The Kancheepuram Central Co-operative Bank Ltd, Kancheepuram V. DCIT, Vellore

ITA 670/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8597 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 21-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR M M BHUSARI
• Assessee Lawyers: K RAVI
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.670/MDS/2016 ( / ASSESSMENT YEAR: 2010-11) THE KANCHEEPURAM CENTRAL CO- OPERATIVE BANK LTD., 15G, SHEIKPET NORTH STREET, KANCHEEPURAM - 631 501. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, VELLORE. PAN:AAAAK1908J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. K.RAVI, ADVOCATE /RESPONDENT BY : DR.M.M.BHUSARI, CIT /DATE OF HEARING : 22 ND JUNE, 2016 /DATE OF PRONOUNCEMENT : 7 TH SEPTEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 13, CHENNAI DATED 14.12.2015 IN ITA NO.283/CIT(A)- 13/2010-11 PASSED UNDER SECTION 143(3) R.W.S 250(6 ) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS APPEALS, HOWEVER, THE CRUXES OF THE ISSUES ARE AS F OLLOWS:- I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE DISALLOWANCE AMOUNTING TO RS.31,15,08,410/- MADE BY THE LEARNED ASSESSING OFFICER BEING PROVISION CREATED TOWARDS NPA UNDER SECTION 36(1)(VII) OF THE ACT. 2 ITA NO.670/MDS/2016 II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING THE QUANTUM OF AGGREGATE AVERAGE ADVANCES ADOPTED BY THE ASSESSING OFFICER F OR THE PURPOSE OF GIVING RELIEF UNDER SECTION 36(1)(VI IA) OF THE ACT. 3. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND W HICH IS AS FOLLOWS:- THE ASSESSEE BEING A CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING IS ELIGIBLE FOR DEDUCTION U NDER SECTION 80P OF THE ACT EQUAL TO THE SUM OF PROFIT A ND GAINS ATTRIBUTABLE TO THE BUSINESS OF BANKING. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO- OPERATIVE SOCIETY CARRYING ON BANKING BUSINESS FILE D ITS RETURN OF INCOME ON 30.09.2010 FOR THE ASSESSMENT YEAR 201 0-11 ADMITTING INCOME OF RS.5,89,61,130/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS IS SUED TO THE ASSESSEE ON 30.08.2011. THEREAFTER THE ASSESSMENT W AS COMPLETED BY THE LEARNED ASSESSING OFFICER ON 07.03 .2013 UNDER SECTION 143(3) OF THE ACT WHEREIN HE HAS MADE CERTAIN ADDITIONS/ DISALLOWANCES AMONGST WHICH ONE OF THE A DDITION WAS PROVISION CREATED TOWARDS NPA AMOUNTING TO RS.31,15,08,410/-. 3 ITA NO.670/MDS/2016 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.31,15,08,416/- . IT WAS EXPLAINED BY THE LEARNED AUTHORIZED REPRESENTATIVE THAT THE A SSESSEE HAD NOT CLAIMED DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT BUT IN FACT THEY HAVE CLAIMED DEDUCTION UNDER SECTI ON 36(1)(VII) R.W.S. 36(2) OF THE ACT. THE GIST OF THE SUBMISSION OF THE LEARNED AUTHORIZED REPRESENTATIVE BEFORE THE LE ARNED ASSESSING OFFICER IS REPRODUCED HEREIN BELOW FOR RE FERENCE: THE ASSESSEE HAS CLAIMED DEDUCTION WITH REGARD TO BAD DEBTS U/S.36(1)(VII) AND NOT UNDER SECTION 36(1)(VI IA). BAD DEBTS NEED NOT BE PROVEN TO BE IRRECOVERABLE U/S.36(1)(VIIA). THERE WAS NO OMISSION/ERROR IN CALCULATING THE INCOME. THE ASSESSEE HAS WRITTEN OF F IN THE PROFIT AND LOSS ACCOUNT AS PER THE WORKING GIVE N BELOW:- BAD DEBTS AS AT 31.03.2010 : RS.120,32,58,741 BAD DEBTS AS AT 31.03.2009: RS. 89,17,50,325 BAD DEBTS DEBITED TO P&L A/C. 31,15,08,416 THEREAFTER ON EXAMINING THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE LEARNED ASSESSING OFFICER ARRIVED AT A CONCLUSION THAT THE ASSESSEE HAD ONLY CREATED A PRO VISION FOR BAD & DOUBTFUL DEBTS AND HAD NOT WRITTEN OFF ANY BA D DEBTS DURING THE FINANCIAL YEAR 2009-10 AND THEREFORE MAD E 4 ITA NO.670/MDS/2016 ADDITION OF RS.31,15,08,410/- BY DISALLOWING THE BA D DEBT NOT WRITTEN OFF IN THE BOOKS OF ACCOUNTS. 6. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) UPHELD THE ORDER OF THE LEARNED ASSESSING OFFICER BY AGREEING WITH THE OBSERVATIONS MADE BY THE LEARN ED ASSESSING OFFICER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. SINCE TH E ASSESSEE IS A CO-OPERATIVE SOCIETY CARRYING ON BANK ING BUSINESS, IT IS ELIGIBLE FOR DEDUCTION UNDER SECTIO N 36(1)(VIIA) OF THE ACT TOWARDS CERTAIN PROVISION MADE FOR BAD A ND DOUBTFUL DEBTS IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. WHEN SUCH PROVISION IS ALLOWED AS DEDUCTION, THE AC TUAL BAD DEBT OF THE ASSESSEE HAS TO BE CHARGED TO THAT ACCO UNT AND ONLY IF THERE IS AN EXCESS FURTHER DEDUCTION WILL B E ALLOWED UNDER SECTION 36(1)(VII) OF THE ACT. THE PROVISION S OF SECTION 36(1)(VII) IS REPRODUCED HEREIN BELOW FOR REFERENCE AND TO JUSTIFY THE SAME: 5 ITA NO.670/MDS/2016 36(1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRE D TO IN SECTION 28- 36(1)(VII) : SUBJECT TO THE PROVISIONS OF SUB-SECTI ON (2), THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH CLAUSE (VIIA) APPLIES, THE AMOUNT OF THE DEDUCTION RELATING TO ANY SUCH DEBT OR PART THEREOF SHALL BE LIMITED TO THE AMOUNT WHICH SUCH DEBT OR PART THERE OF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE. 8. FURTHER, AS PER THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF VIJAYA BANK VS. CIT REPORTED IN 231 CTR 209 IT HAS BEEN HELD THAT THE IF AN ASSESSEE DEBITS AN AMOUNT OF DOUBTFUL DEBT TO PROFIT AND LOSS ACCOUNT AND CRED ITS SUNDRY DEBTORS ACCOUNT THE SAME SHOULD BE ALLOWED AS A DE DUCTION. THIS DECISION BEING THE LAW OF LAND HAS TO BE METIC ULOUSLY FOLLOWED BY ALL THE RELEVANT AUTHORITIES. HOWEVER, AT THE SAME TIME, AN EFFECTIVE CONTROL HAS TO BE EXERCISED AND ESTABLISHED BEFORE THE REVENUE SO THAT THE SAME DEBTORS ARE NOT CLAIMED AS BAD DEBTS AGAIN AND AGAIN BECAUSE THE DEBTORS TO WARDS WHICH SUCH BAD DEBTS ARE CLAIMED ARE NOT WRITTEN OF F IN THE BOOKS OF ACCOUNTS. SINCE THESE ASPECTS HAVE NOT BEE N 6 ITA NO.670/MDS/2016 CONSIDERED BY THE LEARNED ASSESSING OFFICER, WE HER EBY REMIT BACK THE MATTER TO THE FILE OF THE LEARNED ASSESSIN G OFFICER FOR FRESH CONSIDERATION, ACCORDINGLY THE ISSUE WITH RES PECT TO COMPUTATION OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT IS ALSO REMITTED BACK FOR FRESH CONSIDERATION. FURT HER, SINCE THE ASSESSEE HAS RAISED AN ADDITIONAL ISSUE IN REGA RD TO THE CLAIM OF DEDUCTION UNDER SECTION 80P OF THE ACT FOR THE FIRST TIME, THE ISSUE IS ALSO REMITTED BACK TO THE FILE O F THE LEARNED ASSESSING OFFICER FOR DENOVO CONSIDERATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 7 TH SEPTEMBER, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 7 TH SEPTEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .