ACIT, CIRCLE - 1(2), JALPAIGURI, JALPAIGURI vs. THE JALPAIGURI CENTRAL CO-OPERATIVE BANK LTD., JALPAIGURI

The present appeal has been preferred by the revenue against the order dated 29.07.2022 of Commissioner of Income Tax (Appeals), NFAC, Delhi [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The revenue has raised the following grounds of appeal: i. Whether on the facts and circumstances of the case CIT(A) was justified in deleting the additions made on provision of Overdue Interest by failing to appreciate that the assessee has not declared such Provisions for Overdue interest as Bad Debt written off as irrecoverable in its books till 31.03.2014 when the claim has been made that the said interest has been accrued or generated from the bunch of Loans which are already declared as NPAs. ii. Whether, the Provision for Overdue Interest, is allowable expenditure under Income-tax Act, 1961 in view of the judgement of Hon'ble Supreme Court in the case of Southern Technologies Limited vs. JCIT, Coimbatore (2010}187 Taxman 346 wherein it has been decided that the provision for NPA made in terms of the RBI Directions does not constitute expenses for purpose of sec. 36(1)(vii) of the Income-tax Act, 1961? iii. That the Department reserves the right to add, delete, review, change or modify any ground in the course of hearing.”

Brief facts of the case are that the assessee is carrying on banking business as guided by the Banking Regulation Act, 1949 and the assessee filed its return of income by declaring total income of Rs. 51,55,790/- for the A.Y. 2014-15. Thereafter case of the assessee was selected for scrutiny under CASS followed by notices issued u/s 143(2) & 142(1) of the Act. In response to the notices, ld. AR of the assessee appeared from time to time filed various details as asked for. The ld. AO while framing the assessment he disallowed the following amounts of assessee’s income as under: “i. Disallowance of deduction claimed u/s 36(1)(viia) Rs. 2,69,29,500/- ii. Disallowance of excess deduction claimed u/s 36(1)(viia) Rs. 2,03,84,910/- iii. Disallowance of provision of overdue interest Rs. 6,59,85,103/- iv. Interest paid to depositors disallowed Rs. 4,32,48,111/- v. Depreciation disallowed Rs. 5,24,657/- vi. Law charges disallowed Rs. 2,03,520/- Total assessed income at Rs. (-) 16,24,31,590/-”

Aggrieved by the above order, assessee went in appeal before the CIT(A) where the claim of the assessee was partly allowed by ld. CIT(A) observing as follows: “5.8 In respect of the disallowance of deduction claimed as aggregate average Rural advance amounting to Rs.2,69,29,500/-, the appellant has claimed that no such deduction had been claimed by it. From the copy of ITR submitted, no such deduction seems to have been claimed. The appellant has stated that it had filed rectification application before the Assessing Officer, which is pending decision. The Assessing Officer is directed to examine the claim and reduce the income, if no such expenditure/deduction had been claimed by the appellant.

In effect, the appeal is Partly Allowed.”

Feeling aggrieved by the above order, revenue preferred an appeal before this Tribunal. We after going through the impugned order passed by the ld. CIT(A) on the ground taken by the assessee in respect of disallowance of Rs. 6,59,85,103.07/- made by AO on account of provision of overdue interest. The ld. CIT(A) considered the issue by observing in the following manner: “5.9.8 Hence, the overdue interest would be allowable to the appellant in light of judicial decisions, subject to the proper computation of the same. The appellant should furnish before the AO computation of the 5 AY: 2014-15 The Jalpaiguri Central Co-operative Bank Ltd. interest on NPAs which have been considered doubtful and irrecoverable. The Assessing Officer should ascertain that such interest has been duly included in the total receipt of this year. Further, the appellant should submit details of the exact loans which have been considered NPA and irrecoverable. If any part of the interest is received in any subsequent year, the same has to be offered to be taxed as income of that year on cash basis. The Assessing Officer is directed to give opportunity to the appellant to furnish the complete information and after proper verification, the amount of interest on NPAs for the relevant year is to be allowed as deduction.”

From the perusal of the findings given by the ld. CIT(A) in the impugned order we note that the ld. CIT(A) while partly allowed the ground of the assessee in respect of issue involved with the direction to the ld. AO to verify the particulars in the light of judicial decision and delete the addition if the appellate submissions is factually correct with supporting documents. The said findings given by the ld. CIT(A) is not correct as we note that section 251(1)(a) of the Act does not empower to the Ld. CIT(A) for setting aside the matter to the file of the Ld. AO. The power given to the Ld. CIT(A) in terms of section 251(1)(a) of the Act relates to confirming, reducing, enhancing or annulling the assessment. The relevant portion of the section is extracted as under: “251(1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers: (a) In an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment.”

In the result, the appeal of the revenue is allowed for statistical purposes.