THE DAKSHIN DINAJPUR DISTRICT CENTRAL COOPERATIVE BANK LTD.,BALURGHAT V. ACIT, CIRCLE 3(2), MALDA

ITA 2189/KOL/2025

AI Insights

The case involves The Dakshin Dinajpur District Central Co-operative Bank Ltd. appealing against the orders of the National Faceless Appeal Centre, Delhi, which confirmed disallowances made by the Assessing Officer (AO) for the assessment years 2012-13 to 2014-15. The primary issues were the disallowance of miscellaneous expenses and provisions made for non-performing assets (NPA). The Tribunal found that the disallowances were made on presumptions without proper evidence, and that the provisions for NPA were in accordance with RBI and NABARD guidelines, thus allowable under Section 36(1)(viia) of the Income Tax Act.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 835821 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 26-09-2025
• Other Referred Cases: CIT vs. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), Omar Salay Mohamed Sait vs. Commissioner of Income-tax [1959] 37 ITR 151 (SC), Catholic Syrian Bank Ltd. Vs CIT (2012)343 ITR 270(SC), Southern Technologies Ltd. vs. Joint Commissioner of Income-tax, Coimbatore [2010] 187 Taxman 346 (SC), Tamilnadu State Apex Coop Bank Ltd Vs ACIT (2014) 43 taxmann.com 111(Chennai Trib)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARCHANA GUPTA
• Assessee Lawyers: DILIP CHATTERJEE
• Keywords: Set aside; Bad and doubtful debts

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA Nos. 2187 to 2189/KOL/2025 (Assessment Years: 2012-13 to 2014-15) The Dakshin Dinajpur District Central Co-operative Bank Ltd. Kachari Road, Balurghat, Dakshin Dinajpur, PIN-733101 West Bengal Vs. DCIT, Circle 3 1st Floor, Netaji Market Complex, Rathbari, Malda-732101 West Bengal (Appellant) (Respondent) PAN No. AAAJD0642H Assessee by : Shri Dilip Chatterjee, AR Revenue by : Ms. Archana Gupta, DR Date of hearing: 14.01.2026 Date of pronouncement: 10.02.2026 O R D E R Per Rajesh Kumar, AM: These are appeals preferred by the assessee against the orders of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 17.07.2025, 21.07.2025, 24.07.2025 for the AY 2012-13 to 2014-15 A.Y. 2012-13 ITA No. 2187/KOL/2025 2. The issue raised in ground no.1 is general in nature and needs no adjudication. 3. The first issue raised in ground no.2 is against the confirmation of disallowance by the ld. CIT (A) of ₹1,78,019/-, which was made by the Printed from counselvise.com Page | 2 ITA Nos. 2187 to 2189/KOL/2025 The Dakshin Dinajpur District Central Co-operative Bank Ltd. AYs 2012-13 to 2014-15 ld. AO by disallowing expenses at the rate of 10% of total amount debited under miscellaneous expenses of ₹17,80,192/-. 3.1. The facts in brief are that the ld. AO observed from the Profit and Loss account that the assessee has debited under the head miscellaneous expenses under the head other expenses schedule 19 a sum of ₹17,18,192/-. The assessee submitted before the ld. AO that these are the composite expenses of 7 branches of the bank to meet the day-to-day expenses. The assessee also furnished few bills, however, the ld. AO noted that such expenses are represented by self- made vouchers and therefore, not verifiable and were internally maintained by the assessee and thus, to block the leakage of Revenue made adhoc disallowance of 10% of the total expenses. 3.2. In the appellate proceedings, the ld. CIT (A) confirmed the disallowance by observing that since, the assessee has failed to establish the genuineness of the expenses before the ld. AO and before the appellate authority and there was also no explanation apart from furnishing the debit vouchers self-generated for meeting the day-to- day expenses of the bank, therefore the ld. CIT (A) justified the disallowance of expenses. 3.3. After hearing the rival contentions and perusing the materials available on record, we find that the authorities below have disallowed the expenses on the ground that these are the petty expenses incurred by the branches to meet the day-to-day expenses for which there were no proper evidences . Therefore, the genuineness of which could not be established. In our opinion, the authorities below have failed to give any plausible and reasonable findings as to how these were non- genuine. In our opinion, the disallowance of expenses merely on presumption and surmises at the rate of 10% of the said expenses Printed from counselvise.com Page | 3 ITA Nos. 2187 to 2189/KOL/2025 The Dakshin Dinajpur District Central Co-operative Bank Ltd. AYs 2012-13 to 2014-15 incurred is incorrect and cannot be sustained. In our opinion, the disallowance cannot be made on estimation and presumption basis as has been held in the case of CIT vs. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC)vide order dated 12-09-1972 and Omar Salay Mohamed Sait vs. Commissioner of Income-tax [1959] 37 ITR 151 (SC) dated 05-03-1959. Consequently, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. 4. The second issue raised in ground nos. 3 and 4 is against the order of ld. CIT (A) confirming the disallowance of ₹2,72,91,922/- as disallowed by the ld. AO in respect of provisions made against the non-performing assets under the head other expenditure schedule-19 of the Profit and Loss account by ignoring the fact that same are allowable under Provisions of Section 36(1)(viia) of the Act and was created in accordance with the RBI and NABARD guidelines. 4.1. The facts in brief are that the ld. AO upon examination of the Profit and Loss account observed that the assessee has debited ₹2,72,91,922/- on account of provisions for NPA under the head “other expenses”. Accordingly, the ld. AO asked the assessee to explain the same. The assessee submitted before the ld. AO that the basis of claiming NPA provisions was n accordance with guidelines and norms framed by the RBI applicable to all banks and making the strict compliance to the same. The assessee also furnished before the ld. AO the details of NPA Provisions along with NPA statement, annexed in the balance sheet. The ld. AO noted therefrom that the assessee created the provisions against NPA and such provisions cannot be debited to the Profit and Loss account and accordingly, a show cause notice was given. The assessee replied the said show cause notice which is extracted by the ld. AO at page no.3,4,5 and 6 of the Printed from counselvise.com Page | 4 ITA Nos. 2187 to 2189/KOL/2025 The Dakshin Dinajpur District Central Co-operative Bank Ltd. AYs 2012-13 to 2014-15 assessment order. The assessee submitted before the ld. AO, however, the reply of the assessee did not favour with the ld. AO and the said provisions were disallowed and added to the income of the assessee. 4.2. In the appellate proceedings, the ld. CIT (A) affirmed the same. 4.3. After hearing the rival contentions and perusing the materials available on record, we find that u/s 36(1)(viia) of the Act, it has been specifically provided in respect of provisions for bad and doubtful debts created interalia by co-operative banks that all amount not exceeding 7.50% of the total income computed before any deduction under these clauses and chapter VIA, an amount not exceeding 4% of aggregated advances made by the rural branches of such bank computed in the prescribed manner. We have also perused the provisions of Section 36(1)(vii) of the Act, which provides for allowing the amount of any bad debt or a part thereof which is written off as irrecoverable in the account of the assessee. We observe that both these deductions are independent of each other. We note that Section 36(1)(vii) of the Act deals with the writing off bad debts whereas the section 36(1)(viia) deals with creation of provisions for bad and doubtful debts based upon the non-performing assets of the bank, which is in accordance with the guidelines issued by the Reserve Bank of India and NABARD. Therefore, considering these provisions of these se3ctions , we are of the view that the assessee is entitled to deduction u/s 36(1)(viia) of the Act. The case of the assessee is squarely covered by the decision of Hon'ble Apex Court in the case of Catholic Syrian Bank Ltd. Vs CIT (2012)343 ITR 270(SC). We note that the decision relied by the ld. AO in case of Southern Technologies Ltd. vs. Joint Commissioner of Income-tax, Coimbatore [2010] 187 Taxman 346 (SC)/[2010] 320 ITR 577 (SC)/[2010] 228 CTR 440 (SC)[11-01-2010] Printed from counselvise.com Page | 5 ITA Nos. 2187 to 2189/KOL/2025 The Dakshin Dinajpur District Central Co-operative Bank Ltd. AYs 2012-13 to 2014-15 is not applicable to the assessee as the decision was rendered in the context of Section 36(1)(vii) of the Act, where the assessee is a co- operative bank and therefore, the Section 36(1)(viia) is appliable for rural branches. We also note that the issue has been decided in case of Tamilnadu State Apex Coop Bank Ltd Vs ACIT (2014) 43 taxmann.com 111(Chennai Trib), wherein it has been held that the assessee is entitled to deduction claim in respect of provision for bad and doubtful debts. Considering these facts we are inclined to set aside the order of ld. CIT (A) and direct the AO to delete the addition made. Consequently the ground no. 3 and 4 are allowed. A.Ys. 2013-14 & 2014-15 ITA Nos. 2188 & 2189/KOL/2025 5. The issues raised in these appeals are similar to ones as decided by us in ITA No. 2187/KOL/2025. Accordingly, our decision would, mutatis mutandis, apply to these appeals of assessee in ITA No. 2188 & 2198/KOL/2025 as well. Hence, the appeals of assessee are allowed. 6. In the result, all the appeals of the assessee are allowed. Order pronounced in the open court on 10.02.2026. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 10.02.2026 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 6 ITA Nos. 2187 to 2189/KOL/2025 The Dakshin Dinajpur District Central Co-operative Bank Ltd. AYs 2012-13 to 2014-15 Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "