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Income Tax Appellate Tribunal - Mumbai

Janakalyan Sahakari Bank Ltd., Mumbai vs Acit 1(3)(1), Mumbai on 19 December, 2018

आयकर अपील य अ धकरण, मुंबई यायपीठ,'एफ',मुंबई।

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "F", MUMBAI ी जो ग दर संह, उपा य एवं ी जी. मंजूनाथ, लेखा सद य, केसम Before Shri Joginder Singh, Vice President, and Shri G. Manjunatha, Accountant Member ITA NO.2666/Mum/2016 Assessment Year: 2011-12 Deputy Commissioner of M/s JanakalyanShakari Income Tax -1(3)(1), बनाम/ Bank Limited R. No.540, 5th Floor 140, VivekDarshan, Vs. Aayakar Bhavan, Sindhi Society, M. K. Road, Churchgate, Chembur, Mumbai-400020 Mumbai-400071 (राज व/Revenue) ( नधा#$रती /Assessee) P.A. No. AACFJ6244R C.O. No.298/Mum/2017 (Arising out of ITA NO.2666/Mum/2017) Assessment Year: 2011-12 M/s JanakalyanShakari Deputy Commissioner of Bank Limited बनाम/ Income Tax -1(3)(1), 140, VivekDarshan, R. No.540, 5th Floor Vs. Sindhi Society, Aayakar Bhavan, Chembur, M. K. Road, Churchgate, Mumbai-400071 Mumbai-400020 ( नधा#$रती /Assessee) (राज व/Revenue) P.A. No. AACFJ6244R 2 M/s Janakalyan Sahakari Bank Ltd.

C. O. No.298/Mum/2017 राज व क ओर से / Revenue by Shri Sushil Kumar Poddur-

DR नधा#$रतीक ओर से/ Assessee by Shri VishwasMehendale ु वाई क( तार)ख / Date of Hearing :

 सन                                                   27/11/2018

 आदे श क( तार)ख /Date of Order:                       19/12/2018


                         आदे श / O R D E R

Per Joginder Singh (Vice President) The Revenue is aggrieved by the impugned order dated 22/01/2016 of the Ld. First Appellate Authority, Mumbai and the assessee has preferred Cross objection. First, we shall take up the appeal of the Revenue, wherein, the first ground raised pertains to allowing deduction of Rs.5,91,49,154/- under section 36(1)(vii) of the Income Tax Act, 1961 (hereinafter the Act).

2. During hearing, Shri Sushil Kumar Poddar, Ld. DR, invited our attention to para-6.5 of the impugned order and para-4.1 and 4.4 of the assessment order. It was pointed out that impugned amount should be opening balance, therefore, the finding of the Ld. Commissioner of Income Tax (Appeal) is wrong. On the other hand, Shri 3 M/s Janakalyan Sahakari Bank Ltd.

C. O. No.298/Mum/2017 Vishwas Mehandale, ld. counsel for the assessee contended that it was done as per RBI norms for which our attention was invited to page-3 of the balance sheet, page-27 & 28 of the paper book including schedule-B and page-5 of the paper book.

2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is engaged in the business of banking, declared 'NIL' income in its return filed on 29/09/2011 which was processed under section 143(1) of the Act. The case of the assessee was selected for scrutiny, therefore notices under section 143(2) and thereafter under section 142(1), along with questionnaire were issued and served upon the assessee. The assessee attended the proceedings from time to time and furnished the details. The Ld. Assessing Officer observed that in its profit & loss account, the assessee debited nil towards bad debts reserves or bad debts however in the computation of income, the assessee claimed bad debts of Rs.5,91,49,154/- under section 36(1)(vii) of the Act. The 4 M/s Janakalyan Sahakari Bank Ltd.

C. O. No.298/Mum/2017 assessee was asked to justify the claim of bad debts. The assessee made written submissions dated 20/12/2013. The Ld. Assessing Officer found that the assessee has not written off the bad debts in the profit & loss account, therefore, the same is not allowable. It was further noted by the Ld. Assessing Officer that the assessee was having credit balance in the account 'provision for bad and doubtful debt account', wherein, the opening balance was shown at Rs.69,13,86,854/- and closing balance at Rs.54,66,65,946/-. The stand of the Revenue is that the bad debt can be allowed only to the extent if it is a written off in its accounts. The ld. Assessing Officer disallowed the bad debts of Rs.5,91,49,154/-. On appeal before the Ld. Commissioner of Income Tax (Appeal), the bad debt was held to be allowable, on the ground that the assessee has fulfilled the conditions provided under section 36(1)(vii) of the Act. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in 5 M/s Janakalyan Sahakari Bank Ltd.

C. O. No.298/Mum/2017 juxtaposition and analyzed, without going into technicalities, it has been found by the Ld. Commissioner of Income Tax (Appeal) that the assessee claimed bad debts of Rs.5,91,49,154/- under section 36(1)(vii) and written of the same as irrecoverable bad debts in its books of accounts. Considering the totality of facts and in view of the amendment in the taxation laws with effect from 01st April, 1989, the requirement of demonstrating that the debts has become bad has been dispensed with and only requirement remains that it should be "written off" in books of accounts of the assessee, which has been further clarified by CBDT Circular No.551 dated 23/01/1990. Our view find support from the ratio laid down in CIT vs Brilliant Tutorials Pvt. Ltd. 292 ITR 399 (Mad.), CIT vs Morgan Securities and Credits Pvt. ltd. (210 CTR 336)(Del.), DCIT vs Oman International Bank Saog. (313 ITR

128)(Bom.), CIT vs Star Chemicals (Bom.) Pvt. Ltd. 220 CTR 319 (Bom.), CIT vs Global Capital Ltd. 201 taxation 210 (Del.), CIT vs M/s Excel Fashion Pvt. Ltd. (201 taxation

216)(Del), CIT vs Auto meters Ltd. 292 ITR 345 (Del.). So 6 M/s Janakalyan Sahakari Bank Ltd.

C. O. No.298/Mum/2017 far as, the reliance upon the decision in Kashmir Trading Company vs DCIT and Ahamadabad Electricity Company Ltd. (supra), the decision from Hon'ble Rajasthan High court and Gujarat High Court are concerned, the Hon'ble Apex Court, later on, in T.R.F. Ltd. vs CIT 323 ITR 397 (SC), considering the provision of section 36(1)(vii), prior to April, 1, 1989 and post amendment held that it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. Mere written off in its accounts is enough, thus, following the aforesaid decision from Hon'ble Apex Court, in principle, we affirm the stand of the Ld. Commissioner of Income Tax (Appeal), resulting into dismissal of this ground of the Revenue.

3. The next ground raised by the assessee pertains to deleting the addition made by the Assessing Officer for bad and doubtful debts reserves amounting to Rs.11,16,02,000/- on account of recovery of NPA and overdue interest reserves amounting to Rs.57,08,000/- on account of recovery of overdue interest on NPA ignoring the 7 M/s Janakalyan Sahakari Bank Ltd.

C. O. No.298/Mum/2017 finding of the ld. Assessing Officer and disregarding the nexus of interest income disclosed and worked out on NPA. 3.1. The Ld. DR contended that there is no finding by the Ld. Commissioner of Income Tax (Appeal) for which our attention was invited to para-7.1 of the impugned order by advancing arguments which is identical to the ground raised. However, the ld. counsel for the assessee explained that whatever was received was offered for taxation in the next year.

3.2. We have considered the rival submissions and perused the material available on record. So far as, facts are concerned, these has been mentioned in the assessment order as well as in the impugned order. We note that this issue has not been examined properly and even the assessee has not produced the necessary facts before the Ld. Assessing Officer, therefore, we deem it appropriate to remand ground no.2 & 3 (which are interconnected) to the file of the Ld. Assessing Officer to examine the claim of the assessee afresh. The assessee is 8 M/s Janakalyan Sahakari Bank Ltd.

C. O. No.298/Mum/2017 directed to furnish the necessary evidence in support of its claim before the ld. Assessing Officer, for which opportunity may be given to the assessee. Thus, both these grounds are allowed for statistical purposes, consequently, the appeal of the Revenue is partly allowed for statistical purposes.

4. Now, we shall take up the cross objection of the assessee (298/Mum/2017), wherein, disallowing the claim of bad debts amounting to Rs.5,91,49,154/- under section 36(1)(vii) has been raised. This ground of the Revenue has been dismissed, therefore, this cross objection of the assessee has remained for academic interest only.

5. So far as, the bad and doubtful reserves on account of recovery of NPA amounting to Rs.11,16,02,000/- and overdue interest reserves amounting to Rs.57,08,000/- on account of recovery of overdue interest on NPA are concerned, , while disposing of the appeal of the Revenue, these interconnected grounds were remanded back to the file of the Ld. Assessing Officer 9 M/s Janakalyan Sahakari Bank Ltd.

C. O. No.298/Mum/2017 for fresh adjudication, therefore, both these grounds are dismissed as in-fructuous.

Finally, the appeal of the Revenue is partly allowed for statistical purposes, whereas, the cross objection of the assessee are disposed off as indicated above.

This order was pronounced in the open court, at the conclusion of the hearing, in the presence of ld. representative from both sides on 27/11/2018.

                Sd/-                                             Sd/-
        (G. Manjunatha)                                   (Joginder Singh)
लेखा सद$य / ACCOUNTANT MEMBER                       उपा&य' /VICE PRESIDENT
   मब

ंु ईMumbai; +दनांक Dated : 19/12/2018 f{x~{tÜ?P.S / नजी स चव आदे श क ()त+ल,प अ-े,षत/Copy of the Order forwarded to :

1. अपीलाथ/ / The Appellant

2. 01यथ/ / The Respondent.

3. आयकर आय3 ु त(अपील) / The CIT, Mumbai.

4. आयकर आय3 ु त / CIT(A)- , Mumbai

5. 5वभागीय 0 त न ध, आयकर अपील)य अ धकरण, मब ुं ई / DR, ITAT, Mumbai

6. गाड# फाईल / Guard file.

आदे शानस ु ार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, मब ुं ई / ITAT, Mumbai,