The Chittoor Co-operative Town Bank Limited , Chittoor V. Income Tax Officer, Ward-2, Chittoor

ITA 659/Hyd/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6306 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 24-02-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 02-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR PANDEY
• Keywords: Bad and doubtful debts; Revised return; Set aside
• Section: 143(3); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI L AXMI PRASAD SAHU, ACCOUNTANT MEMBER IT A NO . 659 /H/201 9 ASSESSMENT YEAR: 20 1 5 - 1 6 THE CHITTOOR COOPERATIVE TOWN BANK LTD., CHITTOOR. PAN AAAT3674J VS. INCOME - TAX OFFICER, WARD 2, CHITTOOR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI E. PHALGUNA KUMAR REVENUE BY : SHRI SUNIL KUMAR PANDEY DATE OF HEARING: 24 /0 2 /2021 DATE OF PRONOUNCEMENT: 19 / 0 4 /2021 O R D E R PER LAXMI PRASAD SAHU, A.M. : TH IS ASSESSEE S APPEAL FOR AY 20 15 - 16 IS DIRECTED AGAINST THE C I T(A) , TIRUPATIS ORDER , DATED 2 8 / 0 2 /201 9 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 ; IN SHORT THE ACT , ON THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), TIRUPATI IS ERRONEOUS AND IS NOT BASED ON ITA NO. 659 /HYD/1 9 THE CHITTOOR COOPERATIVE TOWN BANK LTD., CHITTOOR. : - 2 - : FACTS AND CIRCUMSTANCES OF THE CASE AND THE WEIGHT OF THE EVIDENCE PLACED BEFORE THE LD. CIT(APPEALS), 2. THE LD. CIT (APPEALS), TIRUPATI, ERRED IN STATING THAT THE APPELLANT HAS NOT CONTROVERTED THE FINDING OF THE AO THAT THERE IS NO DEBIT TOWARDS 'PROVISION FOR DOUBTFUL DEBTS' 3. THE LD. CIT (APPEALS), TIRUPATI ERRED IN UNDERSTANDING THE FACT THAT THE APPE LLANT FULLY COMPLIED WITH THE PROVISIONS OF SEC 36(1)(VIIA) AND HENCE IS ELIGIBLE FOR DEDUCTION OF PROVISION FOR BAD AND DOUBTFUL DEBTS. 4. THE LD. CIT (APPEALS), TIRUPATI ERRED IN UPHOLDING THE ORDER OF THE LD. AO, WHO MADE FAILED TO UNDERSTAND THE DIST INCTION BETWEEN THE WORDS 'PROVISION' AND 'RESERVE' 5. THE LD. CIT (APPEALS), TIRUPATI OUGHT TO HAVE GONE THROUGH THE AUDITED FINANCIAL STATEMENTS, SUBMITTED BEFORE HIM TO ARRIVE AT THE CONCLUSION THAT THE AMOUNT DEBITED TO THE P&L ACCOUNT IS IN THE NATU RE OF 'PROVISION' AND NOT 'RESERVE'. 6. ANY OTHER GROUND MAY BE URGED WITH THE KIND PERMISSION OF THE HON'BLE TRIBUNAL AT THE TIME OF H EARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2015 - 16 ON 30/10/2015 ADMITTING AN INCOME OF RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY STATUTORY NOTICES WERE ITA NO. 659 /HYD/1 9 THE CHITTOOR COOPERATIVE TOWN BANK LTD., CHITTOOR. : - 3 - : ISSUED TO THE ASSESSEE, AGAINST WHICH, THE ASSESSEE FILED THE INFORMATION. 2.1 DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED ITS STATEMENT OF INCOME, PROFIT AND LOSS ACCOUNT AND AUDIT REPORT ETC., ON PERUSAL OF WHICH, THE AO NOTICED THAT THE ASSESSEE ADMITTED AN INCOME OF RS. 1,59,94,405/ - AND FROM THE SAME CLAIMED DEDUCTION U/S 36(1)(VII)(A) AT RS. 2,88,23,764/ - , WHICH WAS RESTRICTED TO RS. 1,59,93,405/ - . WHEN ASKED TO SHOW CAUSE, THE ASSESSEE FILED REVISED RETURN OF INCOME ON 14/12/2017 AND ADMITTED AN INCOME OF RS. 1,57,23,600/ - AND THE CLAIM MADE AT RS. 2,76,24,259/ - TOWARDS AVERAGE ADVANCES MADE IN RURAL BRANCH WAS WITHDRAWN AND THE CLAIM MADE TOWARDS BAD DEBTS WAS ENHANCED TO RS. 12,74,887/ - . SINCE THE ASSESSEE DID NOT FURNISH ANY DOCUMENTARY EVIDENCE FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE BANK EITH ER FOR RESERVE OR FOR PROVISION IN SUPPORT OF THIS CLAIM, THE AO DISALLOWED THE BAD DEBTS CLAIM OF RS. 12,74,887/ - . 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE ORDER OF THE AO. ITA NO. 659 /HYD/1 9 THE CHITTOOR COOPERATIVE TOWN BANK LTD., CHITTOOR. : - 4 - : 4. AGGRIEVED THE ASSESSEE IS IN APP EAL BEFORE THE ITAT. 5. BEFORE US, THE LD. AR OF THE ASSESSEE FILED A PAPER BOOK CONTAINING WRITTEN SUBMISSIONS, REVISED RETURN FILED ALONG WITH COMPUTATION, ORIGINAL RETURN OF INCOME FILED ALONG WITH COMPUTATION, AUDITED FINANCIAL STATEMENTS AND PERPETUAL DEBT INSTRUMENT ISSUED BY VASAVI COOP URBANK BANK. IN THE WRITTEN SUBMISSIONS, THE ASSESSEE STATED THAT SINCE THERE IS A DEBIT TO THE PROFIT AND LOSS ACCOUNT IN RESPECT OF PROVISION FOR DOUBTFUL DEBTS AND SINCE, THE SAME IS BELOW THE LIMIT OF 78.50% OF TO TAL INCOME, THE ASSESSEE IS ENTITLED TO DEDUCTION OF RS. 12,74,887/ - U/S 36(1)(VIIA). FURTHER, IT WAS STATED THAT THE ASSESSEE ALSO ATTACHED AS PART OF THE PAPER BOOK, COPY OF THE PERPETUAL DEBT INSTRUMENT ISSUED BY VASAVI COOPERATIVE URBAN BANK LTD. AND T HE PROVISION MADE AGAINST SUCH INSTRUMENT IS ALSO A PROVISION FOR BAD AND DOUBTFUL DEBT AND HENCE THE SAME IS ALSO TO BE CONSIDERED FOR CALCULATION U/S 36(1 ) (VIIA). THEREFORE, THE ASSESSEE IS ENTITLED TO DEDUCTION OF PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT OF RS. 12,74,887/ - U/S 36(1 ) (VIIA). ITA NO. 659 /HYD/1 9 THE CHITTOOR COOPERATIVE TOWN BANK LTD., CHITTOOR. : - 5 - : 6. THE LD. CIT - DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVEN UE AUTHORITIES. THE FACT THAT THE ASSESSEE FILED THE REVISED RETURN OF INCOME BY CLAIMING PROVISION FOR BAD AND DOUBTFUL DEBTS. THERE IS NO DOUBT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BANKING AND HAS MADE PROVISION FOR BAD AND DOUBTFUL DEBTS FOR LOANS AND ADVANCES. THE AO DOUBTED WHETHER IT WAS A RESERVE OR PROVISION. BUT, THE ASSESSEE IN THE SECOND REVISED COMPUTATION OF INCOME IN THE PROFIT & LOSS ACCOUNT, IT CHANGED AS PROVISION IN PLACE OF RESERVE . THE CONTENTION OF THE ASSESSEE IS THAT I TS CASE IS COVERED BY THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. VIJAYA BANK, [2021] 123 TAXMANN.COM 214 (KAR.) BEFORE THE HONBLE COURT THE QUESTION AROSE I.E. WHETHER DEDUCTION UNDER SECTION 36(1)(VII) IN RESPECT OF PROVIS ION FOR BAD DEBTS WAS TO BE ALLOWED TO ASSESSEE - BANK EVEN THOUGH ITA NO. 659 /HYD/1 9 THE CHITTOOR COOPERATIVE TOWN BANK LTD., CHITTOOR. : - 6 - : ASSESSEE BANK HAD NOT DEBITED ANY BAD DEBTS WRITE OFF IN PROFIT AND LOSS ACCOUNT AND ONLY PROVISION FOR BAD DEBTS (PRUDENTIAL WRITE - OFF HAD BEEN MADE ? THE COURT HELD THAT DEDUCTION U/S 36(1) (VII) CAN BE ALLOWED WHEN THE PROVISION IS MADE FOR BAD DEBTS IN P&L ACCOUNT . IT IS CLEAR FROM THE ORDER OF THE CIT(A) THAT IN THE REVISED PROFIT & LOSS ACCOUNT, THE DISPUTED ISSUE WAS DEBITED IN THE PROFIT & LOSS ACCOUNT. THEREFORE, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE COURT, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE ASSESSEES CLAIM OF THE PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS. 12,74,887/ - . ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN CO URT ON 19 TH APRIL , 2021 . SD/ - SD/ - ( S.S. GODARA ) (LAXMI PRASAD SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 19 TH APRIL , 20 2 1 . K V ITA NO. 659 /HYD/1 9 THE CHITTOOR COOPERATIVE TOWN BANK LTD., CHITTOOR. : - 7 - : C OPY TO : 1 THE CHITTOOR COOPERATIVE TOWN BANK LTD., D. NO. 18 - 776, CHURCH STREET, CHITTOOR. 2 ITO, WARD 2, CHITTOOR, ANDHRA PRADESH 3 C I T(A) , TIRUPATI 4 PR. CIT , TIRUPATI. 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.