Deputy Commissioner of Income-tax, V. The Urban Co.op. Bank Ltd.,

ITA 904/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0751 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAZHAR AKRAM
• Assessee Lawyers: S N KALBHANDE
• Keywords: Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 90 4 /PN/201 4 / ASSESSMENT YEAR : 20 1 0 - 11 THE JOINT COMMISSIONER OF INCOME TAX, RANGE - 2, JALGAON . / APPELLANT VS. THE URBAN COOPERATIVE BANK LTD., DHARANGAON, DIST JALGAON . / RESPONDENT PAN: AA ATT4844R . / CO NO. 39/PN/2015 . / CO NO. 39/PN/2015 / ASSESSMENT YEAR : 20 1 0 - 11 THE URBAN COOPERATIVE BANK LTD., DHARANGAON, DIST JALGAON / CROSS OBJECT OR PAN: AAATT4844R VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE - 2, JALGAON . / RESPONDENT ASSESSEE BY : SHRI S.N. KALBHANDE RE VENUE BY : SHRI MAZHAR AKRAM / DATE OF HEARING : 30 . 12 .2015 / DATE OF PRONOUNCEMENT: 31 . 1 2 .2015 2 ITA NO. 90 4 /PN/201 4 CO NO.39/PN/2015 THE URBAN COOPERATIVE BANK LTD. / ORDER PER SUSHMA CHOWLA, JM : THE APPEAL FILED BY THE REVENUE IS AGAINST ORDER OF CIT(A) - 2 , NASHIK , DATED 20 . 02 .201 4 RELATING TO ASSESSMENT YEAR 20 1 0 - 11 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS AGAINST THE APPEAL FILED BY THE REVENUE. 2. THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3 . THE REVENUE IN ITA NO. 904 /PN/201 4 HAS RAISED THE FOLLOWING GROUNDS OF 3 . THE REVENUE IN ITA NO. 904 /PN/201 4 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE CIT(A), NASHIK HAS ERRED IN DELETING THE ADDITION OF RS.2.05 CRORES ON ACCOUNT OF SETTLEMENT OF NPA ACCOUNTS FROM DUES OF INTEREST. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY, DELETE AMEND ANY OF THE GROUNDS WITH PRIOR PERMISSION OF THE HONBLE CIT, AS PER THE CIRCUMSTANCES OF THE CASE. 3. THE APPELLANT PRAYS TO FILE ANY OF THE ADDITIONAL EVIDENCE APPROPRIATE TO THE GROUNDS TAKEN IN APPEAL. 4 . THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.2.05 CRORES ON ACCOUNT OF SETTLEMENT OF NPA ACCOUNTS FROM DUES OF INTEREST. 5. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS A CO - OPERATIVE BANK WORKING UNDER THE DIRECTIONS OF RESERVE BANK OF INDIA. THE ASSESSEE HAD 3 ITA NO. 90 4 /PN/201 4 CO NO.39/PN/2015 THE URBAN COOPERATIVE BANK LTD. FILED ITS RETURN OF INCOME ON 29.09.2010 SHOWING TAXABLE INCOME AT RS.NIL. ON PERUSAL OF THE PROFIT & LOSS ACCOUNT, THE ASSE SSING OFFICER NOTED THAT THE ASSESSEE HAD DEBITED RS.1 CRORE AS NPA PROVISION FOR INTEREST OVERDUE AND NOT RECEIVABLE AND FURTHER, THE ASSESSEE HAS DEBITED INTEREST NOT RECOVERED ON NPA PROVISIONS TO THE EXTENT OF RS.2.97 CRORES. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE ABOVE SAID AMOUNTS SHOULD NOT BE ADDED IN THE HANDS OF THE ASSESSEE. IN RESPONSE, THE ASSESSEE EXPLAINED THAT THE NPA PROVISION OF RS.1 CRORE WAS MADE ONLY FOR THE INTEREST WHICH WAS OVERDUE BUT NOT RECEIVED OR RECOVERED. IN RESPECT OF SECOND PROVISION OF RS. 2.97 CRORES, THE ASSESSEE EXPLAINED THAT THE SAID PROVISION WAS MADE FOR THE PAST ACCOUNTS , INTEREST OF WHICH WAS ALREADY CREDITED EARLIER AND THE DUES OF EARLIER YEARS WERE SETTLED FOR PAYMENT UNDER ONE TIME SETTLEMENT (OTS) SCHEME. THE SAID ACCOUNTS WOULD NOT BE CHARGED INTEREST THEREAFTER AND WOULD BE CLOSED AS AND WHEN THE PRINCIPAL AND INTEREST CLAIM WOULD BE RECEIVED. THE ASSESSEE ALSO EXPLAINED THAT THE CONCESSION INTEREST CLAIM WOULD BE RECEIVED. THE ASSESSEE ALSO EXPLAINED THAT THE CONCESSION OF INTEREST UNDER THE SAID ACCOUNT WAS GIVEN FOR RS. 2.0528 CRORES AND BALANCE OF CONCESSION OF RS.90 LAKHS WAS YET TO BE ALLOWED WHEN THE BORROWER WOULD PAY THE PRINCIPAL AND INTEREST. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AS T HE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, UNDER WHICH IT IS MANDATORY TO OFFER ALL INCOMES FOR TAXATION ON ACCRUAL BASIS. THE ASSESSING OFFICER MADE AN ADDITION OF RS.1 CRORE ON ACCOUNT OF INTEREST DUE ON NPA AND ALSO THE INTEREST DEBITED TO THE PROFIT & LOSS ACCOUNT OF RS.2.97 CRORES , SINCE NOT RECOGNIZED ON ACCRUAL BASIS, BUT BOOKED AS INCOME ONLY, WHICH WOULD BE ACTUALLY RECEIVED , WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. 6. THE CIT(A) UPHELD THE DISALLOWANCE MADE FOR PROVISION OF INTEREST NOT ALLOWABLE ON NPA ACCOUNT UNDER SECTION 36(1)(VIIA) OF THE ACT AT RS.1 CRORE VIDE 4 ITA NO. 90 4 /PN/201 4 CO NO.39/PN/2015 THE URBAN COOPERATIVE BANK LTD. PARA 6.1 OF THE APPELLATE ORDER. VIDE PARA 6.2 OF THE APPELLATE ORDER, THE CIT(A) NOTED THAT WHERE THE ASSESSEE HAD DEBITED RS.2.97 CRORES ON ACCOUNT OF INTEREST NOT RECOVERED ON NPA ACCOUNTS AND INTEREST WAS CREDITED TO ITS PROFIT & LOSS ACCOUNT SINCE THE ASSESSEE WAS MAINTAINING ITS ACCOUNTS ON ACCRUAL BASIS. DURING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE HAD SUBMITTED THAT THE PROVISION OF RS.2.97 CRORES WAS MADE FOR PAST ACCOUNTS INTEREST, WHICH WAS ALREADY CREDITED IN THE EARLIER YEARS AND SINCE THERE WAS SETTLEMENT FOR PAYMENT UNDER OTS SCHEME, RS. 2.0528 CRORES OF INTEREST WAS SETTLED DURING THE YEAR. HOWEVER, THE ASSESSEE BANK COULD NOT SETTLE THE REM AINING INTEREST OUTSTANDING AMOUNTING TO RS.92 LAKHS . S INCE THE ASSESSEE HAD WAIVED INTEREST TO THE EXTENT OF RS.2.0528 CRORES UNDER THE OTS SCHEME , T HE CIT(A) HELD THAT THE SAME WAS NOT TO BE ADDED IN THE HANDS OF ASSESSEE. HOWEVER, OUTSTANDING INTEREST OF RS.92 LAKHS, WHICH HAD NOT BEEN SETTLED , WAS ADDED BACK TO THE INCOME OF ASSESSEE, IN VIEW OF THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. SECTION 36(1)(VIIA) OF THE ACT. 7. THE REVENUE IS IN APPEAL AGAINST THE RELIEF GIVEN BY THE CIT(A) OF RS.2.0528 CRORES. 8. THE LEARNED D EPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ON THE OTHER HAND, POINTED OUT THAT OUT OF TOTAL PROVISION OF RS.2.97 CRORES, THE RBI HAD FLOATED A SCH EME OF OTS, UNDER WHICH RS.2.0528 CRORES WAS WRITTEN BACK. THIS INTEREST DUE ON NPA WAS FORGONE AND HENCE, PROVISION WAS WRITTEN BACK . T HE BALANCE SUM OF RS.92 LAKHS WAS TAXED IN THE HANDS OF ASSESSEE, AGAINST WHICH THE ASSESSEE IS NOT 5 ITA NO. 90 4 /PN/201 4 CO NO.39/PN/2015 THE URBAN COOPERATIVE BANK LTD. IN APPEAL. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER WITHDREW THE CROSS OBJECTIONS FILED BY THE ASSESSEE. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE FIRST INSTANCE, THE CROSS OBJECTIONS FILED BY THE ASSES SEE BEING WITHDRAWN, ARE DISMISSED AS WITHDRAWN. 11. NOW, COMING TO THE APPEAL OF THE REVENUE, WHERE THE ISSUE IS AGAINST THE DELETION OF ADDITION OF RS.2.0528 CRORES. THE ASSESSEE BANK WAS RECOGNIZING THE INTEREST ACCRUED ON NPAS IN ITS BOOKS OF ACCOU NT FROM YEAR TO YEAR. HOWEVER, THE SAID INTEREST ON NPAS WAS NOT OFFERED TO TAX, I N VIEW OF THE GUIDELINES OF RBI. DURING THE YEAR UNDER CONSIDERATION, PURSUANT TO THE SCHEME FLOATED I.E. OTS OF DUES, THE ASSESSEE BANK HAD FORGONE INTEREST TO THE EXTENT OF RS.2.0528 CRORES, WHICH WAS DUE ON NPAS, WHICH WAS SHOWN AS PROVISION OF INTEREST ACCRUED ON WHICH WAS DUE ON NPAS, WHICH WAS SHOWN AS PROVISION OF INTEREST ACCRUED ON NPAS. THIS WRITING BACK OF THE PROVISION DOES NOT GIVE RISE TO ACCRUAL INCOME / RECEIPTS IN THE HANDS OF THE ASSESSEE. CONSEQUENTLY, WE FIND NO MERIT IN THE O RDER OF ASSESSING OFFICER IN THIS REGARD. WE UPHOLD THE ORDER OF CIT(A) IN HOLDING THAT THE WAIVER OF INTEREST OF RS.2.0528 CRORES AS OTS, UNDER THE SCHEME OF CONCESSION OF DUES OF INTEREST GIVEN TO THE BORROWERS FOR PAYMENT OF PRINCIPAL AND INTEREST IN ONE FINAL PAYMENT , IS NOT THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THE OUTSTANDING INTEREST OF RS.92 LAKHS WHICH HAD NOT BEEN SETTLED HAS BEEN ADDED TO THE INCOME OF THE ASSESSEE, AGAINST WHICH THE ASSESSEE IS NOT IN APPEAL. UPHOLDING THE ORDER OF CIT(A), WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALSO DISMISSED AS WITHDRAWN. 6 ITA NO. 90 4 /PN/201 4 CO NO.39/PN/2015 THE URBAN COOPERATIVE BANK LTD. 12. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AND CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 31 ST DAY OF DECEMBER , 2015. SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 31 ST DECEMBER , 2015 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 2 , NASHIK ; 4. / THE CIT - 2 , NASHIK ; 5. , , / DR A , ITAT, PUNE; 6. / 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE