ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE, KOTA V. M/S JHALAWAR SAHKARI BHOOMI VIKAS BANK LTD., JHALAWAR

ITA 672/JPR/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5932 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 08-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VARINDAR MEHTA
• Keywords: Business expenditure; Additional evidence; Bad and doubtful debts; Set aside

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC H A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 672/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2014-15 ACIT, CIRCLE-01, KOTA CUKE VS. JHALAWAR SAHAKARI BHOOMI VIKAS BANK LTD., SAHAKAR BHAWAN, N. H. NO. 12, JHALRAPATAN ROAD, JHALAWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAAJ1243M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI VARINDAR MEHTA (CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : NONE LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 04/09/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 01/10/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), KOTA DATED 06.02.2019 WHEREIN THE REVENUE HAS TAKEN THE FOLLOWING SOLE GROUND OF APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE PROVISIONS FOR SURAKSHIT BATTA KHAT A KOSH AND AUADHIPAR SOOD KOSH AMOUNTING TO RS. 4,19,92,976/- WITHOUT AP PRECIATING THE FACTS MENTIONED BY THE AO IN THE ASSESSMENT ORDER. 2. AT THE OUTSET, IT IS NOTED THAT THE MATTER WAS I NITIALLY LISTED FOR HEARING ON 31 ST JULY, 2019 HOWEVER NONE APPEARED ON BEHALF OF THE ASSESSEE. THE BENCH THEREAFTER DIRECTED TO SERVE THE NOTICE TO THE ASSE SSEE THROUGH THE ASSESSING OFFICER AND THE MATTER WAS FIXED FOR HEARING ON 4 TH SEPTEMBER, 2019. AGAIN ON SCHEDULE DATE OF HEARING I.E., 4 TH SEPTEMBER, 2019, THE LD. DR SUBMITTED THAT ITA NO. 672/JP/2019 ACIT, KOTA VS. JHALAWAR SAHAKA RI BHOOMI VIKAS BANK LTD. 2 THE NOTICE HAS BEEN DULY SERVED ON THE ASSESSEE ON 3 RD SEPTEMBER, 2019, HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE. IT WAS ACCORDINGLY DECIDED THAT THE MATTER MAY BE DECIDED ON MERIT AFTER HEARI NG THE LD. DR AND MATERIAL AVAILABLE ON RECORD. 3. DURING THE COURSE OF HEARING, THE LD. DR SUBMITT ED THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS DEBITED FOLLOWING TWO PROVISIONS IN I TS PROFIT AND LOSS ACCOUNT AND A SHOW CAUSE WAS ISSUED TO THE ASSESSEE VIDE ORDER- SHEET ENTRY DATED 9 TH NOVEMBER, 2019 AS TO WHY THESE PROVISIONS MAY NOT B E DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE AS UNDER:- (I) SURAKSHIT BATTA KHATA KOSH RS. 49,17,729/- (II) AVADHIPAR SOOD KOSH RS. 3,70,75,247/- 4. THE ASSESSEE HOWEVER, DID NOT FILE ANY SUBMISSIO NS IN THIS REGARD AND OUR REFERENCE WAS DRAWN TO THE FINDING OF THE ASSES SING OFFICER AT PARA 4.2 OF THE ASSESSMENT ORDER AS UNDER:- THE ASSESSEE HAS NOT SUBMITTED ANYTHING SPECIFIC I N THIS REGARD. AS STATED ABOVE, WHILE COMPUTING INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION DEDUCTION IS ALLOWABLE ONLY TO THOSE EXPENSES, WHICH WERE ACTUALLY INCURRED DURING THE PREVIOUS YE AR FOR EARNING INCOME DECLARED IN THE RETURN OF INCOME. ANY PROVISION, MA DE FOR MEETING ANY EXPENDITURE IN FUTURE OR ANY CONTRIBUTION TO MEET A NY EXPENDITURE IN FUTURE CANNOT BE ALLOWED AS BUSINESS EXPENDITURE OF THE YEAR IN WHICH PROVISIONS WAS CREATED/CONTRIBUTIONS WAS MADE. IT I S ACTUAL EXPENDITURE OF THE YEAR, WHICH IS DEDUCTIBLE AS BUSINESS EXPEND ITURE OF THE YEAR. THEREFORE, THE AFORESAID PROVISIONS BEING DEBITED I N THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDER ATION IS NOT ALLOWABLE. HENCE, THE CLAIM BY THE ASSESSEE FOR DED UCTION OF SURAKSHIT ITA NO. 672/JP/2019 ACIT, KOTA VS. JHALAWAR SAHAKA RI BHOOMI VIKAS BANK LTD. 3 BATTA KHATA KOSH AND AVADHIPAR SOOD KOSH AGGREGATIN G TO RS. 4,19,92,976/- IS NOT ALLOWABLE EXPENDITURE OF THE Y EAR AND ACCORDINGLY THE SAME IS DISALLOWED AND ADDED TO ASSESSEES TOTA L INCOME. 5. IT WAS FURTHER SUBMITTED BY THE LD DR THAT THE L D. CIT(A) HAS ALLOWED THE RELIEF TO THE ASSESSEE ON THE BASIS THE ADDITIONAL EVIDENCE AND THE SUBMISSIONS SO FILED BY THE ASSESSEE DURING THE COURSE OF APPEL LATE PROCEEDINGS WITHOUT CONFRONTING THE ASSESSING OFFICER. IT WAS SUBMITTED THAT IT IS A CASE WHERE THE NECESSARY VERIFICATION HAS NOT BEEN CARRIED BY THE ASSESSING OFFICER AND THE RELIEF HAS BEEN GRANTED BY THE LD. CIT(A) WITHOUT C ONFRONTING THE MATERIAL TO THE ASSESSING OFFICER AND CALLING FOR HIS REMAND RE PORT. THE FOLLOWING FINDINGS OF THE LD. CIT(A) ARE THEREFORE, CONTESTED BY THE R EVENUE BEFORE US WHICH READS AS UNDER:- I HAVE GONE THROUGH ASSESSEE'S SUBMISSION AND AO'S FINDINGS. AS REGARDS GROUNDS OF APPEAL NO 1862 THE ADDITION M ADE BY THE A.O. OF AMOUNTS DEBITED IN THE P 86 L ACCOUNT NAMELY 1) PROVISION FOR DOUBTFUL DEBTS OF RS. 49,17,729/- AND 2) TIME BARRED INTEREST OR DISCOUNT ON DEBTORS RS. 3, 70, 75, 247/- IS UNDER CONTENTION. AS PER THE AO. SINCE THESE AMOUNT S COULD NOT BE DEDUCTED UNLESS SUCH AMOUNTS HAD BEEN WRITTEN OFF I N THE BOOKS & DEDUCTION U/S 36(1)(VII), IT WAS A CASE OF PROVISIO NS FOR BAD & DOUBTFUL DEBTS WHICH WERE NOT ALLOWABLE. ACCORDINGLY HE HAS MADE AN ADDITION OF TOTAL AMOUNT OF RS. 4, 19, 92,976/- IN THE CASE. FROM A PERUSAL OF THE DETAILS AVAILABLE AND FILED IN THE COURSE OF THE APPELLATE PROCEEDINGS, IT IS OBSE RVED THAT THE APPELLANT IS A PRIMARY COOPERATIVE AGRICULTURAL 86 RURAL DEVE LOPMENT BANK WHICH IS COVERED UNDER PROVISIONS OF SECTION 36(1)(VIIA) OF THE LT ACT, 1961. ITA NO. 672/JP/2019 ACIT, KOTA VS. JHALAWAR SAHAKA RI BHOOMI VIKAS BANK LTD. 4 THE BANK FOLLOWS A DOUBLE ENTRY SYSTEM WHERE WHILE ON THE ONE HAND THE PROVISION FOR DOUBTFUL DEBTS, WHICH IS A PROVIS ION CREATED TO MEET ANY LOSS IF THE DEBTORS FAIL TO PAY THE WHOLE OR PA RT OF THE DEBT, IS SHOWN IN THE DEBIT SIDE OF P &L ACCOUNT, IT IS DEDUCTED I N THE DEBTORS ACCOUNT IN THE BALANCE SHEET. SIMILARLY AS REGARDS DISCOUNT ON DEBTORS INTEREST W HICH IS A PROVISION CREATED TO MEET ANY LOSS DUE TO ALLOWING OF DISCOUN T IN THE FOLLOWING YEARS FOR PROMPT PAYMENT BY DEBTORS, IS SHOWN ON TH E DEBIT SIDE OF P & L ACCOUNT AND AT THE SAME TIME IT IS DEDUCTED IN TH E DEBTORS ACCOUNT IN THE BALANCE SHEET. THIS IS THE MANNER IN WHICH BAD DEBTS ARE REQUIRED TO BE WRITTEN OFF AS EXPLAINED BY THE SUPREME COURT IN THE CASE OF VI JAYA BANK V. CIT (2010) 322 ITR 166 (SC). THAT BEING THE LEGAL POSIT ION ON THE SUBJECT, ASSESSEE IS WITHIN THE PARAMETERS OF LAW W HEN IT MADE A CLAIM IN THE PROFIT & LOSS ACCOUNT. THE EXPRESSION 'PROVISION' SHOULD NOT MISGUIDE THE REVENUE AUTHORITIES CONSIDERING TH E SAID LEGAL POSITION AT THE LEVEL OF THE SUPREME COURT ON THE S UBJECT THE HON'BLE SUPREME COURT EXPLAINED THAT WHEN THE ASSESSEE DEBI TS PROVISION FOR DOUBTFUL DEBT TO THE PROFIT & LOSS ACCOUNT AND MAKE S A CORRESPONDING CREDIT TO THE CURRENT LIABILITIES AND PROVISIONS ON THE LIABILITIES SIDE OF THE BALANCE SHEET, IT WOULD CONSTITUTE A PROVISION FOR 'DOUBTFUL DEBT' AND IF NECESSARY AN AMOUNT OF DOUBTFUL DEBT TO THE PROFIT & LOSS ACCOUNT AND CREDITS THE ASSET ACCOUNT LIKE SUNDRY D EBTOR'S ACCOUNT, IT WOULD CONSTITUTE A WRITE OFF OF AN ACTUAL DEBT. SUP REME COURT UPHELD THE SAME BY THE DECISION OF THE DIVISION. BENCH IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS. JCIT (2010) 320 ITR 577 (SC). THUS, THE P&L ACCOUNT IS DEBITED IN THE YEAR WHEN P ROVISION IS MADE AND DEBTORS' ACCOUNTS ARE CREDITED IN THE YEAR WHEN FINALLY DEBTORS' ITA NO. 672/JP/2019 ACIT, KOTA VS. JHALAWAR SAHAKA RI BHOOMI VIKAS BANK LTD. 5 ACCOUNTS ARE WRITTEN OFF. THE BAD DEBT HAS BEEN CLA IMED IN THE YEAR WHEN THE ACCOUNT IS FINALLY WRITTEN OFF IN THE DEBT ORS' ACCOUNTS. PROVISIONS OF SECTION 36(1)(VILL ENVISAGE THAT BAD DEBTS SHALL BE ALLOWED TO THE ASSESSEE WHEN THE AMOUNT OF ANY BAD DEBT OR PART THEREOF IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCO UNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. THEREFORE, THE ADDITIONS MADE BY THE A.0 TOTALING T O RS.4, 19, 92,976/- VIDE THE ABOVE TWO ISSUES IN GROUNDS NO 1& 2 ARE NO T UPHELD AND THE ADDITION IS TO BE DELETED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSING OFFICER HAS D ISALLOWED THE PROVISION FOR DOUBTFUL DEBTS AS WELL AS THE PROVISIONS TOWARDS TI ME BARRED INTEREST/ DISCOUNT ON DEBTORS HOLDING THAT THE SAME IS MADE FOR MEETIN G EXPENDITURE IN FUTURE, IN OTHER WORDS, IT IS A CONTINGENT LIABILITY WHICH CAN NOT BE ALLOWED FOR TAX PURPOSES. FURTHER, THE ASSESSEE CHOOSES TO REMAIN S ILENT AND DIDNT RESPOND TO THE SHOW-CAUSE ISSUED BY THE ASSESSING OFFICER. ON APPEAL, THE LD. CIT(A) HAS REFERRED TO CERTAIN ACCOUNTING ENTRIES AND THE DECI SION OF THE HONBLE SUPREME COURT IN CASE OF VIJAYA BANK VS. CIT (2010) 322 ITR 166 (SC) AND HAS ALLOWED RELIEF TO THE ASSESSEE. WE FIND THAT THE ASSESSING OFFICER HAS NOT BEEN CONFRONTED WITH THE MATERIAL BY WAY OF ACCOUNTING E NTRIES AND TREATMENT OF THE PROVISION IN THE BOOKS OF ACCOUNTS AS WELL AS THE S UBMISSION SO FILED BY THE ASSESSEE AND REMAND REPORT WAS NOT CALLED FOR. GIVE N THAT THE ASSESSEE HAS FAILED TO RESPOND TO THE SHOW-CAUSE AND PRODUCE THE RELEVANT DOCUMENTATION BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND BEFORE THE LD. CIT(A), IT HAS FILED THE ADDITIONAL MATERIAL AN D SUBMISSION, IT WAS INCUMBENT ON PART OF THE LD. CIT(A) TO ALLOW AN OPPORTUNITY T O THE ASSESSING OFFICER TO VERIFY THE ADDITIONAL EVIDENCE/MATERIAL SO SUBMITTE D BY THE ASSESSEE AND SUBMIT HIS REPORT TO THE LD CIT(A). WE THEREFORE F IND THAT IN THE INTEREST OF ITA NO. 672/JP/2019 ACIT, KOTA VS. JHALAWAR SAHAKA RI BHOOMI VIKAS BANK LTD. 6 JUSTICE AND FAIR PLAY, THE MATTER DESERVES TO BE SE T ASIDE TO THE FILE OF THE LD. CIT(A) WITH THE DIRECTIONS TO ALLOW AN OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE MATERIAL AND THE EVIDENCE SO FILED BY T HE ASSESSEE IN SUPPORT OF ITS CONTENTION RAISED BEFORE THE LD. CIT(A). THE MATTE R IS ACCORDINGLY SET ASIDE TO THE FILE OF THE LD. CIT(A) WITH THE AFORESAID DIREC TIONS. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01/10/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 01/10/2019 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT, CIRCLE-01, KOTA 2. IZR;FKHZ@ THE RESPONDENT- JHALAWAR SAHAKARI BHOOMI VIKAS BANK LTD., JHALAWAR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 672/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR