ACIT, Ajmer V. AJMER URBAN CO-OPERATIVE BANK LTD., Ajmer

ITA 861/JPR/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5093 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 143(3); 6

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; D S LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NOS. 861/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2007-08 . THE ACIT,CIRCLE-1, AJMER. CUKE VS. M/S AJMER URBAN CO-OPERATIVE BANK LTD., KAISERGANJ, AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACR 5290C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI GAURAV SHARMA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT ROSHANTA MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 4.05.2016. + ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 20/07/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), AJMER DATED 16.09.2013 WHEREIN THE REVENUE HAS TAKE N THE FOLLOWING GROUNDS OF APPEAL: (I) DELETING THE PENALTY U/S 271(1)(C) ON ADDITION OF R S. 277.93 LACS MADE BY THE AO ON ACCOUNT OF BAD AND DOUBTFUL DEBTS CLA IMED BY THE ASSESSEE U/S 36(1)(VIIA); (II) DELETING THE PENALTY U/S 271(1)(C) ON ADDITION OF RS. 5,38,300/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF CONTRIBUTIO N TO THE GRATUITY FUND THOUGH THE FUND WAS NOT APPROVED GRATUITY FUND : 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSMENT WAS COMPLETED U/S 143(3) ON 25.08.2009 BY MAKING VARIOUS ADDITIO NS INCLUDING PROVISION FOR ITA NO. 861/JP/13 ACIT, CIRCLE-1, AJMER VS. M/S AJMER URBAN CO-OPERAT IVE BANK LTD. AJMER 2 BAD AND DOUBTFUL DEBTS OF RS. 277.93 LACS AND CONTR IBUTION TO GRATUITY FUND OF RS. 5,38,000/-. THE MATTER WAS CARRIED IN APPEAL AN D THE COORDINATE BENCH VIDE ITS ORDER DATED 22.12.2011 HAS CONFIRMED BOTH THE DISALLOWANCES. THE AO THEREAFTER LEVIED THE PENALTY U/S 271(1)(C) HOLDING THAT IN VIEW OF THE DECISION OF HONBLE ITAT, HE WAS SATISFIED THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND CONCEALED THE TAX, THEREF ORE IT IS LIABLE FOR PENAL ACTION U/S 271(1)(C) OF THE IT ACT FOR A.Y. 2007-08 . 2.1 THE LD CIT(A) HAS DELETED THE SUBJECT PENALTY A ND HIS FINDINGS CONTAINED AT PARA 3.3 OF HIS ORDER DATED 16.09.2013 ARE REPRO DUCED AS UNDER: FROM ABOVE, IT IS CLEAR THAT THE ISSUE OF DEDUCTIO N OF PROVISION FOR BAD AND DOUBTFUL DEBTS IS A DEBATABLE ISSUE. THE CLAIM HAS BEEN ALLOWED BY THE LD. CIT(A) WHILE THE SAID CLAIM HAS BEEN DISALL OWED BY HONBLE ITAT HOLDING THAT CO-OPERATIVE BANKS ARE NOT SCHEDULED O R NON SCHEDULED BANKS. IT HAS BEEN HELD IN THE CASE OF CIT VS. HARSHVARDHA N CHEMICALS & MINERALS LTD. 259 ITR 212 (RAJ.) THAT ASSESSEE HAVI NG CLAIMED SOME DEDUCTION WHICH ARE DEBATABLE, IT COULD NOT BE SAID THAT IT HAS CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS OF I NCOME AND PENALTY UNDER SEC. 271(1)(C) COULD NOT BE LEVIED. ITA NO. 861/JP/13 ACIT, CIRCLE-1, AJMER VS. M/S AJMER URBAN CO-OPERAT IVE BANK LTD. AJMER 3 IN THIS CONTEXT, IT MAY BE MENTIONED THAT THERE ARE NO TWO OPINIONS ABOUT THE SETTLED POSITION OF LAW THAT REGULAR ASSE SSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO ENTIRELY DIFFERENT SUBJECTS WITH OPERATE IN DISTINCT AND SEPARATE FIELDS SO MUCH SO THAT EN TIRELY DIFFERENT PARAMETERS ARE APPLICABLE FOR MAKING QUANTUM ADDITI ON AND FOR LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE AD DITION IN THE ASSESSMENT ORDER DOES NOT LEAD TO THE AUTOMATIC LEV Y OF PENALTY U/S 271(1)(C) OF THE I.T ACT. IN THE PRESENT CASE, THE PENALTY HAS BEEN LEVIED FO R CLAIMING THE DEDUCTION U/S 36(1)(VIIA) OF THE IT ACT. HOWEVER, IT HAS NOT BEEN SHOWN HOW BY MAKING THE CLAIM IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS IN CASE OF CO-OPERATIVE BANK, ASSESSEE HAS C ONCEALED OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE APPELLANT HA S EXPLAINED THAT THE CLAIM WAS MADE FOR LIABILITY DETERMINED AS PER THE RBI GUIDELINES AND AUDITORS HAVE CONCURRED WITH THE SAID CLAIM OF LIAB ILITY OF THE BANK. FURTHER, AS THERE WAS SUBSTANTIAL LOSS, THERE WAS N OT TAX BENEFIT TO THE ASSESSEE. THE SAID EXPLANATION HAS NOT SHOWN TO BE FALSE OR MALAFIDE AND ALL THE RELEVANT FACTS FOR COMPUTATION OF INCOM E HAVE BEEN DISCLOSED BY THE APPELLANT IN THE RETURN OF INCOME. ITA NO. 861/JP/13 ACIT, CIRCLE-1, AJMER VS. M/S AJMER URBAN CO-OPERAT IVE BANK LTD. AJMER 4 IN VIEW OF ABOVE DISCUSSION THE PENALTY LEVIED BY T HE AO U/S 271(1)(C) FOR THE CLAIM OF DEDUCTION FOR PROVISION FOR BAD AND DO UBTFUL DEBTS U/S 36(1)(VIIA) OF THE IT ACT IS NOT SUSTAINABLE AND IS DELETED. (II) IN THIS CONTEXT, THE ASSESSEE HAS POINTED OUT THAT THE GRATUITY CLAIM WAS MADE BASED ON THE LIABILITY OF THE GRATUITY OF THE ASSESSEE AND FURTHER A SUM OF RS. 4,66,593/- HAS ALREADY BEEN PA ID UPTO THE DATE OF FILING OF THE RETURN. IT IS SEEN THAT ASSESSEE HA S SUBMITTED THE BONAFIDE EXPLANATION FOR THE CLAIM MADE REGARDING GRATUITY. THE ASSESSEE HAS DISCLOSED THE AMOUNT OF PROVISION FOR GRATUITY IN I TS PROFIT AND LOSS ACCOUNT AND ASSESSEE HAS CLAIMED THE SAID DEDUCTION . HOWEVER, THOUGH IT IS GENUINE LIABILITY, THE DISALLOWANCE WAS MADE DUE TO TECHNICAL REASON AS THE SAID FUND WAS NOT APPROVED GRATUITY FUND. T HE ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS NECESSARY FOR COMP UTATION OF INCOME. IT IS NOT THE CASE THAT EXPENDITURE HAS BEEN CAMOUFLAGED OR BOGUS EXPENSES HAVE BEEN CLAIMED. 2.2 AT THE OUTSET, THE LD AR SUBMITTED THAT THE ASS ESSEE COOPERATIVE BANK IS CONTINUOUSLY RUNNING IN LOSSES AND LOSS RETURN OF R S. 11,00,81,191/-WAS FILED BY THE ASSESSEE AND EVEN AFTER CONSIDERING THE DISALLO WANCES AS MADE BY THE AO, IT WILL RESULT IN A LOSS POSITION. FURTHER, IT WAS SUBMITTED THAT THE RBI HAS SINCE CANCELLED ITS LICENCE TO CARRY OUT ITS BANKING ACTI VITY. IT WAS ALSO BROUGHT TO THE ITA NO. 861/JP/13 ACIT, CIRCLE-1, AJMER VS. M/S AJMER URBAN CO-OPERAT IVE BANK LTD. AJMER 5 NOTICE OF THE BENCH THAT THE ASSESSEE HAS PREFERRED AN APPEAL AGAINST THE SAID ORDER OF HONBLE ITAT REGARDING DEDUCTION FOR PROVI SION FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA) OF THE ACT BEFORE HONBLE RAJ ASTHAN HIGH COURT WHICH IS CURRENTLY PENDING ADJUDICATION. 2.3 THE LD AR FURTHER SUBMITTED THAT THE ASSESSEE H AS FURNISHED ALL THE DETAILS REGARDING PROVISIONS FOR BAD AND DOUBTFUL D EBTS IN ITS RETURN OF INCOME, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART OR IN ACCURATE PARTICULARS OF INCOME. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE PROVISION FOR BAD AND DOUBTFUL DEBTS WHICH WAS NOT ACCEPTED, THAT BY ITSE LF WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C). IF THIS CONTENTIO N OF THE REVENUE WAS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLA IM MADE WAS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WOULD INVITE PENALTY U/S 271(1)(C). 2.4 THE LD DR VEHEMENTLY ARGUED THE MATTER AND SUBM ITTED THAT IN QUANTUM PROCEEDINGS, THE DISALLOWANCE OF PROVISION FOR BAD AND DOUBTFUL DEBTS AS WELL AS GRATUITY CONTRIBUTION HAS BEEN CONFIRMED BY THE ITAT AND THE AO HAS RIGHTLY LEVIED THE PENALTY FOR FURNISHING INACCURATE PARTIC ULARS OF INCOME. HE RELIED UPON THE ORDER OF THE AO. 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE PENALTY HAS BE EN LEVIED FOR CLAIMING ITA NO. 861/JP/13 ACIT, CIRCLE-1, AJMER VS. M/S AJMER URBAN CO-OPERAT IVE BANK LTD. AJMER 6 DEDUCTION U/S 36(1)(VIIA) OF THE ACT. THE AO HAS R ELIED SOLELY ON THE DECISION OF THE COORDINATE BENCH IN THE QUANTUM PROCEEDINGS AND STATED THAT IN VIEW OF THE DECISION OF HONBLE ITAT, HE WAS SATISFIED THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND CONCEALED THE TAX, THEREFORE IT IS LIABLE FOR PENAL ACTION U/S 271(1)(C) OF THE IT ACT FOR A.Y. 2 007-08. HOWEVER, THE LD CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT IT HAS NOT BEE N SHOWN HOW BY MAKING THE CLAIM IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS, THE ASSESSEE HAS CONCEALED OR FURNISHED INACCURATE PARTICULARS OF I NCOME. THE APPELLANT HAS EXPLAINED THAT THE CLAIM WAS MADE FOR LIABILITY DET ERMINED AS PER THE RBI GUIDELINES AND AUDITORS HAVE CONCURRED WITH THE SAI D CLAIM OF LIABILITY OF THE BANK. FURTHER, AS THERE WAS SUBSTANTIAL LOSS, THER E WAS NO TAX BENEFIT TO THE ASSESSEE. THE SAID EXPLANATION HAS NOT BEEN SHOWN TO BE FALSE OR MALAFIDE AND ALL THE RELEVANT FACTS FOR COMPUTATION OF INCOME HA VE BEEN DISCLOSED BY THE APPELLANT IN THE RETURN OF INCOME. THE SAME ANALOGY AND FINDING WILL APPLY IN RESPECT OF CONTRIBUTION TO THE GRATUITY FUND. FURT HER, THE DECISIONS OF HONBLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS (20 10) 3 TAXMAN 47, RAJASTHAN HIGH COURT IN CASE OF CIT VS HARSHVARDHAN CHEMICALS AND MINERALS 259 ITR 212 (RAJ) SUPPORT THE CASE OF THE APPELLANT COOPERATIVE BANK. IN LIGHT OF ABOVE, WE HEREBY CONFIRM THE FINDINGS OF THE LD CIT(A) DELETING THE PENALTY ITA NO. 861/JP/13 ACIT, CIRCLE-1, AJMER VS. M/S AJMER URBAN CO-OPERAT IVE BANK LTD. AJMER 7 LEVIED UNDER SECTION 271(1)(C) OF THE ACT. HENCE, THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE DISMISSED. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/07 /2016. SD/- SD/- ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 20/07/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT,CIRCLE-1, AJMER 2. THE RESPONDENT- M/S AJMER URBAN CO-OPERATIVE BA NK LTD. AJMER 3. THE CIT(A) AJMER 4. THE CIT- AJMER, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO.861 /JP/13 ) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 861/JP/13 ACIT, CIRCLE-1, AJMER VS. M/S AJMER URBAN CO-OPERAT IVE BANK LTD. AJMER 8