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TMI Blog2023 (10) TMI 1380X X X X Extracts X X X X X X X X Extracts X X X X ..... per Form 36 and appeal was to be filed on or before 17.11.2020 but actually it was filed on 24.12.2020, thereby there was a delay of 37 days. The Revenue has filed condonation petition stating that this delay is due to pandemic period of Covid 19 and subsequent events. We noted that the Hon'ble Supreme Court in Miscellaneous Application No. 665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No. 21 of 2022 vide order dated 10.01.2022. Since the Hon'ble Supreme Court has condoned the delay during the said period, respectfully following the same we condone the delay and admit the appeal. 3. The only issue in this appeal of Revenue is as regards to the order of CIT(A) quashing the reopening initiated u/s. 147 r.w.s. 148 of the Act, according to CIT(A) the Revenue could not establish failure on the part of the assessee to disclose fully and truly the material facts required for the assessment of the relevant assessment year in view of the proviso to section 147 of the Act. For this, Revenue has raised following ground nos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be withdrawn. II) Further it was noticed that the assessee had claimed deductions of Rs. 14,95,14,257/- under Section 36(1) (viia) of the Act towards creation of bad and doubtful doubts. However it was noticed that the assessee had not created any reserve for bad debts in its books of account during the previous year 2007-08 relevant to assessment year 2008-09. III) Further it was noticed that entire advances of rural branches taken into account while determining 109% of aggregate average advances which resulted in excess deduction of Rs. 2,60,64,200/-. IV) Without prejudice to above as per the explanation to provisions of section 36(1)(via) of the Act with regard to "rural branch" it has been explained that" Rural branch means only rural branches of a Scheduled bank or non scheduled bank are eligible for the 10% of aggregate average advances of its rural branches . Since the assessee is Co-operative bank and not a scheduled or non scheduled it is not entitled for 10% of aggregate average advances amounting to Rs. 14,19,77,700/-." These reasons are reproduced in para 2 of the assessment order. Accordingly, reassessment was framed u/s. 143(3) of the Act vide order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble ITAT has set aside the orders of my Ld. Predecessor-in-office for fresh decision on whole gamut of deduction u/s 36(1) (vii) (a). But in case of this particular assessment order passed u/s 143(3) r.w.s 147, the Hon'ble Tribunal had quashed the appeal order on the reasoning that the reopening after passage of four years from the end of the assessment year and based on same set of materials was bad in law. Hon'ble Tribunal had delved into the facts and had a conclusive finding that there were no new material or things in possession of the AO in possession of the AO for resorting to provision to section 147 of the Act. For the sake of convenience, relevant part of Hon'ble Tribunal's order is extracted as under: "5. We have considered the rival submissions. A perusal of the reasons recorded by the AO for the purpose of re-opening of the assessment clearly shows that re- opening has been done beyond the period of four years from the end of the relevant A.Y. In such cases, it is absolutely required that for the purpose of re-opening, there must be some fresh evidence or information available with the AO, which is the foundation for the formation of opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to know that the deduction on account of provision for standard assets realized, non-statutory reserves realized, deduction u/s. 36(1)(viia) of the Act on account of non-creation of any reserve for bad debt or entire advances of rural branches. From the above reasons, it is clear that the Revenue could not establish anything that there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year. We notice that this issue is covered by the decision of Hon'ble Supreme Court in the case of CIT vs. Foramer France, (2003) 264 ITR 566, wherein the Supreme Court has affirmed the decision of Hon'ble Allahabad High Court in the case of Foramer France vs. CIT, (2001) 247 ITR 436 by observing as under:- 14. Having heard learned counsel for the parties, we are of the view that these petitions deserve to be allowed. 15. It may be mentioned that a new Section substituted Section 147 of the Income-tax Act by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. The relevant part of the new Section 147 is as follows : "147. If the Assessing Officer, has reason to believe tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d truly all material facts necessary for the assessment. Hence, the proviso to the new Section 147 squarely applies, and the impugned notices were barred by limitation mentioned in the proviso." 6.1 In the absence of any failure on the part of the assessee to disclose fully and truly all material facts and assessment framed u/s. 143(3) of the Act and now reopening beyond 4 years which is against the provisions of the Act. Hence, we find no infirmity in the order of CIT(A) and the same is confirmed. This appeal of the Revenue is dismissed. ITA No. 857/CHNY/2020, AY 2008-09 7. The appeal by the assessee in ITA No. 857/CHNY/2020 is arising out of order of the Commissioner of Income Tax (Appeals), Puducherry in ITA No. 47,48/CIT(A)-PDY/2017-18 dated 31.08.2020. The assessment was framed by the ACIT, Circle-II, Cuddalore, for the assessment year 2008-09 u/s. 143(3)(ii) of the Income Tax Act, 1961 (hereinafter the 'Act') vide order dated 28.12.2010. 8. The first issue in this appeal of assessee is as regards to the order of CIT(A) enhancing the assessment u/s. 251(2) of the Act on the issue other than the income from other sources which is already subject matter of assessment is inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 11,33,06,946; whereas, the assessee has claimed deduction u/s. 36(1)(viia) towards bad and doubtful debts at Rs. 18,35,33,849 in the statement of Total income (STI); and the AO in the assessment u/s. 143(3) allowed the said deduction at Rs. 14,95,14,257. But the deduction allowable to the assessee u/s. 36(1)(viia) r.w.r. 6ABA is only Rs. 10,53,74,000 as arrived at in para 5.4.3 above. Hence, the assessee was issued an enhancement notice u/s. 251(2) requiring it to show-cause as to why the deduction u/s. 36(1)(viia) should not be restricted as above:" The assessee contested the issue of enhancement now by stating that there is no expressed limitation that the deduction u/s. 36(1)(viia) of the Act is to be restricted to the amount of provisions made in the books of accounts and assessee before CIT(A) cited the provisions of section 36(1)(vii) of the Act wherein it is clearly laid down that bad debts should be written off as irrevocable in the accounts of the assessee and therefore according to him, there are two different provisions in the statute book i.e., 36(1)(viia) and 36(1)(vii) both are of different footings. It was submitted the CIT(A) cannot enhance the assessment when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re raised by the appellant at para 2(c) of the submission. Such apprehension of assessee on the matter is unfounded. Banks are eligible to claim deduction for bad debt u/s 36(1) (vi) in respect of advances and also claim provision for bad and doubtful debt u/s 36(1) (viia). Section 36(1) (vii) and 36(1) (viia) of the Act operate in their respective fields. Bad debt written off other than for which provision is made u/s 36(1)(viia) will he covered by section 36(1)(vii). In case of present assessee, we are dealing with issue of provision for bad doubtful debt u/s 36(1) (viia) of the Act. Hence, there is no room for absurdity apprehended by the assessee. 11. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the decision of Hon'ble Supreme Court in the case of Jute Corporation of India vs. CIT, [1991] 187 ITR 688 categorically held that the power of the CIT(A) is co-terminus with that of the AO and enhancement can be made on any issue which was touched upon by the AO in the assessment order. According to Hon'ble Supreme Court, the CIT(A) cannot go beyond the assessment record and discover a new source of income for enhancement. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee u/s. 36(1)(viia) r.w.rule 6ABA of the Income Tax Rules, 1962 is only to the extent of Rs. 10,53,74,000/-. Hence, the CIT(A) issued enhancement notice u/s. 251(2) of the Act and directed the AO to enhance by a sum of Rs. 3,62,07,301/- by observing in para 8.1 as under:- "8.1 Deduction u/s. 36(1)(viia) is computed as under The only ground taken by the assessee in this appeal is that the Assessing Officer while calculating deduction u/s 36(1)(viia) has erred in concluding that Vanur Branch of the Bank is a non-rural branch whereas the Vanur Branch is eligible for deduction u/s 36(1)(viia) as the population was below 10,000/-. This ground of the assessee is deemed partly allowed as the rural advances made during the year by Vanur branch is being taken into account in calculating the deduction u/s 36(1)(viia) of the Act but restricted to limit of provision made. In the original appeal order, 7.5% of profit was arrived at Rs. 75,36,557/-. Computation of 10% of rural advance came to Rs. 97,83,743/- However, in this order, it is held that 10% of average rural advance is to be calculated the aggregate average of cumulative advance. The average rural advance, inclusive o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Prathma Bank, supra, We find that there is no discussion about the issue raised by assessee. In the decision of Delhi Tribunal in the case of Prathma Bank, supra, it followed earlier year order in the case of Prathma Bank vs. CIT reported in (2015) 52 ITR (Trib) 454 (Del), wherein the Assessing Officer has allowed the claim of deduction u/s. 36(1)(viia) of the Act as claimed in the books of accounts at 10% of average agricultural advances. The Tribunal recorded the facts as under:- 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. Thakurdwara 847040 4. Amroha 1729725 5. Sambhal 1662607 6. A.P. Chopla 1282308 Total 8015623 18. In the present case, the assessee had given the break-up of each branch (copies of which are placed at page nos. 15 to 28). In the instant case, the assessee in its computation of revised total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove decision of Hon'ble Supreme Court in the case of Southern Technologies Ltd., supra, basically bring out the fact that NBFCs are not allowed to get the benefit of section 36(1)(viia) and 43D of the Act, but it does not at any place deals with the limit upto which this deduction has to be restricted to. Another case law of Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd., vs. CIT, 343 ITR 270 (SC) deals with the issue of deduction on account of provisions for bad and doubtful debts u/s. 36(1)(viia) and also deduction u/s. 36(1)(vii) of the Act. This case basically deals with the interplay of deduction between the provisions of section 36(1)(vii) for bad debts and deductions provided in respect of provision for bad and doubtful debts u/s. 36(1)(viia) of the Act. 14.3 The Chennai Tribunal in the case of The Cuddalore District Central Co-operative Bank Ltd., in ITA No. 739/CHNY/2020 dated 04.11.2022 has considered the decision of Hon'ble Punjab & Haryana High Court in the case of State Bank of Patiala vs. CIT, (2005) 272 ITR 54 (P&H), wherein the Hon'ble High Court has dealt with exactly identical issue and held as under:- "6. A bare perusal of the above shows that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Syndicate Bank, [2020] 422 ITR 460 (Karn) has explained the provisions and held that the condition precedent for claiming deduction under section 36(1)(viia) is that a provision for bad and doubtful debts should be made in the accounts of the assessee. The language employed in the section is clear and ambiguous. In the absence of any provision, the assessee is not entitled to deduction. However, the assessee is entitled to deduction to the extent provision is made in the accounts subject to the limit mentioned in section 36(1)(viia) of the Act. 14.5 We have gone through the decision of Delhi Tribunal in the case of Prathma Bank, supra and noted that this controversy of placing restriction on claim of deduction dealing with the limits of deduction does deal with the issue, prima facie it seems that it does not deal with the issue that deduction will be restricted to the extent of provision made in the books of accounts. 14.6 The direct decision available on the issue is only one High Court decision i.e., the Hon'ble Punjab & Haryana High Court in the case of State Bank of Patiala, supra and that of Hon'ble Karnataka High Court in the case of CIT vs. Syndicate Bank, supra has expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in this appeal of assessee in assessment year 2009-10 in ITA No. 858/CHNY/2020 is as regards to the order of CIT(A) holding the notice of issue u/s. 143(2) of the Act as valid and not barred by limitation. For this, assessee has raised the following ground Nos.10 to 12:- 10. The Commissioner of Income Tax (Appeals) erred in holding that the Notices u/s. 143(2) dated 14/08/2014 and 15/09/2014 which were issued in connection with return of income filed On 28/09 /2009 are not barred by limitation. 11. The Commissioner of Income Tax (Appeals) erred in holding that wrong mention of the dated of filing of a return will be cured by the operation of Section 292B. (In both the notices issued u/s. 143(2), the date of filing of return is mentioned only as 28/09/2009 and therefore, it cannot be viewed as a mere mistake, but it may also indicate non application of mind in assuming jurisdiction.) 12. The CIT(A) erred in relying also on the Order of this Hon'ble Tribunal in the 1st round of appeal to hold that notice u/s. 143(2) was valid. This could not have been done when the entire matter was remitted back to the CIT(A) for de novo adjudication of all issues by the Hon'ble Madr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return which is to be considered for the purpose of assessment as the same has been treated as the return, in response to the notice u/s. 143 by the assessee by the 1ssuance of letter dated 17.04.2014 This being so, we are of the view that the notice issued u/s. 143 (2) is not barred by limitation. " Considering the facts of the case as well as biding decision of the Hon'ble Tribunal, the objections of assessee in this ground are dismissed." We noted that the notice u/s. 143(2)of the Act dated 14.08.2014 and 15.07.2014 was issued after return filed u/s. 148 of the Act. The assessee in response to notice u/s. 148 of the Act dated 20.03.2014 filed an application dated 17.04.2014 asking the AO to treat the return filed on 28.09.2009 as the return filed in response to notice u/s. 148 of the Act. This means that the notice u/s. 143(2) of the Act dated 15.07.2014 is within limitation and hence, this issue of assessee does not survive and hence, accordingly dismissed. The assessee has raised similar issue in assessment years 2010-11 & 2011-12 in ITA Nos. 854 & 855/CHNY/2020, facts being identical as admitted by the counsel for assessee and hence, taking a consistent view, we dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 20.03.2014 (this notice is within 4 years and proviso to section 147 of the Act does not apply to the facts of the case) and for this, the AO recorded the reason that the assessee has claimed deduction of Rs. 21,96,81,180/- u/s. 36(1)(viia) of the Act towards creation of bad and doubtful debts. The AO while completing assessment u/s. 143(3) of the Act, order dated 28.10.2010 allowed deduction to the extent of Rs. 17,52,57,980/-. The AO recorded reason that the assessee has not made any provision in the books of accounts as regards to reserves for bad and doubtful debts and even then, the AO allowed deduction which is not at all allowable and even the view taken by the AO is not sustainable. Hence, the AO after recording reason issued notice u/s. 148 of the Act. The assessee challenged the reopening before CIT(A). The CIT(A) after considering submissions of the assessee confirmed the action of the AO in reopening the assessment on the issue of change of opinion as well as permission granted by CIT. The CIT(A) also noted that the Tribunal has already upheld the reopening of assessment u/s. 148 of the Act as valid and this cannot be challenged again because that order of Tribunal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, it may be recalled that in the case of GKN Driveshaft's (India) ltd vs ITO (259 ITR 19) Hon'ble Apex Court laid down important procedures to be followed in matter of reopening. In the procedure so laid down, it is clear that once a notice u/s 148 is served on assessee, the assessee can apply for the reason recorded for such reopening. Once an application for reason recorded is received, the AO is to forthwith supply the reason recorded to assessee. Thereafter, the assessee may raise objection against the reason recorded. Such objection, if any, has to be disposed by the AO by way of passing a speaking order. In case of present assessee, no objection was raised against reason recorded. Therefore, it is not proper to raise objection at this late stage after the lapse of so many years. Hence, objection raised & consequently, the ground taken is dismissed. 5.3.7. There is another vital point on the matter that cannot be ignored. In the order passed by the Hon'ble Tribunal in case of appeal of the assessee in this year, it is seen that the Hon'ble Tribunal had gone into the merit of validity of reopening u/s 147 of the Act. Relevant parts of the order for A.Y. 2009- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to tax would warrant formation of requisite belief to initiate the proceedings within four years from the end of the relevant assessment year even yet where full disclosure was made and income chargeable to tax had escaped assessment from being included in the final assessment order in which taxable income was worked out. Hence according to us, this ground of the assessee does not succeed and hence, dismissed. 23. Similar issue of validity of reopening of assessment has been raised by the assessee in AYs 2010-11 & 2011-12 in ITA Nos.854 & 855/CHNY/2020. Since, we have already decided this issue for the assessment year 2008-09 in ITA No. 858/CHNY/2020 in preceding para 22, facts being identical as admitted by the ld.counsel for the assessee and hence, taking a consistent view, we dismiss this issue of assessee's appeal in all these years. Therefore, the appeals filed by the assessee in ITA Nos.858, 854 & 855/CHNY/2020 are dismissed. 24. The next issue in the appeal of assessee in ITA No. 856/CHNY/2020, assessment year 2012-13 is as regards to the order of CIT(A) confirming the action of AO upholding the addition towards add back of non-statutory reserve. For this, assessee has r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee is dismissed. ITA No. 3154/CHNY/2019 29. The appeal by the assessee in ITA No. 3154/CHNY/2019 is arising out of order of the Commissioner of Income Tax (Appeals), Puducherry in ITA No. 68/2018-19/AY 2014-15/CIT(A)-13 dated 30.08.2019. The assessment was framed by the ACIT, Circle-1, Vellore, for the assessment year 2014-15 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the 'Act') vide order dated 19.12.2016. The impugned rectification order under dispute is framed by the ACIT, Circle-1, Vellore u/s. 154 of the Act, vide order dated 19.11.2018. 30. The first issue on assumption of jurisdiction by the AO and confirmed by CIT(A) holding that the rectification order passed u/s 154 of the Act by the AO is as per law and consequently holding the restricting of claim of deduction u/s. 36(1)(viia) of the Act for an amount of provision for bad and doubtful debts made in the books of accounts, as the issue is highly debatable and cannot be done while acting u/s. 154 of the Act. For this assessee has raised ground Nos. 2 & 3 as under:- "2. The Commissioner of Income Tax (Appeals) erred in upholding the rectification order passed by the assessing officer, ignoring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial on record. 5. Now, before coming to the merits of the case, firstly it has to be noted that the impugned appeal is against the order passed under section 154 as per Form No. 35 which is basically for rectification of mistakes apparent from record and does not involve issues which has to be established by the process of reasoning on points where there are more than one opinion and which involves a debatable point of law. Whether the provision for bad and doubtful debts has to be allowed u/s 36(1) (viia) or u/s 36(1)(vi) and whether the same is independent of 36(1) or not as argued by the AR is clearly not a patent mistake apparent from records and is clearly a debatable issue as evidenced by the contradictory case laws relied upon by the AO and AR on this issue. Now, the Supreme Court in the case of T.S. Balaram, ITO v Volkart Bros (1971) 82 ITR 40, held that "a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from record." A look at the records must s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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