The Angul United Central Co-operative Bank Ltd., Angul V. DCIT, Circle-4(1), Bhubaneswar

ITA 513/CTK/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5323 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 18-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: S S PADHY
• Keywords: Question of law; Bad and doubtful debts
• Section: 142(1); 145; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PA V AN KUMAR GADALE, JM ./ ITA NO. 513 / CTK /20 1 7 ( / ASSESSMENT YEAR : 20 12 - 20 13 ) THE ANGUL UNITED CENT RAL CO - OP BANK LTD., AT/PO: ANGUL - 759122 VS. DCIT, CIRCLE - 4(1), BHUBANESWAR ./ ./ PAN/GIR NO. : A ACAT 3540 M ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI S.S.PADHY, AR /REVENUE BY : SHRI D.K.PRADHAN, DR / DATE OF HEARING : 03 / 05 /201 8 / DATE OF PRONOUNCEMENT 08 / 05 /201 8 / O R D E R PER SHRI PA V AN KUMAR GADALE, JM : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A) - 2 , BHUBANESWAR , IN ITA NO.0010/2015 - 16, DATED 31.07.2017, FOR THE ASSESSMENT YEAR 2012 - 2013 , PASSED U/S.143(3)/250 OF THE I.T.ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) IS CORRECT IN CONFIRMING THE ORDER PASSED BY LD. AO IN RESPECT TO DISALLOWANCE OF RS.3,91,228/ - UNDER SECTION 40(A)(IA) OF THE ACT ? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) IS CORRECT IN CONFIRMING THE ORDER PA SSED BY LD. AO IN MAKING ADDITION OF RS.41,25,728/ - AS INTEREST ON BAD AND DOUBTFUL DEBTS(NPA) BRUSHING ASIDE THE RBI GUIDELINES AND THE RATIO OF DECISION PASSED IN CASE OF DCIT VS. THE VAISH COO - OP ADARSH BANK LTD.ITA NO.3310/DEL/2012? 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN ASSOCIATION OF PERSON (AOP), ENGAGED IN COOPERATIVE BANKING BUSINESS AND FILED THE RETURN OF INCOME ELECTRONICALLY ON 29.03.2014 WITH TOTAL INCOME OF ITA NO. 513/CTK/2017 2 RS.2,42,94,260/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY A ND NOTICE U/S.143(2) & 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE. IN COMPLIANCE TO THE NOTICE, LD. AR APPEARED FROM TIME TO TIME AND FURNISHED THE AUDITED REPORT IN FORM NO.3CA ALONG WITH RECEIPT AND EXPENDITURE STATEMENT AND T RIAL BALANCE, PROFIT AND LOSS AND BALANCE SHEET AND OTHER DOCUMENTS AS REQUIRED BY THE AO. THE AO ON PERUSAL OF THE FINANCIAL STATEMENT FOUND THAT THE ASSESSEE HAS CLAIMED RS.4,69,057/ - TOWARDS REPAIR AND MAINTENANCE CHARGES OUT OF WHICH RS.2,87,877/ - WAS PAID TO HCL INFO SYSTEMS LIMITED IN RESPECT OF ANNUAL MAINTENANCE CONTRACT AND SINCE THE ASSESSEE HAS MADE THE PAYMENT WITHOUT DEDUCTION OF TAX THE PROVISION OF SECTION 40(A)(IA) R.W.S.194C OF THE ACT ARE ATTRACTED AND THEREFORE MADE THE ADDITION. SIMILAR LY THE AO FOUND THAT NO TDS HAS BEEN DEDUCTED IN RESPECT OF AUDIT FEES U/S.194J OF THE ACT AND MADE THE ADDITION U/S.40(A) (IA) OF THE ACT OF RS.1,03,351/ - . FURTHER , THE AO FOUND THAT DURING THE YEAR AN AMOUNT OF RS.41,25,729/ - HAS BEEN WORKED OUT AS INTERE ST ON NPA ACCOUNT, WHEREAS THE AUDITOR GENERAL, COOPERATIVE SOCIETIES, ODISHA AUDITED THE ACCOUNT S ON 29.9. 2012 AND REFERRED TO STATUTORY AUDITOR HAS CERTIFIED REPORT AT PAGE 8 AS UNDER : - INTEREST INCOME, ALTHOUGH UNREALIZED HAS BEEN RECOGNISED AS INCOME DURING THE YEAR ON MANY ADVANCES CLASSIFIED AS NON - PERFORMING ASSET BY BANK DEVIATING THE GUIDELINES ISSUED BY RESERVE BANK OF INDIA AS WELL AS PRINCIPAL ACCOUNTING POLICIES OF THE BANK RS.41,25,728.00 HAS BEEN WORKED OUT TO BE INTEREST CHARGED ON SUCH N. P.A ACCOUNTS AND NOW DERECOGNISED AND REVERSED. THE AO CONSIDERED THE REPORT OF THE AUDITOR AND RELIED ON THE JUDICIAL DECISION AND CALLED FOR THE EXPLANATION S . THE LD. AR SUBMITTED THAT INTEREST INCOME IN THE PROFIT AND LOSS ACCOUNT AND INTEREST CHARGED IN ITA NO. 513/CTK/2017 3 NPA ACCOUNT IS MADE ON PREVAILING RATE ON SUCH LOAN BUT NO EVIDENCE WAS FILED. FURTHER THE ASSESSEE FAILED TO PROVE THAT INTEREST ON NPA ACCOUNT HAS NOT BEEN REVERSED TO CONTRADICT THE REPORT OF THE STATUTORY AUDITOR AND THE AO RELIED ON THE STATUTORY A UDITORS REPORT AND TREATED NPA ACCOUNT AS INCOME OF THE BANK AND, MADE ADDITION, ALONG WITH OTHER ADDITIONS AND ASSESSED THE TOTAL INCOME OF RS.2,93,40,720/ - AND PASSED THE ORDER U/S.14 3(3) OF THE ACT DATED 13.03.2015. 4. ON APPEAL, THE CIT(A) HAS CONFIRM ED THE INTEREST ON NPA A ND ADDITION U/S.40(A)(IA) OF THE ACT AND HAS CALLED FOR THE REMAND REPORT WITH RESPECT TO NPA INTEREST CALCULATION CHARGES AND GRANTED PARTIAL RELIEF IN OTHER ADDITIONS AND PARTLY ALLOWED THE APPEAL. 5. ON FURTHER APPEAL TO TRIBUNAL, L D. AR IN RESPECT OF FIRST DISPUTED ISSUE OF NON - DEDUCTION OF TDS SUBMITTED THAT THE ASSESSEE HAS MADE THE PAYMENTS IN RESPECT OF ANNUAL MAINTENANCE CONTRACT TO HCL INFO SYSTEMS LTD. WHICH IS ASSESSED TO INCOME TAX AND SIMILARLY AUDITORS FEE HAVE BEEN OFFERED FOR TAX IN THEIR INDIVIDUAL RETURNS AND THEREFORE PRAYED FOR AN OPPORTUNITY TO PROVE THE OFFERING OF INCOME IN THEIR RETURN OF INCOME IN ASSESSMENT BEFORE THE REVENUE . 6. CONTRA, LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 7. WE HAVE HEAR D RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. LD. ARS CONTENTION THAT THE ASSESSEE HAS MADE THE PAYMENT OF ANNUAL MAINTENANCE CONTRACT TO HCL INFO SYSTEM LTD. WITHOUT DEDUCTION OF TDS U/S.194C AND THE COMPANY HAS OFFERED TH E INCOME IN THEIR INCOME TAX ASSESSMENT , THEREFORE, ASSESSEE SHOULD NOT BE TREATED AS ASSESSEE - ITA NO. 513/CTK/2017 4 IN - DEFAULT FOR NON - DEDUCTION OF TDS. SIMILARLY THE AUDIT FEE OF RS. 1,03 ,351/ - WAS PAID WITHOUT DEDUCTION OF TDS U/S.194 J AND AUDITORS HAVE OFFERED THIS INCOME IN THEIR RETURN OF INCOM E. WE FOUND THE ARGUMENTS OF LD. LD. AR ARE DULY SUPPORTED BY THE PROVISION S OF SECTION 40(A)(IA) OF THE ACT AND AS PER THE SECOND PROVISO TO SECTION 40 SUB - CLAUSE (IA) OF CLAUSE (A) , WHICH WAS INSERTED BY THE FINANCE ACT, 20 12 WITH EFFECT FROM 1ST APRIL, 20 13 WHICH READS AS UNDER: 40(A)(IA). NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTED THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' ** ** ** (IA) THIRTY PER CENT OF ANY SUM PAYABLE TO A RESIDENT, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB - SECTION (1) OF SECTION 13 9. PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILED TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISION OF CHAPTER - XVII - B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB - SECTION (1) OF SE CTION 201, THEN FOR THE PURPOSE OF THIS SUB - CLAUSE IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON WHICH SUM OF THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. 8. WE FOUND THE ABOVE PROVISION IS EFFECTIVE RETROSPECTIVELY AS PER THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD. [2015] 61 TAXMANN.COM 45 (DELHI) HELD THAT THE PROVISO ADDED U/S.40(A)(IA) OF THE INCOME TAX ACT,1961 WAS RETROS PECTIVE IN OPERATION AND THE ASSESSEE IS ENTITLED TO THE BENEFIT OF THE SAME. ACCORDINGLY, CONSIDERING THE FACTS, PROVISIONS OF THE ACT AND JUDICIAL DECISION, WE REMIT THIS ISSUE TO THE FILE OF AO AND THE ASSESSEE SHALL FILE ITA NO. 513/CTK/2017 5 REQUIRED DETAILS AND INFORMATI ON IN RESPECT OF OFFERING OF INCOME BY THE RECIPIENT A ND THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9 . ON THE SECOND DISPUTED ISSUE OF ADDITION MADE BY THE AO IN RESPECT OF NPA, LD. AR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN BANKING BUSINESS AND ALSO THE INTEREST ON NPA IS NOT REQUIRED TO BE CHARGED AS PER THE RBI GUIDELINES AND SUBMITTED THAT THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF THE BOUDH CENTRAL CO - OP BANK LTD., ITA NO.397/CTK/2016, ORDER DATED 09.04.2018 H AS CONSIDERED THESE FACTS AND ALLOWED THE APPEAL OF THE ASSESSEE. THEREFORE, THE ASSESSEE PRAYED FOR ALLOWING THE APPEAL. 10 . LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT FILED CLARIFICATION IN RESPECT OF REVERSAL OF EXPENDITURE TO PROVE THAT THE INTEREST ON NPA ACCOUNT HAS NOT BEEN REVERSED TO CONTRADICT THE REPORT OF THE STATUTORY AUDITOR . 11 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FOUND THAT THE CIT(A) HAS CALLED FOR THE REMAND REPORT AND THE CIT(A) HAVING CONSIDERED THE FA CT THAT THE ASSESSEE COULD NOT DEMONSTRATE BEFORE THE AO THAT INTEREST ON NPA HAS NOT BEEN REVERSED AND THE INTEREST INCOME HAS BEEN OFFERED FOR TAXATION. THE CIT(A) RELIED ON THE AUDITORS FINDING THAT INTEREST ON NPA HAS BEEN REVERSED AND IT HAS NOT BEEN INCLUDED IN THE PROFIT AND LOSS ACCOUNT AND FURTHER THE ASSESSEE HAS NOT FILED ANY CERTIFICATE FROM STATUTORY AUDITOR IN RESPECT OF AUDIT REGARDING REVERSAL OF INTEREST ON NPA IS INCORRECT. THIS TRIBUNAL IN CASE OF ITA NO. 513/CTK/2017 6 THE BOUDH CENTRAL CO - OP BANK LTD., ITA N O.397/CTK/2016, ORDER DATED 09.04.2018 HAS HELD THAT NO INTEREST TO BE CHARGED ON THE NPA AND OBSERVED AS UNDER: - 9. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THE MATERIALS AVAILABLE ON RECORD. THE CRUX OF THE ISSUE IS WITH RESPECT OF CHARGING OF IN TEREST ON BAD AND DOUBTFUL DEBTS (NPA). LD. ARS CONTENTION IS THAT NO INTEREST SHALL BE CHARGED BY THE COOPERATIVE SOCIETIES ON THE NPA AND SHALL FOLLOW THE PROVISIONS OF SECTION 43D AND THE RBI GUIDELINES. THE LD. AR SUBMITTED THAT IN ASSESSEES OWN CASE THE COORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THE VERY SAME ISSUE IN FAVOUR OF THE ASSESSEE. WE FOUND IN ITA NO.98/CTK/2017, ORDER DATED 15.02.2018, THE TRIBUNAL HAS HELD AS UNDER: - 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER A UTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE SOLE DISPUTE ARISES IN THIS APPEAL IS THAT WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDITION OF RS.1,93,84,549/ - ON ACCOUNT OF ACCRUED INTEREST ON NPA MADE ON ESTIMATE BASIS BY THE ASSESSING OFFIC ER. THE LD A.R.S CONTENTION THAT INTEREST ON NPA CANNOT BE CHARGED ON ACCRUAL BASIS AND HAS TO BE CONSIDERED ON ACTUAL REALISATION. ALTHOUGH THE ASSESSEE HAS CHARGED INTEREST AND DISCLOSED IN THE BALANCE SHEET BUT NO INCOME HAS ACCRUED TO THE ASSESSEE. WE FIND THAT THIS ISSUE IS NOW SETTLED BY THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF BERHAMPUR CO - OPERATIVE CENTRAL BANK LTD VS ACIT IN ITA NOS.03 & 125/CTK/2017 FOR ASSESSMENT YEARS : 2012 - 2013 & 2013 - 14 ORDER DATED 1.2.2018, WHEREIN, THE T RIBUNAL BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS. SHRI MAHILASEWASAHAKARI BANK LTD. (SUPRA), HAS HELD AS UNDER: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILA BLE ON RECORD. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ASKA CO - OP. CENTRAL BANK LTD (SUPRA). THE OPERATIVE PORTION OF THE ORDER IS REPRODUCED BELOW: 6. WE HAVE HEARD EXTENSIVE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVES PERUSED THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED VARIOUS DOCUMENTS AND DECISIONS RELIED ON BY BOTH THE SIDES. WE FIND THAT THE ISSUE UNDER CONSIDERATION HAS BEEN COVERED BY THE DECISION O F CO - ORDINATE BENCH OF ITAT AHMEDABAD BENCH IN THE CASE OF THE SUVIKAS PEOPLES CO - OP BANK LTD., VS. ACIT IN ITA NO.1288/AHD/2014 DATED 30.11.2017 WHEREIN THE ITAT AHMEDABAD BENCH HAS HELD AS UNDER: - 3. BOTH PARTIES INVITED OUR ATTENTION TO THE CASE RECOR D CONTAINING A CO - ORDINATE BENCHS ORDER IN ASSESSEES CASE ITA NO. 513/CTK/2017 7 ITSELF, ITA NO.2182/AHD/2013 DECIDED ON 5.9.2016 ADJUDICATING BOTH INSTANT ISSUE AGAINST REVENUE AS UNDER: - 3. THE ASSESSEE IS IN THE BUSINESS OF BANKING ACTIVITIES FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF INTEREST ACCRUED ON NON - PERFORMING ASSETS. THE ASSESSEE FURNISHED NECESSARY DETAILS. S9IMULTANEOUSLY, THE ASSESSEE CLAIMED THAT IT HAS T O FOLLOW THE CIRCULARS/GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA AND ONE OF THE GUIDELINE OF THE RBI IS THAT INTEREST INCOME IN RESPECT OF RESTRUCTURED ACCOUNTS CLASSIFIED AS STANDARD ASSETS WILL BE RECOGNIZED ON ACCRUAL BASIS AND THAT IN RESPECT OF THE ACCOUNT CLASSIFIED AS NON - PERFORMING ASSETS WILL BE RECOGNIZED AS CASH BASIS. IT WAS EXPLAINED THAT BECAUSE OF THESE MANDATORY GUIDELINES, THE ASSESSEE HAS NOT RECOGNISED INTEREST ON NON PERFORMING ASSETS ON ACCRUAL BASIS. THIS CONTENTION OF THE ASS ESSEE WAS DISMISSED BY THE AO WHO WAS OF THE OPINION THAT SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, IT SHOULD HAVE RECOGNIZED INTEREST ON NPA ON ACCRUAL BASIS AS PER THE PROVISIONS OF THE INCOME TAX ACT. THE AO ACCORDINGLY MADE THE A DDITION OF RS.15.50 LACS. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS ISSU9E IS NO MORE RES INTEGRA AS IT HAS BEEN DECIDED BY THE HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF SHRI MAHILASEWASAHAKARI BANK LTD. IN TAX APPEAL NO.531 OF 2015 DATED 05.08.2016 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE LD. DR COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. 6. WE H AVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND FORCE IN THE CONTENTION, OF THE LD. COUNSEL. THE HONBLE HIGH COURT (SUPRA) WAS SEIZED WITH THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN HOLDING THAT INTEREST ON NON PERFORMING ASSETS IS NOT TAXABLE ON ACCRUAL BASIS LOOKING TO THE GUIDELINES OF THE RESERVE BANK OF INDIA.? 7. THE HONBLE HIGH COURT CONSIDERED THE F OLLOWING FACTS: - 5.1 THE ASSESSING OFFICER WAS OF THE OPINION THAT INTEREST ON THE NPA HAD ACCRUED TO THE ASSESSEE, EVEN IF IT WAS NOT ACTUALLY REALIZED, AS IT WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND ACCORDINGLY ADDED A SUM OF RS1,72,73,000/ - TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER (APPEALS), WHO UPHELD THE ORDER PASSED BY THE ASSESSING OFFICER. THE ASSESSEE CHALLENGED THE ORDER OF THE COMMISSIONER (APPEALS) BEFORE THE TRIBUNAL, WH ICH ALLOWED THE APPEAL BY DELETING THE INTEREST. BEING AGGRIEVED, THE REVENUE IS IN APPEAL. ITA NO. 513/CTK/2017 8 22. THEREFORE, IN TERMS OF THE ABOVE DECISION, WHERE AN ASSESSEE MAKES PROVISION FOR NPA AND SEEKS DEDUCTION OF SUCH AMOUNT UNDER SECTION 36(1)(VII) OR SECTION 37 O F THE ACT, THEN IN THE COMPUTATION OF INCOME, THE RBI GUIDELINES WOULD HAVE NO ROLE TO PLAY, AND HENCE AN ADD BACK. INSOFAR AS INCOME RECOGNITION IS CONCERNED, THE SUPREME COURT HAS HELD THUS: APPLICABILITY OF SECTION 145. 57.AT THE OUTSET, WE MAY STATE T HAT IN ESSENCE THE RBI DIRECTIONS, 1998 ARE PRUDENTIAL/PROVISIONING NORMS ISSUED BY RBI UNDER CHAPTER III - B OF THE RBI ACT, 1934. THESE NORMS DEAL ESSENTIALLY WITH INCOME RECOGNITION. THEY FORCE THE NBFCS TO DISCLOSE THE AMOUNT OF NPA IN THEIR FINANCIAL AC COUNTS. THEY FORCE THE NBFCS TO REFLECT TRUE AND CORRECT PROFITS. BY VIRTUE OF SECTION 45 - Q, AN OVERRIDING EFFECT IS GIVEN TO THE RBI DIRECTIONS, 1998 VIS - - VIS INCOME RECOGNITION PRINCIPLES IN THE COMPANIES ACT, 1956. THESE DIRECTIONS CONSTITUTE A CO DE BY ITSELF. HOWEVER, THESE RBI DIRECTIONS, 1998 AND THE IT ACT OPERATE IN DIFFERENT AREAS. THESE RBI DIRECTIONS, 1998 HAVE NOTHING TO DO WITH COMPUTATION OF TAXABLE INCOME. THESE DIRECTIONS CANNOT OVERRULE THE PERMISSIBLE DEDUCTIONS OR THEIR EXCLUSI ON UNDER THE IT ACT. THE INCONSISTENCY BETWEEN THESE DIRECTIONS AND THE COMPANIES ACT IS ONLY IN THE MATTER OF INCOME RECOGNITION AND PRESENTATION OF FINANCIAL STATEMENTS. THE ACCOUNTING POLICIES ADOPTED BY AN NBFC CANNOT DETERMINE THE TAXABLE INCOME. IT IS WELL SETTLED THAT THE ACCOUNTING POLICIES FOLLOWED BY A COMPANY CAN BE CHANGED UNLESS THE AO COMES TO THE CONCLUSION THAT SUCH CHANGE WOULD RESULT IN UNDERSTATEMENT OF PROFITS. HOWEVER, HERE IS THE CASE WHERE THE AO HAS TO FOLLOW THE RBI DIRECTIONS, 199 8 IN VIEW OF SECTION 45 - Q OF THE RBI ACT. HENCE, AS FAR AS INCOME RECOGNITION IS CONCERNED, SECTION 145 OF THE IT ACT HAS NO ROLE TO PLAY IN THE PRESENT DISPUTE. THUS, INSOFAR AS INCOME RECOGNITION IS CONCERNED, THE COURT HAS HELD THAT EVEN THE ASSESSING OFFICER HAS TO FOLLOW THE RBI DIRECTIONS, 1998 IN VIEW OF SECTION 45Q OF THE RBI ACT AND THAT AS FAR AS INCOME RECOGNITION IS CONCERNED, SECTION 145 OF THE INCOME TAX ACT, HAS NOT ROLE TO PLAY. 8. AND HELD AS UNDER: - 23. IN THE LIGHT OF THE ABOVE DISCUSSIO N WHAT EMERGES IS THAT WHILE DETERMINING THE TAX LIABILITY OF AN ASSESSEE, TWO FACTORS WOULD COME INTO PLAY. FIRSTLY, THE RECOGNITION OF INCOME IN TERMS OF THE RECOGNIZED ACCOUNTING PRINCIPLES AD AFTER SUCH INCOME IS RECOGNIZED, THE COMPUTATION THEREOF, I N TERMS OF THE PROVISIONS OF THE INCOME TAX ACT, 1961. INSOFAR AS THE COMPUTATION OF TAXABILITY IS CONCERNED, THE SAME IS SOLELY GOVERNED BY THE PROVISIONS OF THE INCOME TAX ACT AND THE ACCOUNTING PRINCIPLES HAVE NO ROLE TO PLAY. HOWEVER, RECOGNITION OF IN COME STANDS ON A DIFFERENT FOOTING. INSOFAR AS INCOME RECOGNITION IS CONCERNED, IT WOULD BE THE RBI DIRECTIONS WHICH WOULD PREVAIL IN VIEW OF THE PROVISIONS OF SECTION 45 - Q OF THE RBI ACT, AND SECTION 145 WOULD HAVE NO ROLE TO PLAY. HENCE, THE ASSESSING OF FICER HAS TO FOLLOW THE RBI DIRECTIONS. 9. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE SET ASIDE THE FINDINGS OF ITA NO. 513/CTK/2017 9 THE LD. CIT(A) AND DIRECT THE A.Q. TO DELETE THE ADDITION OF RS.15.50 LACS WHICH ALSO INCLUDES THE ADDITION OF RS.1,30,864. THE CO - ORDINATE BENCH OF THE TRIBUNAL FOLLOWING THE DECISION OF ITAT AHMEDABAD BENCH IN THE CASE OF SUVIKAS PEOPLES CO - OP. BANK LTD (SUPRA), HAS OBSERVED THAT NO SUCH ADDITION ON ACCOUNT OF NPA INTEREST HAS BEEN MADE BY THE ASSE SSING OFFICER WHILE MAKING ASSESSMENT U/S.143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2015 - 16 IN THE CASE OF THE ASSESSEE (ASKA CO - OP.CENTRAL BANK LTD.). 8. SINCE THE ISSUE UNDER CONSIDERATION IN THE PRESENT CASE IS IDENTICAL TO THE CASE OF ASKA CO - OPERATIV E CENTRAL BANK (SUPRA), RESPECTFULLY FOLLOWING THE DECISION, REPRODUCED ABOVE, WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION ON ACCOUNT OF NPA INTEREST AND ALLOW THE APPEAL OF THE ASSESSEE. 10. RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET A SIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION OF RS.1,93,84,549/ - MADE BY THE ASSESSING OFFICER ON ESTIMATED BASIS AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 10. WE RESPECTFULL Y FOLLOW THE ABOVE ORDER OF TRIBUNAL AND SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. WE RESPECTFULLY FOLLOW THE JUDICIAL PRECEDENCE AND THE FACTS AND CIRCUMSTANCES OF THE CASE AND DIRECT THE AO TO DELETE THE ADDITION AS PER THE OBSERVATIONS MADE ABOVE. ACCORDINGLY, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON THI S 08 / 05 / 201 8 . SD/ - ( N.S.SAINI ) SD/ - ( PA V AN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 08 / 0 5 /201 8 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT - THE ANGU L UNITED CENTRAL CO - OP BANK LTD., AT/PO: ANGUL - 759122 ITA NO. 513/CTK/2017 10 / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 2. / THE RESPONDENT - DCIT, CIRCLE - 4(1), BHUBANESWAR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//