPENDITURE CLAIME D IS INCURRED ON GRANTING OF LOANS AND ADVANCES. THE SUBMISSION OF AR IS REPRODUCED AS UNDER: E. IT IS ALSO WORTHWHILE TO MENTION HERE THAT THE EXPENDITURE INCURRED BY THE BANK IS NOT ONLY FOR TAKING DEPOSIT ITS ALSO RELATES TO GRANTING AND LOANS AND ADVANCES AND OTHER ACTIVITIES. 5.2.1 CONSIDERING ABOVE FACTS IT IS HELD THAT APPEL LANT FAILED TO SUBSTANTIATE THAT THE EXPENDITURE CLAIMED WAS USED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES AS ADMITTEDLY EXPENDITURE IS INCURRED ON DISBURSEMENT OF LOAN AND ADVANCES, WHICH HAS BEEN MADE TO THE DIRECTORS OF THE BANK ALSO. KEEPING IN VIEW THE ABOVE FACTS THE ADDITION MADE BY THE AO IS CONFIRMED. THUS THIS GROUND OF APPEAL IS DISMISSED. 16. BEFORE US THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT RBI REPORTED ONLY THAT BANK HAS DIVERGENCE IN CLASS IFICATION OF THE ASSETS AND NOT DIVERSION OF THE FUND. SHE SUBMI TTED THAT BANK HAS NOT PROPERLY CLASSIFIED THE LOAN ASSETS AC CORDING TO THE RBI NORMS. ACCORDING TO HER THERE IS NO NEXUS O F DISALLOWING RS.44.74 LAKHS AS COST OF THE DIVERTED FUND. SHE SUBMITTED THAT EXPENDITURE INCURRED BY THE BANK IS NOT ONLY FOR TAKING DEPOSIT BUT IT IS ALSO RELATED TO GRANTING L OANS AND ADVANCES AND OTHER ACTIVITIES. SHE FURTHER SUBMITTE D THAT RBI HAS NO WAY REPORTED THAT BOOKS OF ACCOUNTS MAINTAIN ED BY THE ASSESSEE BANK WAS NOT PROPER AND THEREFORE ALL THE EXPENSES INCURRED BY THE BANK ARE BUSINESS-RELATED AND SHOUL D BE ALLOWED FULLY. 17. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDE R OF THE LOWER AUTHORITIES AND SUBMITTED THAT IN IMMEDIATELY PRECEDING YEAR, THE ASSESSEE ITSELF HAS WITHDRAWN IDENTICAL G ROUNDS OF APPEAL AND THUS ASSESSEE HAS ADMITTED THE ADDITION/DISALLOWANCE OF EXPENSES CORRESPONDING TO LOAN DISBURSED IN VIOLATION OF RBI RULES. 18. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES O N THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. WE OBSERVED THAT IN ASSESSMENT YEAR 2013 -14, IDENTICA L GROUNDS WERE RAISED BEFORE THE TRIBUNAL, WHICH IS REPRODUCE D AS UNDER: 2. THAT THE LEARNED CIT(APPEALS), GHAZIABAD IS IN E RRED IN LAW BY CONFIRMING THE ORDER OF DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, GHAZIABAD AND ON FACT IN CONFIRMING THE ADDITION OF RS. 1,22,65,050/- FOR DISALLOWING THE EXPENDITURE U/S 37 BY MAKING THE REFERENCE OF RBI INSPECTION REPORT, DESPITE AND IGNORING THE FACTS T HAT THE ASSESSEE MAINTAINED ITS BOOKS OF ACCOUNTS PROPERLY AND GOT THEM AUDITED, EVEN THE LD ASSESSING OFFICER DID NOT REJECTED THE BOOKS OF ACCOUNTS. IT IS ALSO WORTHWHILE TO MENTION HERE THAT THE LD A SSESSING OFFICER MISUNDERSTOOD THYE REMARKS OF RBI INSPECTOR FOR NON DECLARING OF LOANS OF RS. 1366.51 LACS AS NPA A ND WRONGLY TOOK THE INTEREST OF RS. 69.17 LACS AS NPA AS INCOME. THE LD ASSESSING OFFICER ERRED IN LAW AS IF WE DID NOT TAKE THE INCOME OF RS. 69.17 LACS IN THE BOOKS OF ACCOUNTS, THE LOSS OF THE ASSESSEE WOULD BE INCREAS ED BY THE SAME AMOUNT. 19. THE APPEAL FOR AY 2013-14 HAS BEEN DISMISSED BY THE TRIBUNAL AS WITHDRAWN. THE FINDING OF THE TRIBUNAL IS REPRODUCED AS UNDER: NONE IS PRESENT ON BEHALF OF THE ASSESSEE. HOWEVER , AN APPLICATION ON BEHALF OF THE ASSESSEE DATED 27.01.2020 IS PLACED ON RECORD, STATING THAT THE ASSESSEE DOES NOT WISH TO PRESS THIS APPEAL AND SEE KS PERMISSION TO WITHDRAW THE SAME. THE ID. DR REPORTS NO OBJECTION ON THIS REQUEST OF THE ASSESSEE. THEREFORE, THE APPEAL IS LIABLE TO BE DISMISSED AS WITHDRAWN. 20. THUS ASSESSEE HAS ADMITTED THE DISALLOWANCE IN IMMEDIATELY PRECEDING ASSESSMENT YEAR. IN THE YEAR UNDER CONSIDERATION THE ASSESSING OFFICER MADE ADDITION R ELYING ON HIS FINDING IN THE PRECEDING ASSESSMENT YEAR. ONCE THE ASSESSEE HAS ADMITTED ADDITION IN IMMEDIATELY PRECE DING ASSESSMENT YEAR, PREFERRING APPEAL ON SAME ISSUE IN THE YEAR UNDER CONSIDERATION IS NOT JUSTIFIED AND AGAINST TH E RULE OF CONSISTENCY. 21. FURTHER, WHEN THE LOANS HAVE BEEN DISBURSED IN VIOLATION OF THE RULES OF RBI TO GIVE BENEFIT TO A FEW, THAN EXPENSES CORRESPONDING TO SUCH LOANS ARE NOT WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND THE REFORE ALSO SUCH EXPENSES ARE NOT ALLOWABLE AS DEDUCTION. 22. IN VIEW OF THE ABOVE, WE UPHOLD THE FINDING OF THE LEONARD CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GROU ND OF THE APPEAL OF THE ASSESSEE. 23. THE GROUND NO.3 (THREE) OF THE APPEAL RELATES T O ADDITION OF RS.87,74,000 RELATED TO DISALLOWANCE OF EXPENDITURE ON VARIOUS HEADS. THE ASSESSING OFFICER MADE DISALLOWANCE FOLL OWING THE FINDING OF HIS PREDECESSOR IN THE EARLIER YEAR. THE DETAILED OF DISALLOWANCE MADE IN THE YEAR UNDER CONSIDERATION I S AS UNDER: THIS ISSUE WAS ALSO PRESENT LAST YEAR AND ADDITION WAS MADE IN THIS REGARD. THIS YEAR ALSO ISSUE PERSI STS. THE FINDINGS OF THE RBI AND THE REPLY OF THE ASSESS EE WERE CONSIDERED AND ARE BEING DISCUSSED BELOW: 1. THE COMMENT ON THE NON REPAIR OF OFFICE BUILDING BY THE RBI IS BASED ON PHYSICAL VERIFICATION AND IF IT IS READ WITH DEFICIENCY OF VOUCHERS ARID EXPENSES MADE IN CASH, IT IS CLEAR THAT THE ASSESSEE HAS INDULGED IN OVER BOOKING OF EXPENSES ON REPAIR. HOWEVER, THE ASSESSEE HAS CLARIFIED THAT THE REPAIR INCLUDES OTH ER THAN BUILDING REPAIR, REPAIR OF ELECTRICITY AND MAINTENANCE, COMPUTER REPAIR AND MAINTENANCE, VEHJNLE REPAIR AND MAINTENANCE, AMC AND OTHER MAINTENANCE AND OTHER REPAIR AND,-MAINTENANCE ALSO. CONSIDERING THESE FACTS, IT IS PRUDENT AND REASONAB LE TO DISALLOW/ 30% OF THE REPAIR EXPENSE CUT OF RS. 193.58 LAKH WHICH GIVES A FIGURE OF RS.58.07 LAKH INITIATE PENALTY PRECEDINGS SEPARATELY U/S 271(L)(C ) FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. (ADDITION OF RS.58.07LAKH) 2. BASED ON THE OBSERVATION OF THE RBI AND REPLY OF THE ASSESSEE ALONG WITH DISCREPANCIES IN VOUCHER AND CASH EXPENSES POINTED OUT BY THE RBI, 30% OF EXPENSES ON GENERATOR (RS.39.09 LAKH), TRAVELING AN D CONVEYANCE (RS.41.83' LAKH) AND FOOD AND BEVERAGES RS.11.08 LAKH) ARE BEING DISALLOWED. THIS GIVES A T OTAL DISALLOWANCE OF RS.27.60 LAKH. INITIATE PENALTY PRECEDINGS SEPARATELY U/S 27I(L)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. (ADDITION OF RS.27.60 LAKH) 3. REGARDING WATER AND ELECTRICITY CHARGES, THE REP LY OF THE ASSESSEE IS ACCEPTABLE AS THESE ARE BILLED BY PUBLIC UTILITIES. AND REGARDING PROFESSIONAL CHARGE S, 10% OF THE SAME IS BEING DISALLOWED ON ACCOUNT OF OBSERVATION MADE BY THE RBI REGARDING DISCREPANCY I N VOUCHERS ARID NARRATION. INITIATED' PENALTY PRECEDI NG SEPARATELY U/S 271 (L)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. (ADDITION OF RS.3.07LAKH) 4. THE RBI TEAM HAS QUESTIONED THE 10.09 LAKH OF TELEPHONE EXPENSE IN VIEW OF ALL EMPLOYEES BEING PROVIDED WITH MOBILE PHONES. IN THIS RESPECT THE ASSESSEE HAS CLARIFIED THAT THIS INCLUDES PHONE BIL LS INCLUDES INTERNET CHARGES AND THE COST OF THE MOBIL E PHONES TO EMPLOYEES ALSO.HENCE, IT IS ACCEPTED THAT DESPITE PROVIDING MOBILE PHONES, BANK NEEDS OTHER LINES AS WELL. NO ADVERSE VIEW IS BEING TAKEN. THUS THE TOTAL EXPENSES DISALLOWED AS DISCUSSED ABOVE IS RS.88.74 LAKH (RS.88,74,,000/-) 24. THE LD. CIT(A) ALLOWED PART RELIEF ON REPAIR MA INTENANCE AND TRAVELLING AND CONVEYANCE AND RESTRICTED THE DI SALLOWANCE TO 20% INSTEAD OF 30% MADE BY THE ASSESSING OFFICER . ACCORDINGLY, THE LD. CIT(A) SUSTAINED ADDITION OF R S.85.67 LAKHS OBSERVING AS UNDER: 5.3 GROUND NO. 3: THE APPELLANT HAS CHALLENGED THE ADDITION OF RS. 88.74 SACS BEING 30% DISALLOWANCE O F REPAIR EXPENSES OF RS.193.58 LACS (RS.58.07 LACS), - 30% OF GENERATOR TRAVELLING, AND CONVEYANCE EXPENSE S AND FOOD EXPENSES OF RS 39.09 + RS. 41.83 + RS. 11.08 = RS. 92 LACS) I.E. RS. 27.6 SAC AND 10% O PROFESSIONAL CHARGES I.E. RS. 3.07 LAC. EXAMINATION OF FACTS REVEALS THAT DISALLOWANCE HAS BEEN MADE ON TH E BASIS OF IRREGULARITIES FOUND BY RE INSPECTION TEAM WHEREIN IT HAS BEEN OBSERVED THAT ABOVE SAID EXPENDITURE HAS BEEN EXCESSIVE. AO AFTER DULY CONFRONTING THE OBSERVATION OF THE RBI INSPECTION OFFICIALS MADE THE ABOVE SAID DISALLOWANCE. CONSIDERING THE FACTS GIVEN BY THE RBI INSPECTION T EAM DISALLOWANCE OF 30% OF REPAIR AND MAINTENANCE AND GENERATOR, TRAVELLING AND CONVEYANCE AND FOOD AND BEVERAGES IS FOUND TO BE EXCESSIVE. HENCE SAME IS RESTRICTED TO 20% I.E. DISALLOWANCE OF RS.57.11 LAC S OUT OF RS.85.67 LACS IS CONFIRMED ALONGWITH 10% OF PROFESSIONAL CHARGES. THUS THIS GROUND OF APPEAL I S PARTLY ALLOWED. 25. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES A ND PERUSED THE MATERIAL ON RECORD. WE FIND THAT DISALLOWANCE H AS BEEN MADE RELYING ON THE AUDIT REPORT OF THE RBI, WHERE SPECIFIC DEFECTS OR DEFICIENCY OF VOUCHERS HAVE BEEN RAISED. FURTHER, IN IMMEDIATELY PRECEDING ASSESSMENT YEAR 2013-14, THE ASSESSEE HAS ADMITTED THE DISALLOWANCE IN RESPECT OF THE IDE NTICAL EXPENSES BASED ON THE AUDIT REPORT OF THE RBI. IN O UR OPINION FOLLOWING THE RULE OF CONSISTENCY, THE ASSESSEE IS NOT JUSTIFIED IN PREFERRING THE APPEAL ON SAME ISSUE IN THE YEAR UND ER CONSIDERATION WITHOUT ANY VALID REASONS. THE ASSESS EE HAS NOT SUBMITTED ANY REBUTTAL OF THE OBSERVATION BY THE RB I IN RESPECT OF DEFICIENCY OF VOUCHERS OF THE EXPENSES. IN THE C IRCUMSTANCES, THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPU TE IS UPHELD. THE GROUND NO. THREE OF THE APPEAL IS ACCORDINGLY D ISMISSED. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.10.2021. SD/- SD/- (KUL BHARAT) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21.10.2021 *NEHA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI SL. NO. PARTICULARS DATE 1. DATE OF DICTATION : 21.10.2021 2. DATE ON WHICH THE DRAFT OF ORDER IS PLACED BEFOR E THE DICTATING MEMBER: 21.10.2021 3. DATE ON WHICH THE DRAFT OF ORDER IS PLACED BEFOR E THE OTHER MEMBER: 21.10.2021 4. DATE ON WHICH THE APPROVED DRAFT OF ORDER COMES TO THE SR. PS/PS: 21.10.2021 5. DATE OF WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 21.10.2021 6. DATE ON WHICH THE FINAL ORDER RECEIVED AFTER HAV ING BEEN SINGED/PRONOUNCED BY THE MEMBERS: 21.10.2021 7. DATE ON WHICH THE FINAL ORDER IS UPLOADED ON TH E WEBSITE OF ITAT: 21.10.2021 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 1.10.2021 9. DATE ON WHICH FILES GOES TO THE HEAD CLERK: 10. DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER: 11. DATE OF DISPATCH OF ORDER: