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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT
Per : Kuldip Singh, Judicial Member:
The appellant, M/s. The Greater Bombay Co-Op. Bank Ltd. (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 27.09.2019 passed by Commissioner of Income Tax (Appeals), Mumbai [hereinafter referred to as the CIT(A)] qua the assessment year 2013-14 on the grounds inter-alia that :- “1. The Learned CIT(A) erred in confirming the double addition of Rs.19132172/- in respect of contingent provision for standard assets not appreciating the fact that the claim is contra entry and that the amount of Rs.19132172/- was credited in the interest account. 2 M/s. The Greater Bombay Co-Op. Bank Ltd.
The learned AO and CIT(A) erred in violating the principles of judicial discipline in as much as they have acted contrary to the directions of Hon'ble tribunal which is a superior authority. 3. The appellant craves leave to add, alter or amend any grounds of appeal at the time of hearing.”
2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : on the basis of return of income filed by the assessee qua the year under consideration assessment was framed under section 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) at the total income of Rs.3,69,72,750/- by making addition of Rs.4,95,75,956/- and Rs.1,91,32,172/- after disallowing the assessee’s claim of deduction under section 36(1)(vi) and under section 36(via) of the Act.
3. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has deleted the addition of Rs.4,95,75,956/-, however confirmed the disallowance of Rs.1,91,32,172/- under section 36(1)(via) of the Act. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee approached the Tribunal and the Tribunal vide order dated 27.06.2018 in restored the issue to the file of the Assessing Officer (AO) to examine the original as well as revised returns and compute the income in accordance with law.
The AO in compliance to the order passed by the Tribunal served upon the assessee notice under section 142(1) of the Act. The assessee filed necessary details and submissions.
5. The AO after declining the contentions raised by the assessee and after noting that the amount of Rs.1,91,32,172/- is not found credited in the P&L account of the assessee again disallowed the 3 M/s. The Greater Bombay Co-Op. Bank Ltd. amount and thereby framed the assessment under section 143(3) read with section 254 of the Act.
6. Thereafter, the assessee again carried the matter before the Ld. CIT(A) by way of filing appeal who has confirmed the disallowance by dismissing the appeal. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeal, which is second round of litigation.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
The Ld. A.R. for the assessee challenging the impugned order passed by the Ld. CIT(A) contended that the Ld. CIT(A) has erred in confirming the double addition of Rs.1,91,32,172/- in respect of contingent provisions for standard assets by ignoring the fact that the claim is contra entry and the amount of Rs.1,91,32,172/- was credited in the interest account and that the AO as well as the Ld. CIT(A) have not complied with the order passed by the Tribunal.
However, on the other hand, the Ld. D.R. for the Revenue relied upon the order passed by the Ld. CIT(A).
Undisputedly in the first round of litigation before the Tribunal, while deciding order dated 4 M/s. The Greater Bombay Co-Op. Bank Ltd. 27.06.2018 (supra) was passed by examining the issue at length by returning following findings: “5. We have heard the rival submissions, perused the orders of the authorities below and the computation of income filed by the assessee, original as well as revised computations. On a perusal of the original and first revised computations, we find that the assessee claimed deduction for contingent provision for standard assets. However, we find that from the second revised computation of total income that the assessee withdrawn his claim and computed net loss at ₹.1,18,37,283/- and the Assessing Officer completed the assessment by starting the computation of income with this figure and by making certain additions arrived at income of ₹.3,69,72,750/-, while arriving at this income the Assessing Officer once again disallowed and added back provision for standard assets amounting to ₹.1,91,32,172/-. When the Assessing Officer acted upon the second revised return wherein the assessee withdrawn his claim once again disallowing the provision for standard assets while computing the income by the Assessing Officer amount to double disallowance. This aspect of the matter has been loss sight by the lower authorities. In the circumstances, we are of the opinion that when the Assessing Officer started to compute the income by taking the loss as declared by the assessee in the second revised computation, there shall not be any further disallowance of provision for standard assets as the assessee had already withdrawn the claim and computed the loss at ₹.1,18,37,283/-. In the circumstances, we restore this issue to the file of the Assessing Officer to examine the original as well as the revised returns and compute the income of the assessee in accordance with law, keeping in view our above observations.”
Pursuant to the direction issued by the Tribunal vide order (supra) the AO passed the order as under: “4. In response to the notice dated 04.09.2018, the assessee filed following reply on 17.09.2018 and Shri P. S. Misar, CA, authorized representative of the bank appeared for the hearing: We are in receipt of your above mentioned notice in connection with restoration of issue of contingent provisions for standard assets by the Hon'ble ITAT. We have claimed contingent provisions for standard assets amounting to Rs. 1,91,32,172/-. The provision is made in respect of standard assets at the rates prescribed by RBI. The amount is debited to P & L A/c. and correspondingly credited to P & L A/C. under the head Interest Income. During the course of Assessment proceedings we have filed a revised computation of total income by withdrawing/reducing the claim from the income computed. The net business loss after making this adjustment was Rs. 1,18,37,283/- The AO in his Assessment order, while computing the total income started with the figure of Rs. (1,18,37,283/-) and arrived at total income of Rs. 3,69,72,751/- making certain addition/s disallowances. As such it is submitted that, since AO acted on revised computation of income 5 M/s. The Greater Bombay Co-Op. Bank Ltd. wherein we have already withdrawn the contingent provisions for standard assets, once again disallowing the said provision of standard assets amounts to double disallowance which is not justifiable. We are submitting herewith copy of original as well as revised computation of total income.
Thereafter, vide its letter dated 19.10.2018, the assessee also made following submission:-
The Hon'ble ITAT has restored the issue of claim of contingent provisions for standard asset to your good self to examine the original as well as the revised returns and compute the income keeping in view the observations of the ITAT. On referring to Page No. 3 of ITAT order it will be seen that the Hon'ble Tribunal has decided that when the AO acted upon the second revised return wherein the assessee had withdrawn its claim once again disallowing the provisions for standard assets while computing the income b the AO amounts to double disallowance. This aspect of the matter has been loss sight by the lower authorities. The Tribunal further held that "we are of the opinion that when the AO started to compute the income by taking the loss as declared by the assessee in the second revised computation, there shall not be any further disallowance of provision for standard assets as the assessee has already withdrawn the claim and computed the loss at Rs. 118,37,283/-. As such while giving effect to ITAT order we submit that the amount of Rs. 1,91,32,172/- should reduced. During the course of Proceedings we have submitted copy of P&L a/c, details of contingent provisions of standard assets and the details of interest income. On going through the computation of total Income your good self had raised a query regarding the reduction of Rs. 1,91,32,172/- from the Total Income. At the outset we would like to submit that the Tribunal has no where in its order required your goodself to verify the allowance of the figure of Rs. 1,91,32,172/-. Without prejudice to our above submissions we submit that the bank has made a provision of Rs. 1,91,32,172/-on account of contingent provision for Standard Asset. The same amount has been shown as income in the interest income the details of which have already been filed. As such we submit that this a contra entry. The amount of provision made is recovered from the party and shown in the interest income... This amount recovered from the party is paid back to the party and as such there is no element of income. What can be taxed is the real income and not notional income. We have explained and produced before you the copies of journal entries, in respect of the above transactions, ledger extract and list of parties from whom the interest is recovered and paid back. We are submitting herewith the copies of the same for your record. As such the amount of Rs. 1,91,32,172/- has been correctly reduced from the income.
The details furnished by the assessee were perused and duly considered, hower, the submission of the assessee is not found acceptable. On perusal of the document furnished by the assessee, it is seen that the assessee has debited an amount of Rs.1,91,32,172/- in the 6 M/s. The Greater Bombay Co-Op. Bank Ltd. Profit & Loss account in A.Y 2013-14 towards "Contingent Provision for Standard Assets". Since the assessee is in loss in A.Y 2013-14, therefore, any deduction u/s 36(1)(viia) of the act is not allowed to the assessee. Therefore, the assessee was required to add back the amount of Rs. 1,91,32,172/- debited on account of contingent provision for standard assets in the 'Original Computation of Income, however, in place of adding back the above amount, the assessee erroneously claimed the deduction of Rs. 1,91,32,172/- in the 'Original Computation of Income'. Thereafter, the assessee furnished the 'Revised computation of income', wherein, the assessee, added back the amount of Rs. 1,91,32,172/- in the 'revised computation of income' and nullified the impact of wrong deduction claimed in the Original Computation of Income. However, the deduction claimed by the assessee in the Profit & Loss Account of "Contingent Provision for Standard Assets" of Rs. 1,91,32,172/- remained to be disallowed, therefore, in the assessment order the assessing officer correctly disallowed the contingent provision for standard assets of Rs1,91,32,172/-.
7. Now, in its submission, the assessee also submitted that he has made contra entry of Rs. 1, 91 ,32,172/ - in its books of accounts and also credited the amount Rs. 1, 91, 32, 172 /- is the profit & Loss account of A.Y 2013-14, therefore, vide noting sheet dated 01.10.2018, the assessee was asked to furnish the documentary evidence of the same. In response, vide submission dated 25.10.2018, the assessee furnished the copy of ledger account and profit & loss account, however, on perusal of the same, the amount of Rs. 1,91,32,172/- is not found credited in the profit & loss account of the assessee. In view of above discussion, the contention of the assessee is not found correct, therefore, no relief is allowed to the assessee on this ground. Penalty proceedings u/s. 271(1)(c) of the I.T. Act are separately initiated for furnishing inaccurate particulars of income.”
The order passed by the AO has been confirmed by the Ld. CIT(A) which is under challenge before the Tribunal. The first contention raised by the assessee challenging the impugned order passed by the Ld. CIT(A) is that the Ld. CIT(A) has erred in confirming the double addition of Rs.1,91,32,172/- in respect of contingent provisions for standard assets by not appreciating the fact that the claim is contra entry and that the amount of Rs.1,91,32,172/- was credited in the interest account. When we examine the profit and loss account and computation of return of income filed by the assessee available at page 27 to 30 of the paper 7 M/s. The Greater Bombay Co-Op. Bank Ltd. book along with computation of income it is apparent that the assessee has declared net profit of Rs.88,09,117.66 after making contingent provisions for standard assets to the tune of Rs.1,91,32,172/-.
Furthermore, when we examine the computation of total income filed by the assessee for the year ending 31.03.2013 the assessee shown net profit as per profit & loss account by reducing the contingent provisions for standard assets of Rs.1,91,32,172/-. However, in the revised computation of total income the assessee nullified the reduction of contingent provisions in the earlier computation and added back the contingent provisions for standard deduction as is apparent/highlighted in the revised computation available at page 60 of the paper book and added back the contingent provisions for standard assets. Meaning thereby by adding and subtracting the contingent provisions for standard assets reversed back to the net profit as per profit & loss account declared by the assessee.
We are of the considered view that the AO has rightly held that the assessee is not eligible to claim contingent provisions. The AO during the assessment proceedings in the second round of litigation has also called for copy of ledger account and profit and loss account wherein it is apparent that the amount of Rs.1,91,32,172/- claimed by the assessee is not found credited in the profit & loss account of the assessee.
In view of what has been discussed above, when the assessee is found not eligible to claim the contingent provisions the same has been correctly disallowed by the AO to which the assessee has 8 M/s. The Greater Bombay Co-Op. Bank Ltd. otherwise agreed. Moreover as per profit & loss account when the assessee has declared actual profit of Rs.88,09,117.66 and found to be not eligible for contingent provisions, the addition made by the AO is valid and has rightly been upheld by the Ld. CIT(A). So finding no illegality or perversity in the impugned order passed by the Ld. CIT(A) appeal filed by the assessee is hereby dismissed.
Order pronounced in the open court on 31.03.2023.