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Income Tax Appellate Tribunal, DELHI BENCH: ‘H’: NEW DELHI
Before: SHRI INTURI RAMA RAO & SHRI SUDHANSHU SRIVASTAVA
ORDER PER INTURI RAMA RAO, A.M.: These appeals filed by the assessee bank are directed against the orders of CIT(A), Delhi, dated 28.12.2012 and 17.02.2012 passed for the assessment years 2009-10 and 2008-09 respectively. Since common issues are involved in both the appeals, we proceed to decide the same by a consolidated order. The assessee raised the following grounds of appeal in AY 2009-10: i. That the impugned order u/s 250(6) of the Income Tax Act, 1961 dated 28.12.2012 passed by the Ld. Commissioner of Income Tax (Appeals)- XXVIII, New Delhi is bad in law and against the facts of the case. ii. On the facts & circumstances of the case, the Ld. CIT(Appeals)-XXVII, New Delhi has erred in upholding the assessment order u/s 143(3) dated 29.112.2011 for the AY 2009-10, passed by the Ld. Assessing Officer, Range 38, New Delhi in rejecting the revised computation and disallowing the deduction of Rs. 22,05,025/- (Rs. 19,49,792/- u/s 43B & 2,55,233/- tax free interest otherwise allowable under the provisions of Income Tax Act, 1961. iii. On the facts & circumstances of the case, the Ld. CIT(Appeals)-XXVIII, New Delhi has erred in upholding the assessment order u/s 143(3) Dated 29.12.2011 for the AY 2009-10, passed by the Ld. Assessing Officer, Range 38, New Delhi in disallowance of deduction of Rs. 20,24,842/- on account of bad debts actually written off to party accouts. iv. On the facts & circumstances of the case, the Ld. CIT(Appeals)-XXVIII, New Delhi has erred in upholding the assessment order u/s 143(3) dated 29.12.2011 for the AY 2009-10, passed by the Ld. Assessing Officer, Range 38, New Delhi in additions of Rs. 7,03,654/- on account of difference of interest income shonw by the appellant and reported in AIR. v. That the appellant craves leave for reserving the right to amend, modify, alter and/or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
2. The grounds of appeal raised in for AY 2008-09 are as under: i. That the impugned order u/s 250(6) of the Income Tax Act, 1961 dated 17.02.2012 passed by the Ld. Commissioner of Income Tax (Appeals)- XXVIII, New Delhi, is bad in law and against the facts of the case. ii. On the facts & circumstances of the case, the Ld. CIT(Appeals)-XXVIII, New Delhi has erred in upholding the assessment order u/s 143(3) dated 24.12.2010 for the AY 2008-09, passed by the Ld. Assessing Officer, Range 38, New Delhi in disallowance of deduction of Rs. 23,00,268/- on account of bad debts actually written off to party accounts. iii. That the appellant craves leave for reserving the right to amend, modify, alter and/or forego any ground(s) of appeal at any time before or during the hearing of this appeal. AY 2009-10: 3. For the sake of clarity and convenience, the facts related to the assessment year 2009-10 are stated hereunder: (a) The appellant is a cooperative bank. The return of income for the assessment year 2009-10 was filed on 25th September, 2009, declaring taxable income of Rs. 4,61,84,880/-. Subsequently, the case was selected for scrutiny under CASS and the assessment was completed under Section 143(3) of the Income-tax Act, 1961 (for short “the Act”) vide order dated 29.12.2011 at a total income of Rs. 4,89,13,380/-. While doing so, the Assessing Officer disallowed the bad debts written off of Rs. 20,24,842/- on the ground that the assessee bank is an urban cooperative bank which enjoyed the 7.50% of the total income under the provisions of Section 36(1)(viia) of the Act and therefore the Assessing Officer was of the opinion that any further deduction towards bad debts was not allowable. The Assessing Officer also made addition of Rs. 7,03,654/- on account of alleged difference in the interest income accounted and the interest income as per the Form No. 26AS. Further, the Assessing Officer had not allowed the claim made during the course of assessment proceedings by filing revised computation of total income towards the bonus paid to the employees of Rs. 19,49,792/- which was disallowed in the earlier assessment year and paid during the year relevant to the assessment year under consideration and the tax free interest earned of Rs. 2,55,233/- by placing reliance on the judgment of Hon’ble Supreme Court in the case of Goetz India Ltd Vs. CIT, 284 ITR 323. Being aggrieved, an appeal was filed before the learned CIT(A) who vide order dated 28th December, 2012 dismissed the appeal. Hence, the assesee is before us with the present appeal.
4. We shall now take up the appeal ground-wise. The first ground is general in nature and does not require any adjudication.
The second ground of appeal relates to the disallowance of deduction claimed of Rs. 19,49,792/- under Section 43b of the Act and tax free interest of Rs. 2,55,233/-. The Assessing Officer disallowed this claim on the ground that no revised return of income was filed but only revised computation of income was filed during the course of assessment proceedings. The Assessing Officer had not disputed the veracity of the claim. The appellant claimed sum of Rs. 19,49,792/- under the provisions of Section 43b on the ground that the bonus paid to the staff which was disallowed during the preceding year was claimed as deduction on payment basis under the provisions of Section 43b of the Act. The appellant further claimed exemption on tax free interest of Rs. 2,55,233/- which was by oversight offered to tax. Ld. CIT(A) also confirmed the addition by holding that the claim cannot be made without revising the return of income. Being aggrieved, the appellant is before us with the present appeal. 5.1 Ld. counsel for the appellant submitted that the bonus amount of Rs. 19,49,792/- debited to P&L account in the accounting year relevant to the assessment year 2008-09 and the same was offered to tax in the assessment year 2008-09 since the bonus was not actually paid. However, in the succeeding assessment year i.e. 2009-10, the same was claimed as deduction since it was paid during the year relevant to the assessment year 2009-10. Similarly, the appellant bank earned tax free interest of Rs. 2,55,233/- on IIFCL bonds which was offered to tax by mistake. Thus, both the items were claimed as deduction by filing revised computation. The Assessing Officer had denied the deduction following the decision of Hon’ble Supreme Court in the case of Goetz India Ltd. Vs. CIT (Supra) and held that the assessee was not entitled for deduction, he had not made these claims by filing revised return of income. On appeal before the CIT(A) also, the CIT(A) confirmed the same by holding that the Assessing Officer had no power to entertain the claim made otherwise by way of revised return of income. 5.2 During the course of hearing, the learned Authorized Representative drew our attention to page no. 3 of the paper book, wherein the statement of computation of the total income for the assessment year 2008-09 was placed. From the perusal of the said statement, it was clear that an amount of Rs.
19,79,792/- was added back to the total income. The Authorized Representative of the appellant submitted that the claims cannot be disallowed on the ground that no revised return of income was filed, as it is the duty of the Assessing Officer only to compute the correct taxable income under the provisions of the Act. 5.3 On the other hand, the ld. DR relied on the orders of the lower authorities. 5.4 We heard the rival submissions and perused the material on record. The Assessing Officer disallowed this claim for deduction of bonus paid of Rs. 19,49,792/- which was disallowed for the assessment year 2009-10 on payment basis during the year under appeal on the ground that the claims were not made by filing the revised return of income. The reasoning of the Assessing Officer cannot stand the test of the law laid down by several High Courts. The Hon’ble Gujarat High Court in the case of CIT Vs. Mitesh Impex, 225 Taxman 168 (Gujarat) after review of entire law on the income, held as follows: “30. In what manner and to what extent, a ground, a legal contention or a fresh claim can be made at an appellate stage are vexed questions and have occupied the minds of the Courts in numerous occasions.
In the case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688 the Supreme Court noted with approval observation of the Court in the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 to the effect that "The Appellate Assistant Commissioner, therefore, has plenary powers in disposing of appeal. The scope of his power is co-terminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do." It was observed that there was no reason why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income-tax Officer. The Act does not place any restriction or limitation on the exercise of appellate power. It was observed that:— "The above observations are squarely applicable to the interpretation of section 251(1)(a) of the Act. The declaration of law is clear that the power of the Appellate Assistant Commissioner is co-terminus with that of the Income-tax Officer, if that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income-tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations if any prescribed by the statutory provisions. In the absence of any statutory provision the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised
by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer."
32. In case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) when the question of law was raised for the first time before the Tribunal though facts were already on record, the Supreme Court observed that there is no reason why the assessee should be prevented from raising such a question before the Tribunal for the first time so long as the relevant facts are on record in respect of the item concerned. There is no reason to restrict the power of the Tribunal in such appeal only to decide the grounds which arise from the order of Commissioner (Appeals). The Tribunal should not be prevented from considering the questions of law arising in assessment proceedings although not raised earlier.
33. In case of Goetze (India) Ltd. (supra) the Supreme Court distinguished the judgment in the case of National Thermal Power Co. Ltd. (supra) on the ground that the same pertained to the power of the Tribunal under section 254 of the Act to entertain a point of law for the first time and commented that such decision does not relate to the power of the assessing officer to entertain a claim for deduction otherwise than by filing a revised return. In the process the Supreme Court recognized that a new claim could not be entertained by the assessing officer without the assessee revising the return. While doing so it was clarified that:— "4. . . However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income- tax Act, 1961. There shall be no order as to costs."
In the case of CIT v. Jai Parabolic Springs Ltd. [2008] 306 ITR 42/172 Taxman 258 (Delhi), the Delhi High Court held that there is no prohibition on the powers of the Tribunal to entertain an additional ground which according to the Tribunal arose in the matter and for just decision of the case.
In case of CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 349 ITR 336/208 Taxman 498/23 taxmann.com 23 (Bom.) the Bombay High Court considered the issue at considerable length and held that Commissioner (Appeals) as well as the Tribunal have the jurisdiction to consider the additional claim and not merely additional legal submissions. The appellate authorities have discretion to permit such additional claims. Such claims need not be those which became available on account of change of circumstances of law but which were even available when the return was filed.
The Delhi High Court once again in recent judgment in the case of CIT v. Sam Global Securities Ltd. [2014] 360 ITR 682/[2013] 38 taxmann.com 129 observed that the Courts have taken a pragmatic view and not a technical one as to what is required to be determined in taxable income. In that sense assessment proceedings are not adversarial in nature. With these observations Court confirmed the view of the Tribunal reversing the decision of the assessing officer rejecting the claim of the assessee on the ground that no revised return was filed.
In case of CIT v. Cellulose Products of India Ltd. [1985] 151 ITR 499 (Guj.), Full Bench of this Court held that merely because a ground has not been raised though it could have been raised in support of the relief sought in the appeal, it cannot be said that such ground cannot be raised before the Tribunal. Such ground can be raised provided it falls within the contours of the subject matter of the appeal.
It thus becomes clear that the decision of the Supreme Court in the case of Goetze (India) Ltd. (supra) is confined to the powers of the assessing officer and accepting a claim without revised return. This is what Supreme Court observed in the said judgment while distinguishing the judgment in the case of National Thermal Power Co. Ltd.(supra) and that is how various High Courts have viewed the dictum of the decision in the case of Goetze (India) Ltd.(supra). When it comes to the power of Appellate Commissioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the assessing officer. Income-tax proceedings are not strictly speaking adversarial in nature and the intention of the Revenue would be to tax real income.
This is primarily on the premise that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the assessing officer.”
5.5 Thus, in the above cases, it has been held that new claims can always be made at any stage of appellate proceedings. The law laid down by Hon’ble Apex Court in the case of Goetz India Ltd (supra) is not applicable to the claim made either before Commissioner of Income Tax (Appeals) or Income Tax Appellate Tribunal. In the light of above pronouncement, the Hon’ble Gujarat High Court after reviewing the entire case law on this issue had clearly laid down “there is no bar to entertain new claim either by Commissioner of Income Tax (Appeals) or Income Tax Appellate Tribunal”. Accordingly, respectfully following the above Rulings, we direct the Assessing Officer to allow this claim after due verification, whether the bonus has been paid during the previous year under consideration, and whether the interest claim of Rs. 2,55,233/- is tax free or not. Accordingly, this ground of appeal is set aside to the file of the Assessing Officer to allow the claim, in the aforesaid terms.
The next ground relates to the disallowance of deduction of Rs. 20,24,842/- on account of bad debts. The Assessing Officer disallowed the bad debts written off of Rs. 20,24,842/- on the ground that the amount of deduction claimed and allowed under the provisions of Section 36(1)(viia) of the Act for bad and doubtful debts of Rs. 38,00,870/- is more than the bad debts claimed and also on the ground that the bad debts claimed pertained to the period when the appellant claimed deduction under section 80P of the Act. The Commissioner of Income Tax (Appeals) also upheld the addition holding that the claim for deduction of bad debts were not allowable as the same is over and above the limits specified under Section 36(1)(viia) of the Act. The relevant provisions of the Act are reproduced as under: “Section 36(1) (vii): subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year: Provided that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause. Following second proviso shall be inserted after the first proviso to clause (vii) of sub-section (1) of section 36 by the Finance Act, 2015, w.e.f. 1-4- 2016 : Provided further that where the amount of such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof becomes irrecoverable or of an earlier previous year on the basis of income computation and disclosure standards notified under sub-section (2) of section 145 without recording the same in the accounts, then, such debt or part thereof shall be allowed in the previous year in which such debt or part thereof becomes irrecoverable and it shall be deemed that such debt or part thereof has been written off as irrecoverable in the accounts for the purposes of this clause. [Explanation 1].—For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the accounts of the assessee; [Explanation 2.—For the removal of doubts, it is hereby clarified that for the purposes of the proviso to clause (vii) of this sub-section and clause (v) of sub-section (2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts under clause (viia) and such account shall relate to all types of advances, including advances made by rural branches;] 36(1)(viia) in respect of any provision for bad and doubtful debts made by— (a) a scheduled bank [not being a bank incorporated by or under the laws of a country outside India or a non-scheduled bank or a co- operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one-half per cent] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner : Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year: Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words "five per cent", the words "ten per cent" had been substituted : Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government: Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head "Profits and gains of business or profession." Explanation.—For the purposes of this sub-clause, "relevant assessment years" means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005; (b) a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A); (c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) : Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an amount not exceeding ten per cent of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous year. Explanation.—For the purposes of this clause,— (i) "non-scheduled bank" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank; (ia) "rural branch" means a branch of a scheduled bank or a non- scheduled bank situated in a place which has a population of not more than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; (ii) "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); (iii) "public financial institution" shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956); (iv) "State financial corporation" means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951); (v) "State industrial investment corporation" means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and eligible for deduction under clause (viii) of this sub-section; (vi) "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P; 6.1 The Interpretation of above provisions had come before the Hon’ble Apex Court in the case of Catholic Syrian Bank Ltd. Vs. CIT, (2012) 343 ITR 270 (SC) wherein the Hon’ble Supreme Court held that the provisions of Section 36(1)(vii) and 36(1)(viia) are separate, distinct and independent from each other. As a result, the provisions of Section 36(1)(vii) governing the allowance of bad debts are not controlled or limited by the provisions of Section 36(1)(viia) but once the bad debt is actually written off as irrecoverable and the requirements of the provisions of Section 36(2) of the Act are satisfied then it will not be permissible to deny such deduction on the apprehension of the double deduction under the provisions of Section 36(1)(viia) and the proviso to section 36(1)(vii) of the Act. The proviso to Section 36(1)(vii) only limits its application to the case of bank to which clause 36(1)(viia) applies. The proviso is limited in its application to bad debts arising out of the rural advances of banks. The provisions of Section 36(1)(viia) of the Act in no way control the application of the provisions of Section 36(1)(vii). The benefit of deduction under Section 36(1)(vii) should be allowed subject to the fulfillment of the conditions laid down under Section 36(2) of the Act. The provisions of Sections 36(1)(vii) and 36(1)(viia) of the Act are distinct and independent from each other. However, by virtue of the proviso to Section 36(1)(vii) of the Act, what is allowed as a provision for bad and doubtful debts under the provisions of Section 36(1)(viia) cannot be allowed under the provisions of Section 36(1)(vii). In the case in hand, the Assessing Officer denied the deductions under Section 36(1)(vii) solely on the ground that the bad debts which were written off were pertaining to the period when the income was exempt under the provisions of Section 80P of the Act and also on the ground that the deduction claimed under Section 36(1)(viia) is more than the deduction claimed under Section 36(1)(vii) of the Act. The reasoning of the Assessing Officer does not stand test of the law laid down by the Hon’ble Apex Court in the case of Catholic Syrian Bank Ltd. (supra). Further, it is not in dispute that the amounts claimed as bad debts were actually written off in the books of account and in the light of the fact that the provisions for bad debts was not claimed in the earlier years which goes to prove that the claim is not hit by the proviso to Section 36(1)(vii) of the Act. Therefore, we direct the Assessing Officer to allow the bad debts claimed to Rs. 20,24,842/-. Accordingly, this ground of appeal
is allowed.
7. The next ground relates to the addition of Rs. 7,03,654/- on account of alleged difference between the interest income declared by the appellant and the Form No. 26AS of the Department. The Assessing Officer made addition of Rs. 7,06,654/- on the ground that there was a difference in the interest income earned by the appellant from ICICI Bank, Vijaya Bank and HDFC Bank, as per the information contained in Form No. 26AS. The coordinate bench of the ITAT, Delhi in for AY 2009-10, dated 31st March, 2015, held vide para 6 of the order that the information contained in Form No. 26AS cannot be itself the basis for making addition to the income returned. To the same effect, the decision of a coordinate bench of ITAT, Jabalpur, in the case of Ravindra Pratap Thareja Vs. ITO, 154 ITD 633. Accordingly, the grounds of appeal is set aside to the file of the Assessing Officer for due verification after affording reasonable opportunity of being heard to the assessee. Hence, the appeal is partly allowed for statistical purposes.
ITA No. 1432/Del/2012 for AY 2008-09 8. The only issue involved in this appeal relates to the disallowance of deduction claimed of Rs. 23,00,268/- on account of bad debts for the assessment 2008-09. Since this ground of appeal has already been allowed in A.Y. 2009-10, accordingly we direct the Assessing Officer to allow the appeal filed in for A.Y 2008-09.
9. In the result, the appeal filed in ITA No. 840/Del/2013 for A.Y. 2009-10 is partly allowed for statistical purposes and the appeal filed in ITA No. 1432/Del/2012 for A.Y. 2008-09 is allowed in full. The decision is pronounced in the open court on 16th October, 2015.