Punjab Gramin Bank, Kapurthala V. The Dy Commissioner of Income Tax, Jalandhar

ITA 654/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7873 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 29-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Assessee Lawyers: RANJAN SEHGAL LD
• Keywords: Reopening of assessment; Business expenditure; Reassessment proceedings
• Section: 43B; 143(3); 37(1); 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A. NO.654(ASR)/2016 ASSESSMENT YEAR:2009-10 PUNJAB GRAMIN BANK, JALANDHAR ROAD, KAPURTHALA. PAN:AAALP0309F VS. DCIT, CIRCLE-IV, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. RANJAN SEHGAL (LD. CA) RESPONDENT BY: SH. RAHUL DHAWAN (LD. DR) DATE OF HEARING: 01.08.2017 DATE OF PRONOU NCEMENT: 11.08.2017 ORDER PER N. K. CHOUDHRY: THE ASSESSEE PREFERRED THE INSTANT APPEAL, FEELING AGGRI EVED AGAINST THE ORDER DATED 17 TH OCT. 2016 PASSED IN APPEAL NO.79/15-16, BY THE LD. CIT(A)-2, JALANDHAR. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL. 1. THE LD. CIT(A), HAS ERRED IN NOT APPRECIATING THE FACTS OF THE CASE AND PROVISIONS OF LAW IN ITS ACTUAL SPIRIT. 2. THE LD. CIT(A) HAS ERRED IN OVERLOOKING THE FAC TS & DOCUMENTS PLACED BEFORE HIM WITH RESPECT TO ASSESSMENT PROCEEDINGS A ND NOT PASSING A SPEAKING ORDER ON ISSUE OF CHANGE OR OPINION BY THE ASSESSING OFFICER IN INITIATING REASSESSMENT PROCEEDINGS. 3. THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE DECISIONS OF HONBLE SUPREME COURT AND DELHI HIGH COURT ON ISSUE OF CHAN GE OF OPINION AND UPHOLDING THE REOPENING OF ASSESSMENT BY THE ASSESS ING OFFICER ON PROCEDURAL ISSUES ONLY. 4. THE LD. CIT(A) HAS ERRED IN NOT DECIDING THE GRO UNDS RAISED BEFORE HIM WITH RESPECT TO ALLOWABILITY OF PROVISION FOR L EAVE ENCASHMENT AND NOT PASSING A SPEAKING ORDER ON THE ISSUES RAISED BEFOR E HIM. 5. THE LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION OF PREMIUM PAID TO L.I.C UNDER GROUP LEAVE ENCASHMENT SCHEME POLICY BY FOLLOWING THE DECISION OF HIS PREDECESSOR IN THE CASE OF APPELLANT IN A.Y. 2012-13 WITHOUT ITA NO.654(ASR)/2016 ASST. YEAR: 2009-10 2 CONSIDERING THE FACT THAT HIS PREDECESSOR HAS UPHEL D THE ADDITIONS UNDER SECTION 43B(F) OF INCOME TAX ACT WITHOUT GIVING OPP ORTUNITY WHEREAS ADDITION WAS MADE BY THE ASSESSING OFFICER UNDER SECTION 37 OF INCOME TAX ACT. 6. THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT PAYMENT OF PREMIUM TO LIC UNDER GROUP LEAVE ENCASHMENT SCHEME POLICY BY THE APPELLANT ASSESSEE WAS MADE FOR GETTING ITSELF INSU RED AGAINST LIABILITY OF LEAVE ENCASHMENT TOWARDS ITS EMPLOYEES. 7. THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT ASSESSEE HAS ACTUALLY PAID THE AMOUNT WHI CH WILL BECOME PAYABLE TO ITS EMPLOYEES ON ACCOUNT OF LEAVE ENCASH MENT TO LIC UNDER A VALID INSURANCE POLICY AND PROVISIONS OF SECTION 43 B(F) OF INCOME TAX ACT ARE NOT ATTRACTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE APPELLANT ASSESSEE CRAVES LEAVE TO RAISE AND URGE ANY OTHER GROUND OF APPEAL AS MAY BE DEEMED PROPER AT THE TIME OF HE ARING. 3. THE BRIEF FACTS OF THIS CASE ARE AS UNDER: THAT THE ORIGINAL ASSESSMENT IN THIS CASE WAS MADE U/S 143(3) AT THE INCOME OF RS.497492880/- ON 20.11.2013 AGAINST THE RETURNED FIGURE OF RS.496033505/-. THE ASSESSEE IS A CO- OPERATIVE SOCIETY ENGAGED IN BANKING BUSINESS. LATER ON IT WAS NOTED THAT THE ASSESSEE HAS CLAIMED A PROVISION ON ACCOUNT OF PAYMENT OF RS.1 CRORE TO LIC OF INDIA FOR GROUP LEAV E ENCASHMENT SECURED FOR THE EMPLOYEES. THIS PROVISION WAS INCLUDED IN THE AMOUNT OF RS.186879(000) UNDER THE SUB HEAD PAYMENTS TO AND PROVISION FOR EMPLOYEES UNDER THE BROAD HEAD OPERAT ING EXPENSES. THE THEN A.O FAILED TO APPLY HER MIND TO THE ISSUE AND AN ESCAPEMENT OF INCOME OF RS. 1 CRORE OCCURRED DUE TO INADVERTENCE. FURTHER ENQUIRIES IN THIS REGARD REVEAL ED THAT THE POLICY ISSUED BY THE LIC OF INDIA IS AN INVESTMENT PLAN WHICH IS ALSO REVOCABLE AND CARRIES INTEREST, PREMIUM OF WHICH HAS BEEN ITA NO.654(ASR)/2016 ASST. YEAR: 2009-10 3 PUT INTO GROWTH FUND AND SMALL PART OF PREMIUM IS FOR LEAVE ENCASHMENT AND MAJOR PORTION OF PREMIUM IS DEPLOYED I N GROWTH FUND. THEREFORE, THE PREMIUM IS MORE OF A CAPITAL EXP ENDITURE. AS THE EXPENDITURE IS NEITHER ALLOWABLE U/S 36 NOR U/S 37 (I) OF THE INCOME TAX ACT,1961, SO THERE WAS AN ESCAPEMENT OF INCOME OF RS.1 CRORE WITHIN THE SCOPE OF PROVISION OF 147 IN THE ORIGINAL ASSESSMENT, THEREFORE, THE SAME WAS REOPENED U/S 147 OF TH E I. T. ACT, 1961 BY ISSUING NOTICE U/S 148 DATED 29 TH MARCH, 2014 AFTER FOLLOWING THE LEGAL PROCEDURE. THE ASSESSEE COMPLIE D WITH NOTICE U/S 148 DT. 29.03.2014 VIDE HIS REPLY DT. 28.04 .2014 ON RECORD, THEREAFTER, THE ASSESSEE OBJECTED THE PROCEEDINGS U /S 147 AS WELL AS 148 OF THE ACT ON DIFFERENT GROUNDS, HOWEV ER, THE ASSESSING OFFICER DETERMINED THE LIABILITY BY ADDING RS.1 CRORE CONSIDERING AS CAPITAL IN NATURE. THEREAFTER, FEELING A GGRIEVED AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER, THE ASSESSE E PREFERRED THE FIRST APPEAL BEFORE THE LD. CIT(A). TH E LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. BY HOLDING AS UNDER: 5.3. I HAVE PERUSED THE ASSESSMENT ORDER PASSED BY THE A.O AND DETAILED SUBMISSIONS MADE BY THE APPELLANT INCLUDIN G JUDICIAL CITATION GIVEN THEREIN AND FIND THAT AN ADDITION OF RS.1 CRO RE HAS BEEN MADE BY THE A.O. ON ACCOUNT OF PROVISION OF LEAVE ENCASHMEN T. THE ADDITION WAS MADE ON THE GROUND THAT NO PAYMENT HAS ACTUALLY BEE N MADE BY THE APPELLANT ON ACCOUNT OF LEAVE ENCASHMENT, IT IS SET TLED BY THE A.O. THAT PAYMENTS MADE BY THE APPELLANT ARE FOR PURCHASE OF POLICIES AGAINST AN INVESTMENT PLAN. IT IS STATED BY THE A.O. THAT C ONTINGENT LIABILITIES DO ITA NO.654(ASR)/2016 ASST. YEAR: 2009-10 4 NOT CONSTITUTE EXPENDITURE AND CANNOT BE THE SUBJEC T MATTER OF DEDUCTION UNDER THE MERCANTILE SYSTEM OF ACCOUNTING . 5.4. I HAVE CAREFULLY CONSIDERED THE MATERIAL AVAIL ABLE ON RECORD AND FIND THAT THIS ISSUE HAS ALREADY BEEN EXAMINED IN DETAIL BY THE UNDERSIGNED IN THE CASE OF THE APPELLANT FOR A.Y.20 12-13, IN APPEAL NO.80/15-16 WHEREIN THE ADDITION MADE BY THE A.O. H AS BEEN UPHELD. 5.6. SINCE, THERE IS NO CHANGE IN THE FACTS OF THE CASE IN THIS YEAR, THUS PLACING RELIANCE ON THE FINDING GIVEN EARLIER IN THE CASE OF THE APPELLANT IN A.Y. 2012-13, I HOLD THAT A.O WAS JUST IFIED IN MAKING AN ADDITION OF RS.1 CRORE ON ACCOUNT OF PREMIUM PAID B Y THE APPELLANT. ACCORDINGLY, I CONFIRMED THE ADDITION OF RS.1 CORE MADE BY THE A.O. ON ACCOUNT OF PAYMENT MADE TO LIC FOR GROUP LEAVE ENCA SHMENT. 4. FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE LD. CIT(A), THE ASSESSEE PREFERRED THE INSTANT APPEAL WHICH IS UNDER CO NSIDERATION AND SUBMITTED THAT IN THE APPEALS OF THE ASSESSEE ITSELF Q UA ASST. YEARS:2012-10-11, 2011-12 & 2012-13, THIS HONBLE BENC H HAS ALREADY DEALT WITH THE ISSUE, THEREFORE, IN THE SAID CIRCUMSTANCE S, THE INSTANT CASE MAY BE DEALT WITH THE SAME EFFECT. 5. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTA NCES OF THE CASE AS IN THE INSTANT CASE, THE ASSESSEE PURCHASED A POLICY UN DER GROUP LEAVE ENCASHMENT SCHEME FROM LIC CORPORATION OF INDIA W HILE PAYING THE PREMIUM OF RS.1 CRORE AND THEREAFTER, CLAIMED IT AS BUSINESS EXPENDITURE UNDER THE SUBJECT HEAD PROVISION FOR LEAV E ENCASHMENT AMOUNTING TO RS.1 CRORE UNDER MAIN HEAD PROVISIONS FOR EMPLOYEES AMOUNTING TO RS.18690000.00 IN P&L ACCOUNT BUT THE ASSESSI NG OFFICER ITA NO.654(ASR)/2016 ASST. YEAR: 2009-10 5 DISALLOWED BY HOLDING THAT DEDUCTION OF EXPENDITURE O N THIS GROUND CANNOT BE SAID TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AS SUCH WAS NOT LIABLE AS BUSINESS EXPENDITURE OF THE APPELL ANT/ ASSESSEE AND THEREAFTER, THE ACTION OF THE ASSESSING OFFICER WAS U PHELD BY THE LD. CIT(A) FOR THE ASST. YEARS: 2011-12 AND 2012-13 THE SAME ISSUE WAS RAISED BEFORE THIS HONBLE BENCH AND THIS HONBLE BENCH IN PARA NO.14 OF THE ORDER DATED 15 TH MARCH, 2017 PASSED IN ITA NOS. 583 &584(ASR)/2015, 580(ASR)/2015, 569(ASR)/2016 & 597(ASR) /2016 WAS PLEASED TO HELD AS UNDER: 14. NOW COMING TO THE APPEALS FILED BY ASSESSEE, WE FIND THAT ASSESSING OFFICER HAD DISALLOWED THE PAYMENT MADE T O LIC AND BAJAJ ALIANZE U/S 37(L) OF THE ACT, HOLDING THE SAM E TO BE NOT EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE LD. CIT(A) WHILE CONFIRMING THE DISALLOWANCE HAS NO T CONSIDERED THE CLAIM OF THE ASSESSEE U/S 37(1) OF THE ACT AND HAS CONFIRMED THE ADDITION BY HOLDING THAT THE PROVISIONS OF SECTION 43B(F) WERE APPLICABLE TO THE ASSESSEE. HOWEVER, THE CLAIM OF T HE ASSESSEE IN ITS WRITTEN SUBMISSIONS IS THAT ASSESSEE HAD NOT CREATE D THE PROVISIONS AND IN FACT HAD MADE THE PAYMENT AND THEREFORE THE PROVISIONS OF SECTION 43B(F) OF THE ACT WERE NOT APPLICABLE, IT W AS ALSO REQUIRED THAT LD. CIT(A) HAD CONFIRMED THE DISALLOWANCE U/S 43B (F) WITHOUT AFFORDING OPPORTUNITY TO THE ASSESSEE, THEREFORE, W E DEEM IT APPROPRIATE TO REMIT THIS ISSUE TO THE OFFICE OF LD . CIT(A) WHO SHOULD EXAMINE THE CLAIM OF THE ASSESSEE U/S 37(1) OF THE ACT AS THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE U/S 37( 1) OF THE ACT THE LD. CIT(A) SHOULD ALSO HEAR THE ASSESSEE ON THE APPLICABILITY OF PROVISIONS OF SECTION 13B(F) OF THE ACT. IN VIEW OF THE ABOVE, THE APPEALS FILED BY ASSESSEE ARE ALLOWED FOR STATISTIC AL PURPOSES. CONSIDERING THE ISSUE AS IDENTICAL AS IN THE PREVIOUS AP PEAL, WE ARE OF THE CONSIDERED OPINION THAT THE INSTANT APPEAL OF THE ASSESSEE IS ALSO DESERVE THE SAME TREATMENT AS IT WAS HELD IN THE AF ORESAID APPEALS. THEREFORE, WE FEEL IT APPROPRIATE TO REMIT THE INSTA NT ISSUE TO THE FILE OF LD. CIT(A), WHO SHOULD EXAMINE THE CLAIM OF THE ASSESSEE U/S 37(1) OF ITA NO.654(ASR)/2016 ASST. YEAR: 2009-10 6 THE ACT AS THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE, THEREFORE, THE LD., CIT(A) SHOULD ALSO HEAR THE ASSESSEE ON THE APPL ICABILITY OF PROVISION OF SEC.43(B)(F) OF THE I.T. ACT. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11.0 8.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:11.08.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER