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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
।आयकर अपीलीय अिधकरण ”बी” �ायपीठ पुणेम�। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.439/PUN/2022 िनधा�रण वष� / Assessment Year : 2017-18 Shrijeet Finance Private Limited, The Assistant Ambejogai Road, Parli, V Commissioner of Maharashtra – 431515. s Income Tax, Circle, PAN: AAQCS2652F Jalna. Appellant/ Assessee Respondent /Revenue Assessee by Shri Suhas Bora – AR Revenue by Shri Sourabh Nayak – Addl.CIT(DR) Date of hearing 22/02/2024 Date of pronouncement 22/04/2024 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the assessee against the order of Ld.Commissioner of Income Tax(Appeals)[NFAC], passed under section 250 of the Income Tax Act, 1961, dated 25.10.2021 emanating from assessment order dated 27.12.2019 passed under section 143(3) of the Income Tax Act, 1961. The assessee has raised the following grounds of appeal : 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs.6,66,151/-
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made by the AO and not appreciating the contention of the appellant that the provision @0.40% made on standard assets was as per the as per the NPA provisions norms and guidelines issued by Reserve Bank of India.
On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 12,34,000/- u/s 68 of the Act made by the AO and not appreciating the contention of the appellant that cash accepted during the demonetization period was towards the instalment of outstanding loan account of the borrower.
On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 12,34,000/- by invoking provisions of section 68 of the Act made by the AO without appreciating the following important facts:
a. The amount received are not credit instead are the payment received towards the regular monthly instalment of outstanding loan account. b. The said amounts are received towards the regular monthly instalment and not specifically due to demonetisation. c. The cash against loan was accepted after taking into consideration the KYC guidelines specified by the RBI. The appellant craves leave to add, alter, amend or deleteany of the above grounds of appeal.
Submission of ld.AR : 2. The ld.AR filed paper book. Ld.AR also filed an application under rule 29 of the Appellate Tribunal Rules, 1963, to admit the
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additional evidence contained in the paper book at page no.43 to 63. The relevant written submission is reproduced here as under :
The appellant could not produce the documents referred to in the Paper Book No.2 at Sr. No.8, which is working of Deduction U/Sec.36(l)(via) of the Act for AY 2017-18 as both the lower authorities have not considered the amendment in Section 36(l)(via)(d) of the Act while making an addition.
The Appellant prays that in the interest of justice the additional evidences may be admitted and the issue may be decided after considering the additional evidences. The Appellant relies on the ratio laid by the Hon'ble Supreme Court in the case of Tek Ram v. CIT (2013) 357 ITR 133 wherein it was held that where documents filed by assessee before Court had some relevance, same should be considered while deciding appeal.
2.1 The ld.AR has relied on the following decisions : 1. Hon’ble ITAT Pune Bench in ITO Vs. CD Patani Nagri Sahkari Pat Sanstha in ITA No.727/PUN/2022 for A.Y. 2017-18 dated 28.03.2023.
Hon’ble ITAT Pune Bench in Bhagur Urban Credit Co-operative Society Limited Vs. ITO in ITA No.561/PUN/2022 for A.Y.2017-18 dated 03.0.2023.
Hon’ble ITAT Chennai Bench in Purani Hospital Supplies Private Limited Vs. DCIT in ITA No.489/CHNY/2022 for A.Y. 2017-18 dated 31.05.2023.
Hon’ble ITAT Indore Bench in Jila SahakariKendriya Bank Vs. DCIT in ITA No.455/IND/2018 for A.Y.2014-15 dated 28.04.2023.
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Submission of ld.DR :
The ld.Departmental Representative(ld.DR) for the Revenue
made written submissions as under :
“ The appellant company is Non-Banking Finance Company registered with RBI, Mumbai. The business activity of the company is to finance to farmers for purchase of tractors or two wheelers. The appellant had filed return of income for A.Y. 2017-18 on 24.10.2017 declaring total income at Rs.77,56,840 derived from income from profit and Gains of Business or Profession and Other sources. The case has been selected for 'complete type of scrutiny under CASS'. As per SFT/FIU data, the appellant had deposited cash during the specified period for demonetization. Assessment in this case has been completed u/s 143(3) of the Income Tax Act by making an addition of (i) Rs. 6,66,151/- by disallowing the contingent provision against standard assets debited by the assessee in the P&L account and (ii) Rs. 12,34,000/- u/s 68 of the Act on account of difference of cash balance as on 08.11.2016 and cash deposited on 02.12.2016 as NBFC were not allowed to accept old currency notes during demonetization period.
The Assessing officer had reproduced the notification S.O. 3407(E) dated 08/11/2016 & S.O. 3418(E) of Ministry of Finance (Department of Economic Affairs), New Delhi dated 08/11/2016 (F. No. 10/03/2016-cy.l) and corrigendum of the said circular in assessment order. As per these notification, it is clear that only "banking company defined under the Banking regulation Act, 1949 (10 of 1949)" read "banking company, co-operative bank, corresponding new bank, subsidiary bank, regional rural bank and the state bank of India as defined under the Banking regulation Act, 1949 (10 of 1049) were allowed to accept old currency and the assessee as a NBFC was not allowed to accept old currency.
During the assessment proceedings, the AO observed from the
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submissions made by the appellant that in Cash Book the cash balance on 08.11.2016 was Rs. 16,39,408/-. However, on 02.12.2016, the appellant had deposited an amount of Rs. 28,73,500/- in old currency. In cash book, the appellant had shown cash received from some persons. The appellant was requested to give details of nature of transactions, reason for giving cash & complete details of persons/s who has given cash. It was also required by the appellant to submit allowability of provision made against standard asset as it is neither covered u/s 36(l)(viia) nor u/s 37(1) of the I.T. Act. In response, the appellant submitted that cash was accepted from the customers who were borrowers and amount was credited in the cutomer loan repayment account during the period 08.11.2016 to 31.12.2016. The appellant had interpreted the circular as the NBFC is financial company like bank so it accepted the cash in borrower loan account.
The findings of Ld. CIT(A) findings are as under on the issue of addition u/s 68 of I.T. Act 1961:
"The appellant has not demonstrated with evidence that it is authorized by the Government to receive the old currency notes during the demonetization period. Therefore, it is held that although the appellant was not legally allowed to receive the old currency notes during the demonetization period, it appears that the appellant has received such currencies even after the announcement of demonetization. As Govt, of India has declared such old denomination notes as 'not a legal tender. I am of the considered opinion that the action of the AO in applying the provision of Section 68 of the I.T. Act 1961 and taxing such sum is correct."
Department's View:- In view of AO's and NFAC's detailed reasoning and findings, the addition made by the AO requires to be confirmed. In this case, amount of Rs.12,34,000/- was credited in the books of accounts of the appellant in financial year 2016-17. The explanation offered by
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the appellant was not satisfactory in the opinion of the assessing officer.
The AO has relied on the Notification dt. 08.11.2016 and corrigendum on 09.11.2016 from Ministry of Finance defining banking company which included Co-operative Bank, Subsidiary Regional Rural Bank and Private Sector Bank and Public Sector Bank. The NBFCs were exclusively excluded from receiving old currency notes during demonetization period.
The copy of Notification and corrigendum by Ministry of Finance is enclosed for your kind perusal.”
Findings &Analysis : 4. We have heard both the parties and perused the records. The assessee is a Non-Banking Finance Company(NBFC) registered with Reserve Bank of India having Registration No.N-13.02036 dated 27.12.2012. Assessee in the profit and loss account has debited Rs.6,66,151/- as contingent provision against standard assets. The Assessing Officer(AO) disallowed the said amount on the ground that it was a contingent unascertained liability and hence not allowable as deduction. The ld.CIT(A) confirmed the said addition.
4.1 Before us, the ld.AR filed additional evidence. Ld.AR submitted that Finance Act, 2016 has introduced section 36(1)(viia)(d) w.e.f. 01.04.2017. As per said provision, NBFC’s
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are allowed to make provision for bad and doubtful debts of an amount not exceeding 5% of the total income. Ld.AR submitted that both ld.CIT(A) and AO failed to consider the provisions of the Act introduced w.e.f 01.04.2017. On perusal of the assessment order and ld.CIT(A)’s order, it is observed that both these authorities have not considered the section 36(1)(viia)(d) introduced w.e.f. 01.04.2017. The relevant part of the Explanatory Memorandum of Finance Bill, 2016 is reproduced here as under : “Considering the fact that Non-Banking Financial companies (NBFCs) are also engaged in financial lending to different sectors of society, it is proposed to amend the provision clause (viia) of sub- section (1) of section 36 so as to provide deduction from total income (computed before making any deduction under this clause and Chapter-VIA) on account of provision for bad and doubtful debts to the extent of five per cent of the total income in the case of NBFCs. This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years.
4.3 Since AO and ld.CIT(A) failed to consider the provisions of 36(1)(viia)(d) and assessee had filed additional evidence to substantiate this claim, in the interest of substantial justice, we set- aside the addition made by AO of Rs.6,66,151/- to the Assessing Officer for denovo adjudication. The Assessing Officer shall give opportunity to the assessee. Accordingly, Ground No.1 of the assessee is allowed for statistical purpose.
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Ground No.2 and 3 : 5. During the assessment proceedings, the AO observed that the assessee has received cash in old currency during the demonetization period between 08.11.2016 to 13.12.2016 of Rs.12,34,000/-. The assessee submitted before the AO that these amounts were deposited by their customers towards the loan installments. Assessee submitted list of customers. Assessee also submitted that all the customers were having proper KYC Documents. However, the AO made addition under section 68 of the Act, on the ground that as per the RBI Guidelines assessee being an NBFC was not permitted to accept the old currencies which were no-more legal tender after 08.11.2016. Ld.CIT(A) confirmed the said addition. The only plea taken by the AO, ld.CIT(A) and ld.DR that as per the notification no.S.O. 3407(E) dated 08/11/2016 & S.O. 3418(E) of Ministry of Finance (Department of Economic Affairs), New Delhi dated 08/11/2016 (F. No. 10/03/2016-cy.l) only banking company defined under the Banking Regulation Act were allowed to accept demonetized currency after 08.11.2016, and NBFCs were not allowed to accept impugned currencies.
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5.1 The AO made addition under section 68 of the Act. To invoke section 68 of the Act, the AO has to prove that assessee failed to file identity of the depositors, genuineness of the transaction and creditworthiness. In this case, the assessee had submitted the names of the persons from whom cash was received during the demonetization period in the form of demonetized currency. Assessee also submitted that assessee maintains all KYC documents of all these persons. The AO had not asked the assessee to produce the said KYC Documents. Rather AO has not challenged the identity of the depositors, genuineness of the transactions and creditworthiness of the depositors. In these facts and circumstances of the case, we are of the opinion that no addition can be made under section 68 of the Act. We find support from the order of ITAT Pune Bench authored by then Hon’ble Vice-President, Shri R.S.Syal in the case of M/s.Bhagur Urban Credit Co-operative Society Ltd., Vs. ITO in ITA No.561/PUN/2022 for A.Y.2017-18 dated 03.01.2023. Therefore, the AO is directed to delete the addition of Rs.12,34,000/- made under section 68 of the Act. Accordingly, Ground No.2 and 3 are allowed.
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Ground No.4 is general in nature, needs no adjudication, hence, dismissed.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 22nd April, 2024.
Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 22nd April, 2024/ SGR* आदेशक��ितिलिपअ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड�फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.