Kankaria Maninagar Nagrik Sahakari Bank Ltd., Ahmedabad V. The ACIT, Circle-12, Ahmedabad

ITA 725/AHD/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8636 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-01-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 11-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: RAHUL PATEL
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI , A.M.) I. T. A. NO. 725 / AHD/ 20 1 4 (A SSESSMENT YEAR: 2010 - 11) KANKARIA MANINAGAR NAGARIK SAHAKARI BANK LTD. JAI NIWAS, MANINAGAR CHAR RASTA, MANINAGAR, AHMEDABAD 380008 V/S ASSISTANT COMMI SSIONER OF INCOME TAX, CIRCLE - 12, AHMDABAD (APPELLANT) (RESPONDENT) PAN: AAAAK 6862D APPELLANT BY : SHRI RAHUL PATEL, A.R. RESPONDENT BY : SHRI ROOP CHAND, SR. D.R. ( )/ ORDER DATE OF HEARING : 09 - 01 - 2015 DATE OF PRONOUNCEMENT : 02 - 02 - 2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) - I I, AHMEDABAD DATED 18.01.2014 FOR A.Y. 2010 - 2011. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 1. ASSESSEE IS A CO - OP. BANK OPERATING WITHIN THE JURISDICTIONAL AREA OF AHMEDABAD AND LICENSED BY RESERVE BANK OF INDIA AS PER THE PROVISIONS OF BANKING REGULATION ACT. ASSESSE E FILED ITS RETURN OF INCOME FOR A.Y. 20 10 - 11 ON 30. 0 9.2010 DECLARING TOTAL INCOME OF RS. 1,76 , 58,140 / - . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SE CTION 143(3) VIDE ITA NO 725/AHD/2014 . A.Y. 2010 - 2011 2 ORDER DATED 28.02.2013 AND THE TOTAL INCOME WAS DETERMINED AT RS. 3,06,27,619/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 18 . 01.2014 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE A FORESAID ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS; - 1. LD. COMMISSIONER OF INCOME TAX ( APPEALS 1 - II, AHMEDABAD ERRED IN LAW AS WELL AS FACTS IN CONFIRMING ADDITION OF RS. 67,21,070/ - ON AMOUNT OF UNREALIZABLE INTEREST ON NON - PERFORMING ADVANCES ( CONSIDERED AS STICKY ACCOUNTS ) WHICH WAS NOT RECOGNIZED AS REVENUE BY THE ASSESSEE BANK FOLLOWING THEORY OF REAL INCOME WHILE DETERMINING ACCRUED INCOME AS PER PROVISIONS OF SECTION 145 OF THE INCOME TAX ACT, 1961. 2. LD. COMMISSIONER OF INCOME TAX ( APPEALS) - II, AHMEDABAD ERRED IN FACTS AS WELL AS IN LAW IN CONFIR MING ADDITION OF RS. 40,35,373/ - PERTAINING TO AN AMOUNT OF INTEREST INCOME ALREADY RECOGNIZED AS INCOME IN THE PRECEDING YEARS FOLLOWING ERSTWHILE GUIDELINES OF RESERVE BANK OF INDIA. 3. LD. COMMISSIONER OF INCOME TAX ( APPEALS ) - II, AHMEDABAD NOT CORREC T IN FACTS AS WELL AS IN LAW IN CONFIRMING DISALLOWANCE TO THE EXTENT OF 20% OF THE ENTIRE DISALLOWANCE OF RS. 19,95,532/ - - MADE BY ID. ASSESSING OFFICER IN RESPECT OF CERTAIN EXPENSES NAMELY - ADVERTISEMENT EXPENSES OF RS. 6.34.904/ - , CONSULTANCY FEE EXP. O F RS. 7,64,000/ - , BUILDING MAINTENANCE EXP. OF RS. 29,168/ - , OFFICE EXP. OF RS. 5,67,460/ - . 1 ST GROUND IS WITH RESPECT TO ADDITION ON ACCOUNT OF UNREALIZABLE INTEREST ON NON PERFORMING ADVANCES. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED T HAT THOUGH THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE INTEREST ON NON PERFORMING ASSETS (NPA) ACCOUNTS WERE NOT OFFERED TO TAX. A.O WAS OF THE VIEW THAT INTEREST ON NPA ACCOUNT S WAS REQUIRED TO BE CALCULATED ON ACCRUAL BASIS AND THEREF ORE SHOULD HAVE BEEN OFFERED TO TAX. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM TO WHICH ASSESSEE INTERALIA SUBMITTED THAT ASSESSEE BEING A BANK WAS GOVERNED BY REGULATIONS PRESCRIBED OF RESERVE BANK OF INDIA (RBI) , NO INTEREST COULD BE RECOGNIZED IN RESP ECT OF NON PERFORMING ASSETS UNLESS THE SAME IS AC TUALLY REALIZED. THE SUBMISSION OF THE ASSESSEE WAS NO T FOUND ACCEPTABLE TO THE A.O AS HE WAS OF THE VIEW THAT THE RBI ACT AND THE INCOME TAX ACT OPERATE IN ALTOGETHER DIFFERENT FIELDS. HE WAS FURTHER OF TH E VIEW THAT INCOME TAX ACT ITA NO 725/AHD/2014 . A.Y. 2010 - 2011 3 BEING A SPECIAL ACT SO FAR AS COMPUTATION OF TAX LIABILITY WAS CONCERNED, T HE ASSESSEE SHOULD HAVE COMPLIED WITH THE PROVISIONS OF INCOME TAX ACT. A.O WAS FURTHER OF THE VIEW THAT ASSESSEE WAS CREDITING ACCRUED INTEREST ON NPA I N ITS PROFIT AND LOSS ACCOUNT TILL 31.03.2007 WHEN 100% DEDUCTION WA S AVAILABLE TO IT U/S. 80P(2) OF THE ACT BUT AFTER 01.04.2007 , THE ASSESSEE BEING AN URBAN CO - OP. BANK , WAS NOT ENTITLED FOR 10 0% DEDUCTION U/S. 80P(2) AND THEREFORE FROM FINANCIAL YEAR 20 07 - 08 ASSESSEE HAS NOT CREDIT INTEREST ON NPA AC COUNT TO THE PROFIT AND LOSS ACCOUNT AND THEREBY NOT OFFERED IT TO TAX. HE WAS THEREFORE OF THE VIEW THAT THE ACCRUED INTEREST ON NPA ACCOUNT SHOULD BE CONSIDERED AS INCOME AND ACCORDINGLY MADE ADDITION OF RS . 67,21,070/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) UPHELD THE ADDITION MADE BY A.O BY HOLDING AS UNDER: - 5.7 HOWEVER, ON CAREFUL CONSIDERATION OF THE CITATIONS RELIED UPON BY THE A.R. AS WELL AS WORDINGS MENTIO NED IN SECTION 145(1) OF THE ACT ALONGWITH METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT, IT IS CLEAR THAT THE AMOUNT OF RS.67,21,070/ - SHOULD HAVE BEEN CREDITED TO THE P&L ACCOUNT ON THE BASIS OF SECTION 145(1) OF THE ACT. THE APPELLANT COMPANY CAN FOLLO W THE GUIDELINES OF THE RBI FOR THEIR OWN BANKING ACTIVITIES AND ALSO AS PER IRAC BUT FOR THE PURPOSE OF COMPUTATION OF INCOME UNDER INCOME - TAX ACT, THE PROVISIONS AS PER I.T. ACT SHOULD HAVE BEEN FOLLOWED. EVEN OTHERWISE, THE A.R. HAS NOT BEEN ABLE TO EST ABLISH WITH ANY SUPPORTING PROOF/EVIDENCE THAT THE SAID AMOUNT PERTAINING TO LOANS GIVEN TO VARIOUS CLIENTS, ACTUALLY HAS BECOME IRRECOVERABLE. THERE COULD BE DIFFERENT CRITERIA FOR IDENTIFYING STICKY LOANS OR THE LOANS IN THE CATEGORY OF NPAS BUT THAT DOE S NOT NECESSARILY MEAN THAT THE AMOUNT HAD BECOME ABSOLUTELY IRRECOVERABLE. IT HAS NOT BEEN SHOWN AS TO WHAT STEPS WERE TAKEN BY THE APPELLANT BANK FOR RECOVERY OF THE SAID LOANS AND WHETHER THE AMOUNT HAD BECOME ACTUALLY AND FINALLY UNREALIZABLE. IT HAS A LSO NOT BEEN EXPLAINED AS TO WHAT IS THE TIME LIMIT OR BORDER LINE BEYOND WHICH THE LOAN COULD BE SAID AS UNREALIZABLE. THE WORDINGS OF SECTION 145(1) ARE VERY CLEAR THAT IN 'MERCANTILE SYSTEM OF ACCOUNTING' WHICH INCLUDES 'ACCRUAL METHOD', THE INCOME HAS TO BE RECOGNIZED AS AND WHEN IT ACCRUES. THE COURT CASES REFERRED TO BY THE LEARNED A.R. ALSO SPEAK OF THE SITUATION WHEN THE AMOUNT HAS BECOME UNREALIZABLE, ONLY THEN THE SAME COULD NOT BE TAKEN AS INCOME BUT IN THE CASE OF THE APPELLANT, MERELY BY GIVING THE LOANS IN TERMS OF STICKY LOANS BY FOLLOWING A PARTICULAR BANKING NORM, IT CANNOT BE SAID THAT THE AMOUNTS HAD BECOME UNREALIZABLE. THUS, IN VIEW OF THE AFORESAID DISCUSSION AND CONSIDERING THE ENTIRE FACTS OF THE CASE, I AM OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION OF RS.67,21,070/ - . THE ADDITION IS HEREBY CONFIRMED. THE GROUND OF APPEAL FAILS. ITA NO 725/AHD/2014 . A.Y. 2010 - 2011 4 4. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LD. A.R. REITERATED THE SUBMIS SIONS MADE BEFORE A.O AND CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE BEING A BANK , WAS GOVERNED BY REGULATIONS OF RBI AND IT WAS FOLLOWING THE PRUDENTIAL ACCOUNTING NORMS PRESCRIBED BY RBI. HE FURTHER SUBMITTED THAT THE PRESENT METHOD OF ACCOUNTING HAS BEE N CONSISTENTLY FOLLOWED BY THE ASSESSEE AND HAS ALSO BEEN ACCEPTED BY THE REVENUE. HE FURTHER SUBMITTED THAT FOR THE PURPOSE OF TAXATION THE REAL INCOME THEORY HAS TO BE CONSIDERED. HE FURTHER PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS. GUJARAT APOLLO INDUSTRIES LTD. (2014) TIOL - 2018 - HC - AHM - IT. HE ALSO PLACED RELIANCE ON THE DECISION OF THE AHMED ABAD TRIBUNAL IN THE CASE OF SAV DARGANJ MERCANTILE CO - OP. BANK LTD. VS. ACIT AND KARNAWATI CO - OP. BANK LTD. VS. DCIT. HE ALSO PLACED ON RECORD THE COPY O F THE AFORESAID DECISIONS. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT THE TAXABILITY OF INTEREST INCOME ON NPA ACCOU NT. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS A CO - OP. BANK AND IS GOVERNED BY THE REGULATIONS OF RBI . IT IS ALSO AN UNDISPUTED FACT THAT DURING THE YEAR UNDER CONSIDERATION THE INTEREST ON NON PERFORMING ASSET S (NPA) HAS NOT BEEN CONSIDERED AS INCOME BY ASSESSEE. WE FIND THAT WHILE DISALLOWING THE CLAIM OF THE ASSESSEE OF NOT CONSIDERING THE INCOME FROM NPA ACCOUNTS , THE A.O HAS NOT RECORDED ANY FINDING ABOUT ANY UNCERTAINTY IN COLLECTION OF INCOME ON THE NPA ACCOUNTS . FURTHER THERE IS NOTHING ON RECORD TO INDI CATE THAT THE INTEREST INCOME ON THE ADVANCES WHICH HAVE BEEN CLASSIFIED BY ASSESSEE TO BE NPA ACCOUNTS ARE NON RECOVERABLE. WE FURTHER FIND THAT BEFORE THE HON BLE MADRAS HIGH COURT IN THE CASE OF SAKTHI FINANCE LTD. VS. CIT (2013) 352 ITR 102 (MAD RAS) THE ISSUE WAS AS TO WHETHER NON RECOGNITION OF INTEREST INCOME ON NPAS BY ASSESSEE FOLLOWING RBI GUIDELINES WOULD BY ITSELF CONSTITUTE A VALID GROUND FOR NOT RECOGNIZING THE SAID INCOME ON THE BASIS OF ITS NON ACCRUAL, THE ADOPTED METHOD OF ACCOUNTI NG BEING ADMITTED MERCANTILE. THE HON BLE HIGH COURT AFTER RELYING ON ITA NO 725/AHD/2014 . A.Y. 2010 - 2011 5 THE DECISION OF HON BLE SU PREME COURT IN THE CASE OF SOUTHERN TECHONOLOGIES LTD. (2010) 320 ITR 577 , HAS NOTED THAT MERE CHARACTERIZATION OF AN ACCOUNT AS AN NPA WOULD NOT BY ITSELF BE S UFFICIENT TO SAY THAT THERE IS UNCERTAINTY AS REGARDS RELIABILITY OF INCOME OR INTEREST INCOME THEREON. ACCRUAL OF INTEREST IS A MATTER OF FACT TO BE DECIDED SEPARATELY FOR EACH CASE ON THE BASIS OF EXAMINATION OF FACTS AND CIRCUMSTANCES AND IT WOULD REQUI RE THE ASSESSMENT OF THE RELEVANT FACTS AND CIRCUMSTANCES OF EACH CASE . O NLY BY ASSESSMENT OF FACTS AND CIRCUMSTANCES, THE AUTHORITY COULD ARRIVE AT A DECISION WHETHER THERE IS UNCERTAINTY OF THE INTEREST ACCRUED ON NPA. ONLY WHEN THERE IS UN CERTAINTY OF REALISABILITY OF INCOME OR INTEREST INCOME THAN IT IS NOT CHARGEABLE TO TAX. THE SYSTEM OF ACCOUNTING FOLLOWED ONLY RECOGNIZES IT BRINGING THE INCOME TO THE BOO KS. THE ADOPTED ACCOUNTING POLICY I.E. RECOGNIZING INCOME ON NPA ACCOUNT S ONLY SUBJECT TO REALI ZATION DOES NOT SERVE AS A STANDARD CATEGORY. 7. IN THE PRESENT CASE BEFORE US, NEITHER OF THE PARTIES HAVE PLACED MATERIAL ON RECORD TO DEMONSTRATE THAT THE VERIFICATION OF ACCRUAL OF INTEREST HAS BEEN DECIDED ON THE BASIS OF EXAMINATION OF EACH ACCOUNT AN D IN T HE LINE WITH THE GUIDELINES LAID DOWN BY THE AFORESAID DECISION OF HON BLE MADRAS HIGH COURT . WE THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF SAKTHI FINANCE LTD. (SUPRA) ARE OF THE VIEW THAT THE ACCRUAL OF INTEREST IS A MATTER OF FACT WHICH NEEDS TO BE DECIDED ON THE BASIS OF EXAMINATION OF THE STATUS OF EACH PARTY. WE THEREFORE RESTORE THE ISSUE BACK TO THE FILE OF A.O TO DECIDE THE ISSUE DE NOVO IN THE LIGHT OF THE GUIDELINES ISSUED BY HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SAKTHI FINANCE LTD. (SUPRA) , THE GUIDELINES PRESCRIBED BY R.B.I AND IN ACCORDANCE WITH LAW. NEEDLESS TO STATE THAT A.O SHALL PROVIDE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO COOPERATE B Y PROMPTLY FURNISHING ALL THE REQUIRED DETAILS CALLED FOR BY THE A.O TO DECIDE THE ISSUE. IN THE RESULT, THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO 725/AHD/2014 . A.Y. 2010 - 2011 6 GROUND NO. 2 IS WITH RESPECT TO ADDITION OF RS. 40,35,373 PERTAIN TO AN AMOUN T OF INTEREST INCOME. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAD CLAIMED DEDUCTION OF RS. 40,35,361/ - AS PRIOR PERIOD INTEREST. A.O ALSO NOTICED THAT ASSESSEE HAD NOT DEBITED THE AFORESAID AMOUNT IN THE ACCOUNT OF BORROWE RS/NPA ACCOUNT ON ACCRUAL BASIS NOR IT HAD CREDITED SUCH AMOUNT IN PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS THEREFORE ASKED AS TO WHY THE AMOUNT SHOULD NOT BE DISALLOWED TO WHICH ASSESSEE INTERALIA SUBMITTED THAT THAT IT REPRESENTS INCOME WHICH HAS ALREAD Y BEEN TAXED BY WAY OF ADDITION TO AN INTEREST INCOME IN PRECEDING YEAR. THE SUBMISSION OF THE ASESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O IN VIEW OF THE FACT THAT ASSESSEE WAS CREDITING ACCRUED INTEREST ON NPA IN ITS PROFIT AND LOSS ACCOUNT TILL 31.03.200 7 WHEN 100% DEDUCTION WAS AVAILABLE TO CO - OP. BANKS U/S. 80P(2) OF THE ACT. A.O NOTICED THAT FROM FINANCIA L YEAR 2007 - 08 , ASSESSEE BANK HAS NOT OFFERED THE INCOME ON ACCOUNT OF INTEREST ON NPA ACCOUNT. HE WAS THEREFORE OF THE VIEW THAT DEDUCTION CLAIMED BY THE ASSESSEE AS PRIOR PERIOD INTERES T IS BASICALLY DOUBLE DEDUCTION AND H E ACCORDINGLY DI SALLOWED THE CLAIM OF ASSESSEE. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) UPHELD THE ADDITION MADE BY A.O BY HOLDING AS UND ER: - 5.2 ON CAREFUL CONSIDERATION, I COME TO THE CONCLUSION THAT THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE AMOUNT OF RS.40,35,373/ - WHICH WAS CLAIMED AS DEDUCTION IN THE NAME OF PRIOR PERIOD INTEREST. THE DISALLOWANCE IS CONFIRMED. THE GROUND OF APPEAL FAILS. 9. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 10. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A) AND FURTHER SUBMITTED THAT THE INCOME HAS ALREADY BEEN OFFERED TO TAX IN EARLIER YEARS. HE THEREFORE SUBMITTED THAT THE ASSESSEE BE ALLOWED THE DEDUCTION. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND CIT(A). ITA NO 725/AHD/2014 . A.Y. 2010 - 2011 7 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IT IS ASSESSEE S SUBMISSION THAT T HE INTEREST OF RS. 40,35,373/ - HAS ALREADY BEEN OFFERED TO TAX IN EARLIER YEARS. APART FROM THE SUBMISSIONS THAT THE AMOUNT HAS BEEN OFFERED TO TAX IN EARLIER YEAR S, NO DETAILS OR BREAK UP HAS BEEN PLACED BEFORE US TO DEMONSTRATE AS TO WHEN THE INTEREST W AS OFFERED TO TAX IN EARLIER YEAR . WE ALSO FIND THAT A.O HAS ALSO NOT GIVEN ANY FI NDING ABOUT AS TO WHEN THE AMOUNTS WAS CLAIMED BY THE ASSESSEE AS DEDUCTION AND THEREFORE THE AMOUNT CLAIMED BY THE ASSESSEE IS DOUBLE DEDUCTION. WE ARE THEREFORE OF THE VIEW THAT THE ISSUE NEEDS RE - EXAMINATION. WE THEREFORE RESTORE THE ISSUE BACK TO THE FILE OF A.O TO DECIDE THE ISSUE AFRESH AND GIVE A CATEGORICAL FINDING AS TO WHEN THE AMOUNT WAS CLAIMED BY ASSESSEE IN EARLIER YEARS AND ALSO WHEN IT WAS ALLOWED AS DEDUCTION. NEEDLE SS TO STATE THAT A.O SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO FURNISH ALL THE REQUIRED DETAILS PROMPTLY TO A.O SO AS TO ENABLE HIM TO DECIDE THE ISSUE. IN THE RESULT, THIS GROUND OF ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. GROUND NO. 3 IS WITH RESPECT TO DISALLOWANCE OF CERTAIN EXPENSE. 12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAD DEBITED ADVERTISEMENT EXPENSES (RS. 6,34,904, CONSULTANCY FEES RS. 7,64,000/ - BUILDING M AINTENANCE RS. 29,168/ - , OFFICE RENT RS. 5,67,460/ - ) AGGREGATING TO RS. 19,95,532/ - . HE FURTHER NOTED THAT THE EXPENSES CLAIMED BY THE ASSESSEE I N THE PROFIT AND LOSS ACCOUNT HAD NO CO - RELATION WITH THE AMOUNTS APPEARING IN THE LEDGER ACCOUNTS THAT WERE SU BMITTED BY THE ASSESSEE. HE FURTHER NOTED THAT IN THE ABSENCE OF THE PROPER EXPLANATIO N, THE AGGREGATE EXPENDITURE OF R S. 19,95,532/ - COULD N OT BE ALLOWED AND HE THEREFORE DISALLOWED TH E SAME WHEN THE MATTER WAS CARRIED BEFORE LD. CIT(A) HE RESTRICTED THE DISALLOWANCE TO 20% BY HOLDING AS UNDER: - 7.5 IN APPEAL ALSO, THE LEARNED A.R. HAS NOT FURNISHED ANY DETAILS OR EXPLANATION REGARDING THE DIFFERENCE MENTIONED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IN RESPECT OF FOUR HEADS OF EXPENSES. THE A.R. ITA NO 725/AHD/2014 . A.Y. 2010 - 2011 8 H AS SIMPLY FURNISHED THAT ALL THE EXPENSES WERE LEGITIMATE AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS WRONG. TAKING INTO ACCOUNT, THE FACTS OF THE CASE AND THE MATERIAL ON RECORD, I ARN OF THE VIEW THAT ENTIRE DISALLOWANCE OF RS.19,95,532/ - WOUL D BE UNJUSTIFIED BECAUSE THE EXPENSES UNDER THE HEAD ADVERTISEMENT EXPENSES, CONSULTANCY FEES, BUILDING MAINTENANCE, OFFICE RENT ARE N ECESSARILY INCURRED IN THE COUR SE OF BANKING BUSINESS OF THE BANK. HOWEVER, CONSIDERING THE DISCREPANCY MENTIONED BY THE AS SESSING OFFICER AND INABILITY OF THE A.R. TO SUBSTANTIATE HIS CONTENTION, I CONFIRM THE DISALLOWANCE TO THE EXTENT OF RS.20% AND THE BALANCE 80% OF THE AMOUNT IS ALLOWED. THE APPELLANT GETS PART RELIEF ACCORDINGLY. THE GROUNDS OF APPEAL ARE DISPOSED OFF AC CORDINGLY. 13. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 14. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A) AND FURTHER SUBMITTED THAT A.O HAD WRONGLY CONSIDERED EXPENDITURE PERTAINING TO THE BRANCH AS WE LL AS HEAD OFFICE FOR ARRIVING AT THE CONCLUSION THAT THE EXPENSES HAVE NOT BEEN EXPLAINED. HE FURTHER SUBMITTED THAT THE ASSESSEE IS A BANK GOVERNED BY THE RBI GUIDELINES AND IS SUBJECT TO STATUTORY AUDIT. HE ALSO POINTED TO THE CLARIFICATION THAT WAS SUB MITTED AND PLACED AT PAGE 22 TO 24 OF THE PAPER BOOK. HE THEREFORE SUBMITTED THAT THE ENTIRE EXPENSES SHOULD HAVE BEEN ALLOWED AND NO ADHOC DISALLOWANCE OF THE EXPENSES WAS CALLED FOR IN THE PRESENT CASE. LD. D.R. ON OTHER HAND SUPPORTED THE ORDER OF A.O. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT A.O HAD DISALLOWED THE EXPENSES FOR THE REASON THAT THE ASSESSEE COULD NOT EXPLAIN THE DISCREPANCY BETWEEN THE AMOUNT APPEARING IN THE LEDGER AN D ITS PROFIT AND LOSS AC COUNT. ON THE OTHER HAND W E FURTHER FIND THAT CIT(A) HAS RESTRICTED THE DISALLOWANCE TO 20% BUT WHILE RESTRICTING THE DISALLOWANCE TO 20%, T HERE IS NO FINDING OF CIT(A) ABOUT THE DISCREPANCY WHICH HAS N OT BEEN EXPLAINED BY THE ASSESSEE . IN VIEW OF THE AFOR ESAID FACTS AND THE CONTENTIONS OF THE LD. A.R, WE ARE OF THE VIEW THAT IN FAIRNESS , THE MATTER NEEDS TO BE RE - EXAMINED AND WE THEREFORE RESTORE THE ISSUE BACK TO THE FILE OF A.O TO DECIDE THE ISSUE AFRESH AFTER GIVING ADEQUATE OPPORTUNITY OF HEARING TO TH E ASSESSEE. THE ASSESSEE IS ALSO ITA NO 725/AHD/2014 . A.Y. 2010 - 2011 9 DIRECTED TO FUR NISH ALL THE REQUIRED DETAILS CALLE D FOR BY THE ASSESSEE SO AS TO ENABLE THE A.O TO DECIDE THE ISSUE. IN THE RESULT, THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 02 - 0 2 - 201 5 . SD/ - SD/ - (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD