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2016 (12) TMI 56 - ITAT DELHI

2016 (12) TMI 56 - ITAT DELHI - TMI - Revision u/s 263 - Computation of deduction u/s 36(1)(viia) - Held that:- the present case, the assessee had given the break-up of each branch. The assessee in its computation of revised total income/loss clearly mentioned that deduction u/s 36(1)(viia) of the Act was claimed @ 10% of average agricultural advances of ₹ 801.56 crores. Thereafter, the AO after examining the aforesaid details came to the conclusion that the claim of the assessee was allow .....

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y the AO. Therefore, the action of the ld. CIT in setting aside the assessment order passed by the AO was not justified. - Decided in favour of assessee - ITA No. 2316/Del/2013 - Dated:- 25-11-2016 - Sh. N. K. Saini, AM and Smt. Beena Pillai, JM For The Assessee : Sh. Piyush Kaushik, Adv. For The Revenue : Smt. Paramita Tripathy, CIT DR ORDER Per N. K. Saini, AM: This is an appeal by the assessee against the order dated 19.02.2013 of ld. CIT, Moradabad. 2. Following grounds have been raised in t .....

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well sufficient to curtail the assumption of jurisdiction u/s 263 on part of CIT on the facts and circumstances of the case and in the law. 3. That the CIT has in assuming jurisdiction u/s 263 grossly failed to appreciate that it is not permissible for the Commissioner under the proceedings u/s 263 to re-examine the claim of assessee and substitute his judgment for that of the Assessing Officer. 4. Without prejudice to the foregoing, the CIT has on the merits grossly failed to appreciate that t .....

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after referred to as the Act). 4. Facts of the case in brief are that the assessee filed its return of income on 30.09.2009 declaring an income of ₹ 52,11,39,000/-. The said return was revised on 30.08.2010 and total loss was shown at ₹ 18,85,37,525/-. Thereafter the return was further revised and filed on 11.10.2010 showing loss of ₹ 13,80,69,000/-. The said return was processed u/s 143(1) of the Act. Later on, the case was selected for scrutiny. The AO framed the assessment u .....

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nder: "In the original return of income, we did-not claim the deduction provided u/s 36(1)(viia) of the I.T. Act for the provisions for Bad and doubtful debts. The provisions of this section expressly provide for deduction u/s 36(1)(viia) as per limits laid down therein for the Banks. The provisions for bad and doubtful debts provided in the profit & loss account has been added and thereafter the deduction as per limits prescribed under, the provisions of section 36(1)(viia) has been cl .....

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son, apart from social commitments which banks undertake, that allowance of the nature mentioned in sections 36(i)(viia) and 43D are open restricted to banks and not to NBFC's. Lastly even in the case of banks the provisions for NPA has to be added back and only after such add back that deduction under s. 36(i)(viia) can be claimed by the banks. Therefore, even in the case of the banks, there is an element of add back, however, by way of special provisions banks are allowed to claim deductio .....

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eted the assessment on the figure of returned loss. The ld. CIT observed that subsequently a proposal was submitted by the Adl. CIT, Range-I, Moradabad vide letter dated 06.11.2012 wherein it was mentioned that during the assessment proceedings the details regarding provisions for bad and doubtful debts were not properly examined and there were no details pertaining to the provisions for bad and doubtful debts claimed by the assessee amounting to ₹ 80,15,60,000/-, it was also mentioned in .....

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ubtful debts account made under that clause. He further observed that the claim of deduction u/s 36(1)(viia) of the Act has to be examined only in respect of provisions for bad and doubtful debts made in the accounts and in the present case, the assessee had made provision for bad and doubtful debts to the extent of ₹ 14,18,27,000/-. According to the ld. CIT that the claim in respect of provision for bad and doubtful debts will not exceed to 7.5% of the total income and 10% of the average .....

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s at ₹ 14,18,27,000/- and the revised claim was worked out on the basis of 10% of average agricultural advances of ₹ 801.56 crores. The ld. CIT also referred to the decision of the Hon ble Punjab & Haryana High Court in the case of State Bank of Patiala Vs CIT & Others reported at (2005) 272 ITR 54. The ld. CIT mentioned in the impugned order that the assessee claimed that the issue under consideration was covered by the judgment of the Hon ble Supreme Court in the case of So .....

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such branches. Having regard to the increasing social commitment, Section 36(1)(viia) has been amended to provide that in respect of provision for bad and doubtful debt made by a scheduled bank or a non scheduled bank, an amount not exceeding a specified percent of the total income or a specified percent of the" aggregate average advances made by rural branches, whichever is higher, shall be allowed as deduction in computing the taxable profits. 6. The ld. CIT did not accept the contention .....

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of the Act was furnished by the assessee during the course of assessment proceedings or proceedings u/s 263 of the Act before him. The ld. CIT held that the order passed by the AO was not only erroneous but prejudicial to the interest of Revenue as the AO did not examine properly the claim made by the assessee u/s 36(1)(viia) of the Act. Accordingly, the same was set aside to the file of the AO with the direction to re-examine the claim u/s 36(1)(viia) of the Act afresh. 7. Now the assessee is i .....

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sions dated 16.11.2011 that the deduction with respect to Section 36(1)(viia) of the act was claimed out of the book only i.e. in the computation of income and no adjustment had been made in the accounts. Therefore, there would arise no question of preparation and filing of revised accounts. It was further submitted that the branch wise details of advances on which deduction u/s 36(1)(viia) of the Act was claimed and list of branch wise provisions were submitted before the AO vide submission dat .....

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the modus operand of the business activities; ii. Computation of deduction u/s 36(1)(viia); iii. Working of provision for bad debts and claim of bad debts; iv. Bills for fixed assets purchased during the year; v. Reasons for loss; vi. Details of branches; vii. Contingent liabilities - details - whether debited to P&L a/c; viii. Confirmation for unsecured loans received / squared during the year; ix. Details of Doubtful & Loss assets; x. Computation of total income; xi. Break up of other .....

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u/s 36(1)(viia) of ₹ 80,15,60,000 were submitted (page 15-28 PB): iii. Impact of relevant adjustments in the Revised return of income with respect to computation of deduction u/s 36(1)(viia) was explained; iv. It was explained that the adjustments in the revised return of income with respect to deduction u/s 36(1)(viia) have been made out of the books only. It was explained that the accounts are not impacted by the said adjustments; v. Vide the said submission a reference was made to the d .....

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hat since the assessee is a Regional Rural Bank (RRB) sponsored by Syndicate Bank therefore the assessee is under a strict vigilance and control of RBI. It was clarified before the AO that it is not permissible for the assessee to provide non rural advances. It was further submitted before the AO that from the details submitted it is very clear that all the advances made and accordingly the claim of deduction u/s 36(1)(viia) is with respect to rural advances only. Further the remaining details a .....

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ral branches the assessee is entitled to a deduction which is quantified not with respect to the amount provided for in the accounts but with respect to certain percentage of total income and a certain percentage of aggregate average advances made by the rural branches of the bank. The Bangalore ITAT clearly held that deduction u/s 36(1)(viia) is a specific deduction given by the statute irrespective of the quantum provided by the assessee in its accounts towards provision for bad and doubtful d .....

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he statute irrespective of the quantum provided by the assessee in its accounts towards provision for bad and doubtful debts. Therefore, there were deliberations with the AO in the course of scrutiny assessment proceedings u/s 143(3) of the Act. It was emphasized that in the assessee case the ld. CIT himself could not point out that certain specific branches are non rural branches and that there was anything wrong with rural advances given by the assessee or claim made u/s 36(1)(viia) of the Act .....

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laws: CIT Vs Sunbeam Auto Ltd. (2010) 332 ITR 167 (Del) CIT Vs New Delhi Television Ltd. (2013) TIOL 776 HC Del CIT Vs Gabriel India Ltd. 203 ITR 108 (Bom) CIT Vs Ganpat Ram Bishnoi 296 ITR 292 (Raj.) CIT Vs International Travel House Ltd. 344 ITR 554 (Del) CIT Vs Ashish Rajpal 320 ITR 674 (Del) A2Z Maintenance & Engineering Services Ltd. Vs CIT (2015) TIOL-1894-ITAT-DEL Sardhana Papers Pvt. Ltd. Vs CIT (2015) TIOL-2016 (ITAT Del) ITO Vs DG Housing Projects Ltd. 343 ITR 329 (Del) Ø D .....

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using Projects Ltd. 343 ITR 329 (Del) Director of Income Tax Vs Jyoti Foundation 357 ITR 388 (Del) A2Z Maintenance & Engineering Services Ltd. Vs CIT (2015) TIOL-1894-ITAT-DEL Sardhana Papers Pvt. Ltd. Vs CIT (2015) TIOL-2016 (ITAT Del) 11. It was also submitted that the present case was not at all a case of complete lack of inquiry. Therefore, the approach of ld. CIT in directing the AO to make fresh inquiry and re-examine the claim by raising doubts and suspicion, without any definite find .....

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of the Revenue. 13. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the assessee is a subsidiary of Syndicate Bank and its case was selected for scrutiny. The AO framed the assessment u/s 143(3) of the Act on 13.12.2011. Thereafter, the ld. CIT by invoking the provisions of Section 263 of the Act held vide order dated 19.02.2013 that the assessment framed by the AO was erroneous and p .....

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under the Act. It empowers the Ld. CIT to make or cause to be made such an enquiry as he deems necessary in order to find out if any order passed by Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The only limitation on his powers is that he must have some material(s) which would enable him to form a prima facie opinion that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. Once he .....

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in section 263 of the Act. But the Ld. CIT does not have unfettered and unchequred discretion to revise an order, he is required to exercise revisional power within the bounds of the law and has to satisfy the need of fairness in administrative action and fair play with due respect to the principle of audi alteram partem as envisaged in the Constitution of India as well as in section 263 of the Act. An order can be treated as 'erroneous' if it is passed in utter ignorance or in violatio .....

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T under section 263 of the Act may be summarized as under:- (i) The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Both the conditions must be fulfilled. (ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, than the said section will be attracted. (iii) An incorrect assumption of facts or an incorrect ap .....

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rroneous order, unless the view taken by the Assessing Officer is unsustainable under the law. (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power under section 263 of the Act, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) If the Assessing Officer exercises .....

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anation be a letter in writing and the Assessing Officer allowed the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be said to be either erroneous or prejudicial to the interest of the Revenue. 15. Reverting to the facts of the present case, it is noticed that the assessee filed its revised return on the basis of the judgment of Hon ble Supreme Court in the case of Southern Technologies Vs JCIT reported at 320 ITR 577. Thereafter, the .....

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- whether debited to P&L a/c; viii. Confirmation for unsecured loans received / squared during the year; ix. Details of Doubtful & Loss assets; x. Computation of total income; xi. Break up of other expenses; & xii. Repair & maintenance - nature. 16. In response to the above, the assessee vide its reply dated 16.11.2011 furnished various details to the AO (copy of which is placed at page nos. 9 to 12 of the assessee s paper book) and the relevant portion of the said letter read as .....

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a) of Income Tax Act'1961 was filed alongwith the return of income. The reasons for filing revised return are given in the letter filed alongwith the revised return. It is, however, submitted that the revised return was filed to claim proper admissible deduction u/s 36(1)(viia) of the I.T. Act which is a, statutory deduction. Further, the revised return is covered u/s 139(5) of the I.T. Act. The working of claim of deduction u/s 36(1)(viia) at ₹ 80,15,60,000/- is given in the sheet of .....

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eduction u/s 36(1)(viia). Please note, the aforesaid adjustments are effected out of the book i.e. in the computation of income. The accounts are thus not affected by the aforesaid adjustments. Further, in the course of discussion on 01/11 your goodself had wanted to know as to whether after making these adjustments the assessee is required to furnish any revised report from auditor, accounts etc. In this regard, it may be noted that since the aforesaid adjustments are made out of the book only .....

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fication regarding claim of deduction u/s 36(1)(viia) has already been filed in your office on 06/07/2010. However, for the sake of convenience, a copy of the same is being filed. Under these circumstances, the claim of ₹ 80,15,60,000/-which is equal to the 10% of Rural advances, may kindly be allowed u/s 36(1)(viia) of the IT. Act. 3. The working of provisions of Bad Debts of ₹ 14,18,27,000 was also filed alongwith the revised return of income, same is re enclosed herewith for ready .....

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it is very clear that all the advances made and accordingly the claim of deduction u/s 36(1)(viia) is with respect to rural advances only. 17. The assessee also furnished the details of monthly average of agricultural advances outstanding in rural branches (copy of which is placed at page no. 14 of the assessee s paper book) which read as under: S. No. Region Monthly average of agricultural advances outstanding in rural branches F.Y. 2008-09 AMT IN 000 1. Moradabad 1104553 2. Rampur 1389390 3. .....

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6 crores. Thereafter, the AO after examining the aforesaid details came to the conclusion that the claim of the assessee was allowable and he accordingly allowed the claim of the assessee u/s 36(1)(viia) of the Act. The said claim was in accordance with law and as provided in the provisions of Section 36(1)(viia) of the Act. 19. In the present case, the ld. CIT only directed the AO to reexamine the claim afresh. He nowhere stated that the claim of the assessee was not correct or it was not in ac .....

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ion are treated as erroneous and prejudicial to the interests of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interests of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. In cases where there is inadequate enquiry but not lack of enquiry, the Commissioner must record .....

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he ld. CIT simply directed the AO to re-examine the claim u/s 36(1)(viia) of the Act afresh. He nowhere recorded a finding that the inquiry made by the AO was erroneous and did not point out any error or mistake made by the AO. Therefore, the action of the ld. CIT in setting aside the assessment order passed by the AO was not justified. 22. Similarly, the Hon ble Jurisdictional High Court in the case of CIT Vs International Travel House Ltd. (2012) 344 ITR 554 (Del) held as under: Assessing Offi .....

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