Calcutta High Court
Principal Commissioner Of Income Tax vs Raigunj Central Co-Operative Bank Ltd on 17 February, 2017
Author: Aniruddha Bose
Bench: Aniruddha Bose, Arindam Sinha
ORDER SHEET
G.A no.3652 of 2015
ITAT no.162 of 2015
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction (Income Tax)
ORIGINAL SIDE
Principal Commissioner of Income Tax, Jalpaiguri
Versus
Raigunj Central Co-operative Bank Ltd.
BEFORE:
The Hon'ble JUSTICE ANIRUDDHA BOSE
The Hon'ble JUSTICE ARINDAM SINHA Date:17th February, 2017 Mr. Nizamuddin, Adv.
..for the Revenue.
Mr. Khaitan learned Sr. Adv.
..for the Assessee.
Arindam Sinha,J.: The Revenue is aggrieved by order dated 7th April, 2015 passed by the Income Tax Appellate Tribunal, Kolkata "C" Bench, Kolkata in ITA no.895/KOL/2012 and ITA no 49/KOL/2013 respectively pertaining to the assessment years 2007-08 and 2009-10. By the impugned order the Tribunal allowed the appeal pertaining to assessment year 2007-08 on both grounds. The appeal as pertaining to the assessment year 2009-10 was found to have facts and issues identical to the said earlier assessment year and decided in terms thereof. The assessee was successful before the Tribunal.
The Tribunal held that the change of status made by the Assessing Officer of the assessee from that of a co-operative society to a company was not permissible under the law until and unless a cogent reasoned order is passed for the same. The Tribunal also found that the issue arising out of the claim of the assessee for unrealized interest taken to income reversed, by debiting to P & L account and crediting to Overdue Interest account following the guidelines issued by the RBI, is highly debatable and it cannot be adjudicated while acting under Section 154 of the Income Tax Act, 1961.
Mr. Nizamuddin, learned advocate appeared on behalf of the Revenue and submitted that he was pressing only suggested question nos. 1 and 2 for being answered on admission in appeal. The said suggested questions are reproduced below:-
"(i)Whether on the facts and circumstances of the case the Ld. Tribunal had erred in law in allowing the appeal of the assessee deleting the disallowance made under Section 154 of the I.T. Act, 1961, by holding that the issue was debatable while mistake was apparent from record within the meaning of Section 154 of the I.T. Act, 1961?
(ii) Whether on the facts and circumstances of the case the order of the Ld. Tribunal has erred in law in deleting the disallowance made under Section 154 of the I.T. Act, 1961, relating the assessment year 2009-10 as well as in assessment year 2007-08 which was beyond the subject matter of appeal?
He submitted, by relying on the supplementary affidavit filed by the Revenue, the Assessing Officer in the assessment order while dealing with the provisions for overdue interest and standard assets had said, inter alia, as follows:-
"It is mere a Provision only. Such Provisions cannot be debited to the profit & Loss account of the assessee in such circumstances. The premise of the law is that loss or expenses not incurred cannot be allowed whatever be the treatment in books of accounts of the assessee"
Having said that the Assessing Officer made a mistake in including the said provisions under deductions which was rectified by the rectification order. The same was an error apparent and duly rectified.
Mr. Khaitan, learned senior Advocate appeared on behalf of the assessee and submitted that overdue interest provision and provision from standard assets aggregating the sum of Rs.67,33,445/- had been allowed as deduction under Section 36(1)(viia) by the AO in the assessment order. However, by subsequent rectification order dated 14th February, 2012 the Assessing Officer had deleted the deduction. Referring to the impugned order he submitted that the deduction could not be reversed since interest debited to borrowed account but for any reason was not actually realized, the account is to be treated as NPA as per the guidelines issued by the RBI. The assessee had done that. The same could not be undone by rectification since it was a debatable issue.
The Assessing Officer after disallowing the said two provisions in para (A) of his order, said in para (B) therein as follows:-
"B. Assessee has debited an amount of Rs.2,91,93,886/- in the head provision for bad and doubtful debts in Column 38 of the Part A-P & L of the return. But no amount was written in Column no.37 of the same part means there was no bad debt which were written off. Provisions in this case are not allowable deduction if not expensed/happened.
"Provided that in the case of an assessee to which Cause (viia) applies, the amount of deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof of exceeds the credit balance in the Provisions for bad and doubtful debts account made under that clause."
Assessee is entitled to get deduction u/s.36(1)(viia) of the Act which has been considered separately. Hence, it is here disallowed and would be considered in the computation.
(Addition of Rs.2,91,93,886/-"
In the computation of income in the assessment order disallowances under serial nos.1 and 2 included the sum of Rs.2,91,93,886/- taken twice. These sums included the sum of Rs.67,33,445/-. The computation also provided for a deduction under section 36(1)(viia) of the said sum of Rs.2,91,93,886 as admissible.
The assessee applied for rectification under section 154. The rectification regarding the amount of Rs.2,91,93,886/- taken twice was made as sought for in the said application. However a further rectification, not applied for, was made by deleting the sum of Rs.67,33,445/- from the said sum of Rs.2,91,93,886/- allowed as a deduction under section 36(1)(viia). On appeal the CIT(A) observed that the said two provisions are not allowable as per the Act. On further appeal, the Tribunal held as follows:-
"..........In case of assessee, if interest is debited to borrowed account but for any reason interest has not actually realized, account is to be treated as NPA as per the guidelines issued by RBI. In that eventuality, the amount is unrealized, the unrealized interest so taken to income should be reversed by debiting to the P & L Account and crediting to overdue interest reserve account. It was the claim of the assessee that during the year unrealized interest taken to income has been reversed by debiting the P & L Account and crediting to provision for overdue interest account following the guidelines issued by RBI. We find that this issue is highly debatable and it cannot be adjudicated while acting u/s.154 of the Act. The AO should have made disallowance only while framing regular assessment or reassessment, which was made prior to resorting to this rectification. This disallowance cannot be made while acting u/s.154 of the Act reason being this is not a prima facie mistake it is a highly debatable issue. In term of the above, we allow this issue of assessee's appeal."
It is clear from the above that the deletion of the Rs.67,33,445/- allowed as deduction under section 36(1)(viia) cannot be said to have been made in rectification of an error apparent in the assessment order. We as such have no reason to interfere with the impugned order and, therefore, do not find that any substantial question of law is involved in this case.
The application and appeal are dismissed.
(Aniruddha Bose, J.) (Arindam Sinha, J.)