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Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: SRI RAJESH KUMAR & PRADIP KUMAR CHOUBEY
order
: July 23rd, 2024 ORDER
Per Pradip Kumar Choubey, Judicial Member:
This appeal filed by the assessee pertaining to the Assessment Year (in short ‘AY’) 2015-16 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the ‘Act’) by ld. Commissioner of Income-tax (Appeals)- NFAC, Delhi [in short ld. ‘CIT(A)’] dated 29.11.2023 arising out of the assessment order framed u/s 143(3) of the Act dated 09.10.2017.
The brief facts of the case of the appellant are that the assessee is an Urban Cooperative Bank maintaining books of accounts on mercantile basis. Return of income for the AY 2015-16 was filed declaring total income of Rs.
I.T.A. No.: 142/KOL/2024 Assessment Year: 2015-16 Kolkata Police Co-Operative Bank Ltd. 3,31,21,610/-. The case of the assessee was selected for scrutiny through CASS, after examination the Assessing Officer (hereinafter referred to as ld. 'AO') has calculated the income at Rs. 4,15,79,670/- thereby holding that assessee has claimed expenses of Rs. 71,87,731/- as deduction without any rational and just and the claim of Rs. 71,87,731/- is treated as bogus by the AO and added in the total income of the assessee. Ld. AO has further found that assessee has provision Rs. 41,90,647/- for bad debt which exceeds the limit of 7.5% of total income as provided in u/s 36(1)(via) of the Act and after calculation the AO determined the value at Rs. 29,20,324/- and after deduction from the amount of Rs. 41,90,647/- as claimed by the assessee it comes to Rs. 12,70,324/- and the same has been added in the total income of the assessee. The assessee put the said order under challenge before the ld. CIT(A) but the ld. CIT(A) has also affirmed the order of the AO. Being aggrieved and dissatisfied with the order the assessee brought the present appeal before the Tribunal. 2.1. Ld. Counsel for the assessee challenges the impugned order raising the following grounds: “
1. That the addition of gratuity paid for Rs.2616795 and leave salary paid for Rs. 1885400/- is unjustified and unsustainable since the same is allowable on actual payment basis under Section 43B of Income Tax Act, 1961 in view of the fact that the provision made towards the same had already been added back in computation of income consistently.
2. That the addition towards provision for doubtful debts for Rs.2685536 is patently illegal since the same is clearly allowable to a co operative bank u/s 36(1)(viia) of the Income Tax Act, 1961 and relying on submission of AR is erroneous since there cannot be estoppel under statute and tax cannot be levied without any authority of law.
3. That disallowance of Rs. 1270324 towards excess provisioning of bad debt reserve is baseless since transfer to bad debt reserve fund for Rs. 4190647 was never claimed as a deduction in computation of income since it was a mere appropriation of profit and both the authorities have failed to understand the financial statements in proper perspective.
4. That without prejudice to above as an alternative submission that for subsequent assessment years when no such addition is perpetrated under similar circumstances, then the addition has no legal legs to stand upon.
I.T.A. No.: 142/KOL/2024 Assessment Year: 2015-16 Kolkata Police Co-Operative Bank Ltd.
That the appellant reserves the right to add, amend, alter, vary and/ or withdraw any or all of the above” 2.2. Ld. Counsel for the assessee has submitted that the ld. AO and the ld. CIT(A) has wrongly added the amount to the income of the assessee by adding the amount which has been paid by the assessee by way of gratuity and leave salary to the employee. The ld. Counsel assessee further submits that in the case of Urban Cooperative Bank the actual payments made on account of leave encashment of leave salary are always available on cash basis u/s 43B of the Act and the assessee exactly done the same which is clearly evident from the tax computation submitted before the lower authorities but the AO and ld. CIT(A) has ignored the same. Ld. Counsel for the assessee further submits that there was no basis before the AO and ld. CIT(A) to raise doubts about the authenticity of the payment made by the assessee as assessee being a Cooperative Bank and his accounts are subject to verification and scrutiny by the RBI. It has further been argued by the ld. Counsel for the assessee that appellant has consistently followed such approach in other assessment years also and that has been accepted by the Department. The prayer of the ld. Counsel for the assessee is such an addition may be deleted and relief may be granted to the appellant. His further argument is that assessee is also eligible to claim provision for bad and doubtful debt to the extent of 7.5% of the total income before making any deduction and the AO has wrongly held by restricting the provision for bad and doubtful debt to Rs. 29,20,323/- as against an amount of Rs. 41,90,647/- and only disallow the amount of Rs 12,70,324/-. According to him, the entire addition is baseless since it is a mere appropriation of profit and this was never claimed as a deduction. Profit and loss account statement has also been furnished. 2.3. Ld. D/R has supported the impugned order.
Upon hearing the rival submissions of the Counsels of the respective parties, the only two points for determination in this case which are as follows: A) Whether the addition of Rs. 71,87,731/- in the income of the assessee is justified.
I.T.A. No.: 142/KOL/2024 Assessment Year: 2015-16 Kolkata Police Co-Operative Bank Ltd. B) Whether the AO or ld. CIT(A) were justified in disallowing the amount of Rs. 41,90,637/- and added to the total income of the assessee.
3.A.i. After hearing the submissions of the Counsels of the respective parties, we have perused the records and it admits of no doubt that the assessee is an Urban Cooperative Bank and Registrar of the Cooperative Society is responsible for regulation of management and aspects of these banks such as incorporation, registration, management and audit etc. It is also not in doubt that accounts of such cooperative banks are subject to the verification and the scrutiny of RBI. We have perused the documents filed by the assessee and find that assessee has filed a chart regarding deduction which is as follows:
Gratuity paid Rs.2626795/- Leave Salary paid Rs.1885400/- Provision for doubtful debt Rs 2685536/- Total Rs 7187731/- 3.A.ii. There is also a copy of computation of total income that reflects the payment against gratuity, leave salary and provisions for doubtful debt. The assessee has also brought the profit and loss account (photocopy) of the books of accounts which is duly certified by the Chartered Accountant, Secretary etc. A separate chart with respect to the payment of gratuity and leave salary towards the employee has also been filed by the assessee that reflects the name of persons against whom the gratuity had been paid which is as under:
PAYMENT OF GRATUITY FOR FY-2014-15 SNO DATE OF PAYMENT EMPLOYEE'S NAME AMOUNT (RS.) 1 31-05-2014 SWAPAN KUMAR DUTTA 600000 2 31-05-2014 AMITA MUKHERJEE 600000 3 31-05-2014 ASHOK BANERJEE 600000 4 31-12-2014 ASHISH SENGUPTA 576675 5 31-01-2015 ILA BERA 240120 TOTAL 2616795 3.A.iii. We have gone through the order and finding of ld. CIT(A) and find that appeal of the assessee had been dismissed on the ground that assessee I.T.A. No.: 142/KOL/2024 Assessment Year: 2015-16 Kolkata Police Co-Operative Bank Ltd. had not brought any other documents to substantiate his case. We are of this opinion that the finding of ld. CIT(A) lacks of merit as the assessee which is a cooperative bank has submitted the photocopy of the books of accounts, separate break-up chart has also been provided that goes to establish the payment of gratuity, leave salary and the provision for doubtful debt has also been shown. It is not in dispute that in case of an Urban Cooperative Bank the actual payments made on account of leave encashment and leave salary are always on cash basis u/s 43B of the Act. We fail to understand that how ld. CIT(A) comes to the conclusion that appellant has failed to discharge its statutory onus. 3.A.iv. Considering the above discussion, we come to this conclusion that addition of Rs. 71,87,731/- by the AO confirmed by ld. CIT(A) is erroneous and liable to be struck down. We hereby hold that assessee is entitled to get relief for deduction Rs. 71,87,731/- as claimed. Accordingly, this issue has been decided in favour of the assessee. 3.B.i. It reflects to the addition of Rs. 12,70,324/- in the income of the assessee. In this context, we have gone through the order of the ld. AO which deals thus. 3.B.ii. During the course of hearing, this fact was brought to the notice of the ld. A/R of the assessee. Ld. A/R admitted the excess provisioning on the account of bad debt and agreed to above computation of Rs. 29,20,324/- . 3.B.iii. After the admission of ld. A/R, the AO has added the amount of Rs. 12,70,324/- by deducting the amount of Rs. 29,20,323/- from the amount of Rs. 41,90,647/-. We further find that before the ld. CIT(A) also the finding of ld. CIT(A) is bad. Undisputedly, it is the case of admitted/agreed disallowance. 3.B.iv. Keeping in view the admission of the ld. A/R before the ld. AO and also not controverted before ld. CIT(A), we are not inclined to interfere on I.T.A. No.: 142/KOL/2024 Assessment Year: 2015-16 Kolkata Police Co-Operative Bank Ltd. this issue. Accordingly, this issue is decided against the assessee and in favour of the Revenue. 4. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open Court on 23rd July, 2024. Sd/- Sd/- [Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member Dated: 23.07.2024 Bidhan (P.S.) Copy of the order forwarded to:
1. 1. Kolkata Police Co-Operative Bank Ltd., 18 Lal Bazar Street, Lal Bazar, Kolkata, West Bengal, 700001.
2. DCIT, Cir-35, Kolkata. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata.