Saurashtra Gramin Bank Manager (F & A), Rajkot, Rajkot V. The Commissioner of Income Tax-I, Rajkot

ITA 61/RJT/2021

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4774 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-09-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 22-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHA VYAS
• Keywords: Wrong claim; Bad and doubtful debts; Set aside
• Section: 263; 143(3); 192

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, राजकोट 瀈यायपीठ 瀈यायपीठ瀈यायपीठ 瀈यायपीठ, , , , राजकोट IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.61/RJT/2021 Assessment Year :2015-16 Saurashtra Gramin Bank 1 st Floor, LIC Jeevan Prakash Building, Wing-2, Tagore Road Rajkot 360 001. PAN : AAHAS 2116 H Vs. Pr.Commissioner of Income- Tax-1, Rajkot. अपीलाथ / (Appellant) यथ /(Respondent) Assessee by : Smt.Asha Vyas, AR Revenue by : Ms.Jaya Chaudhary CIT-DR स ु नवाई क तार ख/Date of Hearing : 25/09/2023 घोषणा क तार ख /Date of Pronouncement: 07/12/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld.Pr.Commissioner of Income Tax-1, Rajkot [hereinafter referred to as “Ld.Pr.CIT]by invoking provision of section 263of the Income Tax Act, 1961 ("the Act" for short) dated 31.3.2021pertainingto the Asst.Year2015-16. 2. The grounds raised by the assessee in the appeal are as under: 1. The grounds raised in this appeal are without prejudice to one another. 2. Learned Principal Commissioner of Income Tax has grievously erred setting aside the Order dated 22.12.2017 made under section 143(3) without appreciating the fact that your Honour's appellant was duly ITA No.61/RJT/2021 2 scrutinized under section 143(3) and all the aspects were discussed in detail. So action of the Learned Principal Commissioner of income Tax passing the Order under section 263 is not justified and bad in law. 3. Learned Principal Commissioner of Income Tax further erred in challenging the eligibility of deduction under section 36(l)(viia) amounting to Rs 9,11/45,412/ without appreciating the fact the same deduction is allowable as per the statute, has nothing to do with RBI Provisioning requirements. 3. We have heard both the parties and have gone through the orders of the ld.Pr.CIT several times. We have not been able to discern the finding of error by the ld.Pr.CIT in the assessment order passed by the AO in his entire order that he passed under section 263 of the Act. Surprisingly, what we have noted is that he found no error in the order of the AO, but still went on to hold that there was an error in the assessment order causing prejudice to the Revenue. We shall now elaborate the entire case. 4. The order of the ld.Pr.CIT reveals that error which he found in the assessment order pertained to excess claim of provision for bad &doubtful debts under section 36(1)(viia) of the Act allowed to the assessee by the AO. Perusal of the para-2 of the ld.Pr.CIT order brings out the facts culled out from records by the ld.Pr.CIT leading to this finding of error, but in this para-2 itself ld.Pr.CIT states that while total eligible amount of deduction under section 36(1)(viia) of the Act was Rs.8726 lakhs , the assessee had claimed only Rs.1307 lakhs. Noting this fact, he further goes on to assume jurisdiction to revise the assessment order. When admittedly, the finding of fact of the ld.Pr.CIT is that the assessee had claimed less deduction under section 36(1)(viia) of the Act, we are unable to fathom as to how he arises at a contrary finding subsequently of the assessee having claimed excess deduction u/s 36(1)(viia) of the Act. The ld.Pr.CIT has reiterated this fact of the assessee having claimed ITA No.61/RJT/2021 3 “lesser” deduction under section 36(1)(viia) of the Act, while discussing the case on merits at para 5.1 of the order as under: “5.1 As regards the submission of the assessee on merits of the disallowance u/s. 36(1)(viia) is concerned the same has also been carefully gone through, however not found to be convincing. The argument of the assessee that the section nowhere puts on obligation on assessee about provisions to be made should be out of current year's profit or availability of reserve fund, is not correct. In fact during the assessment proceedings the assessee itself vide letter dated 12/10/2017 has submitted that the aggregate average advance made by the rural branches of the bank for the F.Y. 2014-15 was Rs.84,901 lakhs on which eligible amount of deduction u/s. 36(1)(viia) @ 10% stands at Rs. 8,490 lakhs plus 7.5% of the total income computed before making any deduction comes to Rs. 236 lakhs, thus total eligible amount was Rs. 8,726 lakhs. However the assessee has claimed Rs.1,307 lakhs. Therefore the A.O. had failed to disallow the excess claim and provisions made in this regard.Thus excess claim of Rs.9,11,45,412/- was wrongly allowed. Therefore the computations made by the assessee in its submission cannot be considered and accordingly such contention is rejected. The reliance placed by the assessee on the Apex Court decision in the case of CIT v/s Vegetable products [188 ITR 192 (SC)] is not relevant here as in the case of the assessee there are not two constructions of a taxing statue but the issue is wrong claim of deduction u/s. 36(1)(viia) and its allowance by the A.O. 5. It is apparent and evident from the above para 5.1 that the ld.Pr.CIT notes that the total eligible claim of deduction of the assessee was Rs.8726 lakhs, but the assesseehad claimed Rs.1307 lakhs only. Clearly, the finding of the fact is that, the assessee had claimed less deduction under section 36(1)(viia) of the Act; but having found the facts to be so, in the same breath, the ld.Pr.CIT notes that “the AO had failed to disallow the excess claim and provisions made in this regard” - clear, apparent and obvious finding of error which is contrary to the admitted facts found by the ld.Pr.CIT. This was pointed out to the ld.DR during the course of hearing before us. He was asked to explain as to what error was noted by the ld.Pr.CIT in the assessment order with respect to assessee’s claim of deduction under section 36(1)(viia) of the Act, particularly ITA No.61/RJT/2021 4 when the ld.Pr.CIT found the facts to demonstrate that the assessee had claimed “lesser” deduction. The ld.DR was unable to bring any clarity on this issue before us. Therefore, clearly, as per the finding of facts by the ld.Pr.CIT on the issue of claim of deduction under section 36(1)(viia) of the Act by the assessee, there is no error pertained to excess claim allowed to the assessee. The ld.Pr.CIT’s order is, therefore, not sustainable in law in the absence of any finding of error in the assessment order, andis therefore set aside for this reason. 6. Before concluding, we may add here that on going through the order of the ld.Pr.CIT, more particularly, para-2 of his order, what transpires is that, the ld.Pr.CIT noted that, the assessee had claimed excess provision on account of bad and doubtful debtsin its books of accounts/P&L account; that the assessee’s provision for bad & doubtful debts was in excess as per the RBI Norms inthis regard. This is apparent from para-2 which is being reproduced hereunder: ITA No.61/RJT/2021 5 7. A perusal of the above reveals that, the ld.Pr.CIT noted from the records that, the assessee had claimed deduction under section 36(1)(viia) of the Act of Rs.1307 lakhs. He noted that in its books of accounts/P&L account, the assessee had made provision of Rs.12.76 crores out of current year’s profit. He further noted the provision outstanding at the end of the year was Rs.14.91 crores while that required as per the RBI Norms was Rs.609.76 lakhs. He ITA No.61/RJT/2021 6 further noted that the assessee-bank had also made provision of hundred percent of gross NPA less interest not collected account and subsidiary reserve fund. According to the ld.Pr.CIT, minimum required provision for NPA accordingly as per the RBI Guidelines was Rs.5.09 crores while the assessee had made provision of Rs.14.91 crores. Thereafter, further noting in the paragraph, he makes another calculation of the provision for bad and doubtful debts, which the assessee ought to have made in accordance with RBI Guidelines regarding NPA provisions, and notes that the assessee had provided for bad and doubtful debts in excess to the tune of Rs.9.11 crores. Having noted this fact of excess provisioning made in the books of the assessee, keeping in view RBI Guidelines in this regard, he thereafter states that this excess provision needed to be disallowed under section 36(1)(viia) of the Act. There is no coherence between these two findings of the ld.Pr.CIT, more particularly, when he himself in para- 2 notes that the assessee had claimed short provisioning as per the section 36(1)(viia) of the Act. 8. What is relevant for the finding of the error in the assessment order is, whether any excess claim had been allowed to the assessee for provisioning of bad and doubtful debts in terms of section 36(1)(viia) of the Act. The emphasis is on the allowance of claim as per section 36(1)(viia) of the Act. As per the ld.Pr.CIT, admittedly, there is no excess claim made by the assessee under section 36(1)(viia) of the Act, but in fact short claim made by the assessee. Having said so, any claim made by the assessee in its books of accounts/Profit & Loss account as per RBI guidelines is not relevant for the purpose of finding error in the assessment order. For that matter, even the ld.Pr.CIT has not pointed out as to how the RBI ITA No.61/RJT/2021 7 directives for provision for bad and doubtful debts are relevant and/or any correlation for the purpose of calculating claim of deduction under section 36(1)(viia) of the Act. Having pointed out no such co-relation and his admitted case itself being that the assessee had claimed short deduction as per the Income Tax Act, clearly there is no error found by the ld.Pr.CIT in the assessment order. The order passed under section 263 of the Act, is therefore, held not sustainable in law, in the absence of any finding of error in the assessment order, much less, leading to any prejudice to the interest of the Revenue. In view of the above, the grounds of appeal of the assessee are allowed. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 7 th December, 2023 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 07/12/2023