DCIT, CIR-2, JALPAIGURI, JALPAIGURI vs. M/S UTTAR BANGA KSHETRIYA GRAMIN BANK, COOCHBIHAR

आदेश /O R D E R PER Waseem Ahmed, Accountant Member:-

ITA No.576/Kol/2015 & CO No 73/Kol/2017 A.Y. 2010-11 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 2 This appeal as well as Cross Objection (CO) by the Revenue and assessee is directed against the order of Commissioner of Income Tax (Appeals)-Jalpaiguri dated 27.02.2015. Assessment was framed by DCIT, Circle-2,Jalpaiguri u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 28.03.2013 for assessment year 2010-11. Shri S.K. Tulsiyan, Ld. Advocate appeared on behalf of assessee and Shri Kalyan Nath Ld. Departmental Representative appeared on behalf of Revenue. 2. Revenue’s appeal is delayed by 9 days and condonation petition has been field explaining the reasons for the delay. Ld. AR did not object for condoning the delay. Hence, we condone the delay and admit the Revenue’s appeal for hearing. 3. The appeal as well as CO is heard together and being disposed of by way of this common order for the sake of convenience. 4. First we take up Revenue’s appeal. The grounds raised by Revenue are as under:- “1. The Ld. CIT(A) has relied upon the decision of Hon'ble Special Bench ITAT in the case of DCIT Vs. Catholic Syrin Bank Lt. 2004 (267) ITR 52, wherein, the Hon'ble ITAT has restored the case back to the Assessing Officer to examine the factual position an decided the case as per direction. The Ld. CIT(A) has erred in law by directing the AO to recall for the details of commission paid to recovery agents, debt wise details and to decide the case, which is bad in law, as restoring the case back to the Assessing Officer for re-examining the claims as made by the assessee is not permissible as per law. The CIT(A) can only confirm, reduce, enhance or annual the assessment. ‘Reliance is placed on the ratio of the jugement in the case of Vigur Trading & Investment (Ind) Ltd. vs. ITO Wd-9(2), Kolkata ITA No.994(Kol) of 2009 AY 2005-06 order dated 15.02.2012 ‘B’ Bench Kolkata’ 2. CIT(A) has not rebutted the arguments of the Assessing Officer for making additions under a Debt. In the annual reports of the assessee, no claim has been made as bad debt written off.”

ITA No.576/Kol/2015 & CO No 73/Kol/2017 A.Y. 2010-11 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 3 5. First issue raised by Revenue in this ground No.1 is that Ld. CIT(A) erred in restoring the matter to the Assessing Officer with direction to re- examine the deduction claimed u/s. 36(1)(viia) of the Act. 6. Briefly, the facts are that the assessee is a regional rural bank and registered with Reserve Bank of India. The assessee in the year under consideration has claimed the deduction u/s. 36(1)(viia) of the Act in respect of provision created for the bad debt as per the guidelines of Reserve Bank of India. The provision was claimed to have been made in accordance with Rule 6ABA of the Income Tax Rule, 1962 for all rural advance shown in the balance-sheet. 7. However, the AO was of the view that the assessee is entitled for the deduction in respect of rural advance made during the year. Therefore, the Assessing Officer allowed 10% deduction of the fresh advance made by the rural branches of the bank during the year and excess provision was disallowed and added to the total income of assessee. 8. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the interest income earned on all rural advance was offered to tax which was inclusive of carry forward advance as well as fresh advance made during the year. However, Ld. CIT(A) after considering the submissions of assessee has restored the matter back to the file of AO with the specific direction by observing as under:- “6.5 It is seen that the assessee has claimed a deduction u/s. 36(1)(vii), which is for bad debt written off and a deduction u/s. 36(1)(viia), which is for provision for bad and doubtful debts in respect of advances made by rural braches. Such a situation has been considered in the judgment of Special Bench of Hon'ble ITAT in the case of DCIT Vs. Catholic Syrian Bank Ltd 2004 (267) ITR 0052-ITAT. In this judgement the Hon'ble Special Bench ITAT has observed as under- ‘As regards the actual application of the provisions of both clauses (vii) (viia) to the case, we find that the Commissioner of Income-tax ((Appeals) has found that the assessee-bank is maintaining two separate accounts, one for bad and doubtful debts other for the provision for bad debts in rural branches for which separate accounts are maintained and that this is evidenced by the entries in the printed profit and loss account, balance-sheet an break-up details. That this is the factual position

ITA No.576/Kol/2015 & CO No 73/Kol/2017 A.Y. 2010-11 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 4 was also confirmed before us by learned senior counsel for the assessee. In fact, he also stated that debt-wise position can also be ascertained from the records maintained by the bank. Under the circumstances, the matter has to be restored to the Assessing Officer to enable him to examine the factual position and decide the same as per our directions.’ “In view of the judgement of Special Bench of Hon'ble ITAT, the AO is directed to call for the debt wise details from the bank and allow deduction u/s.36(1)(viia) by considering carried forward rural advances & current year rural advances and reducing it by the debts for which deduction u/s.36(1)(vii) has been claimed. The AO is directed to ensure that the advances which have been written off and for which deduction u/s.36(1)(vii) has been claimed, are not considered for calculating the deduction u/s.36(1)(viia).” The Revenue, being aggrieved, is in appeal before us. 9. Ld. DR before us submitted that Ld. CIT(A) has exceeded his jurisdiction by restoring the file back to AO for fresh adjudication. As per the provision of Section 251 of the Act he has no power to restore the matter back to the file of AO. Ld. DR without prejudice to the above also submitted that the assessee can claim the deduction in respect to provision created u/s 36(1)(viia) of the Act if it is made in the books of account. In the instant case the deduction was claimed u/s 36(1)(viia) of the Act in the computation of income and without making any provision in the books of account. Ld. DR vehemently relied on the order of AO. On the other hand, Ld. AR before us submitted that the direction issued by Ld. CIT(A) is very specific and therefore it cannot be said that the matter has been restored back to the file of AO. He further submitted that the issue of creating the provision u/s 36(1)(viia) of the Act in the books of accounts is not arising from the order of AO. Therefore, the argument placed by Ld. DR cannot be entertained. He relied on the order of Ld. CIT(A). 10. We have heard the rival contentions of both the parties and perused the material available on record. The issue in the instant case relates to the disallowance made by the AO in respect of provision created u/s. 36(1)(viia) of the Act. As per the AO the assessee is entitled for deduction u/s 36(1)(viia) of the Act in respect of fresh rural advance made during the year. However, Ld.

ITA No.576/Kol/2015 & CO No 73/Kol/2017 A.Y. 2010-11 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 5 CIT(A) reversed the order passed by AO after having reliance on the judgment of Special Bench of Hon'ble Tribunal in the case of DCIT Vs. Catholic Syrian Bank Ltd 2004 (267) ITR 0052-ITAT. As per the Ld. CIT(A) both rural advance i.e. carry forward from the earlier years as well as fresh advance made during the year are entitled for deduction u/s. 36(1)(viia) of the Act. Accordingly, Ld. CIT(A) directed the AO to rework the deduction u/s 36(1)(viia) of the Act. 10.1 We find that Ld. CIT(A) has given a very specific direction for working out the amount of eligible deduction available to assessee u/s 36(1)(viia) of the Act. Therefore, we conclude that the matter has not been restored back to the file of AO in contravention to the provision of Section 251 of the Act as alleged by Revenue. 10.2 Coming to the second contention of Ld. DR that assessee failed to claim the deduction u/s 36(1)(viia) of the Act in the books of account. In this regard, we find that instant issue is not arising from the order of Authorities Below. In our considered view, none of the authority has claimed to have made the disallowance on the ground of non claim in the books of account. However, in the interest of natural justice and fair play we direct the assessee to demonstrate same from the audited financial statement whether it has claimed deduction u/s. 36(1)(viia) of the Act in its books of account. Thus, the ground of Revenue is allowed as indicated above. 11. Second issue raised by Revenue in ground No.2 is that Ld. CIT(A) erred in deleting the addition made by AO on bad debt written off. 12. The assessee in the year under consideration has claimed bad debt written off for ₹7,91,30,420/- which was classified under the head provision and contingency. However, the AO was of the view that the claim was made by the assessee in respect of bad debt written off under the head provision and contingency which signifies that the bad debt has not actually been written off in the books of the assessee. Thus the impugned bad debt written off is actually representing the provision and contingency which is not allowable as deduction u/s 36(1)(vii) of the Act. Therefore, the AO disallowed the same and added to the total income of assessee.

ITA No.576/Kol/2015 & CO No 73/Kol/2017 A.Y. 2010-11 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 6 13. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the deduction was claimed in respect of bad debt written off in the manner as provided by the Reserve Bank of India. Therefore, the deduction claimed by assessee cannot be denied merely on the ground that it was not shown under the appropriate head of accounts. As such, the bad debts written off were duly recorded in the books of account and it does not represent the provision and contingency as observed by the Assessing Officer. Ld. CIT(A) after considering the submission of assessee remitted back the matter to the file of AO with a direction to check whether the bad debt has actually been written off in the books of account. The Revenue, being aggrieved, is in appeal before us. 14. Before us both the parties relied on the order of Authorities Below as favourable to them. 15. We find that Ld. CIT(A) has given a very specific direction for working out the amount of eligible deduction available to the assessee u/s 36(1)(vii) of the Act. Therefore, we conclude that the matter has not been restored back to the file of AO in contravention to the provision of Section 251 of the Act as alleged by Revenue. In this view of the matter and for natural justice and fair play we remit back the matter to the file of AO for fresh adjudication in terms of our above direction and pass a speaking order in accordance with law. Hence, this ground of Revenue’s appeal is allowed for statistical purpose. 16. In the result, Revenue’s appeal is allowed for statistical purpose.

Coming to assessee’s CO No.73/Kol/2017. 17. As far as CO filed by assessee is concerned, the first aspect to be considered is the condonation of 29 days delay in filing the CO which is explained as owing to sleekness of the Chartered Accountant who was looking after the income-tax matter of assessee-bank. Considering the reasons given, we deem it fit to condone the delay in filing the CO of assessee.

ITA No.576/Kol/2015 & CO No 73/Kol/2017 A.Y. 2010-11 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 7 18. Grounds raised by assessee in its CO are as under:- “1) That the CIT(A) erred in observing that a claim of Rs.2,62,74,265/- was made by the assessee u/s. 36(1)(viia) when the actual made in the return was Rs.26,27,42,650/- 2) That the Ld. CIT(A) has rightly held that the aggregate average advances stipulated u/s. 36(1)(viia) be computed by considering the carried forward rural advances and current year rural advances and the same should be upheld. 3) That the Ld. CIT(A) erred in directing the AO to verify the claim made by the assessee u/s. 36(1)(viia) not appreciating the fact that a detailed calculation of aggregate average advances was produced before the AO in course of assessment.” 19. First issue raised by assessee is that Ld. CIT-A erred in observing the claim made by assessee for ₹2,62,74,265/- whereas actual claim made in the return was of ₹26,27,42,650/-.

ITA No.576/Kol/2015 & CO No 73/Kol/2017 A.Y. 2010-11 DCIT, Cir-2, JAL Vs. M/s Uttar Banga Kshetriya Gramin Bank Page 8 24. In the result, assessee’s CO is partly allowed for statistical purpose.

Sd/- Sd/- (Aby. T. Varkey) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp &दनांकः- 08/11/2017 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक /Assessee-M/s Uttar Banga Kshetriya Grmin Bank, H.O. Sunity Road, P.O. & Dist. Coochbehar in 736101 2. राज�व/Revenue-DCIT, Circle-2, 2nd Fl, C.R. Building, Race Course, Para, Naya Basty, Jalpaiguri Pin 735101 3. संबं1धत आयकर आयु2त / Concerned CIT Kolkata 4. आयकर आयु2त- अपील / CIT (A) Kolkata 5. 5वभागीय �8त8न1ध, आयकर अपील�य अ1धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड; फाइल / Guard file. By order/आदेश से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील�य अ1धकरण, कोलकाता ।