ACIT, CIRCLE - 1, BURDWAN, BURDWAN vs. BURDWAN CENTRAL COOPERATIVE AGRICULTURAL PRODUCTION & MARKETING SOCIETY LTD., BURDWAN

This appeal is preferred by the revenue against the order of Ld. CIT (Appeals) Asansol dated 19.02.2010.

In ground no 1 to 4, the revenue has challenged the action of the Ld. CIT (A) in deleting the disallowance made by the AO on account of assessee’s claim for deduction u/s 80P(2)(a) of the Act in respect of bank commission, handling charges, insurance charges and drying charges. 3. The assessee in the present case is a cooperative society which is engaged in the business of letting out of warehouse and trading in agricultural equipments, fertilizers and other articles for the purpose of supplying them to its members. The return of income for the year Assessment Year: 2006-07 Burdwan Central Co-op. Agri. Produ. & Markt. Soc. Ltd. under consideration was filed by it on 31.10.2006 declaring a total income at Nil after claiming deduction u/s 80P(2)(a). During the course of assessment proceedings, the claim of the assessee for the said deduction was examined by the AO and on said examination, he held that the assessee society was not entitled for deduction u/s 80B(2)(a) in respect of income on account of bank commission, handling charges, insurance charges and drying charges amounting to Rs. 66,309/-, 94,737/-, 63,78,268/- and 54,669/- respectively. He, therefore, disallowed the claim of the assessee for deduction u/s 80P(2)(a) in respect of the said income in the assessment completed u/s 143(3) vide an order dated 26.12.2008. 4. Against the order passed by the AO u/s 143(3), an appeal was preferred by the assessee before the Ld. CIT (A). During the course of appellate proceedings before the Ld. CIT (A), it was pointed out on behalf of the assessee the amounts in question received on account of bank commission, handling charges, insurance charges and drying charges did not represent the income of the assessee but the same was actually the reimbursement of expenses incurred by the assessee. Keeping in view this submission made by the assessee, the Ld. CIT (A) deleted the disallowance made by the AO u/s 80P(2)(a). 5. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. It is observed that the disallowance made by the AO u/s 80P(2)(a) in respect of bank commission, handling charges, insurance charges and drying charges has been deleted by the Ld. CIT (A) vide his impugned Assessment Year: 2006-07 Burdwan Central Co-op. Agri. Produ. & Markt. Soc. Ltd. order after having found that the same did not represent any income of the assessee but it was a case of reimbursement of expenditure actually incurred by the assessee which was credited separately in the profit and loss account of the assessee instead of the same against the corresponding expenditure. At the time of hearing before us, the learned DR has not been able to doing anything on record to rebut or controvert the findings recorded by the Ld. CIT (A) while giving relief to the assessee on this issue. We, therefore, find no justifiable reason to interfere with the impugned order of the Ld. CIT (A) on this issue and upholding the same, we dismiss ground no 1 to 4 of the revenue’s appeal.

Ground no 5 raised by the revenue in this appeal read as under: “That on the facts and circumstances of the case Ld. CIT (A) has erred in holding that the amount of difference of Rs. 48,68,826/- between the actual bank balance and the balance sheet amount cannot be added as income u/s 68 of the I.T. Act, 1961 and in directing the Assessing Officer to delete the balance difference of Rs. 15,09,442/- after verification.”

In the balance sheet filed along with its return of income, the assessee had shown overdrafts of Rs. 20,34,183/- and Rs. 31,14,197/- from West Bengal State Cooperative Bank and Burdwan Central Cooperative Bank respectively. The statements of the said banks as furnished by the assessee during the course of assessment proceedings before the AO however revealed that there was a positive balance of Rs. 36,845/- and Rs. 11,93,043/- in the account of the assessee with West Bengal State Cooperative Bank and Burdwan Central Cooperative Bank respectively. There was thus a difference of Rs. 63,78,268/- and since the assessee failed to reconcile the same to Assessment Year: 2006-07 Burdwan Central Co-op. Agri. Produ. & Markt. Soc. Ltd. the satisfaction of the AO, an amount of Rs. 63,78,268/- was added by the AO to the total income of the assessee u/s 68 by treating the same as unexplained cash credit.

The addition made by the AO u/s 68 was disputed by the assessee in the appeal filed before the Ld. CIT (A) and after considering the submissions made by the assessee as well as the material on record, the Ld. CIT (A) decided this issue vide paragraph no 4 of his impugned order as under: “4. Ground No. 3 is with regard to addition of difference of bank balance amounting to Rs. 63,78,268/-. The balance sheet of the assessee shown the following balances as overdrafts:- (i) Rs. 20,34,183.30(-) West Bengal State Co-Op Bank (ii) Rs. 31,14,197.20(-) Burdwan Central Co-Op Bank Rs. 51,48,580.509(-) However, as per the bank statement the balance were as under:- (iii) Rs. 36,845.09 West Bengal State Co-Op Bank (iv) Rs. 11,93,043.26 Burdwan Central Co-Op Bank Rs. 12,29,888.35 The AO observed that thus there was a difference of Rs. 63,78,268.85 (Rs. 51,48,580.50 + Rs. 12,29888.35) between the actual bank balance and the balance sheet. The AR expressed his inability to reconcile the statement and the AO, therefore added back Rs. 63,78,208.85/- u/s 68. During course of the appeal proceedings the ld. AR submitted a letter issued by the Chairman of the assessee society in which it was stated that there was an amount of difference between actual bank balance and balance sheet. It was stated that efforts were made to tract out the difference and it was found that the difference had been brought forward since long which fact was corroborated by the audit reports. The ld. AR submitted a chart which shown that a difference of Rs. 20,69,437.39 between the balance sheet figure and the balance in the bank account maintained in the West Bengal State Co-Op Bank Ltd., Kolkata persisted unchanged since F.Y. 1998-99 till the year under appeal. Similarly a difference of Rs. 27,99,387.54 persisted in respect of the balance sheet figure and bank Assessment Year: 2006-07 Burdwan Central Co-op. Agri. Produ. & Markt. Soc. Ltd. account maintained by the assessee in the Burdwan Central Co-Op Bank Ltd., Burdwan since the F.Y. 2000-01 till date. Thus it will be seen that an aggregate difference of Rs. 48,68,826.51 has been persisting since long before the relevant F.Y. which is under appeal. I am of the opinion that the brought forward difference cannot be brought to tax in the current year. The Rajasthan High Court in the case of CIT vs Parmeshwar Bohra 301 ITR 404 held that a sum being carried forward from a preceding year is not an investment or cash credit generated during the relevant year and cannot be taxed as the income of the year. The Delhi High Court held the same view in the case of CIT vs Om Prakash Mahajan & Sons 152 ITR 583 and CIT vs Usha Stud Agricultural Farms Ltd. 301 ITR384. Thus it would be seen that the year of taxability has to be looked into carefully. I, therefore, hold that there can be no addition on account of the brought forward difference. The assessee is directed to submit relevant supporting papers by way of audited balance sheet and bank statements of earlier years and the addition arising out of brought forward difference would stand deleted after verification of these papers by the AO.”

We have heard the arguments of both the sides and also perused the relevant material available on record. The main contention raised by the learned DR before us is that the difference in the bank balance as noticed by the AO during the course of assessment proceedings was not reconciled by the assessee and the explanation that the said difference substantially pertained to the earlier years was offered by the assessee for the first time before the Ld. CIT (A). He has contended that the Ld. CIT (A) accepted the said explanation of the assessee and allowed substantial relief to the assessee on this issue without giving any opportunity to the AO to verify the same. He has urged that this matter may therefore be sent back to the Assessing Officer for allowing such opportunity. We find merit in this contention of the learned DR and since the learned counsel for the assessee has also not raised any objections in this