DCIT, Rewari V. M/s The Rewari District Primary Cooperative, Rewari

ITA 5082/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4825 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 26-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K TEWARI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. K. N. CHARY , JM IT A NO. 5082 /DEL/201 6 : ASSTT. YEAR : 2012 - 13 D CIT , REWARI CIRCLE, REWA RI VS M/S THE REWARI DISTRICT PRIMARY CO - OPERATIVE AGRICULTURE & RURAL DEVELOPMENT BANK LTD., CIRCULAR ROAD, REWARI (APPELLANT) (RESPONDENT) PAN NO. A A BAT4242R ASSESSEE BY : SH. SANJEEV JAIN, CA REVENUE BY : SH. K. TEWARI, SR. DR DATE OF HEARING : 0 1 .0 8 .201 8 DATE OF PRONOUNCE MENT : 01 .0 8 .201 8 ORDER PER N. K. SAINI, AM : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 12.08.2016 OF LD. CIT(A), ROHTAK . 2. THE ONLY GRIEVANCE OF THE DEPARTMENT IN THIS APPEAL RELATES TO THE DELETION OF PENALTY OF RS.30,85,315/ - LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3. DURING THE COURSE OF HEARI NG, THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THE ADDITION ON THE BASIS OF WHICH THE IMPUGNED PENALTY WAS LEVIED BY THE AO HAS ALREADY BEEN DELETED BY THE ITAT IN ITA NO. 4144/DEL/2016 FOR THE ASSESSMENT YEAR ITA NO . 5082 /DE L/201 6 REWARI DISTRICT PRIMA RY CO - OPERATIVE AGRICULTURE & RURAL DEVELOPMENT BANK LTD. 2 2012 - 13 VIDE ORDER DATED 11.06.2018 (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). 4. IN HIS RIVAL SUBMISSIONS, THE LD. SR. DR ALTHOUGH SUPPORTED THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 5 . WE H AVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ADDITION ON THE BASIS OF WHICH THE IMPUGNED PENALTY WAS LEVIED , HAS BEEN DELETED BY THE ITAT VIDE AFOR ESAID REFERRED TO ORDER DATED 11.06.2018. THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 7 & 8 OF THE SAID ORDER WHICH READ AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT(A) HELD AS UNDER: - 4. LD. ASSE SSING OFFICER HAS MADE THE ADDITIONS ON MERE SUSPICION AND HE HAS FAILED TO APPRECIATE THE FACTS AND EXPLANATION ON RECORDS KEPT BY THE APPELLANT & MADE ALL ADDITION ON HIS ASSUMPTION BASIS ONLY. WE LIKE TO MENTION HERE THAT COMPLETE BOOKS OF ACCOUNT W ITH SUPPORTING DOCUMENTS HAVE DULY PRODUCED BEFORE LD. AO. LD. AO DULY GOES THROUGH THE SAME BEFORE COMPLETING THE SCRUTINY PROCEEDING WITHOUT POINTING ANY ADVERSE MATERIAL ON RECORD. HE MADE BOTH THE ADDITIONS MERE SUSPICION AND HE HAS FAILED TO APPRECI ATE THE FACTS AND EXPLANATION ON RECORDS SINCE IT WAS VERY WELL EXPLAINED TO LD. AO THAT PARDB IS FULFILLING ALL THE NECESSARY REQUIREMENT TO CLAIM DEDUCTION U/S 80P(2)(A)(I) AND ALSO THAT ACCRUED INTEREST ON NPA SHOWN IN BALANCE SHEET IS ACCUMULATED BALAN CE OF PREVIOUS YEARS AND ALSO SUCH INCOME WAS NOT EARNED BY THE BANK SINCE THE BORROWER ACCOUNT WAS DEFINED AS NPA ITA NO . 5082 /DE L/201 6 REWARI DISTRICT PRIMA RY CO - OPERATIVE AGRICULTURE & RURAL DEVELOPMENT BANK LTD. 3 ACCOUNT AND INTEREST ON SUCH ACCOUNT CAN T BE ACCOUNTED FOR AS INCOME. IN VIEW OF THE BOTH THE ABOVE CITATION WE HEREBY HUMBLY REQUEST YOU TO DELETE BOTH THE ADDITIONS MADE BY LD. AO. SINCE, THERE IS NO CONCEALMENT OF INCOME AT ALL AS PER GROUND NO. L, 2 & 3, THERE CANNOT PENALTY ALSO U/S. 271(L)(C) & THE PENALTY PROCEEDING NEEDS TO BE DELETED. THE FACTS OF THE CASE ARE SQUARELY COV ERED BY THE HON BLE ITAT, DELHI IN ITS ORDER IN ITA NO. 2362 & 2363/DEL/2012 DATED 31/7/2012 IN THE APPELLANT S CASE FOR ASSESSMENT YEAR 2009 - 10. THEREFORE, I DELETE THE SAID ADDITION. THE GROUNDS OF APPEAL ARE ALLOWED . AS NOTED BY THE CIT(A) IN THE ORDER, IN EARLIER A.Y.2009 - 10, THE TRIBUNAL DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE (BEING ITA NO. 2362 & 2363/DEL/2012 DATED 31/7/2012) . THE TRIBUNAL HELD AS UNDER: 6. A PERUSAL OF THE ABOVE PROVISIONS INDICATES THAT IN THE GROSS TOTAL INCOME OF A C O - OPERATIVE SOCIETY, IF ANY, INCOME REFERRED TO IN SUB - SECTION (2) IS INCLUDED THEN THERE SHALL BE A DEDUCTION OF SUCH INCOME IF OTHER CONDITIONS ARE FULFILLED BY THE ASSESSEE SOCIETY. THE CASE OF THE ASSESSEE FALLS WITHIN THE CATEGORY (I) AND (IV) I.E. AS SESSEE SOCIETY IS CARRYING ON THE BUSINESS OF BANKING AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS, TO PURCHASE AGRICULTURAL IMPLEMENTS SEEDS ETC. TO THIS EXTENT, THERE IS NO DISPUTE ON FACTS. THE CASE OF THE ASSESSING OFFICER IS THAT IN ORDER TO FULFIL THESE OBJECTS, ASSESSEE GETS THE MONEY IN THE SHAPE OF DEPOSITS FROM OTHER CO - OPERATIVE BANKS WHO ARE NOT ITS MEMBERS, THEREFORE, IT IS NOT ENTITLED FOR EXEMPTION. IN ASSESSMENT YEAR 2008 - 09, THE ITAT HAS CONSIDERED THIS ASPECT AND OBSERVED THAT DEPOSITS F ROM NON - MEMBERS DO NOT GENERATE ANY INCOME TO THE ASSESSEE. ASSESSING OFFICER IN THE PRESENT ASSESSMENT YEAR ALSO NOT POINTED OUT HOW INCOME WOULD GENERATE TO THE ASSESSEE BY TAKING DEPOSITS FROM NON - MEMBERS. THE DIRECT SOURCE OF INCOME IS ULTIMATELY FROM THE CREDIT FACILITY PROVIDED TO ITS MEMBERS OR FROM SALE OF SEEDS AGRICULTURAL IMPLEMENTS ETC. CONTEMPLATED IN SECTION ITA NO . 5082 /DE L/201 6 REWARI DISTRICT PRIMA RY CO - OPERATIVE AGRICULTURE & RURAL DEVELOPMENT BANK LTD. 4 80P(2)(A)(IV). THE CALCULATION MADE BY THE ASSESSING OFFICER IS ON HYPOTHESIS ONLY. HE ASSUMES THAT FOR EXAMPLE HUNDRED RUPEES ARE TAKEN AS A DEPOSIT FROM NON - MEMBER, THEN HUNDRED WOULD BE GIVEN TO ITS MEMBERS AS A CREDIT FACILITY WHICH WOULD GENERATE INTEREST INCOME FROM THE MEMBERS, NAMELY, TEN RUPEES. IN THIS TEN RUPEES, THE ELEMENT OF INCOME ON THE CONTRIBUTION MADE BY THE DEPOSITOR IS INVOLVED. TO OUR MIND, THE NET INCOME GENERATED TO THE ASSESSEE IS ONLY FROM ITS MEMBERS. ON THE DEPOSITS, IT WILL PAY INTEREST WHICH WOULD BE ITS EXPENSES AND WOULD BE SET OFF AGAINST THE TOTAL INCOME GENERATED FROM THE CREDIT FACILITY. IT HAS NOT INCOME ON THE DEPOSITS FROM THE NON - MEMBERS RATHER IT MUST HAVE PAID INTEREST ON SUCH DEPOSITS. THIS ISSUE HAS ELABORATELY BEEN DISCUSSED BY THE ITAT IN ASSESSMENT YEAR 2008 - 09 IN THE CASE OF PALHAWAS PRIMARY AGRICULTURE CO - OP SOCIETY. RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT, WE DO NOT FIND ANY ERROR IN THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS). 7. IN RESULT, BOTH THE APPEALS ARE DISMISSED. THUS, GROUND NO. 1 OF THE ASSESSEE S APPEAL HEREIN IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR A.Y . 2009 - 10 IN ASSESSEE S OWN CASE. THEREFORE, GROUND NO. 1 IS DISMISSED. 8. AS REGARDING TO GROUND NO. 2 TO 4 OF THE ASSESSEE S APPEAL, THE ACCRUED INTEREST ON NPA SHOWN IN BALANCE SHEET IS ACCUMULATED BALANCE OF PREVIOUS YEARS AND ALSO SUCH INCOME WAS NOT EARNED BY THE BANK SINCE THE BORROWER ACCOUNT WAS DEFINED AS NPA ACCOUNT AND INTEREST ON SUCH ACCOUNT CANNOT BE ACCOUNTED FOR AS INCOME. THE TRIBUNAL IN CASE OF ACIT VS. THE ROHTAK CENTRAL COOPERATIVE BANK LTD. BEING ITA NO. 2839/DEL/2011 HELD AS UNDER: - 3.4 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. THE JHAJJAR CENTRAL COOP. BANK (SUPRA). THE RELEVANT FINDING OF THE T RIBUNAL READS AS FOLLOWS: (PARA 11) ITA NO . 5082 /DE L/201 6 REWARI DISTRICT PRIMA RY CO - OPERATIVE AGRICULTURE & RURAL DEVELOPMENT BANK LTD. 5 CONSIDERING THE ABOVE SUBMISSION OF THE ASSESSEE WHICH IS WELL SUPPORTED BY RBI/NABARD CIRCULAR DATED 17.08.2002 VIDE PARA NO. 3.1 CLEARLY STATES THAT THE POLICY OF INCOME RECOGNITION SHOULD BE BASED ON RECORD OF RECOVE RY AND THEREFORE UNREALIZED INCOME SHOULD NOT BE TAKEN INTO PROFIT AND LOSS ACCOUNT BY STATE CO - OP BANK 1 CENTRAL CO - OP BANKS AND THAT THE PROVISIONS OF SECTION 43D OF THE ACT ARE CLEAR REGARDING THE RECOGNITION OF INTEREST INCOME ON NPA. THE LD. CIT(A) IN OUR VIEW HAS THUS RIGHTLY HELD THAT OVERDUE INTEREST NOT REALIZED DURING THE YEAR AND CREDITED TO SUSPENSE INTEREST ACCOUNT CANNOT BE TAKEN TO BE THE INCOME OF THE ASSESSEE. THUS THE LD. CIT(A) HAS THUS RIGHTLY DELETED THE ADDITION IN QUESTION. THE SAME I S UPHELD. THERE IS NO SUBSTANCE IN THE CONTENTION OF THE LD. DR THAT THE ASSESSEE WAS HAVING NO OBJECTION TO THIS ADDITION, SINCE WE FIND THAT IT WAS AN ALTERNATIVE SUBMISSION OF THE ASSESSEE BEFORE THE AO THAT EVEN IF ANY ADDITION IS TO BE MADE OF RS.1,2 9,91,989/ - THEN ADDITION OF RS. 1,00,51,715/ - IS TO BE MADE ON ACCOUNT OF INTEREST OF EARLIER YEARS CREDITED (DURING THE YEAR) TO P & L ACCOUNT . EVEN OTHERWISE THE AO IS SUPPOSED TO MAKE JUST ASSESSMENT BASED ON THE PROVISIONS OF LAWS WHICH CANNOT BE IGN ORED SINCE IS AGREEABLE TO THE PROPOSED WRONG ADDITION. THE GROUND NO. 3 IS ACCORDINGLY REJECTED. 3.5 IN VIEW OF THE COORDINATE BENCH ORDER OF THE TRIBUNAL IN THE CASE OF CIT VS. THE JHAJJAR CENTRAL COOP. (SUPRA); WHICH IS IDENTICAL TO THE FACTS OF THE INSTANT CASE WE REJECT THE GROUND NO. 1 RAISED BY THE REVENUE. IT IS ORDERED ACCORDINGLY. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE DECISION OF THE TRIBUNAL IN CASE OF THE ROHTAK CENTRAL COOPERATIVE BANK LTD. THUS, THE ISSUE IS SQUARELY COVERED B Y THE COORDINATE BENCH DECISION. THEREFORE, GROUND NO. 2 TO 4 ARE DISMISSED. 6 . ON A SIMILAR ISSUE, THE HON BLE SUPREME COURT IN THE CASE OF K. C. BUILDERS & OTHERS VS ACIT (2004) 265 ITR 562 HELD AS UNDER: WHERE THE ADDITIONS MADE IN THE ASSESSMENT ORD ER ON THE BASIS OF WHICH PENALTY FOR CONCEALMENT IS LEVIED, ARE DELETED, THERE REMAINS NO BASIS AT ALL FOR LEVYING PENALTY FOR CONCEALMENT AND, THEREFORE, IN SUCH A CASE NO PENALTY ITA NO . 5082 /DE L/201 6 REWARI DISTRICT PRIMA RY CO - OPERATIVE AGRICULTURE & RURAL DEVELOPMENT BANK LTD. 6 CAN SURVIVE AND THE PENALTY IS LIABLE TO BE CANCELLED. ORDINARILY, PENALTY CANNOT STAND IF THE ASSESSMENT ITSELF IS SET ASIDE. 7 . WE, THEREFORE, BY KEEPING IN VIEW THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE AFORESAID REFERRED TO CASE, DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 8 . IN THE RESULT, THE APP EAL OF THE DEPARTMENT IS DISMISSED. ( ORDER PRON OUNCED IN THE COURT ON 01 /0 8 / 201 8 ) SD/ - SD/ - ( K. N. CHARY ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 01 /0 8 /2018 *SUBO DH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR