Income Tax Appellate Tribunal - Delhi
Mahadedha Urban Cooperative Bank Ltd, ... vs Dcit, Circle-1, Ghaziabad on 4 December, 2019
ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH: 'E': NEW DELHI)
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER
ITA No: 4213/Del/2017
(Assessment Year: 2012-13)
Mahamedha Urban Co- DCIT, ]
operative Bank Ltd., Vs Circle-1,
Ghaziabad. Ghaziabad.
PAN No: AAAAM4437E
APPELLANT RESPONDENT
Assessee by : None
Revenue by : Ms. Rakhi Vimal, Sr. DR
ORDER
Per Anadee Nath Misshra, AM
(A) This appeal by Assessee is filed against the order of the Learned Commissioner of Income Tax (Appeals), Ghaziabad ["Ld. CIT(A)" for short], dated 31.03.2017, for Assessment Year ("A.Y.", for short) 2012-13, on the following grounds:
"1. The Ld' CIT (A), Ghaziabad has erred by not giving the proper opportunity to plead the case before it and by passing ex-parte order, the order is not tenable as it is not based on natural ground realities and justice.
2. The Ld' CIT (A), Ghaziabad has also erred by not adjourning the hearing of the case despite requesting twice i.e. on 28/03/2017 & 30/03/2017 on the genuine ground that the counsel was out of station for some urgent work and was to return back in the first week of the following month of hearing, which is against Page 1 of 16 ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
the principle of due natural justice.
3. That the Ld' CIT (A), Ghaziabad and the Ld' Dy. Commissioner of income Tax, Circle - 1, Ghaziabad have erred in law and on facts in making the addition of Rs. 1,15,00,000/- u/s 68 of Income Tax Act, 1961 in share capital only by making a reference of RBI Inspection Report, despite and ignoring the facts that the assessee had submitted all the evidence to prove their credit worthiness. After providing all the related documents the Ld' Assessing Officer neither raised any query for the same nor objected on any submitted documents. It is also worthwhile to mention here that the RBI Inspector had no role to justify the credit worthiness of the shareholder. They have only to give the report on financial discipline of the Bank according to rules and regulations of the RBI.
4. That the learned Dy. Commissioner of Income Tax, Circle - 1, Ghaziabad has erred in law and on facts in making the addition of Rs. 29,50,000/- u/s 68 of income Tax Act, 1961 in share capital made by three companies despite and ignoring the facts that the assessee had submitted all the evidence to prove their credit worthiness. After providing all the related documents the Ld' Assessing Officer didn't raise any query for the same.
5. That the learned Dy. Commissioner of Income Tax, Circle -1, Ghaziabad has erred in law and on facts in making the addition of Rs. 2,17,95,629/- for disallowing the expenditure u/s 37 by making a reference of RBI Inspection Report, despite and ignoring the facts that the assessee has maintained its books of account properly and get them audited. Even the Ld' Assessing Officer didn't reject the books of account.
It is also worthwhile to mention here that the Ld' Assessing Officer misunderstood the remarks of RBI Inspector for non declaring the loans of Rs. 9.61 Crs as NPA and not making the provisions of Rs. 5.69 Crs. on the same and treating it as diversion of the fund. Even the Ld' Assessing Officer ignored their comments about declaring more profit by such provision of Rs. 5.69 Crs.
The Ld' Assessing Officer also ignored the fact that if the Assessee declared the loans of Rs. 9.61 Crs as NPA than a total interest of Rs. 1.25 crs was also to be reversed in addition to making the provision of Rs. 5.69 crs and due to which the declared profit would be reduced by Rs. 1.25 Crs.
The Ld' Assessing Officer has also erred by taking the above bases for disallowing the expenditure without pointing out any deficiencies in the books of account.
6. Any additional ground, if any, may be submitted with your kind permission.
It is, therefore, prayed that the above additions may kindly be deleted and the appeal of the appellant assessee may be allowed on merits of the case."Page 2 of 16
ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
(B) When this appeal came up for hearing before us on 02.12.2019, there was nobody present from assessee's side. It was found from perusal of records that a letter dated 21.11.2019 of MRS & CO., Chartered Accountants was filed for seeking adjournment of hearing fixed on 02.12.2019 on the ground that "...council of the case undersigned is out of town for some personal reasons." . The aforesaid letter dated 22.11.2019 is reproduced below for ease of ready reference:
"
"Page 3 of 16
ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
(B.1) We have further found from perusal of record that there is no Authorization from assessee's side in favour of CA Ram Kumar Dhiman or in favour of MRS & CO, Chartered Accountants to appear in Income Tax Appellate Tribunal ("ITAT", for short) in connection with the present appeal. In the absence of any Authorization from the assessee's side, the letter seeking adjournment lacks legitimacy. Moreover, as nobody was present at the time of hearing before us from assessee's side, we had no assistance at the time of hearing, in fully understanding and in obtaining clarity regarding reason stated for seeking adjournment, vaguely worded as "...some personal reason". In cumulative consideration of these facts and circumstances, we proceed to decide this appeal in accordance with Rule 24 of Income Tax (Appellate Tribunal) Rules, 1963.
(C) Vide Assessment Order passed under Section 143(3) of the I.T. Act, income of the assessee was assessed at Rs. 5,53,11,095/- as against returned income of Rs.
1,90,65,466/-. The relevant portion of the Assessment Order is reproduced as under:
"3. The assessee, Mahamedha Urban Co-operative Bank Ltd. is a Co-operative Bank which has been registered under the Co-operative Societies Act, 1965 and possess license for functioning as Bank from RBI and doing the following activities. Accepting the deposits from the members/public, Granting the secured and unsecured loans including bills/cheques discounting, investing the funds according to the norms of the RBI and Co-operative Society Act, 1-885, The registered office of the bank is situated at Nai Basti, Ghaziabad and the bank is operating: from six branches:
S.No. Branches Address Date of
opening
Ghaziabad Branch Main Brnach, 36, Nai Basti, 01.03.2001
1.
Ghaziabad
2. Noida Branch J-89, Sector-41, Noida 29.08.2003
3. Raj Nagar Branch (Ex-counter) Ec. Raj Nagar, Ghaziabad 25.09.2007
4. Surqjpur BranDhTftx-counterj Surajpur, Greater Noida 15.05.2008
5. Hapur Branch Opp, Bus Stand, Hapur 08.04.2009
Dadri (Ex-counter) - Opp, Bhagwati Nursing Home, 13.12.2009
6,.
Railway Road, Dadri, U.P
Page 4 of 16
ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
The assessee vide ordersheet entry dated 06.01.2016 has been asked to produce Audit Report of RBI for F.Y. 2011-12. The date for compliance was fixed for 07.01.2015. On the given date neither anybody appeared nor any written reply, regarding Audit Report, was received in this office. However, on 08.01,2015, the AR produced a letter from RBI which was addressed to the assessee bank. The AR cited the prior approval condition of RBI in sharing the report before any Authority or Court. In order to get the Audit Report, a notice u/s 133(6) was issued to The Dy. General Manager, Reserve Bank of India, Lucknow, on 23,01,2015.
4. The RBI report titled "Statutory Inspection of Mahamedha Urban Co- operative Bank Limited, Ghaziabad U/s 35 of Banking regulation Act, 1935rVtfith Reference to Financial Position as on March 31, 2012. Loans received on 23,02,2015".
Based on the findings of the RBI report, especially regarding introduction of paid up share capital where source of the contribution was not ascertainable and regarding diversion of funds through bad loans which turned into Non-Performing Assets, show cause notice U/s 142(4) was issued on 05.03.2015 which is being reproduced below:-
Queries:-
The statutory notice U/s 143(2) was issued on 13/08/2013 which was properly served upon you, Your are, required to furnish the replies of following queries on or before 12/03/2015 at 11:30 am.
1. Your attention is drawn to the para no. 21. Of the confidential RBI Report of Statutory Inspection of Mahamedha Urban Co-operative Bank Limited, Ghaziabad, the relevant portion of the paragraph is being reproduced below:-
Paid-Up Share Capital 2.1The paid-up share capital (at book value) of the bank stood at Rs. 535.65 lakh as on the date of present inspection, position an increase of Rs. 126.76 lack (31.00%) from Rs. 408.89 lakh since the date of last inspection, i.e. March 31, 2011. The bank had raised Rs. 303.43 lakh of fresh share money during the year under review. During the yer 34 members contributed more than Rs. 1.00 lakh each. The major individual contributors during the year included Sunita Bhati, wife of Raj Singh Bhati, Chairman of the bank (Rs. 45.00 Lakh) ; Anita Bhati, Director (Rs. 35.00 Lakh); Raj Singh Bhati, Chairman (Rs. 30.00 Lakh); Udaiveer Singh, Director (Rs. 15.00 Lakh) etc. The source of the contribution was not ascertainable. The bank was charging 10% share money from the borrower as against the norm of 2.5% & 5% from the secured and unsecured borrowers respectively. The bank had not prepared the share certificates of the members ice February 11,2007, further, 47 Share certificates issued during January 2, 2002 and April 5, 2002 had not been handed over / dispatched to the members. Share certificate bearing number from 5301 to 7200 issued between July 4, 2005 and February, 11 2007 prepared with signature of only one Director (signature of the Secretary and Chairman not appended) are also yet to be delivered to the respective members. The Board in its meeting dated November, 29, 2011 passed resolution for enhancing the authorized capital of the bank to Rs. 15.00 crore from Rs. 5,00 crore as Page 5 of 16 ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
hitherto. The fee for the nominal membership was also increased from Rs. 2.00 to Rs. 100.00 in the same meeting. The cecisions of the board were registered with registrar on November 1, 2011.
Following investments in the form of Share capital have been cited where the source of the contribution was not ascertainable. These are
1. Sunita Bhati - (Rs. 45,00,000/-)
2.Anita Bhati - (Rs. 35,00,000/-)
3.Raj Singh Bhati - (Rs. 30,00,000/-)
4.Udai Veer Singh - (Rs. 15,00,000/-) To further cloud the genuineness of these transactions, the report mentions following other facts:-
i. The bank was charging 10% Share money from the borrowers as against the norm of 2.5% and 5% from the secured and unsecured borrowers respectively. ii. The bank has not prepared the share certificate of the members since Feb-
11-2007 and further 47 Share Certificate issued during Jan 2, 2002 and April 05, 2002 had not been handed over /dispatched to the members. Similarly, share certificates bearding number 5301 to 7300 were prepaid with signature of only one Director and are also yet to be developed to the respective member.
From the above facts, it is clear that the transactions of receipt of Share money between 01.04.2011 and 31.03.2012 are not genuine. In this respect, you are requested to show-cause why this amount of Share money received from above mentioned four 'alleged' investers could not be added back in our income of the year U/s 68 of the I.T. Act, 1961 for want of genuineness of transaction and creditworthiness.
2. Your attention is drawn to the para 5.6 of the above mentioned repot of the Reserve Bank of India which clearly states that the total amount or diversions in loan account was found to the Rs. 9,61.04 Lacs and over and above this amount additional provisions of Rs. 569.51 Lac has been suggested as provision for BDDR. It means Rs. 1530.55 Lacs of the funds of the Bank has been diverted. This finding of the RBI report along ;with other serious diversion / book fudging instances ;which have also been noted by the RBI investigating team clearly establishes, on the basis of factual audit / investigation of the working of the Bank, that the above mentioned amount of Rs. 1530.55 lacs has been diverted which if interpreted with respect to the provision of the Income-tax Act, 1961, renders the cost of obtaining these funds of Rs. 1530.55 Lacs as nor - business expenditure and hence should be disallowed U/s 37 of the Income Tax Act, 1961.
The Bank has deposits of Rs. 138,06,37,294,7/- during the year and direct the indirect expenses on these deposits in Rs. 19,60,08,132/-. If we take this proportion, the cost of diverted fund of Rs. 15,30,55,000/- comes to Rs. 2,17,95,628,5/-. You are requested to show-cause why this proportionate cost of fund should not be disallowed for being an expenses not related to business.
Page 6 of 16ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
Page 7 of 16ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
Page 8 of 16ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
Page 9 of 16ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
Page 10 of 16ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
"
(C.1) The assessee filed appeal before the Ld. CIT(A). Vide impugned appellate order dated 31.03.2017, the Ld. CIT(A) dismissed the assessee's appeal. The relevant portion of the order of the Ld. CIT(A) is reproduced as under:
"3. Aggrieved by the order of the Assessing Officer (hereinafter 'AO') the appellant has filed this appeal taking the following grounds of appeal:-
3.1 Grounds of appeal:
1. That the learned Dy. Commissioner of income Tax, Circle - I, Ghaziabad has erred in law and on facts in making the addition of Rs.
1,15,00,000/- u/s 68 of Income Tex. Act, 1061 for addition in Share Capital only by making the reference of RBI Inspection report, despite and ignoring the facts that the assessee submitted all the evidence to prove their credit worthiness. After providing the all the related documents the Ld' Assessing Officer didn't raise any querry for the same. It is also worthwhile to mention here that the RBI Inspector had any role to justify the credit worthiness of the Shareholder. The have to give the report on financial discipline of the Bank according to rules and regulation of the RBI.
2. That the learned Dy. Commissioner of income Tax, Circle - I, Ghazjabad has erred in law and on facts in making the addition of Rs. 29,50,000/- u/s 68 of Income Tax Act, 1961 for addition in Share Capital made by three companies despite and ignoring the facts that the assessee submitted all the evidence to prove their credit worthiness.
Page 11 of 16ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
After providing the all the related documents the Ld' Assessing Officer didn't raise any quarry for the same.
3. That the learned Dy. Commissioner of income Tax, Circle - I, Ghazaabad bas erred in law and on facts in making the addition of Rs. 2,17,95,629/- for disallowing the expenditure u/s 37 by making the reference of RBI Inspection report, despite: and ignoring the facts that the assessee maintained its books of account properly and get audited even the Ld. Assessing Officer didn't rejected the books of account. It is also worthwhile to mention here that the Ld. Assessing officer misunderstand the remarks of RBI inspector for non declaring the loans of Rs. 9.61 Crs as NPA and non making the provision of Rs. 5.69 Crs. On the same as diversion of the fund. Even the Ld. Assessing Officer ignore their comments about declaring more profit by such provisions of Rs. 5.69. Crs.
The Ld' Assessing Officer has erred by taking toe above base for disallowing the expenditure without making any deficiencies to the Books of Account.
4. Any Additional ground may be submitted with your kind permission if any.
5. That kindly stay the demand during the pendency of the appeal. It is 'therefore., prayed, that the above addition may kindly be deleted and the appeal of the & appellant assessee may be allowed.
4. Appellant had earlier vide letter dt. 17.02.2015 requested for early fixation of the case. However, this appeal was fixed for hearing on number of times, the details of which are given below, but no compliance was made to any of the notices issued. All these notices were sent to the appellant through Speed Post on the address given in the appeal petition i.e. Form No. 35:
SI. No. Date fixed for Remark
Date of notice hearing
1. 06.04.2016 25.04.2016 None Attended
2. 27.04.2016 05.05.2016 An application filed for adjournment
on the ground that counsel is out of
station and the case fixed for hearing
on 18.05.2016 .
3. 18.05.2016 An application filed for adjournment
for time to file written submission
and the case fixed for hearing on
09.06.2016
4 17.03.2017 28.03.2017 An application filed for adjournment
counsel out of station adjourned to
30.03.2017
5 30.03.2017 not attended
Page 12 of 16
ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
5. From the above it is clear that despite several opportunities none appeared on behalf of the appellant for hearing only applications for adjournment have been filed before the undersigned. Hence the appeal filed by the appellant is liable to be dismissed for non-prosecution. In may above view, I find support from the following decision:-
(i) In the case of CIT Vs. B.N. Bhattachargee & Another 118 ITR 461 (relevant pages 477 & 478) wherein their Lordships have held that "the appeal does not mean merely filing of appeal but effectively pursuing it"
(ii) In the case of Estate of Late Tukojl Rao Holker Vs. CWT 223 IR 480 (MP) while dismissing the reference made at the instance of assessee in default made following observations in their order. "if the partly at whose instance the reference is made fails to appear at the hearing, or fails In taking steps for preparation of the paper books so as to enable hearing of the reference, this court is not bound to answer the reference.
(iii) In the case of CIT Vs. Multplan India Pvt. Ltd. 38ITD 320 (Del). The appeal filed by the revenue before the Tribunal which was fixed f o r hearing but on the date of hearing nobody represented neither the revenue applicant, nor any communication for adjournment was received.
There was no communication or information as to why revenue choose to remain absent on that date. The Hon'ble Tribunal laid down the principle that on the basis of inherent power the appeal filed by the appellant can be treated as un-admitted.
6. Therefore, keeping in view of the above, the appeal filed by the appellant is liable to be dismissed for non-prosecution. No statement of facts has been submitted by appellant alongwith Form 35. Thus all facts given in the assessment order are treated as true and correct facts in the case of dispute.
7. On merits, perusal of facts reveal that appellant is a cooperative bar and AO after obtaining statutory inspection of appellant from RBI examinee the share capital introduced in the appellant bank amounting to Rs. 1,15,00,000/- and after detailed enquiry and having confronted appellant made an addition as appellant failed to discharge requisite onus u/s 68 of the IT Act. Similarly an addition of Rs. 2,95,00,000/- was made on account to failure to substantiate genuineness, identity and creditworthiness of eight investors of share capital. Appellant failed to discharge the primary onus u/s 68. An addition of Rs. 2,1795,629/- was made by AO after considering the statutory report of RBI. In view of above facts since appellant failed to substantiate maintainability of appellant's claim regarding addition to share capital and incurrence of business, expenses u/s 37 at assessment stage as well as during appellate stage. Thus, the additions made by AO are upheld and accordingly appellant's grounds of appeal are dismissed."
Page 13 of 16ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
(D) This present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 31.03.2017 of the Ld. CIT(A). At the time of hearing, Revenue was represented by Ms. Rakhi Vimal, the learned Senior Departmental Representative (in short 'Ld. Sr. DR'). However, as mentioned earlier, none was present from the assessee's side. In the absence of any representation from assessee's side, at the time of hearing before us, we heard the Ld. Sr. DR. The Ld. Sr. DR relied upon the order of the Assessing Officer and the aforesaid impugned order dated 31.03.2017 of the Ld. CIT(A). After perusal of the order of the AO and the aforesaid impugned order dated 31.03.2017 of the Ld. CIT(A), we find that the Ld. CIT(A) has passed speaking order on merits. Relevant portion of the impugned appellate order of the Ld. CIT(A) has already been reproduced in foregoing paragraph (C.1) of this order. We find that the Ld. CIT(A) has given detailed reasons for his decision on merits in the aforesaid impugned appellate order dated 31.03.2017 of Ld. CIT(A). During appellate proceedings in Income Tax Appellate Tribunal ("ITAT", for short) no material has been brought for our consideration to persuade us to take a view different from the view taken by the Ld. CIT(A) in the impugned order on merit. After hearing the Ld. Sr. DR and after perusal of materials on record, and further, in view of the foregoing discussion, we decline to interfere with the aforesaid impugned appellate order dated 31.03.2017 of Ld. CIT(A); and dismiss this appeal.
(E) Before we part; we explicitly clarify that the assessee will be at liberty to approach ITAT for restoration of the appeal in accordance with Proviso to Rule 24 of Income Tax (Appellate Tribunal), Rules, 1963. If the assessee does approach ITAT for Page 14 of 16 ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
restoration of the appeal in ITAT, the matter will be considered in accordance with law having regard to the facts and circumstances.
(F) In the result, appeal filed by Assessee is dismissed.
Order pronounced in the Open Court on 04/12/2019.
Sd/- Sd/-
(H.S. SIDHU) (ANADEE NATH MISSHRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 04/12/2019
Pooja/
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Page 15 of 16
ITA No.- 4213/Del/2017.
M/s Mahamedha Urban Co-operative Bank Ltd.
Date of dictation
Date on which the typed draft is placed before
the dictating Member
Date on which the typed draft is placed before
the Other Member
Date on which the approved draft comes to the
Sr. PS/PS
Date on which the fair order is placed before
the Dictating Member for pronouncement
Date on which the fair order comes back to the
Sr. PS/PS
Date on which the final order is uploaded on
the website of ITAT
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
The date on which the file goes to the
Assistant Registrar for signature on the order
Date of dispatch of the Order
Page 16 of 16