M/S.PATHANMTHITTA DIST. CO-OP BANK LTD,PATHANAMTHITTA vs. THE DCIT, THIRUVALLA

This is an Appeal by the Assessee directed against the Order dated 16.04.2018 by the Commissioner of Income Tax (Appeals), Kottayam [CIT(A)], dismissing its appeal contesting it’s assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’) dated 30/12/2016for AY 2014-15.

It was observed that the assessee’s appeal, filed on 19/9/2018, is delayed by 88 days. The adjournment application dated 27/11/2018 and the accompanying affidavit dated 29/11/2018 by the Secretary of the appellant-bank, however, furnishes no reason, much less sufficient, that the law provides for being proved/shown for the cause of the delay, which is for almost three months. The question of substantiating it with any material does not under the circumstances, arise. Sh. Gopakumar, the ld. counsel for the assessee, was inquired by the Bench if he would, in this view of the matter, prefer to file a fresh affidavit, to which he expressed his inability to do so. The ITANo. 431/Coch/2018(AY: 2014-15) Pathanamthitta District Co-op Bank Ltd. vs. Dy. CIT two ingredients for condonation of delay; which could only be results of positive, affirmative action on the part of the adjudicating authority, i.e.: - (a) proof of due diligence; (b) proof of absence of negligence are completely absent in the instant case. The case law in the matter is legion. We, accordingly, find no reason for condonation of delay and admit the instant appeal.

We may, nevertheless, also, and without prejudice, consider the assessee’s case on merits. The reason is two-fold. In principle, our order being appealable, where reversed on challenge (on the ground of non-condonation of delay), eschew the matter being remand back to the Tribunal for being heard on merits, which, being indeed so, constitutes our second reason. None of the parties brought the fact of the said delay to our notice, so that the hearing was proceeded with on 12/9/2023. The appeal was kept part-heard in view of want of translated copies of the some documents, including the Balance Sheet, which were in vernacular, in english. It was only on 14/9/2023, on which date the hearing was resumed, that the said delay, on being observed by the Bench, was put across to Shri Gopakumar. Reference in the matter may be made to Mela Ram & Sons[1956] 29 ITR 607 (SC), explaining that an appeal presented out of time is an appeal, and an order dismissing it as time barred is one passed in appeal. An appeal decided oblivious of it being delayed, was yet required to be decided on the condonation of delay despite it having been admitted.

The first issue on merits is the disallowance of provision for expenses, at Rs. 284.48 lacs, claimed by the assessee, a district co-operative bank registered under the Kerala Co-operative Societies Act, 1969 (Kerala Act), through debit of it’s Profit and Loss Account (operating statement) for the year, being financial year (fy) 2013-14, the relevant previous year. Of the same, it was made clear by Shri Gopakumar at the outset, that he was not pressing the disallowance of provisions for Rs. 64.48 lacs, limiting his arguments to the balance provision for Rs. 220 lacs, i.e., in respect of ITANo. 431/Coch/2018(AY: 2014-15) Pathanamthitta District Co-op Bank Ltd. vs. Dy. CIT salary arrears of employee’s. The assessee-bank, in which the Government of Kerala (GoK) is a major stakeholder, revises the pay of it’s employees every 5 years, constituting an advisory panel (AP) for the purpose, which, after taking into account several factors having a bearing on the matter, furnishes it’s recommendations for consideration by the GOK/assessee. The pay so revised is valid for 5 years, the last of which was the period 2007-12, i.e., up to 31.03.2012. The AP for the period of 2013- 18 was constituted on 03/02/2014, Govt. order pursuant to whose recommendations was passed on 31/3/2015 (copy on record). The assessee-bank, accordingly, provided for additional liability on account of employee’s remuneration for the years FYs. 2012-13 and 2013-14 in closing it’s accounts on 31.03.2014. The Revenue has disallowed the same due to the liability being not ascertained. The assessee, Shri Gopakumar would continue, relying on past behaviour, provided for the estimated expenditure on salary, held constant for 5 years at a time. No material, though, was stated as specifically relied upon by the assessee or produced at any stage. The ld. CIT-DR, on the other hand, relied on the orders by the authorities below, stating that no case, apart from relying upon some case law, has been made out by the assessee.

We have considered the rival contentions, and perused the material on record. Our first observation is that the law in the matter, i.e., deduction of provision for an expense is well-settled, and the issue arising is, thus, primarily factual. The liability, where ascertained, is to be provided for; conservatism being a fundamental accounting assumption on which the accounts of a going concern are to be based (refer AS-1 issued under section 145(2) of the Act). The quantum of provision is to be based on the best available information, and revised at each year-end on the basis of the latest, updated information. The case law in the matter is legion, viz., Rotork Controls India (P.) Ltd. v. CIT [2009] 314 ITR 62 (SC); Bharat Earth Movers Ltd. vs. CIT [2000] 245 ITR428 (SC); Calcutta Co. Ltd. vs. CIT [1959] 37 ITR 1 (SC).

Our next observation is that there is nothing on record to show the terms of reference, or the parameters to be considered by the AP in forming it’s considered opinion in the matter. On what basis, then, an estimation can be said to have been made by the assessee in providing for the increased liability? The assessee’s case, principally factual, is, as afore-noted, sans any material. How, we wonder, then, could the Revenue be faulted with in disallowing the same? No improvement in it’s case, which rests largely on the non-existent recommendation by the AP, has been made by the assessee in the appellate proceedings, including before us. Even going by past behaviour, as Shri Gopakumar would contend, there is nothing on record to exhibit the same, and on which basis therefore it could be said that the impugned provision has been made. That is, we are, at the second appellate stage, years after finalizing the accounts and filing the return of income, still searching for the relevant material.

We are conscious that the inflation is a general macro-economic factor in the matter. So, however, there is nothing on record of the same as obtaining for FYs 2012-13 and 2013-14 and, two, of the said inflation having been absorbed in full in the past revisions. In fact, the same gets absorbed through Dearness Allowance (DA) which forms part of regular pay structure, and revised every 6 months, so that the pay

We accordingly find no reason for interference with the impugned assessment on that ground.

The only other issue is the provision u/s. 36(1)(viia) of the Act, which is to be allowed at the prescribed rate on the income computed without giving effect to the said provision. The section is clear, and that is precisely what the ld. CIT(A) has, vide para 4.2.3 of his order, held. We find no infirmity therein. We decide accordingly.

In the result, the appeal filed by the assessee is dismissed as not maintainable and, in any case, without merit. Order pronounced on December 12, 2023 under Rule 34 of The Income Tax(Appellate Tribunal) Rules, 1963.