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Income Tax Appellate Tribunal, BENCH : COCHIN
Before: SHRI GEORGE GEORGE K. & Ms. PADMAVATHY S.
Date of hearing : 02.03.2023 Date of Pronouncement : 08.03.2023 O R D E R
Per Padmavathy S, Accountant Member:
This appeal is against the order of the CIT(A), National Faceless Appeal Centre, Delhi [NFAC] dated 17.4.2022 for the AY 2011-12.
The assessee is a co-operative society engaged in banking business. The assessee filed return of income for AY 2011-12 on 22.9.2011. The case was selected for scrutiny under CASS and notice u/s. 143(2) was duly served on the assessee. The AO completed the assessment u/s. 143(3) assessing the income at Rs.17,42,94,672. The assessment was revised u/s. 263 directing the AO to conduct a proper verification and pass the order accordingly. The AO completed the assessment u/s. 143(3) r.w.s. 263 by making a further disallowance of Rs.4,01,02,932. Aggrieved, the assessee preferred an appeal before the CIT(A) who upheld the disallowances. The assessee raised the following grounds of appeal:-
3. The only issue contended by the assessee through various grounds is with regard to the addition made towards reversal of interest made during the year. In this regard, the ld AR submitted that under the agricultural debt waiver and debt relief scheme, 2008, the Ministry of Finance directed the Scheduled Commercial Banks, Local Area Banks, Co-operative Credit Institutions to waive / provide concession with respect to agricultural loans dispersed between 1.4.1997 to 31.3.2007 to farmers which became overdue as on 31.12.2007 and remained unpaid upto 29.2.2008. Under the Scheme, the small and marginal farmers were entitled to 100% debt waiver, whereas other farmers were given a rebate of 25% of the eligible amount. The ld. AR further submitted that in the supplementary instructions laid down in the implementation Circular No.1 of 2008, the lending institutions shall neither claim from Central Govt. nor recover from the farmer interest in excess of the principal amount, unapplied interest, penal interest, legal charges, inspection charges and miscellaneous charges etc.
4. The ld AR also submitted that the assessee inadvertently has charged interest and other charges in the books of account during the previous assessment year and has declared the same as part of the income. However, in the light of the above Scheme, no such income was receivable from the customers by the assessee. The assessee has identified the said error during the AY 2011-12 and accordingly rectified the same by reversal of interest in the books of accounts. The impugned addition made during AY 2011-12 according to the ld. AR is nothing but the reversal of interest which was inadvertently credited to the P&L account and is not bad debt as has been disallowed by the lower authorities.
The ld DR relied on the order of the AO.
We heard the parties and perused the material on record. We notice that the AO while passing the order u/s. 143(3) r.w.s. 263 has made a disallowance of Rs.4,01,02,932 u/s 36(1)(viia) treating the said amount as a write off of bad debt. We also notice that the CIT(A) has also confirmed the disallowance by stating that the amount is claimed as a write off under ADWDRS for the reason that the assessee is in the business of banking and that the amounts advanced to farmers were written off which is allowable only u/s. 36(2). Accordingly, the CIT(A) confirmed the disallowance.
Before us, the ld AR submitted that similar disallowance made by the AO for AY 2009-10 in the case of a sister concern, Northern Malabar Gramin Bank has been deleted by the CIT(A). On perusal of records, it is noticed that as per the ADWDRS Scheme 2008 and the Circular 1 of 2008, the assessee is not entitled to charge any interest on the agricultural loans. It is claimed in assessee’s case that the amount debited to the P&L account is not the write off of bad debts u/s. 36(1)(viia), but the reversal of interest inadvertently offered to tax in the earlier assessment year. This fact has not been factually examined by the lower authorities and therefore we remit the issue back to the AO for fresh consideration and decide in accordance with law. Needless to say that assessee be given opportunity of being hearing.
The assessee’s appeal is allowed for statistical purposes.