THE ITO, KOCHI vs. M/S.KANAYANNUR CO-OP AGRICULTURAL AND RURAL DEV.BANK LTD, KOCHI

O R D E R

Per George George K, JM :

. M/s.Kanayannoor Co-op.Agri. & RDB Ltd. is no delay in filing the appeal by the Revenue and we proceeded to dispose of the same on merits.

read as follows:- “1. The order of the Commissioner of Income Tax (Appeals)II, Kochi, in ITA No.65/Cir.1(1)/NC/CIT(A)-II/Kochi/2016-17 dated 12.12.2019, is opposed to law, facts and circumstances of the case.

2. Whether the learned Commissioner of Income Tax (Appeals) is right in allowing assessee’s appeal holding that the reserves debited to P&L account should be allowed as deduction.

3. The learned CIT(A) erred in granting relief to the assessee without calling for remand report during appellate proceedings as per Rule 46A from the Assessing Officer.

4. For these and other grounds that may be urged at the time of hearing, it is requested that the order of the Commissioner of Income tax (Appeals) may be set aside and that of the Assessing Officer restored.”

4. At the very outset, the learned AR submitted that the CIT(A) has not allowed the assessee’s appeal by holding that the reserve debited to the profit and loss account should be allowed as deduction. Therefore, the above ground No.2 is misplaced.

. M/s.Kanayannoor Co-op.Agri. & RDB Ltd. the CIT(A) and his directions are as follows:-

“5. Ground No.2 and 3 5.1 The appellant submitted as under: “Ground : Mistake in computation of total income. 1.1 In para 5.9, Total income of the appellant is computed by the Assessing Officer. To the net profit from business, the reserves and provisions debited to Profit and Loss account is added. This computation has the following mistakes: 1.1.1. Rs.40,00,000/- is added as Reserve for Vehicle Recoupment. . However, the actual amount is Rs.3,09,074/- (Rs.1,40,213/- + Rs.1,68,861/-.) 1.1.2 The reserves and provisions debited to Profit and Loss account were added back to total income by the Assessing Officer for the reason that they are not actual expenses. However, the following reserves and provisions credited to the profit and loss account were not reduced. 1.1.2.1 Reserve for overdue interest Rs.2,44,18,247 1.1.2.2 Reserve for overdue principal (NPA) Rs.2,47,21,066 1.1.2.3 Reserve for amount objected Rs. 1,47,003 1.1.2.4 Reserve for Sitting fees Rs. 336 1.1.2.5 Reserve for incentive Rs. 7,734 1.1.2.6 Reserve for Daily wages Rs. 18,276 The details is provided in the following table:- Particulars As computed by Correct Amount AO Net profit as per P&L 55,73,903 55,73,903 Less : Income considered under 3,53,116 3,53,116 the head House Property Net profit from business as per 52,20,787 52,20,787 P&L Add : Reserves And provisions created (debited to P&L) Reserve for overdue interest 2,94,77,000 2,94,77,000 Reserve for overdue principal 3,04,76,000 3,04,76,000 (NPA) Vehicle Recoupment fund 40,00,000 3,09,074 Reserve for OTS 3,47,000 3,47,000 Building Recoupment fund 5,74,000 5,74,000

. M/s.Kanayannoor Co-op.Agri. & RDB Ltd. Less : Reserves and provisions removed (credited to P&L) Reserve for overdue interest -- 2,44,18,247 Reserve for overdue principal -- 2,47,21,066 (NPA) Reserve for amount objected -- 1,47,003 Reserve for sitting fee -- 336 Reserve for incentive -- 7,734 Reserve for Daily wages -- 18,276 Income from Business 7,00,94,787 1,70,91,199

Hence the income from business is overstated by the assessing officer by Rs.5,30,03,588/-. 2. Submission of the appellant is factual and verifiable. The AO is directed to verify the claim of the appellant and make necessary corrections at the time of giving appeal effect. For statistical purposes, this ground is treated as allowed.”

6.1 The CIT(A) has directed the A.O. to verify the claim of the assessee and make necessary corrections at the time of giving effect to his order. The directions of the CIT(A) is in accordance with law and we confirm the same. It is ordered accordingly.

Order pronounced on this 22nd day of June, 2022.