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Income Tax Appellate Tribunal, “F” Bench, Mumbai
Before: Shri Shamim Yahya (AM) & Shri Amarjit Singh (JM)
Per Shamim Yahya (AM) :
These are appeals by the Revenue against common order of learned CIT(A) for A.Ys. 2009-10, 2010-11 & 2013-14.
The grounds of appeal read as under :- 1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in deleting the addition on account of Bad and doubtful debts u/s 36(l)(vii) without appreciating the fact that assessee has failed to write off the bad debts from Profit and loss account. 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in deleting the addition on account of Bad and doubtful debts u/s 36(1)(vii) without appreciating the fact that any deduction for bad debts can be allowed under section 36(1)(vii) only to the extent of bad debts written off exceeding this amount.
Brief facts of the case are as under :
2 M/s. Janakalyan Sahakari Bank Limited
The assessee is a co-operative Bank and is in business of banking. Return of income for AY 2009-10 was filed on 29.09.2009 declaring total income at Nil after claiming the earlier year losses of Rs. 9,63,52,240/-. Subsequently, revised return was filed on 24.12.2014. The assessment u/s 143(3) was completed on 31.3.2016 accepting the returned income. Subsequently an order u/s 263 was passed on 05.02.2019 by the Pr. Commissioner of Income Tax-1, Mumbai. The AO then issued notices u/s 143(2) and 142(1) to the assessee and the assessment proceedings were completed u/s 143(3) r.w.s. 263 of the Act vide order dated at total income of Rs.20,89,91,469/-. During the course of assessment proceedings, the AO noticed that the assessee is not eligible for deduction u/s 36(1)(vii) of the Act. The AO noted that the opening balance in the Bad and Doubtful Debts Reserve Account as on 1st April 2008 is Rs. 1,04,99,33,272/-. Further the assessee has not written off the bad debts in the profit and loss account (As per P&L account of the ITR dtd. 24.12.2014 the Bad Debts is of Rs.0 for AY 2009-10). However, the assessee claimed Rs.30,53,44,709/- in the computation of income for AY 2009-10. The AO then contended that the amount of deduction u/s 36(1)(vii) cannot be allowed to the assessee and issued a show cause notice dated 26.06.2018 to the assessee. The submission offered by the assessee during the course of assessment proceedings have been briefed by the AO at para 3 of the assessment order. While doing so, the AO has stated that the assessee has not made any new submission but has only reiterated the submission given before the Pr. Commissioner of Income Tax-1, Mumbai. The AO rejected assessee's submission and stated that it is very clear from the audited accounts that the deduction has been wrongfully claimed by the assessee in contravention to the provisions of section 36(i)(vii) of the Act. The relevant portion of the assessment order is reproduced as under: "6. The submission of the assessee is not acceptable as it is very clear from the audited accounts that the deduction has been wrongfully claimed by the assessee in contravention to the provisions of the section 36(i)(vii) of the Act due to following reasons: • The assessee has not written off bad debts in the P&L account
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• It is seen in case of the assessee that it is having credit balance in the account provision for bad and doubtful debts account as under:
Opening balance Rs. 1,04,99,33,272/- Closing balance Rs.83,48,21,439.33
The AO held that thus, any deduction for bad debts can be allowed under section 36(1)(yii) only to the extent of bad debts written off exceeding this amount which is not the case. Hence an amount of Rs. 30,53,44,709/-.
Upon assessee’s appeal learned CIT(A) followed the ITAT order in assessee’s own case for A.Y. 2011-12 and held as under : “I have considered the facts of the case, AO's contentions, submissions of the appellant. During the course of appellate proceedings, the appellant submitted that on similar issue, in its own case for AY 2011-12 the appellant has been granted relief by ITAT, Mumbai vide order ITA No266/Mum/2016. The relevant portion of the ITAT order for AY 2011-12 is reproduced as under: ".... The Ld. Assessing officer found that the assesses has not written off the bad debts in the profit & loss account, therefore, the same is not allowable. It was further noted by the Ld. Assessing Officer that the assesses was having credit balance in the account 'provision for bad and doubtful debt account', wherein, the opening balance was shown at Rs. 69,13,86,854/- and closing balance at Rs. 54,66,65,946/-. The stand of the Revenue is that the bad debt can be allowed only to the extent if it is a written off in its accounts. The Ld. AO disallowed the bad debts of Rs. 5,91,49,154/-. On appeal before the Ld. Commissioner of Income tax (Appeal), the bad debt was held to be allowable, on the ground that thee assesses had fulfilled the conditions, provided under section 36(1)(vii) of the Act. If the observations made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertations made by the Ld., respective counsel, if kept in juxtaposition and analysed, without going into the technicalities, it has been found by the Ld. Commissioner of Income Tax (Appeals) that the assesses claimed bad debts of Rs. 5,91,49,154/- under section 36(1)(vii) and written of the same as irrecoverable bad debts in its books of accounts. Considering the totality of facts and in view of the amendment in the taxation laws with effect from 01st April, 1989 the requirement of demonstrating that the debts has become bad has been demonstrating that the debts has become bad has been dispensed with and only requirement remains that it should be "written off in books of accounts of the assesses, which has been further clarified by CBDT Circular no. 551 dated 23/01/1990. Our view find support firm the ratio laid down in CIT vs Brilliant Tutorials Pvt. Ltd. 292 ITR 399 (Mad.), CIT vs Morgan Securities and credits
4 M/s. Janakalyan Sahakari Bank Limited
Pvt. Ltd. (210 CTR 336)(Del.), DCIT vs Oman International Bank Saog.(313 ITR 128)(Bom.), CIT vs. Star chemicals(Bom.) Pvt. Ltd. 220 CTR 319 (BOM.), CIT vs. Global Capital Ltd. 201 taxation 210 (Del.), CIT vs M/s. Excel Fashion Pvt. Ltd. (201 taxation 216)(Del.), CIT vs Auto Meters 292 ITR 345 (Dei.). So, far as, the reliance upon the decision in Kashmir trading Company vs DCIT and Ahmadabad Electricity Company Ltd. (supra), the decision from the Hon'ble Rajasthan High Court and Gujarat High Court are concerned, the Hon'ble Apex Court, Later on in T.R. F. Ltd. Vs. CIT 323 ITR 397(SC), considering the provision of section 36(1)(vii ), prior to April,1989 and post amendment held that the debt in fact has become irrecoverable. Mere written off in its accounts is enough, thus, following the aforesaid decision from Hon'ble Apex Court, in principle, we affirm the stand of the Ld. CIT(Appeal), resulting into dismissal of this ground of the revenue." In view of the above-mentioned decision of ITAT, Mumbai in the appellant' own case for 2011-12 and also in view of the fact that the facts pertaining to AY 2011-12 is identical to the facts of A.Y. 2009-10 the AO is directed to allow the assessee’s claim for bad debts amounting to Rs. 30,53,44,709/- of the Act.” The Ld. CIT(A) followed the above order for AY 2010-11 & 2013-14, holding the facts to be similar.
Against this order revenue is in appeal before us.
We have heard both the parties and perused the records. Learned departmental representative relied upon the orders of the assessing officer. Learned counsel of the assessee on the other hand supported the order of Leonard CIT appeals and submitted that learned CIT(appeals) has followed and ITAT order in assessee's own case and hence the order of Learned CIT(appeals) is to be sustained.
Upon careful consideration we note that in the ITAT order referred by the learned CIT(A) there was an acceptance of the finding of the learned CIT(A) that the claim of bad debt was in accordance with the provisions of section 36(1)(vii) of the Act. In the present case learned CIT(Appeals) has not given any such finding. The assessing officer has given the speaking order with relevant computations for his opinion that the claim is not in accordance with provisions of section 36(1)(vii) of the Act. Thereafter he has computed the amount to be disallowed. Learned CIT(Appeals) on the other hand is not giving
5 M/s. Janakalyan Sahakari Bank Limited
categorical finding that assessee's claim is in accordance with the provisions of section 36(1)(vii) of the Act. He has not commented or examined the AO’s computation of disallowance in any manner. He is in a roundabout manner mentioning that facts are similar and following the ITAT order he was allowing the assessee's appeal. In our considered opinion the learned CIT(A) has to give a proper finding as to how the AO’s finding (which is duly accompanied by necessary computation) that the claim under section 36(1)(vii) is not allowable is wrong. Without doing that the learned CIT(A) case cannot simply say that earlier ITAT order is applicable. As in the said ITAT order there was an acceptance of the finding of Leaned CIT(A) that the claim of the assessee was in accordance with section 36(1)(vii) of the Act. Hence in our considered opinion in the interest of justice this matter needs to be remitted to the file of learned CIT(A). Learned CIT(A) is directed to give finding as to how the AO’s computation is wrong and assessee's claim is allowable under section 36(1)(vii) of the Act. Thereafter he will examine the applicability of the ITAT order as above. Needless to add the assessee should be granted adequate opportunity of being heard.
Our above adjudication applies mutatis mutandis to all the appeals here.
In the result these appeals by the revenue are allowed for statistical purposes.
Pronounced in the open court on 06.01.2022
Sd/- Sd/- (AMARJIT SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 06/01/2022 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A)
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CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai