DCIT, Cir-2, Jalpaiguri, Jalpaiguri V. M/s Uttar Banga Kshetriya Gramin Bank, Coochbihar

ITA 707/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1075 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 22-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T VARKEY JUDIC IA L M EMBER
• Keywords: Bad and doubtful debts; Provision of bad debts
• Section: 143(3); 37(1)

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI ABY.T VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 7 07 - 708 / KOL / 2015 ASSESSMENT YEARS:2011-12 & 2012-13 DCIT, CIRCLE-2, 2 ND FLOOR, C.R. BUILDING, RACE COURE PARA, NAYA BASTY, JALPAIGURI- 735101 V/S . M/S UTTAR BANGA KSHETRIYA GRAMI BANK, HEAD OFFICE, SUNITY ROAD, P.O & DIST. COOCHBEHAR PIN 736 101 [ PAN NO.AAACU 9683 Q ] /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI S.K. TULSIYAN, ADVOCATE /BY REVENUE NONE /DATE OF HEARING 03-10-2017 /DATE OF PRONOUNCEMENT 08-11-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- BOTH APPEALS FILED BY THE REVENUE ARE DIRECTED AGA INST THE COMMON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-JALPA IGURI DATED 30.03.2015. ASSESSMENTS WERE FRAMED BY DCIT, CIRCLE-2,JALPAIGUR I U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDERS DATED 25.03.2014 & 30.09.2014 FOR ASSESSMENT YEARS 2011-12 & 2012-13 RESPECTIVELY. 2. IT WAS NOTICED THAT NONE APPEARED ON BEHALF OF R EVENUE NOR FILED ANY ADJOURNMENT APPLICATION. THUS IN THE ABSENCE OF ANY PLAUSIBLE REASON WE REGRET TO ADJOURN AND DECIDED TO DISPOSE OF THE SAM E ON MERIT AFTER HEARING ITA NO.707-708/KOL/2015 ASSESSMENT YEA RS 2011-12 & 2012-13 DCIT, CIR-2, JAL VS. M/S UTTAR BANGA KSHETRIYA GRAMIN BANK PAGE 2 THE LD. AUTHORIZED REPRESENTATIVE APPEARED ON BEHAL F OF ASSESSEE, SHRI, S.K. TULSIYAN. 3. SINCE COMMON GROUNDS ARE INVOLVED IN BOTH THE AP PEAL OF REVENUE EXCEPT FIGURES, THEREFORE THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENI ENCE. REVENUES APPEAL IN ITA NO.707/KOL/2015 FOR A.Y. 20 11-12 AS LEAD CASE : 4. GROUNDS RAISED BY REVENUE IN ITS APPEAL ARE REPR ODUCED BELOW:- 1. THE LD. CIT HAS ERRED IN LAW AND FACT IN DIRECT ING THE ASSESSING OFFICER TO VERIFY THE PAYMENTS MADE TO RECOVERY AGE NTS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN ALL OWING PAYMENT OF RS.2,02,123/- OF PERSONAL NATURE FOR THE HOTEL EXPE NSES TO THE AUDITORS MERE ON THE POINT THAT PAYMENTS TO AUDITORS AS WELL AS TA/DA AND HOTEL EXPENSES WERE MADE AS PER THE GUIDELINES OF RBI. TH E GUIDELINES OF RBI CANNOT ABSOLVE THE ASSESSEE FROM DEDUCTION OF T AX AT SOURCE U/S 194J OF THE IT ACT, 1961. 3. THE LD. CIT(A) HAS NOT REBUTTED THE ARGUMENT OF THE ASSESSING OFFICER REGARDING PAYMENT OF RS.3,63,228/- TO LAYER S. PAYMENT MADE TO LAYERS FOR FILING OF IT RETURNS AND REPRESENTING BE FORE THE INCOME TAX AUTHORITIES DOES NOT ESTABLISH THE FINANCIAL POSITI ON OF THE ASSESSEE AND PAYMENTS MADE TO LAYERS FOR APPEARING BEFORE THE CO URTS, ON ISSUES RELATED WITH THE GRIEVANCE OF THE EMPLOYEES FOR NON -PROMOTION, INCREMENT, PENSION, APPOINTMENT ARE NOT BUSINESS RE LATED EXPENDITURE. 4. THE LD. CIT(A) HAS ERRED IN LAW AND FACT IN ALLO WING DEDUCTION U/S.36(1)((VII) FOR BAD DEBTS AND U/S. 36(1)(VIIA) FOR PROVISION OF BAD DEBTS, AS THOSE WERE NOT CLAIMED IN THE SPECIFIC WA Y. 5. RELIANCE IS PLACED ON THE RATIO OF THE FOLLOWING JUDGMENTS: A) VISARA TRADING INVESTMENT PVT. LTD VS.ITO, WARD- 9(2), KOLKATA ITA NO.994(KOL) OF 2009 A.Y 205-06 ORDER DATED 15.02.20 12 B BENCH, KOLKATA B) CIT-II VS. JONSAN PARK ADVERTISING & MARKETING P VT. LTD. [2015] 56 TAXMAN.COM 286 (DELHI) C) GOETZE (INDIA) LTD. VS. CIT (2006) 204 CTR 182 ( SC) 5. IN VIEW OF THE ABOVE FACTS, PROVISION OF LAW AND RATIO OF JUDGEMENTS, SUBSTANTIAL QUESTIONS OF LAW ARISES. 6. THE APPELLANT MAY PLEASE BE ALLOWED TO ADD OR AL TER THE GROUNDS OF APPEAL, IF ANY. ITA NO.707-708/KOL/2015 ASSESSMENT YEA RS 2011-12 & 2012-13 DCIT, CIR-2, JAL VS. M/S UTTAR BANGA KSHETRIYA GRAMIN BANK PAGE 3 5. FIRST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN GIVING DIRECTION TO THE ASSESSING OFFICER TO VERIFY THE PAYMENTS MADE TO RECOVERY AGENT. 6. BRIEFLY, THE FACTS OF THE CASE ARE THAT ASSESSE E IS A REGIONAL RURAL BANK AND ENGAGED BUSINESS OF BANKING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE FAILED TO DE DUCT TAX AT SOURCE (FOR SHORT TDS) ON THE AMOUNT OF COMMISSION FOR 24,310/- U/S 194H OF THE ACT. THEREFORE, THE AMOUNT OF COMMISSION EXPENSE OF 24,310/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 7. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE COMMI SSION WAS PAID IN SMALL AMOUNT AND IT DOES NOT FALL UNDER THE PROVISION OF SECTION 194H OF THE ACT. ACCORDINGLY, LD. CIT(A) DIRECTED TO THE AO TO VERIF Y THE AMOUNT OF COMMISSION BY OBSERVING AS UNDER:- THE ASSESSEE SUBMITTED THAT SOME OF THE TDS IS N OT REFLECTED IN THE TDS DATA OF THE DEPARTMENT BUT HAVE BEEN PAID BY TH E ASSESSEE. THE AO IS DIRECTED TO VERIFY THE CONTENTIONS OF THE ASS ESSEE REGARDING TDS AND TAKE ACTION AS PER LAW. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 8. LD. AR BEFORE US SUBMITTED THAT THE DIRECTION IS SUED BY LD. CIT(A) IS VERY SPECIFIC AND THEREFORE IT CANNOT BE SAID THAT THE MATTER HAS BEEN RESTORED BACK TO THE FILE OF AO. HE RELIED ON THE ORDER OF L D. CIT(A). 9. WE HAVE HEARD THE LD. AR AND PERUSED THE MATERIA L AVAILABLE ON RECORD. AT THE OUTSET WE FIND THAT LD. CIT(A) HAS G IVEN A VERY SPECIFIC DIRECTION TO CHECK WHETHER THE AMOUNT OF COMMISSION IS SUBJEC T TO TDS UNDER SECTION 194H OF THE ACT. THEREFORE, WE CONCLUDE THAT THE MA TTER HAS NOT BEEN RESTORED BACK TO THE FILE OF AO IN CONTRAVENTION TO THE PROV ISION OF SECTION 251 OF THE ITA NO.707-708/KOL/2015 ASSESSMENT YEA RS 2011-12 & 2012-13 DCIT, CIR-2, JAL VS. M/S UTTAR BANGA KSHETRIYA GRAMIN BANK PAGE 4 ACT AS ALLEGED BY REVENUE. HENCE, THIS GROUND OF RE VENUES APPEAL IS DISMISSED. 10. NEXT ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR 2,02,123/- ON ACCOUNT OF TA/DA AND HOTEL EXPENSES INCURRED BY THE AUDITOR WITHOUT DEDU CTING TDS U/S. 194-J OF THE ACT. 11. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S CLAIMED AUDIT FEES EXPENSE FOR AN AMOUNT OF 7,52,738/- ONLY. OUT OF SAID AMOUNT, TDS WAS DEDUCTED ON AN AMOUNT OF 5,50,675/- ONLY. THUS, ON REST OF AMOUNT OF 2,02,123/- WAS INCURRED WITHOUT DEDUCTING THE TDS. 11.1 BESIDES THE VIOLATION OF TDS PROVISION THE AO OBSERVED THAT ASSESSEE HAS INCURRED THE EXPENSE OF 2,02,123/- ON THE TRAVELLING AS WELL AS HOTEL EXPENSE FOR 1,04,393 & 97,730/- RESPECTIVELY. THE AO WAS OF THE VIEW THAT THE ABOVE SAID EXPENSES ARE IN THE NATURE OF PERSON AL EXPENSES AND THEREFORE IT HAS NO BUSINESS CONNECTION OF THE ASSESSEE. THUS , AO DISALLOWED THE SUM OF 2,02,123/- AND ADDED TO THE TOTAL INCOME OF ASSESSE E. 12. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THESE EXP ENSES WERE INCURRED AS PER THE GUIDELINES OF RBI FOR GETTING THE ACCOUNT A UDITED. ALL THE EXPENSES INCURRED BY THE ASSESSEE SUCH AS AUDIT FEES, TA/DA/ HOTEL EXPENSES ARE INCIDENTAL TO THE BUSINESS. LD. CIT(A) AFTER HEARIN G THE CONTENTION OF ASSESSEE DELETED THE ADDITION MADE BY THE AO. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 13. WE HAVE HEARD RIVAL LD. AR AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN THE INSTANT CASE THE DISALLOWANCE WAS MA DE OF THE EXPENSES INCURRED ON TA/DA AS WELL AS HOTEL EXPENSE OF THE A UDITORS. THE AO WAS OF THE VIEW THAT THE EXPENSES ARE PERSONAL IN NATURE A ND THEREFORE IT HAS NO ITA NO.707-708/KOL/2015 ASSESSMENT YEA RS 2011-12 & 2012-13 DCIT, CIR-2, JAL VS. M/S UTTAR BANGA KSHETRIYA GRAMIN BANK PAGE 5 BUSINESS NEXUS. HOWEVER, LD. CIT(A) HELD THAT THES E EXPENSES WERE INCURRED AS PER THE GUIDELINES OF RBI AND ACCORDINGLY, DELET ED THE ADDITION. THERE IS NO AMBIGUITY THAT THE ASSESSEE HAS TO GET ITS ACCOUNT AUDITED COMPULSORY BY A QUALIFIED CHARTERED ACCOUNTANT. ACCORDINGLY, ASSESS EE IS LIABLE TO INCUR THE COST BY WAY OF AUDITORS FEES, TRAVELLING EXPENSES AND HOTEL EXPENSES OF THE SAID AUDITORS AS PER THE RBI GUIDELINES. THEREFORE, WE HOLD THAT THESE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE IN RELA TION TO ITS BUSINESS. THEREFORE THESE EXPENSES CANNOT BE REGARDED AS PERS ONAL EXPENSES OF THE AUDITORS. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). HOWEVER, WE NOTE THAT THE INSTANT ISSUE WAS RAISED BEFORE US FOR THE DISALLOWANCE ON ACCOUNT OF NON-DEDUCTION OF TDS. TH EREFORE, SAME IS NOT ELIGIBLE FOR DEDUCTION AS THE ASSESSEE FAILED TO DE DUCT TDS. HOWEVER, ON PERUSAL OF RECORD, WE FIND THAT AO DURING THE COURS E OF ASSESSMENT PROCEEDINGS HAS MADE THE REFERENCE TO THE PROVISION OF TDS APPLICABLE ON TA/DA AND HOTEL EXPENSE INCURRED BY ASSESSEE. BUT S AME WAS NOT DISALLOWED ON ACCOUNT OF NON-DEDUCTION OF TDS BUT THIS WAS DIS ALLOWED AS IMPUGNED EXPENSES ARE IN NATURE OF PERSONAL EXPENSES. AS THE ISSUE OF NON-DEDUCTION OF TDS IS NOT ARISING FROM THE ORDER OF AO, THEREFO RE, WE REFRAIN OURSELVES FROM ADJUDICATING THE SAME. HENCE, THIS GROUND OF R EVENUES APPEAL IS DISMISSED. 14. NEXT ISSUE RAISED BY REVENUE IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER FOR 3,63,228/- ON ACCOUNT OF PAYMENTS TO LAWYERS. 15. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S INCURRED THE FOLLOWING EXPENSES:- SL.NO. NAME ADDRESS AMOUNT 1 MIHIR BANERJEE INCOME TAX RETURN FILING APPEARING BEFORE IT AUTHORITIES 63,100 2 M/S CHARU SUNDAR BASU APPEARING BEFORE HC 1,76,2 35 3 OTHERS 1,23,953 ITA NO.707-708/KOL/2015 ASSESSMENT YEA RS 2011-12 & 2012-13 DCIT, CIR-2, JAL VS. M/S UTTAR BANGA KSHETRIYA GRAMIN BANK PAGE 6 THE ABOVE EXPENSES WERE TREATED BY THE AO AS PERSON AL IN NATURE. AS PER THE AO THE EXPENSES INCURRED BY THE ASSESSEE WERE NOT R ELATED TO THE BUSINESS OF ASSESSEE. ACCORDINGLY, AO DISALLOWED THE SAME AND A DDED TO THE TOTAL INCOME OF ASSESSEE. 16. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO DELETED THE ADDITION MADE BY AO BY OBSERVING THAT T HE PAYMENT WAS MADE TO CA/LAWYERS TO SAFEGUARD THE INTEREST OF ASSESSEES BUSINESS AS WELL AS TO ENSURE VARIOUS COMPLIANCE REQUIRED UNDER VARIOUS AC TS. THUS, THESE EXPENSES CANNOT BE REGARDED AS PERSONAL IN NATURE. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 17. LD. AR FOR THE ASSESSEE RELIED ON THE ORDER OF LD. CIT(A) AND HE STATED THAT THE ISSUE MAY BE DECIDED ON MERIT. 18. WE HAVE HEARD LD. AR FOR THE ASSESSEE AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, DISALLOWA NCES WERE MADE BY AO TREATING THE EXPENSES INCURRED BY ASSESSEE UNDER TH E HEAD LAWYERS FEES AS PERSONAL IN NATURE. HOWEVER, ON PERUSAL OF THE FACT S OF THE CASE, WE FIND THAT THESE EXPENSES WERE INCURRED BY ASSESSEE IN CONNECT ION ITS BUSINESS ACTIVITIES AND THEREFORE THESE EXPENSES ARE ELIGIBL E FOR DEDUCTION U/S 37(1) OF THE ACT. IN THE LIGHT OF ABOVE REASONING, WE HOLD T HAT THE ORDER OF THE LD. CIT IS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERE NCE IS CALLED FOR. CONSEQUENTLY, REVENUES GROUND IS DISMISSED. 19. LAST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN GIVING DIRECTION TO THE AO TO ALLOW DEDUCTION U/S.3 6(1)(VII) FOR BAD DEBT AS WELL AS U/S. 36(1)(VIIA) FOR THE PROVISION OF BAD DEBT A FTER NECESSARY VERIFICATION. 20. AT THE OUTSET, IT WAS OBSERVED THAT ABOVE ISSUE HAS ALREADY BEEN DECIDED BY THIS TRIBUNAL IN REVENUES APPEAL IN ITA NO.576/KOL/2015 FOR A.Y. 2010-11 WHEREIN THIS MATTER WAS REMITTED BACK TO TH E FILE OF AO IN TERMS OF OUR ITA NO.707-708/KOL/2015 ASSESSMENT YEA RS 2011-12 & 2012-13 DCIT, CIR-2, JAL VS. M/S UTTAR BANGA KSHETRIYA GRAMIN BANK PAGE 7 DECISION (SUPRA). CONSEQUENTLY, REVENUES GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 21. IN THE RESULT, REVENUES APPEAL IS ALLOWED PART LY FOR STATISTICAL PURPOSE. COMING TO REVENUES APPEAL IN ITA NO.708/KOL/2015 F OR A.Y. 12-13 . 22. IN THE APPEAL, SINCE THE FACTS ARE EXACTLY IDE NTICAL, LD. AR AGREED WHATEVER VIEW TAKEN IN THE ABOVE APPEAL (ITA NO.707 /KOL/2015) MAY BE TAKEN IN THIS APPEAL ALSO, WE HOLD ACCORDINGLY. 23. IN THE RESULT, REVENUES APPEAL IS ALLOWED PART LY FOR STATISTICAL PURPOSE. 24. IN COMBINE RESULT, BOTH APPEAL OF REVENUE ARE TREAT ED PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT 08 /11/2017 SD/- SD/- (ABY. T. VARKEY) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP &- 08 / 11 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S UTTAR BANGA KSHETRIYA GRMIN BANK, H. O. SUNITY ROAD, P.O. & DIST. COOCHBEHA R IN 736101 2. /REVENUE-DCIT, CIRCLE-2, 2 ND FL, C.R. BUILDING, RACE COURSE, PARA, NAYA BASTY, JALPAIGURI P IN 735101 3. 1 2 / CONCERNED CIT KOLKATA 4. 2- / CIT (A) KOLKATA 5. 5 881, 1, / DR, ITAT, KOLKATA 6. ; / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 1,