Dy. C.I.T., Circle-2, Farrukhabad V. Regional Kishn Gramin Bank, Mainpuri

ITA 62/AGR/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0693 (ITAT-AGRA)
• Duration Of Justice: 6 year(s) 2 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-06-2013
• Assessment Year: misc
• Appeal Filed On: 28-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH KUMAR JAIN
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 62/AGRA/2013 ASSTT. YEAR : 2009-10 D.C.I.T., CIRCLE-2, VS. REGIONAL KISAN GRAMIN BA NK, FARRUKHABAD. KUTCHHARY ROAD, NEAR KOTWALI MAINPURI. (PAN : AABCK 4565 G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI WASEEM ARSHAD, SR. D.R. RESPONDENT BY : SHRI RAKESH KUMAR JAIN, C.A. DATE OF HEARING : 18.06.2013 DATE OF PRONOUNCEMENT OF ORDER : 28.06.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), GHAZIABAD DATED 10.12.2012 FOR THE ASSESSMENT YEAR 2009-10, CHALLENGING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION OF RS. 2,96,22,000/- MADE ON ACCOUNT OF INTEREST INCOME. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A CO-OPERATIVE BANK AND FILED RETURN OF INCOME AT NIL. THE ASSESSEE SUB MITTED THE DETAILS AND DOCUMENTS BEFORE THE AO. THE BOOKS OF ACCOUNTS WERE PRODUCED WHICH WERE TEST ITA NO. 62/AGRA/2013 2 CHECKED BY THE AO. THE ASSESSEE IS AN INCORPORATED BODY UNDER REGIONAL RURAL BANK ACT, 1976. THE SHARE CAPITAL OF THE ASSESSEE W AS CONTRIBUTED BY THE GOVERNMENT OF INDIA, U.P. CO-OPERATIVE BANK AND GOV ERNMENT OF U.P.. THE ASSESSEE HAS BEEN CARRYING ON THE BUSINESS OF BANK AS DEFINED IN BANKING REGULATION ACT, 1949, WHICH INCLUDES GRANTING OF LO ANS AND ADVANCES. THE AO FOUND FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSES SEE THAT IT HAS DISCLOSED INTEREST INCOME ON ADVANCE OF RS.12,48,03,000/-. THE ASSESSE E WAS ASKED TO GIVE DETAILS OF THE INTEREST RECEIVED ON VARIOUS CATEGORIES OF A DVANCES IN A PARTICULAR PROFORMA. THE ASSESSEE FURNISHED THE WORKING OF INT EREST RECEIVED ON ADVANCE, COPY OF WHICH IS REPRODUCED AT PAGE 3 OF THE ASSESS MENT ORDER. THE AO WAS NOT SATISFIED WITH THE DETAILS SUBMITTED BY THE ASSESSE E BECAUSE THE ASSESSEE FAILED TO GIVE BREAK-UP OF AMOUNT OF INTEREST RECEIVED ON DIF FERENT TYPES OF ADVANCES. THE ASSESSEE HAS GIVEN CONSOLIDATED AMOUNT OF INTEREST ON THE ADVANCE. THE AO WHILE MAKING HIS OWN CALCULATION FOUND THAT THE ASSESSEE DID NOT JUSTIFY THE POSITION AS RATE OF INTEREST CHARGED ON LOANS. THE AO, THEREFOR E, AS PER OWN CALCULATION FOUND THAT THE ASSESSEE HAS SUPPRESSED INTEREST INCOME FR OM ADVANCE BY RS.2,96,22,000/- AND ACCORDINGLY MADE THE SAME ADDI TION BY ESTIMATING THE INTEREST INCOME ON ADVANCES. THE ADDITION WAS CHALL ENGED BEFORE THE LD. CIT(A) AND SAME SUBMISSIONS WERE MADE AND IT WAS SUBMITTED THAT THE ASSESSEE FURNISHED DETAILS OF 63 BRANCHES AND FURNISHED THEI R ACCOUNTS AND BALANCE SHEETS ITA NO. 62/AGRA/2013 3 AS PER SCHEDULE-III OF BANKING REGULATION ACT. THE ASSESSEE HAS PROVIDED ALL THE DETAILS AND THE AO WITHOUT ANY BASIS ESTIMATED THE INTEREST WHICH HAS NOT BEEN EARNED BY THE ASSESSEE. THEREFORE, THE ADDITION IS WHOLLY UNJUSTIFIED. THE LD. CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE AND THE MATERIAL ON RECORD, DELETED THE ADDITION. HIS FINDINGS IN PARA 5 & 6 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 5. AFTER CAREFUL CONSIDERATION OF ALL THE FACTS ON RECORD AND RIVAL SUBMISSIONS AS CONTAINED IN ASSESSMENT ORDER AND IN APPELLANTS SUBMISSION, MY OBSERVATIONS/CONCLUSIONS ARE AS UNDER : I FIND THAT THE ENTIRE ADDITION OF RS.2,96,22,000/ - HAS BEEN MADE ON THE BASIS OF MERE CONJECTURES AND SURMISES. THE KIND OF DETAILS A.O. ASKED FOR, WAS ALMOST IMPOSSIBLE FOR T HE ASSESSEE TO FURNISH, WHILE A.O. COULD WELL HAVE CALLED FOR THE BOOKS OF ACCOUNTS AND EXAMINED WHETHER ANY INTEREST CHARGEABLE WAS NO T CHARGED OR WAS WRONGLY CHARGED. RATHER, TO GO FURTHER, IF THER E WERE SO MANY COMPL9CATIONS, THE MATTER COULD HAVE BEEN REFERRED TO SPECIAL AUDIT ALSO. THE A.O. DOES NOT DO ANYTHING WHICH IS REQUIR ED ON HIS PART, BUT RATHER MAKES A WEIRD ESTIMATE ON AVERAGE BASIS, TO INFER THAT HUGE INTEREST AMOUNT HAS BEEN UNDER CHARGED. THE AO HAS FAILED TO APPRECIATE THAT THE BOOKS ARE AUDITED AND HENCE BEF ORE MAKING SUCH DRASTIC INFERENCE; HE HAS TO AT LEAST SITE SOME CON CRETE SAMPLE INSTANCES OF SUCH DEFECT IN BOOKS. ON THE OTHER HAND, THE APPELLANTS EXPLANATIONS AS REPRODUCED ABOVE, ARE FOUND SATISFACTORY. THE APPEL LANT HAS GIVEN SATISFACTORY EXPLANATION AS TO WHY THE ACTUAL INTER EST CHARGED IS LESS THAN THAT ESTIMATED BY A.O. ON AVERAGE BASIS. THEREFORE THE ESTIMATED ADDITION MADE BY THE A.O. IS HELD UNTENABLE. 6. IN THE RESULT, APPEAL IS ALLOWED. ITA NO. 62/AGRA/2013 4 3. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT THE ASSESSEE HAS NOT FURNISHED DESIRED DETAILS BEFORE THE AO. TH EREFORE, THE AO SHALL HAVE TO MAKE ESTIMATE OF INCOME ON ACCOUNT OF INTEREST EARN ED, WHICH SHOULD NOT HAVE BEEN DELETED BY THE LD. CIT(A). ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT ALL THE ACCOUNTS OF THE ASSESSEE HAV E BEEN AUDITED AS PER BANKING REGULATIONS IN WHICH NO DEFECTS HAVE BEEN POINTED O UT BY THE AO AND ADDITION HAS BEEN MADE WITHOUT ANY BASIS. HE HAS RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PARADISE HOLIDAYS , 325 ITR 13, IN WHICH IT WAS HELD THAT THE ASSESSING OFFICER REJECTING BOOK RESU LTS ON LOW NET PROFIT, THEREFORE, REJECTION OF BOOKS OF ACCOUNT IS NOT JUSTIFIED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE FINDINGS OF THE AUTHORITIES BELOW. HONBLE GAUHATI HIGH COURT IN TH E CASE OF B. AND A. PLANTATION AND INDUSTRIES LTD., 242 ITR 22 HELD THA T THERE IS NO PROVISION IN IT ACT EMPOWERING THE ITO TO INCLUDE IN THE IN THE INC OME OF THE ASSESSEE, INTEREST WHICH WAS NOT DUE OR COLLECTED. IN THIS CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE PRODUCED BOOKS OF ACCOUNT BEFORE THE AO WHICH HAVE BEEN EXAMINED BY THE AO. THE ASSESSEE IS A CO-OPERATIVE BANK AND INCORPORATE D UNDER THE REGIONAL RURAL ITA NO. 62/AGRA/2013 5 BANK ACT, 1976. THE ACCOUNTS OF THE ASSESSEE ARE AU DITED AS PER BANKING REGULATION ACT. THE AO HAS NOT POINTED OUT ANY SPEC IFIC DEFECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNT OR THE AUDIT REPORT FURNISHED BY THE ASSESSEE. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE SUBMITTED ALL THE DETAILS OF EARNING OF INTEREST ON ADVANCE AS PER BA NKING REGULATION ACT. THEREFORE, IF THE ASSESSEE COULD NOT HAVE PROVIDED BIFURCATION AS DESIRED BY THE AO, THE AO SHOULD HAVE INVESTIGATED THE MATTER IN D ETAIL FROM THE BOOKS OF ACCOUNT BEFORE PROPOSING THE ADDITION OF SUCH NATUR E. THE AO SHOULD HAVE EXAMINED THE BOOKS OF ACCOUNT AND SHOULD HAVE GIVEN SPECIFIC FINDING THAT THE ASSESSEE HAS CHARGED MORE INTEREST. IN CASE, THERE WOULD HAVE BEEN ANY COMPLICATION IN THE MATTER OR THE AO COULD NOT HAVE EXAMINED THE BOOKS OF ACCOUNT, THE PROPER COURSE IS PROVIDED IN THE ACT F OR REFERRING THE MATTER FOR SPECIAL AUDIT. IN THIS CASE, THE AO DID NOT EXAMINE THE BOOKS OF ACCOUNT IN DETAIL BEFORE ARRIVING AT THE FINDING OF CHARGING OF LOWER INTEREST AND ALSO DID NOT REFER THE MATTER FOR SPECIAL AUDIT. IF THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS SUPPRESSED THE INTEREST, HE SHOULD HAVE GIVEN SPECI FIC FINDING OF FACT AND SHOULD HAVE BROUGHT SOME MATERIAL ON RECORD TO JUSTIFY HIS FINDINGS. WE MAY ALSO NOTE HERE THAT EVEN THE BOOK RESULTS OF THE ASSESSEE HAV E NOT BEEN REJECTED U/S.145(3) OF THE IT ACT. IT, THEREFORE, APPEARS THAT THE AO H AS MERELY ESTIMATED NOTIONAL INTEREST, WHICH WAS NOT DUE OR RECEIVED BY THE ASSE SSEE. THE LD. CIT(A) ITA NO. 62/AGRA/2013 6 CONSIDERING THE DETAILS ON RECORD CORRECTLY DELETED THE ADDITION IN THE MATTER. THERE IS NO MATERIAL IN THE DEPARTMENTAL APPEAL. SA ME IS ACCORDINGLY DISMISSED. 5. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY