Deputy Commissioner of Income Tax, Pune V. M/s. Pune Urban Co-op Bank Ltd, Pune

ITA 708/PUN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0103 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 24-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Section: 271(1)(c); 43D; 147; 145

Judgement Text

' IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 708/PUN/2017 / ASSESSMENT YEAR : 2007-08 DCIT, CIRCLE-5, PUNE. ....... / APPELLANT / V/S. M/S. PUNE URBAN CO-OP BANK LTD., PLOT NO.BC-2, GULTEKADI, MARKET YARD, PUNE-411037. PAN-AAAAP0284A / RESPONDENT ASSESSEE BY : SHRI M.K.KULKARNI REVENUE BY : SHRI PANKAJ GARG / DATE OF HEARING : 14.05.2019 / DATE OF PRONOUNCEMENT : 17.05.2019 / ORDER PER D.KARUNAKARA RAO, AM : THIS APPEAL BY THE REVENUE IS FILED AGAINST THE ORDER OF THE LD. CIT(APPEALS)-4, PUNE DATED 10.10.2016 FOR THE ASSESSMENT YEAR 2007- 08. THE REVENUE HAS RAISED FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN DELETING ADDITION OF INTEREST OF RS. 2,55,12,739/- ON NPA WHEN THE SAID INTEREST HAS ACCRUED TO THE BANK AS PER THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY IT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW WHETHER THE CIT(A) WAS CORRECT IN HOLDING THAT THE PROVISION OF SECTION 43D OF THE IT ACT' 1961 WILL NOT BE APPLICABLE TO THE 2 ITA NO. 708/PUN/2017 A.Y.2007-08 ASSESSEE BANK BEING CO-OPERATIVE SOCIETY AND NOT FINANCIAL INSTITUTION? 3. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING THE ORDER OF THE CIT(A) BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES, LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BANKING ACTIVITIES. IT FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING. IN THE REASSESSMENT MADE U/S 143 R.W.S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT ACT), THE ASSESSING OFFICER DISALLOWED INTEREST CLAIM ON NPS TO THE TUNE OF RS.3,84,88,635/- AS PER THE DISCUSSION GIVEN IN PARA 6 ALONGWITH ITS SUB-PARAGRAPHS. CONTENTS OF PARA 6.8 & 6.9 ARE RELEVANT AND THE SAME ARE EXTRACTED HEREUNDER:- 6.8. TO SUM UP, RBI GUIDELINE HAVE BEEN ISSUED UNDER DELEGATED LEGISLATION FOR THE PURPOSE OF EFFECTIVE SUPERVISION AND CONTROL OF MONETARY AND SYSTEM AND TO SUPERVISE AND EXERCISE CONTROL ON BANKS AND NBFCS. THE RBI GUIDELINE WOULD NOT OVERRIDE THE MANDATORY PROVISIONS OF SECTION 145 AND ACCRUAL OF INCOME UNDER SECTION 5. SINCE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE INTEREST INCOME FROM ASSETS INCLUDING NPAS HAS TO BE ASSESSEE TO TAX ON ACCRUAL BASIS. 6.9. AS PER SECTION 43D OF THE ACT: ONLY THE ABOVE MENTIONED RECORDED ON THE REASONS ARE ELIGIBLE FOR THE BENEFIT OF SECTION 43D. IN THE PRESENT THE ASSESSEE IS NOT ELIGIBLE FOR THE BENEFIT OF SECTION 43D TO CONSIDER THE INTEREST INCOME ON NON PERFORMING ASSETS AS AND WHEN RECEIVED. HENCE THE ASSESSEE HAS FAILED TO OFFER INTEREST INCOME OF RS.3,84,88,635/- ON ACCRUAL BASIS AND IS HEREBY ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE 3 ITA NO. 708/PUN/2017 A.Y.2007-08 PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE I.T.ACT ARE INITIATED FOR CONCEALMENT OF INCOME. 3. IN THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE SIMILAR ADDITION WAS MADE IN THE PAST FOR THE AY 2010-11 AND THE CLAIM OF THE ASSESSEE WAS ALLOWED BY THE TRIBUNAL VIDE ITA NO.2001/PN/2013 DATED 29.09.2014 IN THE ASSESSEES OWN CASE FOR AY 2010-11. HE ALSO SUBMITTED THAT THE DECISION AS TAKEN IN FAVOUR OF THE ASSESSEE RELYING ON THE ANOTHER DECISION IN THE CASE OF THE OMERGA JANTA SAHAKARI BANK LTD. IN THIS REGARD. THE SAID APPEAL DISCUSSED IN THIS ISSUE AT PARA 5 AND OTHER PARAGRAPHS. THE ASSESSEE CONTESTED THE ASSESSING OFFICERS CONTENTION OVER THE TAXABILITY OF INTEREST INCOME OF RS.3,84,88,635/- ON ACCRUAL BASIS. HE ALSO CONTESTED THAT THE ASSESSEE IS ELIGIBLE FOR BENEFIT OF DEDUCTION U/S 43D OF THE ACT. ON CONSIDERING THE ASSESSEES SUBMISSIONS AS WELL AS THE INSTRUCTION NO.17 OF THE CBDT, THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE RELYING ON THE SAID ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE. LD.DR SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER IS FAIR AND REASONABLE AND THE SAME REQUIRES TO BE CONFIRMED AND THE ORDER OF CIT(A) SHOULD BE REVERSED. 4. ON THE OTHER HAND, THERE WAS NONE TO REPRESENT BEFORE US ON BEHALF OF THE ASSESSEE. 5. ON HEARING, LD. DR FOR THE REVENUE, WE FIND THAT THE DECISION TAKEN BY THE CIT(A) IS IN TUNE WITH THE PRINCIPAL OF JUDICIAL CONSISTENCY AND THE RELIEF GRANTED BY THE CIT(A) IS BASED ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA). IN THIS REGARD, WE REPRODUCED THE CONTENTIONS OF PARA 5.3 TO 5.3.4 FOR THE SAKE OF COMPLETENESS:- 4 ITA NO. 708/PUN/2017 A.Y.2007-08 5.3.1. THE COPIES OF THE BALANCE SHEET FOR A.Y.2007-08 HAS BEEN DULY PURSUED. THERE IS NO DOUBT ADDITION OF RS.3,84,88,695/- WAS MADE ON THE BASIS OF OUTSTANDING BALANCE AS PER THE BALANCE SHEET AS ON 31.03.2007 WHICH IS AS UNDER:- INTEREST RECEIVABLE ON INVESTMENT RS.1,29,75,896 INTEREST RECEIVABLE ON NPA LOAN ADVANCED RS.2,55,12,739 TOTAL RS.3,84,88,635 OUT OF THE ABOVE RS.3,84,88,635/-, AN AMOUNT OF RS.1,29,75,896 PERTAINS TO INTEREST RECEIVABLE ON INVESTMENT OF THE ASSESSEE WHICH HAS ALREADY BEEN CREDITED TO THE PROFIT AND LOSS A/C. THE LD. AO HAS ERRONEOUSLY TREATED IT AS ACCRUED INTEREST ON NPA ACCOUNT WHICH IS TOTALLY INCORRECT. HENCE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.1,29,75,896/-. 5.3.2. FURTHER, IT IS AN ESTABLISHED FACT THAT THE AO HAS ERRED IN TAKING THE FIGURE OF RS.2,55,12,739/- (CLOSING BALANCE AS ON 31.03.2007) AS INTEREST ACCRUED ON NPA A/C. WITHOUT DEDUCTING RS.3,87,33,470/- (OPENING BALANCE AS ON 01.04.2006). AN ARITHMETICAL MISTAKE HAS BEEN MADE WHILE CALCULATING AMOUNT TO BE TREATED AS INTEREST ACCRUED ON NPA A/C AS THERE WAS NO INTEREST ACCRUED ON NPA A/C.[2,55,12,739 3,81,33,470 = (-) 1,26,20,731]. 5.3.3. THE HON'BLE ITAT, PUNE BENCH 'B', PUNE VIDE ITA NO.2001/PN/2013 DATED 29.09.2014 IN APPELLANT'S OWN CASE FOR A.Y.2010-11 HAS UPHOLD THE CLAIM OF THE APPELLANT BY FOLLOWING THE DECISION PASSED IN THE CASE OF THE OMERGA JANTA SAHAKARI BANK LTD. AS THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN BOTH THE CASES. 5.3.4. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND HON'BLE ITAT, PUNE BENCH'S DECISION IN ITS OWN CASE (SUPRA) FOR A.Y.2010- 11, THE GROUND NO.1 RAISED BY THE APPELLANT IS LIABLE TO BE ALLOWED. 5 ITA NO. 708/PUN/2017 A.Y.2007-08 6. FROM THE ABOVE, IT IS OBVIOUS THAT SOME OF THE ITEMS ARE ALREADY OFFERED TO TAX (RS.1,29,75,896/-). THE CIT(A) ALSO DISCUSSED THE FACTS RELATING TO OTHER SUM OF RS.2,55,12,739/-. FURTHER, THE CIT(A) DISCUSSED THE APPLICABILITY OF THE SAID ORDER OF THE TRIBUNAL TO THE YEAR UNDER CONSIDERATION. WE CONSIDERED THE FACT THAT THE LD. DR COULD NOT DEMONSTRATE THE FACTS IS DIFFERENT FOR THE AY 2010-11. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE ORDER OF CIT(A) IS REASONABLE AND THE SAME DOES NOT NEED ANY INTERFERE. THUS, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 17 TH DAY OF MAY, 2019. SD/- SD/- SD/- SD/- (VIKAS AWASTHY) (D.KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATED : 17 TH MAY, 2019. AMIT KUMAR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT-DCIT, CIRCLE-5, PUNE. 2. / THE RESPONDENT-M/S. PUNE URBAN CO-OP BANK LTD., PLOT NO.BC-2, GULTEKADI, MARKET YARD, PUNE-411037. 3. THE CIT(APPEALS), PUNE. 4. THE CCIT, PUNE. 5. , , / DR, ITAT, PUNE. 6. / GUARD FILE. / BY ORDER, SENIOR PRIVATE SECRETARY , / ITAT, PUNE.