Janata Sahakari Bank Ltd., Pune V. DCIT, Circle 11(1), Pune

ITA 831/PUN/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7170 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T BHASKAR REDDY
• Keywords: Depreciation; Opportunity of being heard; Bad and doubtful debts; Corroborative evidences; Provision of bad debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 831/PUN/2013 %' ( ')( / ASSESSMENT YEAR : 2008-09 JANATA SAHAKARI BANK LTD., 1444, SHUKRAWAR PETH, PUNE 411002 PAN : AAAJJ0073G ....... / APPELLANT ' /VS. DCIT, CIRCLE 11(1), PUNE / RESPONDENT / ITA NO. 1215/PUN/2013 %' ( ')( / ASSESSMENT YEAR : 2008-09 THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE -11(1), PUNE ....... / APPELLANT ' /VS. M/S. JANATA SAHAKARI BANK LTD., 1444, BAJIRAO ROAD, SHUKRAWAR PETH, PUNE 411002 PAN : AAAJJ0073G / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI T. BHASKAR REDDY / DATE OF HEARING : 05-01-2017 / DATE OF PRONOUNCEMENT : 02-02-2017 2 ITA NOS. 831 & 1215/PUN/2013 * / ORDER PER VIKAS AWASTHY, JM : THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 19-03-2013 FOR THE ASSESSMENT YEAR 2008-09. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A CO-OPERATIVE BANK. THE ASSESSEE FILED ITS R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 31-09-2008 DECLARING LOSS OF ` 57,63,63,864/-. THEREAFTER, THE ASSESSEE FILED REVISED RETUR N OF INCOME ON 31-10-2009 DECLARING LOSS OF ` 61,80,38,716/-. THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY THROUGH CASS. ACCOR DINGLY, FIRST NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSEE ON 30-09-200 9. DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE CLAIMED DEPRECIAT ION OF ` 2,90,38,695/- ON INVESTMENT MADE IN GOVT. SECURITIES HELD U NDER HTM CATEGORY. THE ASSESSEE CLAIMED EXPENDITURE TO THE TUNE OF ` 77,75,96,444/- ON ACCOUNT OF BAD AND DOUBTFUL ADVANCE RES ERVE WRITTEN BACK. THE ASSESSING OFFICER DISALLOWED BOTH THE ABO VE CLAIMS OF THE ASSESSEE. AGGRIEVED BY THE ASSESSMENT ORDER DATED 27-12-2010, T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISS IONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APP EALS) ACCEPTED THE CONTENTIONS OF THE ASSESSEE WITH RESPECT TO BAD AND DOUBTFUL ADVANCE RESERVE WRITTEN BACK AND REJECTED THE CONTENTIONS OF THE ASSESSEE IN RESPECT OF AMORTIZATION OF PREMIUM ON INVE STMENT MADE IN GOVT. SECURITIES HELD TO MATURITY. AGAINST THE FINDINGS O F 3 ITA NOS. 831 & 1215/PUN/2013 COMMISSIONER OF INCOME TAX (APPEALS), BOTH, THE ASSESSEE A ND THE REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. ITA NO. 831/PUN/2013 3. SHRI NIKHIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE SU BMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED I N UPHOLDING DISALLOWANCE IN RESPECT OF INVESTMENT IN GOVT. SECURITIES HELD UNDER HTM CATEGORY. THE LD. AR SUBMITTED THAT SIMILAR ISSUE HAD COME UP FOR ADJUDICATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 21/PN/2014 FOR THE ASSESSMENT YEAR 2005-06 AND ITA N OS. 522 & 523/PN/2013 FOR ASSESSMENT YEARS 2007-08 AND 2009-10 , RESPECTIVELY. THE TRIBUNAL AFTER CONSIDERING THE DECISION RENDERED IN TH E CASE OF ADDL. COMMISSIONER OF INCOME TAX VS. BANK OF MAHARASHTRA IN ITA NO. 1505/PN/2008 FOR ASSESSMENT YEAR 2005-06 DECIDED ON 1 7-09-2014 REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO V ERIFY THE CLAIM OF ASSESSEE AND THEREAFTER ALLOW THE DEDUCTION IN LINE WITH THE DIRECTIONS GIVEN IN THE AFORESAID CASE. THE LD. AR FURNISHED A COPY OF THE ORDER OF TRIBUNAL DATED 25-02-2015 IN ASSESSEES O WN CASE COMMON FOR THE ASSESSMENT YEARS 2005-06, 2007-08 AND 2009-10. 4. ON THE OTHER HAND SHRI T. BHASKAR REDDY REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIO NER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDITION IN RESPECT OF DEPRECIATION CLAIMED BY THE ASSESSEE ON INVESTMENT IN SEC URITIES. HOWEVER, THE LD. DR FAIRLY ADMITTED THAT THE ISSUE RAISED B Y THE ASSESSEE IN APPEAL HAS BEEN ADJUDICATED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS. 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PER USED. THE ONLY ISSUE IN APPEAL BY THE ASSESSEE IS AGAINST DISALLOWAN CE OF 4 ITA NOS. 831 & 1215/PUN/2013 DEPRECIATION OF ` 2,90,38,695/- ON INVESTMENT IN GOVT. SECURITIES HELD TO MATURITY. WE FIND THAT THIS ISSUE HAS BEEN CONSIDERED BY THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 21/PN/2014 FOR ASSESSMENT YEAR 2005-06 (SUPRA) AND THE CROSS APPEAL FILED BY THE DEPARTMENT IN ITA NO. 235/PN/2014 FOR ASSESS MENT YEAR 2005-06. SIMILAR DISALLOWANCE WAS MADE IN THE ASSESSMENT Y EARS 2007-08 AND 2009-10. THE ASSESSEE IN ITA NOS. 522 & 5 23/PN/2013 FOR THE ASSESSMENT YEARS 2007-08 AND 2009-10 HAS ASS AILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) BY RAISING SIMILA R GROUNDS AS ARE RAISED IN THE PRESENT APPEAL. THE CO-OR DINATE BENCH AFTER PLACING RELIANCE ON THE DECISION RENDERED IN THE CASE OF ADDL. COMMISSIONER OF INCOME TAX VS. BANK OF MAHARASHTRA (SUPRA ) HELD AS UNDER : 42. THE ISSUE RAISED BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN ACIT VS. BANK OF MAHARASHTRA (SUPRA) AN D FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE CHANGE I N METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE FOR VALUING ITS HTM SECURITIES AT LOWER OF COST OR MARKET PRICE IS A BONAFIDE CHANGE AND THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEPRECIATION ON VALUE OF H TM SECURITIES. THE LOSS ARISING ON ACCOUNT OF AFS AND HFT SECURITIES HAVE A LREADY BEEN ACCEPTED BY THE ASSESSING OFFICER. CONSEQUENTLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM ARISING ON ACC OUNT OF DEPRECIATION ON VALUE OF HTM SECURITIES. HOWEVER, THE CHANGE IN MET HOD OF VALUATION IN HTM SECURITIES AND ITS EFFECT ON THE COMPUTATION OF INCOME WOULD BE VERIFIED BY THE ASSESSING OFFICER. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE PLEA OF THE ASSESSEE AND RE -WORK THE INCOME IN LINE WITH THE OBSERVATIONS OF TRIBUNAL IN THE CASE OF ACIT VS. BANK OF MAHARASHTRA (SUPRA) VIDE PARA 24, WHICH READS AS UN DER:- 24. IN-PRINCIPLE, WE HAVE ALREADY UPHELD THE STAND OF THE ASSESSEE TO VALUE THE STOCK OF ITS INVESTMENTS / SECURITIES AT LOWER OF COST OR MARKET VALUE. BY APPLICATION OF SUCH METHOD OF VALUATION O F ITS STOCK OF SECURITIES / INVESTMENTS IN ASSESSMENT YEAR 2005-06 ASSESSEE C LAIMED DEDUCTION FOR A LOSS OF RS.359,24,58,508/-. THE EFFECT OF THE CHANGE IN METHOD OF VALUATION ON THE COMPUTATION OF INCOME FOR THE PURP OSES OF INCOME TAX IS A MATTER OF FACTUAL APPRECIATION, WHICH IS LIABLE T O BE VERIFIED BY THE ASSESSING OFFICER APPROPRIATELY. FOR THE AFORESAID PURPOSE, WE THEREFORE DIRECT THE ASSESSING OFFICER TO CONSIDER THE STAND OF THE ASSESSEE STATED AFORESAID AND THEREAFTER RE-WORK THE INCOME OF THE ASSESSEE ACCORDINGLY. 5 ITA NOS. 831 & 1215/PUN/2013 NEEDLESS TO MENTION, THE ASSESSEE SHALL PROVIDE NEC ESSARY WORKINGS TO THE ASSESSING OFFICER, INCLUDING THE INVESTMENT TRA DING ACCOUNT AND / OR SUCH OTHER WORKINGS WHICH WOULD ENABLE THE ASSESSIN G OFFICER TO RE- WORK THE INCOME OF THE ASSESSEE IN ACCORDANCE WITH OUR DECISION IN THE EARLIER PARAGRAPHS. THE ASSESSING OFFICER SHALL ALL OW THE ASSESSEE AN APPROPRIATE OPPORTUNITY OF BEING HEARD AND THEREAFT ER RE-WORK THE COMPUTATION OF INCOME AS PER LAW AND KEEPING IN MIN D THE AFORESAID DIRECTIONS. THUS, ON GROUND OF APPEAL NO.1 ASSESSEE SUCCEEDS. 43. IN VIEW OF THE DIRECTIONS OF THE TRIBUNAL IN TH E CASE OF ACIT VS. BANK OF MAHARASHTRA (SUPRA), IN ORDER TO GIVE THE EFFECT OF THE CHANGE IN THE METHOD OF VALUATION ON THE COMPUTATION OF INCOME, T HE ASSESSING OFFICER IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE AFT ER CONSIDERING THE FACTUAL ASPECTS AND COMPUTE THE DEDUCTION IN LINE W ITH THE DIRECTIONS OF THE TRIBUNAL IN THE CASE OF ACIT VS. BANK OF MAHARA SHTRA (SUPRA). REASONABLE OPPORTUNITY OF HEARING IN THIS REGARD SH ALL BE AFFORDED TO THE ASSESSEE. THE GROUNDS OF APPEAL RAISED BY THE ASSES SEE ARE THUS, ALLOWED FOR STATISTICAL PURPOSES. BOTH THE SIDES HAVE ADMITTED THAT THE ISSUE IN THE PRES ENT APPEAL IS SIMILAR TO THE ONE RAISED IN APPEAL BEFORE THE TRIBUNAL FOR ASSESSMENT YEARS 2007-08 AND 2008-09. THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HDFC BANK LTD. REP ORTED AS 366 ITR 505 HAS UPHELD THE VIEW OF TRIBUNAL IN ALLOWING AMO RTIZATION OF PREMIUM ON SECURITIES HELD UNDER HTM CATEGORY. WE DEEM IT APPROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF ASSESSIN G OFFICER FOR FRESH ADJUDICATION IN LINE WITH THE JUDGMENT OF HONBLE BOMB AY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HDFC BANK LTD. (SUPRA) AND THE DECISION OF CO-ORDINATE BENCH IN ASSESSEE S OWN CASE FOR ASSESSMENT YEARS 2008-09 AND 2009-10 (SUPRA). ACCO RDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 1215/PUN/2013 6. THE DEPARTMENT HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) BY RAISING FOLLOWING GROUNDS IN APPEAL : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TA X (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 6 ITA NOS. 831 & 1215/PUN/2013 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN HOLDING THAT THE BAD DEBTS OF RS.76,76,97,831/- (FO RMING PART OF THE DISALLOWANCE OF RS.77,75,96,444/- MADE IN THE ASSES SMENT) CLAIMED BY THE ASSESSEE IS TO BE ALLOWED AS DEDUCTION U/S. 36( 1)(VII) OF THE INCOME- TAX ACT, 1961. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN FAILING TO APPRECIATE THAT THE ASSESSEE HAD NOT PRO VED ON THE BASIS OF ANY EVIDENCE THAT THE IMPUGNED DEBTS OR PART THEREOF HA D BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF ANY PREVIOUS YEA R(S), WHICH IS A CONDITION PRECEDED AS PER THE PROVISIONS OF SECTION 36(2)(I) FOR ALLOWING DEDUCTION U/S.36(1)(VII). 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN FAILING TO APPRECIATE THAT THE MERE CREATION OF A P ROVISION FOR BAD DEBTS DOES NOT BY ITSELF AMOUNT TO FULFILMENT OF THE COND ITION PRESCRIBED IN SECTION 36(2)(I). 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OU GHT TO HAVE APPRECIATED THAT THE BURDEN OF PROVING COMPLIANCES WITH THE PROVISIONS OF SECTION 36(2)(I) WAS ON THE ASSESSEE WHO HAD NOT DISCHARGED THE SAID BURDEN IN ANY MANNER. 6. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME-TAX(APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF THE AP PELLATE PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL. 7. THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME T AX (APPEALS) HAS ERRED IN ACCEPTING THE CLAIM OF THE ASSESSEE WITH RESPECT TO PROVISION FOR BAD DEBTS WRITTEN BACK TO PROFIT AND LOSS ACCOUNTS U/S. 36(1)(VII) OF THE ACT. THE LD. DR CONTENDED THAT THE ASSESS EE IS A CO- OPERATIVE BANK. THE PROVISION OF SECTION 36(1)(VII A) SQUAREL Y APPLIES TO THE CO-OPERATIVE BANKS. THE ASSESSEE HAS NOT FOLLOWED T HE MANDATORY PROVISIONS FOR WRITING OFF OF PROVISIONS FOR BAD DEBTS. BEFOR E CLAIMING BENEFIT OF SECTION 36(1)(VII A), IN THE FIRST INSTANCE THE ASSES SEE HAS TO CREATE SPECIFIC PROVISION FOR BAD AND DOUBTFUL DEBTS. THER EAFTER, THE BAD DEBTS ARE ALLOWABLE TO THE EXTENT OF 7 % OF THE TO TAL INCOME 7 ITA NOS. 831 & 1215/PUN/2013 BEFORE MAKING ANY DEDUCTION UNDER CHAPTER VI A. THE AS SESSEE HAS NOT COMPLIED WITH THE MANDATORY PROVISIONS OF SECTION 36(1)(V II A) OF THE ACT. THE ASSESSEE HAS CREATED GENERAL PROVISION AND HA S WRITTEN BACK THE SAME TO PROFIT AND LOSS ACCOUNTS IN THE NAME OF BAD AND DOUBTFUL DEBTS. THE ASSESSEE HAS NOT CREATED SPECIFIC PROVISIONS AS ENVISAGED U/S. 36(1)(VII A) OF THE ACT. THEREFORE, THE CLAIM OF ASSESSE E TOWARDS PROVISIONS FOR BAD DEBTS WRITTEN OFF IS NOT ALLOWABLE. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND PRAYED FOR REVERSING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS ) ON THIS ISSUE. 8. ON THE OTHER HAND, THE LD. AR VEHEMENTLY SUPPORTING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE OF ALLOWA BILITY OF WRITING BACK OF BAD DEBTS RESERVE SUBMITTED THAT THE AS SESSEE WAS ENJOYING THE BENEFIT OF SECTION 80P TILL THE TIME IT WAS AME NDED BY INSERTION OF SUB-SECTION (4) BY THE FINANCE ACT 2006 W.E.F. 0 1-04-2007. ASSESSMENT YEAR 2008-09 IS THE FIRST YEAR OF CLAIM OF PR OVISION FOR BAD AND DOUBTFUL DEBTS BY ASSESSEE. THE ASSESSEE CLAIMED D EDUCTION TO THE TUNE OF ` 77.75 CRORES ON ACCOUNT OF BAD DEBTS IN ASSESSMENT YEA R 2008-09. FROM ASSESSMENT YEARS 1985-86 TO 2007-08 T HE ASSESSEE SUO-MOTO MADE PROVISION FOR BAD AND DOUBTFUL DEBTS IN RES PECT OF AMOUNTS NOT RECOVERED. THE OPENING BALANCE OF PROVISIONS FOR BAD AND DOUBTFUL DEBTS AS ON 31-03-2007 IS ` 1,86,76,16,006/-. THE ASSESSEE DID NOT CLAIM ANY PROVISIONS FOR DOUBTFUL DEBTS IN THE EARLIER ASSESSMENT YEARS. THE ASSESSEE HAS COMPLIED WITH ALL T HE CONDITIONS LAID DOWN U/S. 36(1)(VII) R.W.S. 36(2) OF THE ACT. THE ASSESSING OFFICER HAS NOT ALLOWED DEDUCTION U/S. 36(1)(VII A) TO THE ASSESSEE IN ANY OF THE EARLIER ASSESSMENT YEARS. THE LD. AR IN SUPPORT OF HIS SUB MISSIONS PLACED RELIANCE ON THE DECISION OF PUNE BENCH OF THE TRIBUN AL IN THE CASE OF M/S. BORA AGRO FOODS VS. ADDL. COMMISSIONER OF INCO ME TAX IN 8 ITA NOS. 831 & 1215/PUN/2013 ITA NO. 1882/PN/2013 FOR THE ASSESSMENT YEAR 2010-11 DECIDED ON 10-04-2015 AND THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF TRF LTD. VS. COMMISSIONER OF INCOME TAX REPORTED AS 323 ITR 397 (SC). 9. CONTROVERTING THE SUBMISSIONS MADE BY LD. AR, THE LD. DR SUBMITTED THAT THE ASSESSEE HAS NEVER CLAIMED DEDUCTION U/S. 36(1)(VII)(A) OF THE ACT IN THE EARLIER ASSESSMENT YEARS, THEREFO RE, THERE WAS NO QUESTION OF ALLOWING OR DISALLOWING THE SAID CLAIM OF ASS ESSEE BY THE ASSESSING OFFICER. 10. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESE NTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE ASSESSING OFFICER DISALLOWED WRITING OFF OF BAD AND DOUBTFUL DEB TS RESERVE PRIMARILY ON FIVE COUNTS: I. THE ASSESSEE HAS NOT FURNISHED SUPPORTING DOCUMENTARY EVIDENCE FOR THE FINANCIAL YEARS 1985-86 TO 2001-02, THERE FORE IT IS NOT POSSIBLE TO VERIFY WHETHER THE PROVISION WAS INDEED ADDED BACK IN THE COMPUTATION OF INCOME IN THE SAID YEARS. II. THE ASSESSEE HAS FURNISHED COPY OF TWO BOARD RESOLUTION S I.E. RESOLUTION NO. 506 DATED 15-01-2008 AND RESOLUTION NO. 38 4 DATED 05-11-2007 FOR WRITING OFF OF BAD DEBTS. THE AMOUN T INVOLVED IN THE AFORESAID RESOLUTION IS ` 63,44,88,144/-. HOWEVER, NO SUPPORTING EVIDENCE HAS BEEN FURNISHED TO SHOW THAT THE CONDITIONS SET OUT IN THE SAID BOARD RESOLUTIONS ARE COM PLIED WITH. III. THE BOARD RESOLUTIONS FURNISHED BY THE ASSESSEE DOES N OT GIVE ABSOLUTE AUTHORITY TO THE ASSESSEE TO WRITE OFF. THERE IS RIDER TO RECOVER THE AMOUNT IN FUTURE, IF POSSIBLE. 9 ITA NOS. 831 & 1215/PUN/2013 IV. ONE OF THE LOAN WRITTEN OFF WAS RESTRUCTURED WHICH CANNOT BE TREATED AS WRITTEN OFF. V. EVEN IF IT IS ASSUMED THAT THE ASSESSEE HAS CREATED A P ROVISION IN EARLIER YEARS, BY VIRTUE OF DEDUCTION CLAIMED U/S. 80P OF THE ACT, THE SAME HAS BEEN NULLIFIED. 11. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS REVERSED THE FINDINGS OF ASSESSING OFFICER WITH RESPECT TO DISALLOWANCE OF BAD DEBTS PROVISIONS WRITTEN BACK TO PROFIT AND LOSS ACCOUNT. DUR ING THE FIRST APPELLATE PROCEEDINGS THE ASSESSEE FURNISHED NECESSARY D OCUMENT TO SHOW THAT NECESSARY COMPLIANCES WERE MADE IN PURSUANCE TO BOARD RESOLUTIONS. THE COMMISSIONER OF INCOME TAX (APPEALS) SOUG HT REMAND REPORT FROM THE ASSESSING OFFICER ON THE DOCUMENT S FURNISHED BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS ) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DOCUMENTS ON RECORD AND THE REMAND REPORT FROM THE ASSESSING OFFICER HELD THAT T HE ASSESSING OFFICER HAS ERRED IN MAKING THE ADDITION AND HAS FAILED TO EX AMINE THE DOCUMENTS ALREADY ON RECORD. 12. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A C ATEGORIC FINDING THAT THE MATERIAL AVAILABLE ON RECORD SUGGEST THAT THE ASSESSEE HAD CREATED SUO-MOTO PROVISION FOR BAD AND DOUBTFUL DEBT S IN THE PAST MORE THAN 20 YEARS. THE ASSESSEE HAD FURNISHED A CHAR T GIVING THE DETAILS OF THE AMOUNT CREDITED TO THE PROVISION FOR BAD AN D DOUBTFUL DEBTS, WRITE BACK OF EXCESS PROVISION FOR BAD AND DOUBTFU L DEBTS, AMOUNTS CREATED TO THE PROVISION FOR BAD AND DOUBTFUL DE BTS BY WAY OF RECOVERY OF BAD DEBTS AND ACTUAL BAD DEBTS WRITTEN OFF B Y THE ASSESSEE DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEARS 198 5-86 TO 2008- 09. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER OBSERVED THAT THE OPENING BALANCE IN THE PROVISION FOR BAD AND DO UBTFUL DEBTS AS 10 ITA NOS. 831 & 1215/PUN/2013 ON 31-03-2007 STOOD AT ` 1,86,76,16,006/-. AN AMOUNT OF ` 95,22,106/- WAS ADDED TO THE PROVISION DURING THE YEAR AND THE AMOUNT WRITTEN BACK FROM THE PROVISION AND CREDITED TO T HE PROFIT AND LOSS ACCOUNTS IS ` 76,76,97,831/-, WHICH IS THE AMOUNT UNDER DISPUTE. THUS, THE CLOSING BALANCE IN THE PROVISION FOR BAD AND DOUB TFUL DEBTS AS ON 31-03-2008 WAS ` 1,10,94,40,281/-. THUS, THE CONTENTION OF THE REVENUE THAT NO SPECIFIC PROVISION WAS CREATED BY THE AS SESSEE IS AGAINST THE DOCUMENTS ON RECORD. THE COMMISSIONER OF IN COME TAX (APPEALS) HAS MADE REFERENCE TO ANNEXURE 4 ATTACHED WITH STATEMENT OF TOTAL INCOME. A BREAKUP OF THE SAME HAS BEEN REPRODUCE D BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 4.4.3 AND 4.4.4 O F THE IMPUGNED ORDER. THE COMMISSIONER OF INCOME TAX (APPEALS) H AS OBSERVED THAT THE ASSESSING OFFICER HAS COMPLETELY OVERLO OKED ANNEXURE 4 WHILE DEALING WITH THE ISSUE DURING THE ASSESSM ENT PROCEEDINGS. A PERUSAL OF THE ANNEXURE 4 SHOWS THAT TH E AMOUNT WRITTEN OFF DURING THE YEAR WAS ` 76,79,59,796/-. 13. A FURTHER PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE ASSESSEE HAD FILED NECESSARY DOCUMENTS TO SHOW THAT THE CONDITION S LAID DOWN BY THE BOARD OF DIRECTORS WHILE ALLOWING THE WRITTEN OFF OF BAD DEBTS WERE DULY COMPLIED WITH. THE LEDGER ACCOUNTS OF EACH INDIV IDUAL ACCOUNT HOLDER/COMPANY WHOSE OUTSTANDING LOAN AMOUNT H AVE BEEN WRITTEN OFF DURING THE RELEVANT PERIOD WERE FILED BEFORE THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS. THE ASSESSING OFFICER IN REMAND REPORT INSTEAD OF VERIFYING THE SAME HAS REITERAT ED HIS OBJECTION THAT THE BOARD RESOLUTIONS HAVE NOT GRANTED ABSOLUTE M ANDATE TO WRITE OFF THE BAD DEBTS TO THE ASSESSEE, AND HAS LAID A CONDITIO N THAT THE BANK HAS RIGHT TO RECOVER THE AMOUNT IN FUTURE, IF POSSI BLE. THE REVENUE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHO W THAT THE ASSESSEE HAS IN FACT RECOVERED ANY OF THE AMOUNTS WRITT EN OFF IN 11 ITA NOS. 831 & 1215/PUN/2013 SUBSEQUENT ASSESSMENT YEARS OR THE ACCOUNTS DECLARED AS BAD DEBTS WERE ACTUAL LIVE OR BEING CAPABLE OF BEING REALIZED. THE HO NBLE SUPREME COURT OF INDIA IN THE CASE OF TRF LTD. VS. COMMISS IONER OF INCOME TAX (SUPRA) HAS HELD THAT AFTER AMENDMENT OF SECT ION 36(1)(VII) W.E.F. APRIL 1, 1989 FOR CLAIMING DEDUCTION IN RELATION TO BAD DE BTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT DEBT IN FACT HAS BECOME IRRECOVERABLE. THE DEDUCTION IS ALLOWABLE IF BAD DEBTS ARE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF THE ASSESSEE. 14. ONE OF THE OBJECTION RAISED BY THE REVENUE AGAINST WRITING OFF OF BAD DEBTS RESERVE IS THAT THE INCOME OF THE ASSESSEE W AS EXEMPT UP TO ASSESSMENT YEAR 2006-07 ON ACCOUNT OF DEDUCTION U/S. 8 0P OF THE ACT. AS IS EVIDENT FROM THE IMPUGNED ORDER THE ASSESSEE HAD SUO-MOTO CREATED A PROVISION FOR BAD AND DOUBTFUL DEBTS SINCE 1985 -86 ON REGULAR BASIS. WHILE COMPUTING THE INCOME THE ASSESSEE CLA IMED ENTIRE AMOUNT AS EXEMPT U/S. 80P UP TO ASSESSMENT YEAR 2006 -07. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE BENEFIT OF DEDUCTION U/S. 80P IT CANNOT BE INFERRED THAT THE BENEFIT OF SECTION 36(1)(VII) IS NOT AVAILABLE TO THE ASSESSEE IN THE SUBSEQUENT YEARS WHEN THE ASSESS EE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S. 80P OF THE ACT. THE REVENUE HAS NOT PLACED ON RECORD ANY MATERIAL TO SHOW THAT THE PROVISION CREATED BY THE ASSESSEE ON ACCOUNT OF BAD AND DOUBTFUL DEBTS DURING THE PERIOD W HEN THE ASSESSEE WAS ELIGIBLE TO CLAIM DEDUCTION U/S. 80P WAS IN AN Y MANNER APPROPRIATED. 15. THE LD. DR WHILE MAKING HIS SUBMISSIONS HAS RAISED GROU ND THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SECT ION 36(1)(VII A) OF THE ACT WHILE WRITING OFF OF BAD AND DOUBTFUL PROVISION. WE FIND THAT THIS ARGUMENT WAS NEVER RAISED EITHER DURING THE ASSESS MENT PROCEEDINGS OR DURING THE FIRST APPELLATE PROCEEDINGS. EVEN IN THE 12 ITA NOS. 831 & 1215/PUN/2013 GROUNDS FILED BEFORE THE TRIBUNAL THERE IS NO SUCH ISSUE. T HEREFORE, WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE LD. DR. 16. THE COMMISSIONER OF INCOME TAX (APPEALS) BY GIVING A W ELL REASONED AND DETAILED FINDINGS HAS RIGHTLY DELETED THE ADD ITION WITH RESPECT TO WRITTEN OFF OF BAD AND DOUBTFUL DEBTS RESERVE. WE CONCUR WITH THE VIEW OF COMMISSIONER OF INCOME TAX (APPEALS) ON TH IS ISSUE AND DISMISS THE APPEAL OF REVENUE. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 02 ND DAY OF FEBRUARY, 2017. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 02 ND FEBRUARY, 2017 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-I, PUNE 4. ' / THE CIT-I, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, 5 6 / ASSISTANT REGISTRAR, ,- , / ITAT, PUNE