DCIT, Circle, Gurgaon V. The Gurgaon Central Co-op.Bank Ltd, Gurgaon

ITA 5042/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2951 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 30-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ANUJ DUA
• Keywords: Bad and doubtful debts; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘B’ : NEW DELHI) SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and SHRI YOGESH KUMAR US, JUDICIAL MEMBER ITA No.5042/Del./2019 (ASSESSMENT YEAR : 2014-15) DCIT, Circle, vs. The Gurgaon Central Coop. Bank Ltd., Gurgaon. Civil Lines, Jail Road, Gurgaon – 122 001 (Haryana). (PAN : AAALT0271A) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Anuj Dua, CA REVENUE BY : Shri Sumit Kumar Verma, Sr. DR Date of Hearing : 22.09.2022 Date of Order : 26.09.2022 ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : This appeal by the Revenue is directed against the order of ld. CIT (Appeals)-1,Gurgaon dated 29.03.2019 for the Assessment Year 2014-15. 2. The grounds of appeal raised by the assessee read as under :- “Ld. CIT (A) has erred in deleting the addition of Rs.2,35,92,664/- treating it as NPAs while the Assessing Officer made addition on account of disallowance of provision for Standard Assets claimed by the assessee in its Profit and loss account.” 3. In this case, during the course of assessment, Assessing Officer noted that a perusal of the financial statements shows that assessee had ITA No.5042/Del./2019 2 claimed the provision for doubtful debts of Rs.2,35,92,664/- in the profit & loss account. Assessee responded that the same was as per the Reserve Bank of India (RBI) and NABARD guidelines and that the same was also permitted by section 36(1)(vii)(a) of the Income-tax Act, 1961 (for short 'the Act'). The submission of the assessee noted by the AO reads as under :- “It is submitted that the assessee is a Co-operative bank and financing particularly to agriculturist members is rural area. The provisioning of advances is governed by Reserve Bank of India! NABARD. The bank has claimed the provision of Rs.2,35,92,664/- as per norms fixed by the circular (copy of circular enclosed for your kind perusal). The provision has been prescribed by RBI/NABARD keeping in view the risk involved. Your honour is requested to kindly accept the appeal and grant the relief. Besides this, section 36(1)(vii)(a) of the Income Tax Act, 1961 which specifically provides deduction to certain banks in respect of provision for bad & doubt assets, an amount not exceeding 7.5% of the total income and an amount not exceeding 10% of the aggregate average advances made by rural branches of such bank computed in prescribed manner. Almost all the branches of the bank are rural branches. Most of the advances are made to rural population particularly agriculturists. The total advances of the bank was Rs.491.54 crore in 2013-14. The provision debited to profit and loss account is much less that the limit prescribed by in the Income Tax Act.” 4. AO proceeded to examine the definition of debt and bad debt and finally held that onus was on the assessee bank and proceeded to hold that the claim of deduction of Rs.2,35,92,664/- representing provisions of standard assets as bad debts was disallowed and added back to the income of the assessee. 5. Upon assessee’s appeal, ld. CIT (A) noted the assessee’s submission but gave a finding that assessee has in fact not made any ITA No.5042/Del./2019 3 provision for bad debts or NPA. The relevant portion of his order reads as under :- “5. I have carefully considered the appellant's submission. I have also perused the assessment records. As per the submission of the appellant the details of provision claimed as NPA are as under:- Particulars Balance as on 31.03.2013 Balance as on 31.03.2014 Provision Provision for loan and (NIA) 122130000 149327445 27197445 Provision for loss assets 10107549.74 10137549.74 0 Provision against standard assets 15605000 12000219 -3604781 Total provision debited to profit and loss account 23592664 Perusal of the assessment record shows that similar details were filed by the appellant by reply dated 29.11.2016. It is evident from the submission of the appellant that no expenditure on account of provision against standard assets has been claimed by the appellant and intact provision created against standard assets in the earlier years amounting to Rs 36,04,781/- has been reversed. The provision of Rs 2,35,92,664/- on account of Nonperforming assets. Apparently the disallowance has been made on incorrect appreciation of the facts. The disallowance made is deleted. These Grounds of appeal are allowed.” 6. Against this order, the Revenue is in appeal before us. We have heard both the parties and perused the record. 7. Ld. DR for the Revenue relied upon the order of AO. Per contra ld. Counsel of the assessee submitted that the assessee has made necessary provision as required by the guidelines of RBI and NABARD as regards non-performing assets and the same was also within the overall ITA No.5042/Del./2019 4 limit of permissible allowance as per the Act by reference to section 36(1)(vii)(a). 8. Upon careful consideration, we note that the AO has not properly understood the issue. His sole jurisdiction was to examine whether the said bad debt provisions were as per the guidelines of RBI and NABARD and whether the same was permissible in the overall limit u/s 36(1)(vii)(a) of the Act. The exercise which the AO has embarked upon is unnecessary. However, ld. CIT (A) also has not properly understood the issue and he has given a finding that assessee has in fact not made any provision in this regard. In our considered opinion, the interest of justice demands that the issue is to be remitted to the AO and AO is directed to decide the issue afresh in the light of our observations hereinabove. Needless to add, assessee should be granted adequate opportunity of being heard. 9. In the result, the appeal of the Revenue is allowed for statistical purposes. Order pronounced in the open court on this 26 th day of September, 2022. Sd/- sd/- (YOGESH KUMAR US) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 26 th day of September, 2022 TS ITA No.5042/Del./2019 5 Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT (A)-1, Gurgaon. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.