RAJDHANI NAGAR SAHKARI BANK LTD,LUCKNOW vs. DY. CIT, LUCKNOW

O R D E R PER BENCH.: These four appeals have been have been filed for the assessment years 2015 for the assessment years 2015-16, 2016- 17 and 2017-18 by the Assessee and Revenue ssessee and Revenue against the respective orders of the respective orders of the Ld. CIT(A)/NFAC, Delhi dated 02.02.2024, 05.02.2024 & 05.02.2024 Delhi dated 02.02.2024, 05.02.2024 & 05.02.2024. While the Delhi dated 02.02.2024, 05.02.2024 & 05.02.2024 assessee is in appeal in assessment years 2015 assessee is in appeal in assessment years 2015-16, 2016-17 & 2017-18, the Revenue 18, the Revenue 1 to 114/LKW/2024 has filed an appeal in assessment year 2016-17. As all these cases were taken up for hearing together, they are being disposed off by way of a common order. The appeals are being taken up assessment year wise. In the assessment year 2015-16 (ITA. No.112/LKW/2024), the grounds of appeal are as under:- ITA No.112/LKW/2024 ““(1)The Ld. C.I.T. (A), NFAC, erred on facts and in law in upholding the addition of Rs. 30,00,000/- being "Provision for Income Tax for F. Y.-2014 15"solely on the basis of Non furnishing of Revised Return, without appreciating that this provision has not been claimed as Deduction in the Income Tax Return in Schedule- Part-A - P& L and Schedule-BP. Thus, the Income as per Schedule-BP is Rs. 1,47,07,819/- before deducting Income Tax. Thus, this amounts to be double addition. (2) The Ld. C.I.T. (A), NFAC erred on facts and in law in upholding the addition being disallowance of Rs. 41,00,431/- Employees Share of P. F. inspite of the fact the payment has been made to the Provident Fund Commissioner on 29.11.2016 after getting registration with Commissioner, Provident Fund. (3) That the addition of Rs. 41,00,431/- as Employees Contribution u/s 36(1)(v)(a) also includes Employer Contribution which had already been deposited with LIC of India and no disallowance has been made in this regard. The correct amount of Employees Contribution as debited in the P & L Account is only Rs.35,30,209/- which is verifiable from record hence disallowance to the extent of Rs. 5,70,222/- is wrongly upheld. (4) The Ld. C.I.T. (A) erred on facts and in law in upholding the finding of Ld. A. O. for not allowing deduction of Leave Encashment of Rs. 2,05,225/- being paid during the year. (5) The Ld. C.I.T. (A), NFAC w. r. t. Grounds of Appeal No. 2 and3 failed to appreciate that due to expiry of timing for filing of Revised Return, the corrected computation chart was filed before Ld. A. O. Further, the CVT (A) has power to decide the same as the case law of Hon'ble Supreme Court in Goetz (India) Limited Vs. C.I.T. reported in 284 ITR 323 is not applicable on the Power of the Ld. C.I.T. (A). (6) The Ld. C.L.T. (A), NFAC failed to appreciate that CBDT Circular No. 14(XL) 35 dated 11.04.1955 where it hs been held that allowable claim of deduction should be allowed and Revenue should not take the benefit of the ignorance of Assessee, if claim is verifiable from the record available. The above Circular has been followed by Jurisdictional High Court in the case of CIT Vs. Lucknow Public Educational Society reported in 318 ITR223. (7) That Additions upheld by Ld. C.I.T. (A), NFAC are highly excessive, contrary to the facts, law and principle of natural justice and without providing sufficient time and opportunity to have its say on the reasons relied upon by him.”

3. The assessee is aggrieved with this order of the Ld. CIT(A) and has accordingly come before us. Shri K. R. Rastogi, C.A and Shri Shubham Rastogi, C.A., represented on behalf of the assessee before the Bench. It was submitted that the Assessing Officer had considered the income as per the return i.e. at Rs.1,47,07,819/- for the purposes of computation. The said profit was before deducting provision for advance tax at Rs.30,00,000/-. It is true that they had made a provision for income tax at Rs.30,00,000/- in the audited profit and loss account as on 31.03.2015, but it was submitted that the business profit that had been considered in the assessment order, was Rs.1,47,07,819/- and not net profit for assessment year, of Rs.1,18,49,615/-, that had been shown in the P&L account. A computation was submitted before us in which it was shown that the depreciation and provision for income tax had been added back and depreciation as per Income Tax Rules had been claimed, to arrive at the final business profit which had been offered in the return. Thus, the taxable income of the bank was Rs.1,47,07,819/- and 4 to 114/LKW/2024 this included the provision for advance tax of Rs.30,00,000/-. Without appreciating the same, the Ld. AO had added this back and this amounted to a double addition and may be, therefore, deleted. With regard to addition of Rs.41,00,431/- on account of employees share of provident fund, it was submitted that the actual figure of employees contribution which had not been deposited was Rs.35,30,209/- and the assessee had committed a mistake while submitting the revised computation chart. It was, therefore, prayed that only actual amount pertaining to the employees contribution (of Rs.35,30,209/-) should be disallowed instead of disallowance that was confirmed by the Ld. CIT(A). Without prejudice to this argument, it was submitted that the entire amount of employees contribution had been transferred to the Provident Fund Commissioner on 29.11.2016 after registering the EPF with the Provident Fund Commissioner on 05.08.2015. Accordingly, it was prayed that deduction may kindly be allowed. With regard to the denial of deduction on account of leave encashment actually paid, it was submitted that the action of the Ld. CIT(A) was incorrect because the authorities below had considered the amount given in the revised computation of income as the starting point for making of additions and therefore the correct deduction, as per law, was to be allowed to the assessee. It was further submitted that it is held by the Jurisdictional Allahabad High Court in the case of Smt Rajrani Gulati vs CIT reported in 346 ITR 543 that the judgment of the Hon'ble Supreme Court in the case of Goetz (India) Limited vs CIT reported in 284 ITR 323, only limited the power of the AO and did not affect Appellate Authorities. The assessee also placed reliance on the decision of the Hon'ble Bombay High Court in the case of Sesa Goa Ltd vs JCIT, Range-1, Panaji, Goa, reported in 117 taxmann.com 96 (Bom). Furthermore, it was submitted that the CBDT had issued Circular No. 14(XL-35) of 1955, dated 11.04.1955 for directing tax authorities to assist assessees in allowing correct deduction in computation of taxable income and not take benefit of assessee. It was, therefore, prayed by the deduction may kindly be allowed. to 114/LKW/2024 4. On the other hand, Shri Sanjeev Krishna Sharma, Addl. CIT-DR, appearing on behalf of the Revenue submitted, that the disallowances had been correctly made by the AO and sustained by the Ld. CIT(A) and did not call for any interference by us because there was no revised return and these since these were not allowable deduction that had been claimed by the assessee in its P & L account.

ITA. NO. 141/LKW/2024, pertains to A.Y. 2016-17. 6. The grounds of appeal preferred by the assessee in are as under: - ““(1) The Ld. C.I.T. (A), NFAC, erred on facts and in law in upholding the disallowance of Rs.58,09,459/- u/s 14A of 1. T. Act r. w. Rule 8D of 1. T. Rules without appreciating that assessee has not shown any exempt income in the return. Therefore, no addition should be made in this regard. (2) The Ld. C.I.T. (A), NFAC failed to appreciate that CBDT Circular No. 5 of 2014 dated 11.02.2014 has been examined by Hon'ble Delhi High Court in the case law reported in 452 ITR 206 and 399 ITR 483 and held that in the absence of exempt income, CBDT Circular cannot override express provisions of Section 14A of I. T. Act r. w. r. 8D of 1. T. Rules. Thus, the disallowance upheld Rs.58,09,459/-solely on the basis of CBDT Circular is not valid as per Law. WITHOUT PREJUDICE TO ABOVE to 114/LKW/2024 (3) That the deduction of Rs. 16,43,987/- w. r. t. fall in Value of Securities is an D allowable expenditure as per RBI Rules and as per CBDT Instruction No. 17 dated 26.11.2008, the same may be allowed as it is shown in P & L A/c under Schedule-14 "Provision for Depreciation on Investments" and same is verifiable from the Records. However, it is not claimed in the Return, though submissions were filed before Ld. C.I.T. (A), NFAC vide e-filing acknowledgement no. 20012113861664 dated 20.01.2021. (4)That the case law of Hon'ble Supreme Court in Goetz (India) Limited Vs. C.I.T. reported in 284 ITR 323 is not applicable on the Power of the Hon'ble L.T.A.T. in allowing the deduction which is not claimed in the Return and verifiable from records. (5)That Additions upheld by Ld. C.I.T. (A), NFAC are highly excessive, contrary to the facts, law and principle of natural justice and without providing sufficient time and opportunity to have its say on the reasons relied upon by him.

preferred by the Revenue in are as under: - “(1) The Ld. CIT(A), NFAC has erred in law and on facts in deleting the addition of Rs. 2,23,54,660/- claimed by the assessee as exempt income u/s 10(15) of the IT Act on the basis of audited profit and loss account, balance sheet and income tax return.”

8. The facts of the case are that the Assessing Officer noted that the assessee had claimed the following exempt income (i) Dividend on investment (exempt u/s 10(35) of Rs.30,09.485) (ii) Dividend on investment (exempt u/s 10(34) Rs.15,300/-) and (iii) Profit on sale of GOI bonds (exempt u/s 10(38) Rs.3,55,000/-). He accordingly issued a show cause notice to the assessee asking why disallowances should not be made on account of Section 14A of the Act. In response, the assessee submitted that the investment in shares was made out of its own fund. The assessee had sufficient reserves and surplus of Rs.15,99,55,165/-. The dividend income of Rs.96,370/- was received on account of old shares and no expenses had been incurred in the collection of dividend income. The Ld. AO considered the reply of the assessee but did not find the same to be tenable. On perusing the balance-sheet and the profit and loss account, he noted that the assessee had earned income of Rs.33,79,785/- which did not form part of the total income in the relevant assessment year and assessee had invested a sum of Rs.13,75,00,000/- in non SLR to 114/LKW/2024 investment during the course of year, which was not a part of total income for taxable income purposes. The assessee had not apportioned his indirect expenses between taxable and non taxable income of his business. The Assessing Officer observed that even if the assessee had not incurred any direct expenses in relation to the income which did not form a part of total income for taxable purposes, yet the assessee was liable to fall under the ambit of provisions of Section 14A of the Act as it had not apportioned its indirect expenses between taxable and non-taxable income. He therefore recorded his satisfaction that the provisions of Section 14A of the Act shall apply. The Ld. AO further pointed out that the provision of Section 14A(3) of the Act make it clear that the provision of Section 14A(2) of the Act shall apply even in cases where an assessee claims that no expenditure, has been incurred by him in relation to income which does not form part of the total income under this Act and Rule 8D(2) provided the methodology to determine the amount of expenditure in relation to income not includable in total income. Therefore, he determined the disallowable expenditure as per the provisions of Rule 8D(2)(ii) at Rs.58,09,459/-. Thereafter, relying upon the circular of the CBDT and the decision of the Hon'ble ITAT Amritsar Bench in the case of M/s. Lally Motors Pvt Ltd in ITA. No.218/Asr/2017, the Ld. AO made an addition of Rs.58,09,459/- on this account. Going further into the computation of income and profit and loss account, the AO found the assessee had claimed amount of Rs.2,23,54,660/- as exempt on account of interest on GOI Bonds u/s 10(15). He, therefore, asked the assessee to submit necessary evidences in support of claim. In response, the assessee revised its computation of income by reversing the exemption claimed and therefore the Assessing Officer disallowed this claim and added back a sum of Rs.2,23,54,660/-.

9. Aggrieved by these additions, the assessee went in appeal before the Ld. CIT(A). It was submitted that due to some confusion and wrong understanding, the Ld. AO had stated in the body of the assessment order that the bank had claimed exempt income to the extent of Rs.33,79,785/-. However, it was submitted that they had not claimed any exempt income u/s 10(35), u/s 10(34) or u/s 10(38) of the Act 9 to 114/LKW/2024 in the income tax return. In support of this contention, it submitted the audited balance-sheet and the profit and loss account and copy of income tax return filed through e-filing. It is also submitted the details of non SLR investment amounting to Rs.31,01,75,690.00 & copy of general ledger of the investment. It was submitted that as per this ledger account, the interest received was Rs.58,09,459/- and the same had been considered as taxable income under the head, “other income” in schedule – 14”. It was further submitted that the assessee had not received any dividend or exempt income on non SLR investment during A.Y. 2016-17 as all the Investment in Mutual Funds were interest Oriented and not Dividend Oriented and interest on these investments, which were shown at pages 41 to 44 of the P.B., were not covered in under provisions of section 14A of the Act. It was further submitted that the assessee had total interest fee fund of Rs.25,20,31,732/- and therefore, the investment made in non-SLR Investment of Rs.13,75,00,000/-, was entirely out of its own resources and therefore there was no reason for making disallowance in accordance with provisions of Section 14A read with Rule 8D(2)(i) or Rule 8D(2)(ii) of the Rules. Furthermore, it was submitted that it was settled principle that where the assessee bank had mixed funds and investments were made in mutual funds on which dividend exempted and assessee has much more interest free fund, then no disallowance could be made as per Rule 8D(ii) of the Rules relying upon the decision of the Hon'ble Supreme Court in the case of PCIT vs Sintex Industries Ltd (2018) 93 taxmann.com 24 (SC) for this preposition. Reliance was also placed upon the decisions of the Hon'ble Delhi High Court in the case of CIT vs Taikisha Engineering India Ltd (2015) 54 taxmann.com 109 (Delhi), the Hon'ble Bombay High Court in the case of HDFC Bank Ltd vs DCIT 67 taxmann.com 42 the decision of ITAT Delhi Bench in the case of ACIT vs NHPC Ltd (2015) 53 taxmann.com 301, M/s. Hero Fin Corp Ltd vs DCIT, Circle-12(1) (Delhi Trib) and M/s. Ceat Limited vs ACIT, Range- 6(2) in support of this preposition. The Ld. CIT(A) considered the submissions of the assessee but did not find the same to be acceptable. He said that sub-clause (2) of Section 14A clearly stated that if the Assessing Officer was not satisfied with 10 ITA Nos.112 to 114/LKW/2024 correctness of the claim of the assessee, he could determine the expenditure with regard to earning of exempt income as per method prescribed by the notification dated 24.02.2018 by the CBDT and that the assessee had not be able to offer any cogent reason for non disallowance of the expenditure u/s 14A of the Act. Therefore, he held that the decision of the Ld. AO was in accordance with law and he confirmed the addition made by him. With regard to addition of Rs.2,23,54,660/-, the assessee submitted that in the audited profit and loss account and in the return of income, it had not claimed exemption u/s 2(15) of the Act in respect of GOI Bonds of Rs.2,23,54,660/-. The Ld. AO had incorrectly held that the said deduction had been claimed in the return as well as the balance-sheet. However the assessee submitted the return and the balance-sheet to the Ld. CIT(A) to demonstrate that it had not claimed the deductions. The Ld. CIT(A) observed that there was merits in the contention of the assessee as he could neither find any claims of expenditure of Rs.2,23,54,660/- under the head exemption on account of interest income on Government of India Bond nor could he find it deducted from income declared from profit and gain of the business and profession, which was computed at a loss of Rs.1,24,81,747/-. Accordingly, he granted relief to the assessee in this regard.

10. Both the assessee and Revenue are aggrieved with this order of the Ld. CIT(A). The assessee submitted that the Ld. CIT(A) had erred in fact in upholding the disallowance of Rs.58,09,459/- u/s 14A of the Act without appreciating that the assessee had not shown any exempt income in the return and without appreciating that the investments made in non SLR investment had been made out of the assessee’s own funds. It was further submitted that it had been judicially held, that in the absence of exempt income, the CBDT circular cannot override the express provisions of Section 14A of the Act and therefore the disallowance upheld solely on the basis of the said circular, was not valid as per law. It was submitted that authorities below had failed to appreciate, that the assessee had not claimed any exempt income in the income tax return. It was also submitted that the assessee had not made investments on which dividend income was earned. Thus, in the absence 11 to 114/LKW/2024 of investment on which dividend was earned, the provisions of Section 14A of the Act were not applicable. It was submitted that the total investment as on 31.03.2016 as per the balance-sheet were Rs.46,79,70,619/-. This included GOI Bonds of Rs.33,175,690/-, on which interest was received, Uttar Bharat Nagariya Sahkari Bank of Rs.2,55,000/-, on which interest was received and investment in non SLR on which also interest was received. In support of its contentions, it had submitted copy of ledger account of interest on non SLR Investment. Since the assessee did not have any dividend income and all the interest income had been offered to tax in audited profit and loss account under the head “interest earned” and under the heading “other income”, as business income there was no question of any disallowance u/s 14A of the Act. The assessee relied upon a number of decisions made by various Courts as under: - 1 (2019) 112 taxmann.com 322 PCIT-2 vs Caraf Builders & Contructions (P.) Ltd 2 (2019) 106 taxmann.com 181 (SC) PCIT vs GVK Project and Technical Services Ltd 3 (2018) 95 taxmann.com 250 (SC) CIT (Central) 1 vs Chettinad Logistics (P.) Ltd

11. It was further submitted that the Ld. CIT(A) had erred in confirming the addition without appreciating that the CBDT Circular No. 5 of 2014 had been examined by Hon'ble Delhi High Court and Hon'ble High Court held that in the absence of exempted income, CBDT Circular cannot override the express provisions of Section 14A of the Act r.w.r. 8D of the Rules. Reliance was placed on the decision in the case of PCIT vs Amadeus India (P.) Ltd (2022) 145 taxmann.com 311 and PCIT vs IL & FS Energy Development Company Ltd (2017) 84 taxmann.com 186 (Delhi). With regard to ground no. 3, it was submitted that the said deduction of Rs.16,43,987/- being fall in value of securities computed as per RBI Rule and allowable as per CBDT instruction No. 17 dated 26.11.2008, had not been claimed before the AO but was claimed for the first time before the Ld. CIT(A). It was submitted that the failure to claim the said deduction was a mistake and was unintentional. Reliance was placed on Circular No. 14 (XL-35) of 1955, dated 12 to 114/LKW/2024 11.04.1955 wherein tax authorities were enjoined to help the assessee’s claiming and securing reliefs which were allowable. It was submitted that the Hon'ble Allahabad High Court in the case of Smt Rajrani Gulati vs CIT reported in 346 ITR 543 (All) had held that restriction imposed by the Hon'ble Supreme Court in the case of Goetze (India) Ltd (supra) did not apply to the appellate authorities. Reliance was also placed on the judgment of the High Court of Bombay in the case of Sesa Goa Ltd vs JCIT (2020) 117 taxmann.com 96 (Bom) and it was prayed that the deduction may kindly be allowed to it. It was submitted that the provision for fall in value of securities was actually the amortization of premium paid on the investment, as they were purchased at a price more than its face value. Therefore, the premium paid, had to be amortized over the period held to maturity of the investment. The assessee quoted from the CBDT Instruction No. 17, dated 26.11.2008 para no. (vii) and placed reliance on the decision of Hon'ble Karnataka High Court in the case of CIT & anr vs ING VYSYA Bank Limited 186 DTR 193. Other cases, on which reliance were placed were the decisions of the Bangalore Tribunal in the case of Canara Bank vs CIT (2016) 68 Taxmann.com 128 (Bang Trib) and Capital Local Area Bank Ltd vs ACIT (2017) 82 taxmann.com 387 (Amritsar Trib). On the deletion of Rs.2,23,54,660/- by the Ld. CIT(A), which had been raised by the Revenue in ITA. No.141/LKW/2024, it was submitted that the assessee bank had never claimed exemption u/s 2(15) of the Act and the only adjustment made to the profit and loss account, while preparing the return of income, was on account depreciation. The net taxable income was Rs. 76,15,298/-. Since no such claim of expenditure had been made, it could not be disallowed by the AO. Hence, the Ld. CIT(A) was justified in deleting the same.

12. On the other hand, Shri Sanjeev Krishna Sharma, Ld. Departmental Representative on behalf of the Revenue submitted that the AO had passed a reasoned and speaking order and relying upon the CBDT Circular and the decision of the Hon'ble Amritsar Bench in the case of M/s. Lally Motors Pvt Ltd in to hold that the disallowance u/s 14A of the Act was required to 13 ITA Nos.112 to 114/LKW/2024 be made. Since the assessee clearly had exempt income and had been making investments in bonds that would be exempt income, the provision of the Circular applied and the disallowance should be confirmed. With regard to the claim of deduction on account of fall in value securities it was submitted that the same was only a provision and therefore should not be allowed. Furthermore, it had not been claimed by the assessee, by way of a revised return. On the issue of disallowance of Rs.2,23,54,660/-, it was submitted that the Assessing Officer had recorded that assessee had claimed the same amount as exempt interest on GOI Bonds u/s 10(15) and the assessee had revised its computation of income by reversing of exemption claimed. Hence, since the claim of the assessee was not in accordance with law, it had been disallowed. The Ld. Sr. DR prayed that the Ld. CIT(A) should not have deleted the said addition.

are as under: - “1. The Ld. C.I.T. (A), NFAC, erred on facts and in law in upholding the disallowance of Rs.61,78,920/ u/s 14A of 1. T. Act r. w. Rule 8D of 1. T. Rules without appreciating that assessee has not shown any exempted income in the return. Therefore, no addition should be made in this regard.

2. The Ld. C.I.T. (A), NFAC failed to appreciate that CBDT Circular No. 5 of 2014 dated 11.02.2014 has been examined by Hon'ble Delhi High Court in the case law reported in 452 ITR 206 and 399 ITR 483 and held that in the absence of exempt income, CBDT Circular cannot override express provisions of Section 14A of 1. T. Act r. w. r. 8D of 1. T. Rules. Thus, the disallowance upheld Rs.61,78,920/-solely on the basis of CBDT Circular is not valid as per Law.

3. The Ld. C.I.T. (A), NFAC erred on facts and in law in upholding the addition of Rs 12,61,009/- being depreciation on investments (valuation on mark to mark basis) computed as per R.B.I direction which are binding on bank and allowable expenditure as per CBDT Instruction No. 17 dt.26.11.2008 and as per settled case law in this regard.

5. The Ld. C.I.T. (A), NFAC erred on fact and in law in upholding "NACH Expenses" (National Automatic Clearing House) Rs, 81,581 without appreciating that expenses incurred solely and exclusively as Clearing House Expenses of Bank as per Banking Business for which relevant details furnished and explained and same is an allowable expenses.

8. The Ld. C.I.T. (A), NFAC erred on fact in law in upholding the disallowance w. r. t. depreciation Rs 2,16,565/-inspite of the fact the same was rightly claimed as per I.T. Rules and detailed in Tax Audit Report. Further, Relevant Vouchers for addition during the year were also submitted.

9. That Additions upheld by Ld. C.I.T. (A), NFAC are highly excessive, contrary to the facts, law and principle of natural justice and without providing sufficient time and opportunity to have its say on the reasons relied upon by him.”

16. The facts of this case are that the Assessing Officer made additions of Rs.61,78,920/- u/s 14A of the Act read with Rule 8D of the Rules; an addition of Rs.12,61,009/- being depreciation on investment (valuation on mark to mark basis) and Rs.81,581/- on, “NACH Expenses”. He also made a disallowance of Rs.2,16,565/- in respect of depreciation. While making the addition on account of Section 14A, the Assessing Officer pointed out that the assessee had shown investments of Rs.76,78,53,288/- as on 31.03.2019 and held that the income from the same did not form part of the total income for taxation purposes. It had accrued finance cost of Rs.6,36,30,202/- and had not apportioned its indirect expenses incurred to earn taxable and non taxable income. Therefore, the relying upon the CBDT Circular No.05/2014 dated 11.02.2014 and the decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd vs CIT, New Delhi 402 ITR 640, the Ld. AO held that to 114/LKW/2024 as per Rule 8D, the amount of expenditure to be disallowed came to Rs.61,78,920/-, which was less than the total finance cost. Hence, he disallowed the same. While making the disallowance of “NACH Expenses”, the Ld. AO pointed out that the assessee had been asked to justify the expense vis-à-vis ledger account and vouchers and while the assessee had submitted the ledger account, it had not given the details as to how expenses was related to the business operations of the assessee. The Assessing Officer also made a disallowance on account of depreciation because the assessee did not submit evidences of addition to fixed assets.

17. The matter travelled in appeal to the Ld. CIT(A) in which the assessee submitted that it had not claimed any exempt income in the return income and that it had not received any dividend on SLR Investment, because all the investments in mutual fund were interest oriented and not dividend oriented. Hence, the interest/profit on sale of mutual funds were included in its profit and loss account under the head, “interest earned” or “other income” and therefore they were not covered u/s 14A of the Act. Furthermore, it had made investment in bond of Government of India & Uttar Bharat Navkari Sahkari Bank, on which it interest and the same interest was offered to tax. The assessee placed reliance on the decision of the Hon'ble Supreme Court in the following case laws: - 1 (2019) 112 taxmann.com 322 PCIT-2 vs Caraf Builders & Contructions (P.) Ltd 2 (2019) 106 taxmann.com 181 (SC) PCIT vs GVK Project and Technical Services Ltd 3 (2018) 95 taxmann.com 250 (SC) CIT (Central) 1 vs Chettinad Logistics (P.) Ltd 18. It was further submitted that the total investment made in Non SLR Investments of Rs.11,50,00,000/- as on 31.03.2017 were out of “Interest free funds” and that the Hon'ble Supreme Court of India had held that in the case of PCIT vs Sintex Industries Ltd (supra) that where assessee had surplus funds against which investment were made, question of making of any disallowance of expenditure in to 114/LKW/2024 respect of interest and administrative expenses u/s 14A of the Act did not arise. The Ld. CIT(A) once again without considering the issue on merits, simply held that the Assessing Officer had given an opportunity to the assessee to make necessary compliance but the assessee was unable to give any cogent reason for non disallowance of expenditure u/s 14A of the Act, barring the submission mentioned earlier in his order. He, therefore, confirmed the order of the Ld. AO, in view of the Circular No.5/2014 dated 11.02.2014. With regard to the deduction of Rs.12,61,009/- being fall in value of securities, the Ld. CIT(A) did not consider the claim of the appellant on the ground that the assessee was unable to substantiate its claim by furnishing supporting evidence in the assessment stage before the AO. Therefore, he confirmed the said addition. With regard to “NACH Expenses”, the Ld. CIT(A) upheld the disallowance, holding that the assessee was unable to justify its claim as how the same expenditure was incidental to business and with regard to claim of depreciation of Rs.2,16,596/-, the Ld. CIT(A) observed that since the assessee had failed to substantiate its claim with regard to addition to assets with necessary documentary evidence, the same could not be allowed. Accordingly, he dismissed the appeal of the assessee on this ground and after allowing certain other additions, which are not the subject matter of this appeal, he held that the appeal to be partly allowed.

19. The assessee is aggrieved with these additions and has accordingly come before us. Shri K. R. Rastogi, C.A and Shri Shubham Rastogi, C.A., represented on behalf of the assessee. The submission that was made before us were on the same lines as the submission made in . Similarly, the Ld. Counsels made submission with regard to ground no. 3, relating to the deduction of Rs.12,61,009/- with relation to value of securities on the same lines as made by them in . With regard to addition of Rs.81,581/- on account of “NACH Expenses”, it was submitted that the lower authority had failed to appreciate that (NACH) was fund clearing platform set up by the National Payment Corporation of India similar to the existing to ECS of RBI and the expenses in this 18 to 114/LKW/2024 regard had been incurred wholly and solely for banking business. Accordingly, the bank had paid to NIIT Technology Ltd through RTGS for availing “NACH Expenses”. Since the same is allowable expenditure, no disallowance was called for in this regard. A copy of the invoice was submitted and it was also stated that TDS has been deducted on the same. The said payment has been made as per RBI guidelines and all the details had been submitted before the Ld. CIT(A) but the Ld. CIT(A) failed to appreciate the same. On account of addition for depreciation, the Ld. AR submitted that bank was subjected to audit by the statutory auditors and the addition to fixed assets giving the total of addition and amount has been duly shown in the tax audit report in Form 3CD and Item no.

18. This was available before the Ld. AO during the assessment proceedings and copies of the vouchers were submitted in the paper book. Accordingly, it was prayed this addition may kindly be deleted.

20. On the other hand, Shri Sanjeev Krishna Sharma, Ld. CIT-DR supported the orders passed by the Assessing Officer and confirmed by the Ld. CIT(A). It was submitted that the assessee had substantial investments reflected in the balance- sheet on which income had not been offered and therefore the disallowance u/s 14A of the Act was justified. It was further submitted that the assessee had not furnished justification or details with regard to incurred expenses or addition to fixed assets. With regard to the claim for depreciation on investment, it was submitted that the same was only provision and therefore, should not be allowed.