Murshidabad Gramin Bank, Murshidabad V. Addl. C.I.T., Murshidabad, Murshidabad

ITA 570/KOL/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99677 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 1997-1998
• Appeal Filed On: 16-04-2009
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Keywords: Bad and doubtful debts
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI B. P. JAIN, AM ] I.T.A NO S . 568 TO 570 /KOL/20 09 ASSESSMENT YEAR S : 1995 - 96 TO 1997 - 98 MURSHIDABAD GRAMIN BANK VS. A DDL . COMMISSIONER OF INCOME - TAX , (PAN: AA FHM9582G ) MURSHIDABAD ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 23 .0 6 .2015 DATE OF PRONOUNCEMENT: 14 . 0 8 . 2015 FOR THE APPELLANT: SHRI S OUMITRA CHOWDHURY , ADVOCATE FOR THE RESPONDENT: S HRI SAURABH KUMAR, JCIT , SR. DR ORDER PER SHRI MAHAVIR SINGH, JM: ALL T H E S E THREE APPEAL S BY ASSESSEE ARE ARISING OUT OF COMMON ORDER OF CIT (A) - XXXVI , KOLKATA , VIDE APPEAL NO. 6, 10, 7/MSD/CIT(A) - XXXVI/2006 - 07 DATED 2 7 .0 1 .20 09 . 2. THE ONLY COMMON ISSUE IN THESE THREE APPEALS OF ASSESSEE IS AGAINST THE ORDER OF CIT( A ) CONFIRMING THE ACTION OF AO DESPITE THE FACT THAT THE PROCESSING WAS DONE U/S. 143(1)(A) OF THE ACT MAKING DISALLOWANCE OF PROVISION FOR GRATUITY, PROVISION FOR BAD DEBTS AND PROVISION FOR WAGES REVISION. FOR THIS, A SSESSEE HAS RAISED IDENTICALLY WORDED GROUNDS AND THE GROUNDS AS RAISED IN ITA NO.568/K/2009 FOR AY 1995 - 96 READ AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT ALLOWING THE APPEAL OF THE ASSESSEE IN VIEW OF THE ORDERS PASSED BY HIM FOR THE ASST. YEAR 2000 - 01, 2001 - 02, 2002 - 03, 2004 - 05 AND 2005 - 06. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER, WITHOUT CONSIDERING THE MATERI ALS AVAILABLE ON RECORD. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION U/S. 80P OF THE I. T. A CT, 1961. 3. BRIEFLY STATED FACTS ARE THAT THE AO PROCESSED THE RETURN OF INCOME U/S. 143(1)(A) OF THE ACT ON 27.01.1998 FOR AY 1995 - 96 WHEREIN PRIMA FACIE ADJUSTMENT OF RS.1,63,10,400/ - WERE MADE ON ACCOUNT PROVISION FOR BAD DEBT, PROVISION FOR GRATUITY AND PROVISION FOR WAGE REVISION AS CREATED BY THE ASSESSEE IN ITS P&L ACCOUNT. THE ASSESSEE MOVED RECTIFICATION APPLICATION BEFORE THE ADDL. CIT, RANGE, 2 ITA NO S . 568 TO 570 /K/20 09 MURSHIDABAD GRAMIN BANK AY S 1995 - 96 TO 1997 - 98 MURSHIDABAD, WHO REJECTED THE CLAIM OF THE ASSESSEE AFTER CONSIDERING THE WRITTEN SUBMISSION AS UNDER: A WRITTEN SU BMISSION IS FILED BY MR. RAY ON 18.01.06 WHICH IS PLACED ON RECORD. THE ARGUMENTS PUT FORWARD BY MR. RAY ARE: 1. PROVISIONS WERE CREATED BY THE ASSESSEE BANK ON THE INSTRUCTION OF THE RBI AS PER BANKING REGULATION ACT. 2. THE ADJUSTMENTS MADE U/S. 143(1)(A) ARE NOT PRIMA FACIE ADJUSTMENT. THEY ARE DEBATABLE AS PROVISIONS WERE MADE UNDER CERTAIN RULES AND REGULATIONS OF THE BANKING BUSINESS. 3. ONCE NOTICE U/S. 143(2) HAS BEEN ISSUED, THERE IS NO SCOPE FOR MAKING PRIMA FACIE ADJUSTMENTS OR ISSUE AN INTIMATION U/S. 143(1)(A). ARGUMENT NO. 3 IS INFRUCTUOUS AS IT INVOLVES A FRESH GROUND WHICH WAS NOT PETITIONED U/S. 154 IN THE PETITION PENDING BEFORE ME AS FILED BY THE ASSESSEE ON 19.01.01 WHEREIN THE ASSESSEE CALLED FOR RECTIF ICATION ON THE GROUND THAT THE ADJUSTMENTS MADE U/S. 143(1)(A) ARE NOT PRIMA FACIE ADJUSTABLE. HENCE, ARGUMENT NO. 3 IS COMMENTED UPON. ARGUMENT 1 AND 2 ARE COMMON IN NATURE AND THEREFORE TAKEN UP TOGETHER. PROVISIONS MAY BE REQUIRED TO BE MADE BY A BA NKING PERSON AS PER BANKING REGULATION ACT AND MAY BE AN ALLOWABLE ACCOUNTING PRACTICE UNDER COMPANIES ACT. HOWEVER, INCOME OF A PERSON IS TAXED AS PER INCOME TAX ACT, 1961. THE BANKING REGULATION ACT OR THE COMPANIES ACT DOES NOT OVERRIDE THE INCOME TAX ACT 1961. ADJUSTMENTS MADE BY THE THEN A.O RELATING TO PROVISION FOR BAD DEBTS, GRATUITY AND WAGE REVISION WERE DUE TO THE FACT THAT THEY ARE PRIMA FACIE INADMISSIBLE UNDER SUB CLAUSE (III) PROVISO TO SECTION 143(1)(A). MR. RAY FAILED TO PINT OUT IN WHA T MANNER THE ADJUSTMENTS MADE ARE DEBATABLE UNDER THE INCOME TAX ACT, 1961. HENCE, THE PETITION OF THE ASSESSEE IS REJECTED. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO. AGGRIEVED, ASSESSEE IS IN SECOND APPE AL BEFORE TRIBUNAL IN ALL THE THREE YEARS. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. ADMITTEDLY, WHILE PROCESSING THE RETURN OF INCOME FOR THESE ASSESSMENT YEARS, THE AO U/S. 143(1)(A) OF THE ACT DISALLOWED T HE CLAIM OF PROVISIONS FOR BAD DEBT, PROVISIONS FOR GRATUITY AND PROVISIONS FOR WAGE REVISION FOR THE REASON THAT THESE ARE UNASCERTAINED LIABILITIES AND THEREFORE, ADJUSTMENT WAS MADE. NOW BEFORE US, LD. COUNSEL FOR THE ASSESSEE MADE ARGUMENTS THAT THE A BOVE PROVISIONS FOR BAD DEBT, PROVISIONS FOR GRATUITY AND PROVISIONS FOR WAGE REVISION ARE WHETHER ASCERTAINED LIABILITY OR UNASCERTAINED LIABILITY, THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY CIT(A) IN AYS. 2000 - 01, 2001 - 02, 2002 - 03, 2004 - 05 AND 2005 - 06 AN D ALLOWED THE CLAIM OF THE ASSESSEE. ACCORDING TO LD. COUNSEL, THIS IS A HIGHLY DEBATABLE ISSUE AND THIS 3 ITA NO S . 568 TO 570 /K/20 09 MURSHIDABAD GRAMIN BANK AY S 1995 - 96 TO 1997 - 98 CANNOT BE THE SUBJECT MATTER OF PROCESSING U/S. 143(1)(A) OF THE ACT OR RECTIFICATION PROCEEDING U/S. 154 OF THE ACT. ACCORDING TO LD. COUNSEL, THIS BEING A HIGHLY DEBATABLE ISSUE THE AO SHOULD NOT HAVE ASSUMED JURISDICTION FOR MAKING ADJUSTMENT U/S. 143(1)(A) OF THE ACT. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE GONE THROUGH THE PROVISIONS OF THE ACT I.E. SECTION 143(1)(A) OF THE ACT AND IT IS PERUSED THAT THE E XTENT AND AMBIT OF THE PRIMA FACIE ADJUSTMENTS TO BE MADE UNDER THE FIRST P ROVISO TO SECTION 143(1)(A) ARE AS - WHAT WERE PERMISSIBLE, UNDER THE FIRST PROVISO TO SECTION 143(1)(A), TO BE ADJU STED WERE (I) ONLY APPARENT ARITHMETICAL ERRORS IN THE RE TURN, ACCOUNTS OR DOCUMENTS ACCOMPANYING THE RETURN, ( II) LOSS CARRIED FORWARD, DEDUCTION, ALLOWANCE OR RELIEF, WHICH WAS PRIMA FACIE ADMISSIBLE ON THE BASIS OF INFORMATION AVAILABLE IN THE RETURN BUT NOT CLAIMED IN THE RETURN, AND, SIMILARLY, ( II I) THOSE C LAIMS WHICH WERE ON THE BASIS OF THE INFORMATION AVAILAB LE IN THE RETURN, PRIMA FACIE INADMISSIBLE, WERE TO BE RECTIFIED/ALLOWED/DISALLOWED. THIS ONLY MEANT THAT, AT THAT STAGE, ONLY ERRORS APPARENT ON THE FACE OF THE RECORD ALONE MIGHT BE CORRECTED. IT IS FURTHER NOTICED THAT EVEN THIS WAS PERMISSIBLE ON THE B ASIS OF THE INFORMATION ACCOMPANYING THE RETURN. THE ASSESSING OFFICER WAS NOT PERMITTED UNDER THIS GUISE OF MAKING ADJUSTMENT TO ADJUDICATE UPON ANY DEBATABLE ISSUE . T HE ASSESSING OFFICER HAD NO POWER TO GO BEYOND OR BEHIND THE RETURN, ACCOUNTS OR DOCUMEN TS, EITHER IN ALLOWING OR IN DISALLOWING ANY SUCH DEDUCTION, ALLOWANCE OR RELIEF . THIS VIEW IS EXPRESSED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF KHATAU JUNKAR LTD. V. K.S. PATHANIA, (1992) 196 ITR 55(BO M ). UNDER THE GUISE OF EFFECTING AN ADJUSTMENT UN DER THE FIRST PROVISO TO SECTION 143(1)(A), THE ASSESSING OFFICER COULD NOT DECIDE DEBATABLE ISSUES. UNLESS THE INADMISSIBILITY OF A DEDUCTION WAS EVIDENT AND OBVIOUS (AS IN THE CASE OF SECTION 154) FROM THE RETURN AND ITS ANNEXURES, THE ASSESSING OFFICER WHO WANTED TO DISALLOW A DEDUCTION OR A CLAIM, WAS BOUND TO FOLLOW THE PROCEDURE UNDER SECTION 143(2) OF GIVING A NOTICE TO THE ASSESSEE; AND THAT NO SUBSTANTIAL ADJUSTMENTS, WHICH REQUIRED EXAMINATION OF EVIDENCE OR WHICH WOULD REQUIRE A HEARING, WERE CON TEMPLATED UNDER SECTION 143(1)(A). THE ASSESSEE WAS ENTITLED TO A NOTICE UNDER 4 ITA NO S . 568 TO 570 /K/20 09 MURSHIDABAD GRAMIN BANK AY S 1995 - 96 TO 1997 - 98 SECTION 143(2) EVEN THOUGH THE RESULT OF THE HEARING AND CONSEQUENTIAL DISPOSAL MIGHT LEAD TO THE SAME RESULT. IN OTHER WORDS, THE FACT THAT ON ULTIMATE ANALYSIS, THE ASSESSEE M IGHT NOT BE ENTITLED FOR THE DEDUCTION CLAIMED FROM THE TOTAL INCOME DID NOT MEAN THAT RECOURSE COULD BE HAD TO DISALLOWANCE UNDER SECTION 143(1)(A), DISPENSING WITH, HEARING AND DENYING OPPORTUNITY TO THE ASSESSEE TO CHALLENGE THE DISALLOWANCE. ACCORDINGL Y, THE DISALLOWANCES AS MADE BY AO U/S. 143(1)(A) OF THE ACT ARE DELETED AND THESE APPEALS OF THE ASSESSEE ARE ALLOWED. 6 . IN THE RESULT, ALL THE APPEAL S OF ASSESSEE ARE ALLOWED. 7 . ORDER IS PRONOUNCED IN THE OPEN COURT . S D / - 1 0 . 0 8 . 2 0 1 5 S D / - ( B. P. JAIN ) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 1 4 T H A U G U S T , 201 5 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT MURSHIDABAD GRAMIN BANK, BANGIYA GRAMIN VIKAS BANK, BMC HOUSE, N. H. 34, CHUAPUR, CHALTIA, MURSHIDABAD - 742101 2 RESPONDENT ADDL. CIT , MURSHIDABAD . 3 . THE CIT (A), KOLKATA 4. 5. D CIT , KOLKATA. D.R. ITAT, KOLKATA. / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .