TaxTMI 
TaxTMI 
2024 (10) TMI 1838
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....oss or bad debts written off without appreciating the facts of the case. 3. On the facts and circumstances of the case and in law, the Ld. CIT(Appeals) has erred in overlooking the provisions of I.T. Act contained in section 36(1)(viia) of the Act, resulting in miscarriage of justice. 4. Any other ground which may be taken at the time of hearing with the permission of Hon'ble ITAT." 3. Facts in Brief:- The assessee is a Scheduled Co-operative Bank engaged in the activities of banking within the purview of Banking Regulation Act. The assessee filed its return of income on 30/09/2015, disclosing total income of ` nil, as the assessee has reported loss for assessment year 2015 16 at 12,39,52,307. The assessee has claimed carry forward of business loss along with unabsorbed depreciation for current year as well as preceding year. The assessee filed its revised return on 01/10/2015, claiming TDS which remained to be claimed in original return of income. There were no changes in income insofar as other claims are concerned. The case was selected for Scrutiny under CASS. The Assessing Officer concluded by passing order dated 27/12/2017, under section 143(3) of the....
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....l be transferred back to the assessee. The assessee vehemently supported his case relying upon the Hon'ble Mumbai ITAT decision dated 08/11/2017 in ITA no. 2833/Mum/2015 Asst year 2009-10 in the case of Bank of India, Mumbai Vs. Dy. CIT, Mumbai. However, in the said decision there is no mention of what was the treatment given to NPA by the Bank of India and whether these NPAs were to reverted back to the Bank of India after specific period or not. Further the Bank of India is a nationalised bank and assessee a multi-state cooperative bank, there may be vast difference in modalities of NPA sale as well as applicability of provisions of Income Tax Act, 1961. In spite of specific query to the assessee to elaborate how the claim is allowable, the assessee filed reply in brief without any tangible reason being offered in support of the claim. Moreover, there is no reference whether it wanted to write off the said balances as less or Bad Debts. Yet looking at the facts of the claim, it is neither a loss nor Bad Debts. Without the loss or bad debt being written off in the books of accounts, which is primary condition as per I. T. Act, 1961, no such claim can be allowed. In view of the....
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....sets of any bank or financial institution- 5.3.2 The applicability of the SARAFESI Act to Multi-State Co-operative Banks has also been upheld by Hon'ble Supreme Court vide order dated 05/05/2020 in Civil Appeal No. 5674 Of 2009 Pandurang Ganpati Chaugule Versus Vishwasrao Patil Murgud Sahakari Bank. Thus one part of the apprehensions raised by the AO regarding parity of Nationalised Banks with Multi-State Cooperative banks is addressed. For the remaining factors considered by AO in disallowance of this loss, reference is first made to the relevant portion of the order of Hon'ble ITAT Mumbai in the case of Bank of India, Mumbai vs. DCIT in ITA No. 2833/Mum./2015 for AY 2009-10 vide order dated 08/11/2017: "13. Disallowance of loss of Rs. 49.35 crores, on sale of assets to Asset Reconstruction Company of India Ltd. (ARCIL), is the subject matter of ground number eight. During the assessment proceedings, the AO directed the assessee to file details on account of loss claimed. As per the AO, the assessee had only submitted that the deduction had been claimed on account of sale of NPAs to ARCIL, that it did not provide any other justification in support of the ....
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.... assessee had suffered loss while carrying out normal business activity i.e. selling its assets. Therefore, we hold that there was no justification for disallowing the loss suffered in the transaction. Reversing the order of the FAA, we decide Ground no.8 in favour of the assessee. 5.3.3 It is observed that the facts of the present case are similar to the above referred case wherein the Hon ITAT has held in at para 13.3 of the above-referred order that it is the substance of the transaction that was the conclusive proof of taxability as against entries in books of accounts. As discussed at preceding para 4.0, the appellant suffered a loss as its NPAs valued at Rs. 5284.23 lakhs were sold to ARC for Rs. 4200.00 lakhs. To further rule out any possibility of excess claim, the appellant was asked during the appeal proceedings to justify the claim of this loss with respect to the deduction claimed and allowed to it u/s36(1)(viia) of the Act. The appellant furnished the working as summarized below, along with copies of computation of income filed with returns of respective AYs: Assessment Year Amount debited to PL Account and added back Amount allowed / claimed u/s 36(1....
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..../2015 for ay 2009 10). 2) The provisions of SARFAESI ACT 2002 are not applicable to co-op. bank? 3) Sale of NPAs worth Rs.52.84 crores for Rs.39.90 crores is conversion of bad asset into good asset. 4) Deduction on account of provision is already allowed to Assessee under section 36(1)(viia) of the Act. On all the issues assessee made necessary submission before AO during assessment proceeding which the AO did not find to his satisfaction. In appellate proceeding before Commissioner of Income Tax (Appeals) assessee made same submissions in principle. The copies of submissions made before CIT(A) are part of assessee's paper book submitted before Hon'ble ITAT on 12-09-2024 (PB page no. 36-50, 51 53, 54-93 and 94-125). The assessee submitted before CIT(A) computations of income for AY 2007- 08 to AY 2015-16 in order to establish by claiming a loss on sale of NPA, bank did not claim double deduction. CIT(A) after giving due consideration to the submissions made time to time and discussion during personal hearings, allowed a deduction Against the order of CIT(A) dt.31/08/2020 the "Department" filed an appeal before Hon'ble ITAT which is un....
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.... Dr./Cr. Rs. Rs. 1. Bad & Doubtful Debt Reserve A/c Investment in SR A/c Cash A/c To Respective Branch A/c (Being Consideration received against sale of NPA Assets transferred to respective Branches. As per RBI Norms, SR are to be valued at Redeemable Value or NBV of Assets Securitised, Whichever is less) Dr. Dr. Dr. Cr. 1,627.41 3,446.82 210.00 5,284.23 2. Excess Amt. of Sec Receipt Receivable A/c Provision of Excess Amt. of Sec Receipt A/c (Being difference in Redeemable value of SR (Rs. 3,990 lakh) and NVV of Securitized assets (Rs. 5284.23 lakh - Rs. 1,627.41 lakh = Rs. 3,446.82 lakh) booked as Excess Provision as per RBI Jorms) Rs. 3,990 lakh - Rs. 3,446.82 = Rs. 543.18 lakh Dr. Cr. 543.18 543.18 At Respective Branches: Sr. no. Particulars Dr./Cr. Amount (Rs.) 1. HO A/c Dr. 5,284.23 Respective Advance Account Cr. 5,284.23 On crediting the NPA accounts by the NBV, the system considered it as a repayment and appropriated it against Interest Receivabl....
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.... (iv) If the sale is for a value higher than the NBV, the excess provision will not be reversed but will be utilized to meet the shortfall/loss on account of sale of other financial assets to SC/RC." 9. The loan accounts which were sold to ARCL contained in Page-15 to 43 of the Paper Book were closed on 16/05/2014, and finally had nil balance. Additionally, the computation of income placed at Page-115 of the Paper Book for the assessment year 2013-14, was scrutinized which revealed that the entire provision for bad debts was written back in computation as claim for bad debts was reduced from Rs. 76.32 crore to Rs. 67.50 crore. Thus, the provision created for 6.31 crore hitherto claimed as a deduction in earlier years were suo-moto reversed. Hence, by even by the widest stretch of imagination there is no double deduction of loss, as apprehended by the learned D.R., because the debts do not have any backing by way of provisions and are absolutely uncovered. The Bank could have claimed a higher loss but still on a conservative estimate, they have claimed a loss of Rs. 10.41 crore only. Upon meticulous and punctilious analysis of the evidences on record, it is firmly established th....