TaxTMI 
TaxTMI 
2023 (10) TMI 1380
X X X X Extracts X X X X
X X X X Extracts X X X X
....e impugned appellate order on 18.09.2020 as per Form 36 and appeal was to be filed on or before 17.11.2020 but actually it was filed on 24.12.2020, thereby there was a delay of 37 days. The Revenue has filed condonation petition stating that this delay is due to pandemic period of Covid 19 and subsequent events. We noted that the Hon'ble Supreme Court in Miscellaneous Application No. 665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No. 21 of 2022 vide order dated 10.01.2022. Since the Hon'ble Supreme Court has condoned the delay during the said period, respectfully following the same we condone the delay and admit the appeal. 3. The only issue in this appeal of Revenue is as regards to the order of CIT(A) quashing the reopening initiated u/s. 147 r.w.s. 148 of the Act, according to CIT(A) the Revenue could not establish failure on the part of the assessee to disclose fully and truly the material facts required for the assessment of the relevant assessment year in view of the proviso to section 147 of the Act. For....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and standard assets related to exempted periods, the same is not allowable deduction and has to be withdrawn. II) Further it was noticed that the assessee had claimed deductions of Rs. 14,95,14,257/- under Section 36(1) (viia) of the Act towards creation of bad and doubtful doubts. However it was noticed that the assessee had not created any reserve for bad debts in its books of account during the previous year 2007-08 relevant to assessment year 2008-09. III) Further it was noticed that entire advances of rural branches taken into account while determining 109% of aggregate average advances which resulted in excess deduction of Rs. 2,60,64,200/-. IV) Without prejudice to above as per the explanation to provisions of section 36(1)(via) of the Act with regard to "rural branch" it has been explained that" Rural branch means only rural branches of a Scheduled bank or non scheduled bank are eligible for the 10% of aggregate average advances of its rural branches . Since the assessee is Co-operative bank and not a scheduled or non scheduled it is not entitled for 10% of aggregate average advances amounting to Rs. 14,19,77,700/-." These reasons are reproduce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee came into the possession of the AO that impelled him to reopen the assessment. 3.2.1. It may be recalled that the Hon'ble ITAT has set aside the orders of my Ld. Predecessor-in-office for fresh decision on whole gamut of deduction u/s 36(1) (vii) (a). But in case of this particular assessment order passed u/s 143(3) r.w.s 147, the Hon'ble Tribunal had quashed the appeal order on the reasoning that the reopening after passage of four years from the end of the assessment year and based on same set of materials was bad in law. Hon'ble Tribunal had delved into the facts and had a conclusive finding that there were no new material or things in possession of the AO in possession of the AO for resorting to provision to section 147 of the Act. For the sake of convenience, relevant part of Hon'ble Tribunal's order is extracted as under: "5. We have considered the rival submissions. A perusal of the reasons recorded by the AO for the purpose of re-opening of the assessment clearly shows that re- opening has been done beyond the period of four years from the end of the relevant A.Y. In such cases, it is absolutely required that for the purpose of r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecorded and noticed that the entire premise of the reasons are that on perusal of records i.e., assessment proceedings and from assessment records, they came to know that the deduction on account of provision for standard assets realized, non-statutory reserves realized, deduction u/s. 36(1)(viia) of the Act on account of non-creation of any reserve for bad debt or entire advances of rural branches. From the above reasons, it is clear that the Revenue could not establish anything that there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year. We notice that this issue is covered by the decision of Hon'ble Supreme Court in the case of CIT vs. Foramer France, (2003) 264 ITR 566, wherein the Supreme Court has affirmed the decision of Hon'ble Allahabad High Court in the case of Foramer France vs. CIT, (2001) 247 ITR 436 by observing as under:- 14. Having heard learned counsel for the parties, we are of the view that these petitions deserve to be allowed. 15. It may be mentioned that a new Section substituted Section 147 of the Income-tax Act by the Direct Tax Laws (Amen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n, it is the new Section 147 which will apply to the facts of the present case. In the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. Hence, the proviso to the new Section 147 squarely applies, and the impugned notices were barred by limitation mentioned in the proviso." 6.1 In the absence of any failure on the part of the assessee to disclose fully and truly all material facts and assessment framed u/s. 143(3) of the Act and now reopening beyond 4 years which is against the provisions of the Act. Hence, we find no infirmity in the order of CIT(A) and the same is confirmed. This appeal of the Revenue is dismissed. ITA No. 857/CHNY/2020, AY 2008-09 7. The appeal by the assessee in ITA No. 857/CHNY/2020 is arising out of order of the Commissioner of Income Tax (Appeals), Puducherry in ITA No. 47,48/CIT(A)-PDY/2017-18 dated 31.08.2020. The assessment was framed by the ACIT, Circle-II, Cuddalore, for the assessment year 2008-09 u/s. 143(3)(ii) of the Income Tax Act, 1961 (hereinafter the 'Act') vide order dated 28.12.2010. 8. The first issue in this ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4 against the assessment order passed u/s. 143(3) of the Act and the relevant reads in para 5.5 as under:- "5.5 It can be recalled here that the Provision for bad and doubtful debts (Reserve for NPAs made and debited in the accounts during the year is Rs. 11,33,06,946; whereas, the assessee has claimed deduction u/s. 36(1)(viia) towards bad and doubtful debts at Rs. 18,35,33,849 in the statement of Total income (STI); and the AO in the assessment u/s. 143(3) allowed the said deduction at Rs. 14,95,14,257. But the deduction allowable to the assessee u/s. 36(1)(viia) r.w.r. 6ABA is only Rs. 10,53,74,000 as arrived at in para 5.4.3 above. Hence, the assessee was issued an enhancement notice u/s. 251(2) requiring it to show-cause as to why the deduction u/s. 36(1)(viia) should not be restricted as above:" The assessee contested the issue of enhancement now by stating that there is no expressed limitation that the deduction u/s. 36(1)(viia) of the Act is to be restricted to the amount of provisions made in the books of accounts and assessee before CIT(A) cited the provisions of section 36(1)(vii) of the Act wherein it is clearly laid down that bad debts should be written off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, the CIT (A) can very well proceed towards enhancement if the assessment order was found wanting. It is also seen that in connection with the correctness of proposal for enhancement, the appellant had raised certain perceived and inherent illogicality. Certain doubts were raised by the appellant at para 2(c) of the submission. Such apprehension of assessee on the matter is unfounded. Banks are eligible to claim deduction for bad debt u/s 36(1) (vi) in respect of advances and also claim provision for bad and doubtful debt u/s 36(1) (viia). Section 36(1) (vii) and 36(1) (viia) of the Act operate in their respective fields. Bad debt written off other than for which provision is made u/s 36(1)(viia) will he covered by section 36(1)(vii). In case of present assessee, we are dealing with issue of provision for bad doubtful debt u/s 36(1) (viia) of the Act. Hence, there is no room for absurdity apprehended by the assessee. 11. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the decision of Hon'ble Supreme Court in the case of Jute Corporation of India vs. CIT, [1991] 187 ITR 688 categorically held that the power of the CIT(A) is co-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Rs. 11,33,06,946/- whereas assessee has claimed deduction u/s. 36(1)(viia) of the Act towards bad and doubtful debts at Rs. 18,35,33,849/- in the statement of total income. The AO in the assessment u/s. 143(3) of the Act allowed the said deduction of Rs. 14,95,14,257/-. According to CIT(A) the deduction allowed to the assessee u/s. 36(1)(viia) r.w.rule 6ABA of the Income Tax Rules, 1962 is only to the extent of Rs. 10,53,74,000/-. Hence, the CIT(A) issued enhancement notice u/s. 251(2) of the Act and directed the AO to enhance by a sum of Rs. 3,62,07,301/- by observing in para 8.1 as under:- "8.1 Deduction u/s. 36(1)(viia) is computed as under The only ground taken by the assessee in this appeal is that the Assessing Officer while calculating deduction u/s 36(1)(viia) has erred in concluding that Vanur Branch of the Bank is a non-rural branch whereas the Vanur Branch is eligible for deduction u/s 36(1)(viia) as the population was below 10,000/-. This ground of the assessee is deemed partly allowed as the rural advances made during the year by Vanur branch is being taken into account in calculating the deduction u/s 36(1)(viia) of the Act but restricted to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alculated as per the provisions of section 36(1)(viia) of the Act, whichever is less. The assessee relied on the decision of Delhi Tribunal in DCIT vs Prathma Bank. However, the bench preferred the decision of Hon'ble Punjab & Haryana High Court and allowed the appeal of the revenue. 14.1 As regards to the decision of Delhi Tribunal in the case of Prathma Bank, supra, We find that there is no discussion about the issue raised by assessee. In the decision of Delhi Tribunal in the case of Prathma Bank, supra, it followed earlier year order in the case of Prathma Bank vs. CIT reported in (2015) 52 ITR (Trib) 454 (Del), wherein the Assessing Officer has allowed the claim of deduction u/s. 36(1)(viia) of the Act as claimed in the books of accounts at 10% of average agricultural advances. The Tribunal recorded the facts as under:- 17. The assessee also furnished the details of monthly average of agricultural advances outstanding in rural branches (copy of which is placed at page No. 14 of the assessee's paper book) which read as under: S. No. Region Monthly average of agricultural advances outstanding in rural branches F.Y. 2008-09 AMT IN '000'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....balance in the provision for bad and doubtful debt account. The point to be highlighted is that in case of banks, by way of incentive, a provision for bad and doubtful debt is given the benefit of deduction, however, subject to the ceiling prescribed as stated above. Lastly, the provision for NPA created by a scheduled bank is added back and only thereafter deduction is made permissible under Section 36(1)(viia) as claimed. The above decision of Hon'ble Supreme Court in the case of Southern Technologies Ltd., supra, basically bring out the fact that NBFCs are not allowed to get the benefit of section 36(1)(viia) and 43D of the Act, but it does not at any place deals with the limit upto which this deduction has to be restricted to. Another case law of Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd., vs. CIT, 343 ITR 270 (SC) deals with the issue of deduction on account of provisions for bad and doubtful debts u/s. 36(1)(viia) and also deduction u/s. 36(1)(vii) of the Act. This case basically deals with the interplay of deduction between the provisions of section 36(1)(vii) for bad debts and deductions provided in respect of provision for bad and doubtful d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat amount only. Since the language of the statute is clear and is not capable of any other interpretation, we are satisfied that no substantial question of law arises in this appeal for consideration by this court." 14.4 We noted that the ratio of the judgment of Hon'ble Punjab & Haryana High Court in the case of State Bank of Patiala directly applies to the current controversy raised by assessee. Even the recent decision of Hon'ble Karnataka High Court in the case of CIT vs. Syndicate Bank, [2020] 422 ITR 460 (Karn) has explained the provisions and held that the condition precedent for claiming deduction under section 36(1)(viia) is that a provision for bad and doubtful debts should be made in the accounts of the assessee. The language employed in the section is clear and ambiguous. In the absence of any provision, the assessee is not entitled to deduction. However, the assessee is entitled to deduction to the extent provision is made in the accounts subject to the limit mentioned in section 36(1)(viia) of the Act. 14.5 We have gone through the decision of Delhi Tribunal in the case of Prathma Bank, supra and noted that this controversy of placing restriction on claim of de....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 17. The next common issue in these four appeals of assessee is as regards to the claim of deduction u/s. 36(1)(viia) of the Act, wherein the CIT(A) held that the deduction cannot exceed the provision made for bad and doubtful debts in the books of accounts. Since, we have already decided this issue for the assessment year 2008-09 in ITA No. 857/CHNY/2020 in preceding paras 14 to 14.6, taking a consistent view we dismiss this common issue of all these appeals of assessee. 18. The next issue in this appeal of assessee in assessment year 2009-10 in ITA No. 858/CHNY/2020 is as regards to the order of CIT(A) holding the notice of issue u/s. 143(2) of the Act as valid and not barred by limitation. For this, assessee has raised the following ground Nos.10 to 12:- 10. The Commissioner of Income Tax (Appeals) erred in holding that the Notices u/s. 143(2) dated 14/08/2014 and 15/09/2014 which were issued in connection with return of income filed On 28/09 /2009 are not barred by limitation. 11. The Commissioner of Income Tax (Appeals) erred in holding that wrong mention of the dated of filing of a return will be cured by the operation of Section 292B. (In both the notice....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 17.04.2014 requesting to treat the return already filed on 28.09.2009 as return filed in response to the notice issued u/s. 148 of the Act. This being so, the assessee vide his letter dated 17.04.2014 had requested for the treatment of the return dated 28 09.2009 as return to the response to the notice issued u/s 148 of the Act. Only after that the AO has issued the notice u/s. 143(2) on 16.09.2014. In the said notice, as the return was dated 28.09.2009, he had referred to the said date. In fact the said return dated 28.09.2019 is the return which is to be considered for the purpose of assessment as the same has been treated as the return, in response to the notice u/s. 143 by the assessee by the 1ssuance of letter dated 17.04.2014 This being so, we are of the view that the notice issued u/s. 143 (2) is not barred by limitation. " Considering the facts of the case as well as biding decision of the Hon'ble Tribunal, the objections of assessee in this ground are dismissed." We noted that the notice u/s. 143(2)of the Act dated 14.08.2014 and 15.07.2014 was issued after return filed u/s. 148 of the Act. The assessee in response to notice u/s. 148 of the Act dated 20.03.20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....olding that the appellant had failed to disclose material facts necessary for the assessment during the original assessment proceedings. 21. Brief facts are that the assessee, a co-operative bank engaged in the business of banking filed its return of income electronically for the assessment year 2009-10 on 29.09.2008 admitting income of Rs. 6,45,28,433/- after claiming deduction u/s. 36(viia)(a) of the Act. The assessee's case was selected for scrutiny assessment and assessment was completed u/s. 143(3) of the Act vide order dated 28.10.2010. Subsequently, the AO issued notice u/s. 148 of the Act dated 20.03.2014 (this notice is within 4 years and proviso to section 147 of the Act does not apply to the facts of the case) and for this, the AO recorded the reason that the assessee has claimed deduction of Rs. 21,96,81,180/- u/s. 36(1)(viia) of the Act towards creation of bad and doubtful debts. The AO while completing assessment u/s. 143(3) of the Act, order dated 28.10.2010 allowed deduction to the extent of Rs. 17,52,57,980/-. The AO recorded reason that the assessee has not made any provision in the books of accounts as regards to reserves for bad and doubtful debts and even th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sment year, the officer reopening the assessment was not required to obtain permission of the Commissioner for issuing of notice u/s 148 of the Act. 5.3.6. It is also pertinent to note that after notice u/s 148 was issued, the assessee requested the AO to treat the return filed earlier as return in response to notice u/s 148 of the Act. Thereafter, the assessee asked for copy of reason recorded for reopening of assessment. The same was supplied to assessee. Afterwards, there was no objection to the reopening from the side of assessee. It cooperated with the AO in course of reassessment proceeding. In this connection, it may be recalled that in the case of GKN Driveshaft's (India) ltd vs ITO (259 ITR 19) Hon'ble Apex Court laid down important procedures to be followed in matter of reopening. In the procedure so laid down, it is clear that once a notice u/s 148 is served on assessee, the assessee can apply for the reason recorded for such reopening. Once an application for reason recorded is received, the AO is to forthwith supply the reason recorded to assessee. Thereafter, the assessee may raise objection against the reason recorded. Such objection, if any, has to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch originally ought to have been included in the taxable income while framing assessment but was not so included. Hence, it is sufficient and it itself provide a cause or justification for a belief to the AO that such income had escaped assessment and the AO in such cases would be ex-facie justified in initiating the proceedings u/s. 147 of the Act. It is the case of non-assessment of an item on account of claim of deduction u/s. 36(1)(viia) of the Act in regard to the amount for which no provision for bad or doubtful debt have been created in the books of accounts of the assessee. Hence in our view, the nonassessment of an item of income chargeable to tax would warrant formation of requisite belief to initiate the proceedings within four years from the end of the relevant assessment year even yet where full disclosure was made and income chargeable to tax had escaped assessment from being included in the final assessment order in which taxable income was worked out. Hence according to us, this ground of the assessee does not succeed and hence, dismissed. 23. Similar issue of validity of reopening of assessment has been raised by the assessee in AYs 2010-11 & 2011-12 in ITA Nos.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T, Circle-1, Cuddalore, for the assessment year 2016-17 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the 'Act') vide order dated 17.12.2018. 28. The only issue in this appeal of assessee is as regards to the claim of deduction u/s. 36(1)(viia) of the Act, wherein the CIT(A) held that the deduction cannot exceed the provision made for bad and doubtful debts in the books of accounts. Since the issue and facts are identical in the case of The Villupuram District Central Cooperative Bank Ltd.,in ITA No. 857/CHNY/2020 and we have decided the issue in preceding paras 14 to 14.6, taking a consistent view, we dismiss this issue of assessee. Accordingly, the appeal of the assessee is dismissed. ITA No. 3154/CHNY/2019 29. The appeal by the assessee in ITA No. 3154/CHNY/2019 is arising out of order of the Commissioner of Income Tax (Appeals), Puducherry in ITA No. 68/2018-19/AY 2014-15/CIT(A)-13 dated 30.08.2019. The assessment was framed by the ACIT, Circle-1, Vellore, for the assessment year 2014-15 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the 'Act') vide order dated 19.12.2016. The impugned rectification order under dispute is framed by the ACIT, Circle-1, Vell....
X X X X Extracts X X X X
X X X X Extracts X X X X
....income determined in the books of accounts maintained by the assessee for the purpose of claiming deduction u/s. 36(1)(viia) of the Act. The assessee should have debited the provision bad and doubtful debts in the income and expenditure statement and credited the same to the current liabilities and provisions in the liabilities side of the balance sheet. Therefore according to AO, he rectified the mistake apparent from record u/s. 154 of the Act. Aggrieved, assessee preferred appeal before CIT(A). 32. The CIT(A) confirmed the action of the AO by observing in para 4 & 5 as under:- "4. I have gone through the assessment order, the subsequent rectification passed u/s 154 and also perused the material on record. 5. Now, before coming to the merits of the case, firstly it has to be noted that the impugned appeal is against the order passed under section 154 as per Form No. 35 which is basically for rectification of mistakes apparent from record and does not involve issues which has to be established by the process of reasoning on points where there are more than one opinion and which involves a debatable point of law. Whether the provision for bad and doubtful debts....