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Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
Before: SHRI BHAVNESH SAINI & SHRI SANJAY ARORA
I.T.A. No.53/JAB/2018 Assessment year:2014-15 1
IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA No.53/JAB/2018 Assessment Year:2014-15
JILA SHAKARI KENDRIYA BANK vs. Asst. CIT, MYDT, H.O. Civil Lines, Damoh CircleSagar, M.P. Sagar, M.P. [PAN: AAAJJ 0843Q] (Appellant) (Respondent)
Appellant by Shri P.C. Bardia, CA Respondent by Shri H.P. Meena, CIT- DR Date of hearing 12/12/2019 Date of pronouncement 24/12/2019
O R D E R Per Sanjay Arora, AM: This is an Appeal by the Assessee, directed against the Order by the Commissioner of Income Tax (Appeals)-1, Jabalpur(‘CIT(A)’ for short)dated 19.02.2018, partly allowing the assessee’s appeal contesting its assessment under section143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for Assessment Year (A.Y.) 2014-15.
The assessee, a co-operative bank, filed its’ return of income for the year on 26/9/2014 at an income of Rs. 1,88,82,500, which was subject to verification proceedings, assessing the total income at Rs. 7,40,11,912 by making several additions. The present appeal is principally in respect of an addition for Rs. 5,30,88,834 on a failure on the part of the assesse to
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satisfactorily explain and substantiate the provision made in accounts to that extent. In appeal, it was explained that the amount disallowed as unexplained provision by the Assessing Officer (AO) was in fact the balance amount out of the difference between the balance-sheet sum as on 31/3/2014 and 31/3/2013under the head ‘Other liabilities and provisions’, being at Rs. 25,33,10,142 and Rs. 15,18,61,870 respectively (refer Schedule 6 to the balance-sheet as on 31/3/2014), that is, Rs.10,14,48,265, after deducting there- from the following: (a) the provision for interest: Rs. 1,18,47,831, and (b) the provision for bad and doubtful debts: Rs. 3,65,11,600
The AO, it was submitted by the ld. counsel for the assessee, Sh.Bardia, had presumed that the said difference was a provision and, further, had been debited to the Profit &Loss Account (P&L A/c) for the relevant year, while the same represented liabilities, which had not been debited to the P&L A/c and, therefore, not claimed by way of deduction/s in computing total income. The ld.CIT(A), in appeal, after reproducing section 36(1)(viia), which is in respect of ‘provision for bad and doubtful debts’, explained the same, and directed the AO to recompute the deduction u/s. 36(1)(viia) after verifying the same by calling for the requisite details, i.e., the aggregate average advances by the rural branchesof theassesse-bank for the relevant year. Aggrieved, the assessee is in second appeal. The ld. Sr. DR could not controvert the same.
We have heard the parties, and perused the material on record. Both the AO as well as the ld. CIT(A), we are afraid, have not applied themselves to the issue at hand, with the former having even not, as claimed by the assessee before the ld. CIT(A), sought an explanation from the assessee, making it all the more incumbent on the first appellate authority to either call for a remand report from the assessing authority (to be issued after hearing the assessee), or require both the parties to state their respective casesbefore him, and decide
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issuing definite findings of fact. He, however, remits the matter back, construing the addition to be on account of provision for bad and doubtful debts, requiring verification thereof, even as the same had already been allowed in assessment at the claimed sum, and not in dispute before him (refer Gd. 2 before the ld. CIT(A)). This precursory approach on the part of the Revenue is most unfortunate, warranting imposition of cost, which we though abstain from. This has resulted in the assessee first making an application under section 154, to no consequence or effect, and then in not being allowed any relief in the appeal-giving effect order inasmuch as the assessee’s claim for deduction u/s. 36(1)(viia) had, as afore-stated, been alreadyallowed by the AO in assessment in full. The assessee also has not helped matters. Its’ application u/s. 154 ought not to, as apparent from the AO’s reply dated 02/5/2018 thereto (on record), have required a consideration on merits, but restricted it to the non-adjudication of its’ Gd. 2 before the ld. CIT(A) inasmuch as the same was not qua the deduction u/s. 36(1)(viia), and, accordingly, ought to have been made before him and not the AO, as done. Further, on merits, true, the Revenue authorities did not apply themselves, disposing the matters post haste, but the charge of non-explanation and non- substantiation of the impugned difference obtains. Why, even up to this stage, the breakup of the impugned sum of Rs. 530.89 lacs is not available; the only clarification given by the assessee is that the same is not a provision, but a liability and, two, not debited to the P&L A/c and, thus, not claimed as expenditure for the relevant year. If not debited to the P&L A/c, where, it must tell, rather show, it is debited in accounts; the AO having already excluded the amount outstanding under the head ‘Other liabilities and provisions’ as on 31/3/2013, the beginning of the current year. If and to the extent so, and the same has not been claimed, the question of any disallowance gets ousted at the threshold. Where and to the extent, however, debited to the P&L A/c, the burden to show that the same is deductible in
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computing it’s total income for the year is on the assessee. The matter, accordingly, is set aside to the file of the AO to consider the issue of allowance or otherwise of the sum of Rs. 5,30,88,842 (the adopted figure being wrongly stated by Rs. 7) afresh, and adjudicate in accordance with law upon due verification, issuing clear findings after allowing the assessee a reasonable opportunity of being heard. We decide accordingly. This decides Grounds 1 and 2.
The third and the last ground of appeal is qua a disallowance of Rs.3,40,578. The same, stated to be in respect of software expenses, stands disallowed in view of it admittedly not pertaining to the relevant year. The same stands confirmed in appeal on the same basis, notwithstanding the assessee’s claim that tax thereon stands deducted during the current year only, so that the expenditure, irrespective of its non-deduction for the earlier year, i.e., to which it pertains, becomes deductible, in view of section 40(a)(ia) (wrongly mentioned as s. 40(a)(i) as the payment is to a resident), for the current year only. The provision of s. 40(a)(ia), in the view of the Revenue, gets attracted for the subsequent year, enabling deduction for that year, only where a disallowance thereunder had been made for an earlier year, i.e., for which it is otherwise (i.e., but for s. 40(a)(ia)) allowable.
We have heard the parties, and perused the material on record. Our first observation in the matter is that the relevant bill, dated 31/3/2013, adduced during hearing by the assessee, pertains to the period January to March, 2013, and is for Rs. 3,40,576, i.e., exclusive of service tax of Rs.42,095. Has service tax not been paid inasmuch as it is not included in the expenditure? Further, true, sec. 40(a)(ia), per proviso thereto, speaks of deduction in a subsequent year on deduction/deposit of tax at source, i.e., where the amount stands disallowed for want of tax deduction at source
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during the relevant year, or its deposit to the credit of the Central Government by the due date or latest by the 30th day of September of the following year. However, the assessee’s claim is that it had not claimed the amount for the immediately preceding year, i.e., AY 2013-14, to which expenditure pertains, implying its effective disallowance.The stated basis of the disallowance is therefore not valid. The fact of the non-claim (for A.Y. 2013-14) as well as deduction/deposit of tax at source during the current year, shall though have to be verified, the onus to establish which is on the assessee. The other aspect, equally relevant, is the date of deduction of tax at source, and its deposit. This is as if the same stands, in any case, deducted and deposited to the credit of the Central Government by 30/9/2013, sec. 40(a)(ia) shall have no application, and the amount gets deductible for A.Y. 2013-14 itself, i.e., where the tax stands deposited by that date. The assessee’s argument is valid only where the non-claim or non-deduction for the earlier year (AY 2013-14) was due to application of s. 40(a)(ia), and not otherwise. That is, taking refuge in the proviso to sec. 40(a)(ia), enabling deduction for the subsequent year of deduction (and deposit) of tax at source, shall become impermissible in case the expenditure was not deductible de hors s. 40(a)(ia). The AO shall verify this aspect as well, and adjudicate on the deduction of the full amount of expense, i.e., Rs. 3,82,671, in accordance with law, explained herein, after determining the facts.We decide accordingly.
Finally, as both the matters stand set aside to the AO with relevant directions/clarifications, we consider it pertinent to state that the completion of assessment in such a case is now subject to the statutory time limit u/s. 153. The assessee shall co-operate in the said proceedings, and the AO endeavor to complete the assessment, in terms of the set-aside, in a time bound manner. We direct accordingly.
In the result,the assessee’s appeal is allowed for statistical purposes.
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Order pronounced in the open court on December 24 , 2019 Sd/- Sd/- (BhavneshSaini) (Sanjay Arora) Judicial Member Accountant Member Dated: 24/12/2019 Copy of the order forwarded to : 1. The Appellant: JILA SHAKARI KENDRIYA BANK MYDT, H.O. Civil Lines, Damoh, M.P. 2. The Respondent:Asst. Commissioner of Income Tax,Circle Sagar,Sagar, M.P 3. The CIT concerned 4. The CIT(A)-1, Jabalpur 5. CIT-D.R., I.T.A.T.