M/s The Jalna Dist Central Co- Op Bank Ltd,, Jalna v. ACIT, Aurangabad

ITA 2414/PUN/2012 | 2009-2010
Pronouncement Date: 26-11-2014 | Result: Partly Allowed

Appeal Details

RSA Number 241424514 RSA 2012
Assessee PAN AAAAT3208Q
Bench Pune
Appeal Number ITA 2414/PUN/2012
Duration Of Justice 1 year(s) 11 month(s) 21 day(s)
Appellant M/s The Jalna Dist Central Co- Op Bank Ltd,, Jalna
Respondent ACIT, Aurangabad
Appeal Type Income Tax Appeal
Pronouncement Date 26-11-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 26-11-2014
Assessment Year 2009-2010
Appeal Filed On 05-12-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE MS. SUSHMA CHOWLA JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO.2414/PN/2012 (ASSESSMENT YEAR: 2009-10) M/S. THE JALNA DIST. CENTRAL CO-OP. BANK LTD. SANTOSHI MATA MANDIR ROAD TAL. & DIST. JALNA. PAN: AAAAT3208Q . APPELLANT VS. THE ASST. COMMISSIONER OF INCOME TAX CIRCLE 1 AURANGABAD . RESPONDENT APPELLANT BY : S/SHRI SUNIL V. PATHAK AND NIKHIL PATHAK RESPONDENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 10-11-2014 DATE OF PRONOUNCEMENT : 26-11-2014 ORDER PER SUSHMA CHOWLA JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) AURANGABAD DATED 22.10.2012 RELATING TO ASSESSMENT YEAR 2009-10 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AURANGABAD ERRED IN FACTS AND ON LAW IN CONFIRMING THE DISALLOWANCE OF RS.5 61 11 625/- FOR DEDUCTION U/S. 36(1)(VI IA) TO THE TOTAL INCOME. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AURANGABAD ERRED IN FACTS AND ON LAW IN CONFIRMING THE DISALLOWANCE OF RS.5 70 42 000/- TO THE TOTAL INCOME. THIS IS RELATED TO THE NOTIONAL REVERSAL OF EXCESS PROVISION FOR BAD & DOUBTFUL DEBTS CREDITED TO PROFIT & LOSS A/C OF RS. 12 00 00 000/-. THE ASSESSEE BANK HAS ALREADY ADDED BACK THE PROVISI ON FOR BAD & DOUBTFUL DEBTS WHICH HAS BEEN DEBITED TO PROFIT & LOSS A/C IN THE RELEVANT YEARS TO THE NET PROFIT WHILE COMPUTIN G THE TAXABLE INCOME OF THE BANK. AS THE BANK HAS ALREADY ADDED THE SE ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 2 AMOUNTS WHILE COMPUTING TAXABLE INCOME OF THE BANK OF THE RELEVANT ASSESSMENT YEARS AGAIN TREATING THE REV ERSAL OF EXCESS PROVISION FOR BAD & DOUBTFUL DEBTS TO THE EXT ENT OF RS.5 70 42 000/- AS INCOME OF THE BANK WILL RESULT IN DOU BLE TAXATION OF SAME AMOUNT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AURANGABAD HAS CONFIRMED THE DISALLOWANCE OF RS.5 70 42 000/- BY DISALLOWING IT ON PROPORTIONATE BASIS WHICH IS NOT LOGICAL HENCE THE SAID ADDITION NEEDS TO BE NULLI FIED. 3. ALTERNATIVELY EVEN IF THE STAND OF THE LEARNED CO MMISSIONER OF INCOME TAX (APPEALS) AURANGABAD IS CONSIDERED CORREC T HE HAS ERRED IN FACTS & ON LAW IN CALCULATING THE RELIEF TO BE ALLOWED OF RS.6 29 58 000/- OUT OF RS.12 00 00 000/-. WHILE CALCULATING TH E PROPORTION OF RELIEF TO BE ALLOWED THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) HAS WRONGLY CONSIDERED THE DEDU CTION ALLOWED OF RS.27 57 17 780/-. BUT THE DEDUCTION CLAIMED & ALLOWED COMES TO RS.15 97 23 883/- (RS.27 57 17 180 -- RS.5 43 29 400 - RS.6 16 64 497) BECAUSE THE LEARNED ASSISTA NT COMMISSIONER OF INCOME TAX AURANGABAD WHILE PASSING ORDER U/S.148 HAS DISALLOWED THE DEDUCTION FOR A.Y 2004-05 OF RS.5 43 29 400/- & FOR A.Y 2005-06 OF RS.6 16 64 497/- BUT THIS FACT HAS NOT BEEN CONSIDERED BY THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) AURANGABAD WHILE PASSING HIS ORDE R. IF THE ACTUAL DEDUCTION ALLOWED IS CONSIDERED AT RS.15 97 23 883/ - THE RELIEF GIVEN WORKS OUT TO RS.8 69 56 000/- INSTEAD OF RS.6 29 58 000/-. 4. SUCH OTHER ORDERS BE PASSED AS MAY BE DEEMED FIT AND P ROPER. 5. THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER VARY A ND / OR WITHDRAW ANY OR ALL THE ABOVE GROUNDS OF APPEAL 3. THE ISSUE IN GROUND NO.1 RAISED BY THE ASSESSEE IS AG AINST DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 36(1)(VIIA) OF THE ACT AT RS.5 61 11 625/-. 4. THE BRIEF FACTS RELATED TO THE ISSUE ARE THAT THE AS SESSING OFFICER ON VERIFICATION OF THE BOOKS OF ACCOUNT AND COMPUTATION OF TOTAL INCOME NOTED THAT THOUGH THE ASSESSEE HAD CLAIMED THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT BUT HAD NOT MADE PROV ISION FOR THE SAME. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS ENTIT LED TO THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT TO THE EX TENT OF PROVISION MADE BY THE BANK FOR THE SAME IN VIEW OF THE AM ENDED PROVISIONS OF THE ACT. IN VIEW THEREOF THE SAID DEDUCTION CLAIMED ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 3 UNDER SECTION 36(1)(VIIA) OF THE ACT AT RS.5 61 11 625/- WAS DISALLOWED. THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. THE ASSESSEE IS IN APPEAL AGAINST THE ABOVE CONFIRMATIO N BY THE CIT(A). SHRI SUNIL V. PATHAK AND SHRI NIKHIL PATHAK APPEARED FOR THE ASSESSEE AND SHRI B.C. MALAKAR APPEARED FOR THE REVENUE AND PUT FORWARD THEIR CONTENTIONS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. UNDER THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE AC IT IS PRO VIDED THAT ANY SCHEDULED BANK OR NON-SCHEDULED BANK OTHER THAN P RIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRIC ULTURAL & RURAL DEVELOPMENT BANK CAN CLAIM DEDUCTION IN RESPECT OF A NY PROVISION FOR BAD & DOUBTFUL DEBTS OF AN AMOUNT NOT EXCEE DING 7% OF THE TOTAL INCOME COMPUTED BEFORE MAKING ANY DEDUCTION UN DER THIS CLAUSE OR CHAPTER VIA AND AMOUNT NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. UNDER THE PROVISIONS OF SAID S ECTION IT IS CLEARLY PROVIDED THAT THE DEDUCTION SPECIFIED THEREIN WOULD BE IS IN RESPECT OF ANY PROVISION FOR BAD & DOUBTFUL DEBTS MADE B Y THE ELIGIBLE ASSESSEE MEANING THEREBY THAT THE SAID DEDUCTION WOULD BE ALLOWABLE UNDER SECTION 36(1)(VIIA) OF THE ACT IN RESPECT OF PROVISION MA DE. FOR ALLOWING THE EXPENDITURE IN RELEVANT YEAR PROVISION TO THAT EXTENT HAS TO BE MADE IN THE BOOKS OF ACCOUNT AND IN THE ABSENCE OF ANY SUCH PROVISION NO DEDUCTION IS ALLOWABLE ON ACCOUNT OF BAD & DOU BTFUL DEBTS. 7. WE FIND THAT SIMILAR ISSUE OF ALLOWABILITY OF CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT AROSE BEFORE THE PUNE B ENCH OF THE ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 4 TRIBUNAL IN SHRI MAHALAXMI CO-OP. BANK LTD. VS. ITO IN ITA NO.1658/PN/2011 RELATING TO ASSESSMENT YEAR 2008-09 AN D VIDE ORDER DATED 29.10.2013 IT WAS HELD AS UNDER: 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. WE HAVE ALSO ANXIOUSLY PERUSED THE AUTHORITIES CITED AT B AR IN ORDER TO DETERMINE THE CONTROVERSY ON HAND. THE RELEVANT P ORTION OF SECTION 36(1)(VIIA) OF THE ACT AS APPLICABLE FOR THE ASS ESSMENT YEAR UNDER CONSIDERATION I.E. A.Y. 2008-09 READS AS UNDER : - [(VIIA) [IN RESPECT OF ANY PROVISION FOR BAD AND DOU BTFUL DEBTS MADE BY (A) A SCHEDULED BANK [NOT BEING [* * *] A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTS IDE INDIA] OR A NON-SCHEDULED BANK [OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK] AN AMOUNT [NOT EXCEEDING SEVEN AND ONE-HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UN DER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCE EDING [TEN] PER CENT OF THE AGGREGATE AVERAGE ADVANCES MA DE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRE SCRIBED MANNER : 10. A BARE PERUSAL OF AFORESAID SECTION CLEARLY BRINGS OUT THAT THE DEDUCTION SPECIFIED THEREIN IS IN RESPECT OF A NY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY.. AN ELIGIBLE ASSESSE E. THE PRESENCE OF THE AFORESAID EXPRESSION IN THE SECTION SUPPORTS THE PLEA OF THE REVENUE WHICH IS TO THE EFFECT THAT THE DEDUCTION ALLOWABLE UNDER SECTION 36(1)(VIIA) OF THE ACT IS IN RESPE CT OF THE PROVISION MADE BY THE ASSESSEE. IN OUR CONSIDERED OPINION THE JUDGEMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF STATE BANK OF PATIALA (SUPRA) CLEARLY COVERS T HE CONTROVERSY IN FAVOUR OF THE REVENUE AND BELIES THE INTERPRETATION SOUGHT TO BE CANVASSED BY THE ASSESSEE. IN THE CASE BEFORE THE HONBLE HIGH COURT ASSESSEE-BANK HAD ORIGINALLY FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 1985-86 CLAIMING DEDUCT ION UNDER SECTION 36(1)(VIIA) OF THE ACT AT RS.1 90 36 000/-. AFTER FIL ING OF THE RETURN THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE AC T WERE AMENDED BY FINANCE ACT 1985 WHEREBY DEDUCTION WAS ENHAN CED TO 10% OF THE PROFIT OR 2% OF THE AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES OF THE BANK WHICHEVER WAS HI GHER. ON ACCOUNT OF THE AMENDED PROVISIONS ASSESSEE FILED A R EVISED RETURN OF INCOME ON 24.04.1986 ENHANCING THE CLAIM FOR DEDUCTION FROM RS.1 90 36 000/- TO RS.1 94 21 000/-. THE ASSESSING OFFIC ER RESTRICTED THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT TO RS.1 90 36 000/- ONLY AND DISALLOWED THE BALANCE ON THE GRO UND THAT IN THE BOOKS OF ACCOUNT PERTAINING TO THE RELEV ANT ASSESSMENT YEAR ASSESSEE HAD MADE A PROVISION FOR BAD AND DOUB TFUL DEBTS OF RS.1 90 36 000/- ONLY. THE ASSESSEE ARGUED THAT THE PRO VISION OF RS.1 90 36 000/- WAS MADE IN THE BALANCE-SHEET FINALIZ ED ON 14.02.1985 WHICH WAS AS PER THE UNAMENDED PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT AND THAT IN VIEW OF THE A MENDMENT OF ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 5 SECTION 36(1)(VIIA) OF THE ACT PERMITTING HIGHER CLAIM OF DEDUCTION THE ASSESSEE COULD NOT HAVE POSSIBLY MADE THE HIGHER PROVISION IN THE BALANCE-SHEET FINALIZED ON A PRIOR DATE BUT IT MA DE UP THE SHORTFALL BY MAKING AN ADEQUATE PROVISION IN THE BALA NCE-SHEET OF THE SUBSEQUENT ASSESSMENT YEAR. ON THIS BASIS IT WAS SOUGHT TO BE MADE OUT THAT THERE WAS SUBSTANTIAL COMPLIANCE WITH THE REQUIREMENT OF LAW OF MAKING PROVISION FOR BAD AND D OUBTFUL DEBTS AND THEREFORE ASSESSEE JUSTIFIED THE CLAIM OF DEDUCTION FOR THE COMPLETE AMOUNT OF RS.1 94 21 000/- AND NOT RESTRICTE D TO RS.1 90 36 000/-. THE CIT(A) AS WELL AS THE TRIBUNAL NEGATED THE PLEA OF THE ASSESSEE AND ACCORDINGLY THE MATTER WAS CARRIED BEFORE THE HONBLE PUNJAB & HARYANA HIGH COURT. THE HO NBLE HIGH COURT REFERRED TO THE PROVISIONS OF SECTION 36 (1)(VIIA) OF THE ACT AND OBSERVED THAT ..THE DEDUCTION ALLOWABLE UNDER THE ABOVE PROVISIONS IS IN RESPECT OF THE PROVISION MADE AND FURTHER WENT ON TO HOLD THAT ..MAKING OF A PROVISION FOR BA D AND DOUBTFUL DEBTS EQUAL TO THE AMOUNT MENTIONED IN THIS SECTION IS MUST FOR CLAIMING SUCH DEDUCTION. IN VIEW OF THE AFOR ESAID JUDGEMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN OUR VIEW THE POSITION SOUGHT TO BE CANVASSED BY THE AS SESSEE DESERVES TO BE REPELLED. WE REPRODUCE HEREINAFTER THE RELEVANT PORTION OF THE ORDER OF THE HONBLE HIGH COURT WHICH READS AS UNDER :- 5. SEC.36(1)(VIIA) OF THE ACT AS APPLICABLE TO THE ASST. YR. 1985-86 READS AS UNDER : IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DE BTS MADE BY A SCHEDULED BANK [NOT BEING A BANK APPROVED BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF CL.(VIIIA) OR A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON-SCHEDULED BANK AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) OR AN AMOUNT NOT EXCEEDING TWO PER CENT OF THE AGGR EGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER WHICHEVER IS HIGHER. 6. A BARE PERUSAL OF THE ABOVE SHOWS THAT THE DEDUCT ION ALLOWABLE UNDER THE ABOVE PROVISIONS IS IN RESPECT OF THE PROVISION MADE. THEREFORE MAKING OF A PROVISION FOR BAD AND DOUBTFUL DEBTS EQUAL TO THE AMOUNT MENTIONED IN T HIS SECTION IS A MUST FOR CLAIMING SUCH DEDUCTION. THE TR IBUNAL HAS RIGHTLY POINTED OUT THAT THIS ISSUE STANDS FURT HER CLARIFIED FROM THE PROVISO TO CL.(VII) OF S.36(1) OF THE ACT WHICH READS AS UNDER : PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH CL.(VIIA) APPLIES THE AMOUNT OF THE DEDUCTION RELATING TO ANY SUCH DEBT OR PART THEREOF SHALL BE LIMITED TO T HE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE. 7. THIS ALSO CLEARLY SHOWS THAT MAKING OF PROVISION EQUAL TO THE AMOUNT CLAIMED AS DEDUCTION IN THE ACCOUN T ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 6 BOOKS IS NECESSARY FOR CLAIMING DEDUCTION UNDER S. 36(1)(VIIA) OF THE ACT. THE TRIBUNAL HAS DISTINGUISHED VARIOUS AUTHORITIES RELIED UPON BY THE ASSESSEE WHER EIN DEDUCTIONS HAD BEEN ALLOWED UNDER VARIOUS PROVISIONS WHICH ALSO REQUIRED CREATION OF RESERVE AFTER THE AS SESSEE HAD CREATED SUCH RESERVE IN THE ACCOUNT BOOKS BEFOR E THE COMPLETION OF THE ASSESSMENT. IT HAS BEEN CORRECTLY PO INTED OUT THAT IN ALL THOSE CASES RESERVES/PROVISIONS HAD B EEN MADE IN THE BOOKS OF ACCOUNT OF THE SAME ASSESSMENT YEAR AND NOT OF THE SUBSEQUENT ASSESSMENT YEAR. 8. IN THE PRESENT CASE THE ASSESSEE HAS NOT MADE AN Y PROVISION IN THE BOOKS OF ACCOUNT FOR THE ASSESSMEN T YEAR UNDER CONSIDERATION I.E. 1985-86 BY MAKING SUPPLEMENTARY ENTRIES AND BY REVISING ITS BALANCE SHEE T. THE PROVISION HAS BEEN MADE IN THE BOOKS OF ACCOUNT OF THE SUBSEQUENT YEAR. 9. WE ARE THEREFORE SATISFIED THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT SINCE THE ASSESSEE HAD MADE A PROVISION OF RS.1 19 36 000 FOR BAD AND DOUBTFUL DEBTS ITS CLAIM FOR DEDUCTION UNDER S. 36(1)(VIIA) OF THE ACT HAD T O BE RESTRICTED TO THAT AMOUNT ONLY. SINCE THE LANGUAGE O F THE STATUTE IS CLEAR AND IS NOT CAPABLE OF ANY OTHER INTERPRETATION WE ARE SATISFIED THAT NO SUBSTANTIAL Q UESTION OF LAW ARISES IN THIS APPEAL FOR CONSIDERATION BY THIS CO URT. 11. IN VIEW OF THE AFORESAID INTERPRETATION OF SECT ION 36(1)(VIIA) OF THE ACT BY THE HONBLE PUNJAB & HARYANA HIGH COURT THE ORDERS OF THE LOWER AUTHORITIES DESERVE TO BE UPHELD I NASMUCH AS THE ASSESSEE HAS NOT MADE A PROVISION FOR BAD AND DOUBT FUL DEBTS IN THE BOOKS OF ACCOUNT EQUAL TO THE AMOUNT OF DEDUC TION SOUGHT TO BE CLAIMED UNDER SECTION 36(1)(VIIA) OF THE ACT AND THE REFORE IN OUR VIEW THE LOWER AUTHORITIES WERE JUSTIFIED IN RES TRICTING THE DEDUCTION TO RS.50 00 000/- BEING THE AMOUNT OF PROVISI ON ACTUALLY MADE IN THE BOOKS OF ACCOUNT. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CITED CER TAIN DECISION IN SUPPORT OF HIS PROPOSITION THAT THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT IS NOT LINKED TO MAKING OF A PROVISION IN THE ACCOUNT BOOKS. AT THE OUTSET WE MAY OB SERVE THAT THE DECISIONS RELIED UPON BY THE ASSESSEE ARE OF VA RIOUS BENCHES OF THE TRIBUNAL AND NOT OF ANY HIGH COURT. THEREFORE THE JUDGEMENT OF THE HONBLE HIGH COURT IN THE CASE OF ST ATE BANK OF PATIALA (SUPRA) WHICH IS CONTRARY TO THE DECISIONS OF THE TRIBUNAL RELIED UPON BY THE ASSESSEE; AND BEING SOLITARY JUDG EMENT OF A HIGH COURT IS REQUIRED TO BE APPLIED HAVING REGARD TO THE ESTABLISHED NORMS OF JUDICIAL DISCIPLINE. FOR THE SAID REASON WE REFRAIN FROM DISCUSSING EACH OF THE DECISIONS OF THE TRIBUNAL RELIED BY THE ASSESSEE BEFORE US. 13. THE OTHER PLEA OF THE ASSESSEE WAS THAT THE CONT ENTS OF THE CBDT CIRCULAR DATED 26.11.2008 (SUPRA) IS CONTRARY TO THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT AND THERE FORE THE SAME SHOULD BE DISREGARDED. IN OUR VIEW THE FOLLOWING EXPLA NATION IN RESPECT OF SECTION 36(1)(VIIA) OF THE ACT RENDERED BY THE CBDT IN ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 7 CIRCULAR DATED 26.11.2008 (SUPRA) BY WAY OF PARA 2(III)(B ) AS UNDER :- (B) THE DEDUCTION FOR PROVISION FOR BAD AND DOUBTFU L DEBTS SHOULD BE RESTRICTED TO THE AMOUNT OF SUCH PRO VISION ACTUALLY CREATED IN THE BOOKS OF THE ASSESSEE IN THE RELEVANT YEAR OR THE AMOUNT CALCULATED AS PER PROVISIONS OF S ECTION 36(1)(VIIA) WHICHEVER IS LESS. IS IN LINE WITH THE INTERPRETATION OF THE SECTION REN DERED BY THE HONBLE PUNJAB & HARYANA HIGH COURT AND CANNOT BE SAI D TO BE CONTRARY TO THE PROVISIONS OF THE ACT. THEREFORE THE RELIANCE PLACED BY THE LOWER AUTHORITIES ON THE CBDT CIRCULAR DATED 2 6.11.2008 (SUPRA) CANNOT BE FAULTED. 14. BEFORE PARTING WE MAY REFER TO THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LT D. (SUPRA) RELIED UPON BY THE ASSESSEE AND ALSO THE DECISION OF OUR CO- ORDINATE BENCH IN THE CASE OF JAYSINGPUR UDGAON SAH AKARI BANK LTD. (SUPRA). WE HAVE CAREFULLY PERUSED THE SAID DECISIO N AND FOUND THAT THE ISSUE BEFORE THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. (SUPRA) WAS QUITE DIFFERE NT; AND IN ANY CASE NONE OF THE OBSERVATIONS OF THE HONBLE SUPR EME COURT RUN CONTRARY TO THE PRONOUNCEMENT OF THE HONBLE PUNJ AB & HARYANA HIGH COURT IN THE CASE OF STATE BANK OF PAT IALA (SUPRA) TO THE EFFECT THAT MAKING OF A PROVISION FOR BAD AND DO UBTFUL DEBTS EQUAL TO THE AMOUNT MENTIONED IN SECTION 36(1)(VIIA) OF THE ACT IS MUST FOR CLAIMING SUCH DEDUCTION. THEREFORE THE JUDGEM ENT OF THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN B ANK LTD. (SUPRA) DOES NOT HELP THE ASSESSEE IN THE PRESENT CO NTROVERSY BEFORE US. FURTHER EVEN IN THE CASE OF JAYSINGPUR U DGAON SAHAKARI BANK LTD. (SUPRA) THE TRIBUNAL HAS MERELY SE T-ASIDE THE MATTER FOR ADJUDICATION AFRESH BACK TO THE FILE OF TH E ASSESSING OFFICER AND IT DOES NOT CONTAIN ANY POSITIVE FINDING W ITH RESPECT TO THE CONTROVERSY BEFORE US. 15. IN THE RESULT CONSIDERING THE AFORESAID DISCUSS ION IN OUR VIEW THE ORDERS OF THE AUTHORITIES BELOW ON THIS ASP ECT ARE LIABLE TO BE UPHELD. WE HOLD SO. 8. WE FIND THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN SHRI MAHALAXMI CO-OP. BANK LTD. (SUPRA). IN THE FACTS OF THE CASE BEFORE US ALSO THE ASS ESSEE HAD NOT MADE A PROVISION IN ITS BOOKS OF ACCOUNT TO THE EXTENT O F DEDUCTION CLAIMED AND FOLLOWING THE SAME PARITY OF REASONING WE HOLD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM OF DEDUCTION UNDER SEC TION 36(1)(VIIA) OF THE ACT. UPHOLDING THE ORDER OF CIT(A) WE DISMISS THE G ROUND NO.1 RAISED BY THE ASSESSEE. ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 8 9. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE IS WIT H REGARD TO DISALLOWANCE OF RS.5 70 42 000/-. 10. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CREDITED A SUM OF RS.12 CRORES ON ACCOUNT OF EXCESS PROVISION FOR BAD & DOUBTFUL DEBTS. THE SAID AMOUNT WAS FURTHER REDUCED IN THE COMPUTATION OF TOTAL I NCOME ON ACCOUNT OF EXCESS PROVISION FOR BAD & DOUBTFUL DEBTS. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE EXPLANATION OF THE ASSESSEE WAS THAT IT WAS MAKING PROVISION FOR THE NON PERFORMING ASSETS (NPA) EVERY YEAR ON THE BASIS OF THE CRITERIA SPECIFIED IN PARA 9 OF TH E RBI DIRECTIONS 1998. THE ASSESSEE CLAIMS TO HAVE MADE THE C ALCULATION AS PER THE NORMS AND HAD MADE PROVISION FOR NPAS OR HAD R EVERSED THE EXCESS PROVISION. THE SAID PROVISION MADE FOR BAD & DOUBT FUL DEBTS AS PER ASSESSEE WAS NOT IN THE NATURE OF LIABILITY BUT WAS IN THE NATURE OF RESERVE MADE TO ASCERTAIN CORRECT PROFITABILITY AS PER RB I REGULATIONS. WHERE THE CLOSING BALANCE OF BAD & DOUBTFUL DEBTS RESERVE ACCOUNT WAS MORE THAN ITS OPENING BALANCE THEN DIFFERENCE WAS DEB ITED TO THE PROFIT & LOSS ACCOUNT AND ADDED BACK WHILE COMPUTING THE TOTAL INCOME UNDER THE INCOME TAX ACT AND VICE-VERSA DEDUCT ED FROM THE TOTAL INCOME. 11. DURING THE YEAR UNDER CONSIDERATION THE ASSESSING OFFICER NOT ED THAT THE ASSESSEE YEAR-WISE FROM ASSESSMENT YEARS 200 1-02 TO 2008- 09 HAD CLAIMED DEDUCTION ON ACCOUNT OF PROVISION FOR BAD & DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) OF THE ACT AT RS.27 57 17 780/- . THE ASSESSING OFFICER WAS OF THE VIEW THAT WHEN THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF PROVISION FOR BAD & DOUBTFUL DEBTS UNDER ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 9 SECTION 36(1)(VIIA) OF THE ACT THEN THE CONTENTION OF THE ASSE SSEE THAT IT HAD MADE PROVISION FOR BAD & DOUBTFUL DEBTS WHILE COMPUTING THE TOTA L INCOME AND HAD NOT CLAIMED THE DEDUCTION ON ACCOUNT OF THE SAME WAS FACTUALLY INCORRECT. THE ASSESSING OFFICER WAS OF THE V IEW THAT ONCE THE ASSESSEE HAD CLAIMED THE DEDUCTION ON ACCOUNT OF PROVISIONS THEN RECOVERY IN THAT ACCOUNT IS TO BE OFFERED FOR TAX IN THE YEAR UNDER CONSIDERATION AS THERE WAS EXCESS PROVISION FOR BAD & D OUBTFUL DEBTS AT RS.12 CRORES AND THE SAME WAS ADDED AS INCOME OF TH E ASSESSEE. THE CIT(A) TABULATED THE YEAR-WISE DETAILS OF PROVISIONS FOR BAD & DOUBTFUL DEBTS DEBITED TO THE PROFIT & LOSS ACCOUNT AND ALSO DEDUCTION CLAIMED UNDER SECTION 36(1)(VIIA) OF THE ACT RELATING TO ASSES SMENT YEARS 2001-02 TO 2008-09 AND OBSERVED THAT THE ASSE SSEE HAD MADE PROVISION FOR BAD & DOUBTFUL DEBTS AT RS.58 00 33 000/- WHER EAS THE ALLOWABLE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT WAS RS.27 57 17 780/-. AS PER THE CIT(A) THE DEDUCTION CLAIMED UNDER SECTION 36(1)(VIIA) OF THE ACT WAS TO BE ALLOWED AT 47.535% AND NOT ALLOWED AT 52.465% OF THE PROVISION MADE FOR BAD & DOUBTFUL DEBTS. IN VIEW THEREOF THE CIT(A) HELD THAT ON REVERSAL OF EXCESS PR OVISION OF BAD & DOUBTFUL DEBTS THE TAXABLE PROVISION WOULD WORK BE OUT TO 47.535% AND HENCE ON THE REVERSAL OF PROVISION OF EXCESS CLAIM OF B AD & DOUBTFUL DEBTS OF RS.12 CRORES RS.5 70 42 000/- IS TO BE TA XED IN THE HANDS OF THE ASSESSEE. THE CIT(A) THUS DELETED THE ADDIT ION TO THE EXTENT OF RS.6 29 58 000/- 12. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ADDITION OF R S.5.70 CRORES. HOWEVER NO APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE DELETION OF PART ADDITION. ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 10 13. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE POINTED OUT THAT THE PROVISIONS OF SECTION 41(1) OF THE ACT WERE DEEMING PROVISIONS AND THE ASSESSING OFFICER SHOULD HAVE CONCRETE EVIDENCE THAT THE SUM OF RS.12 CRORES WRITTEN BACK RELATES TO TH E AMOUNT ALLOWED AS EXPENDITURE. HOWEVER IN THE FACTS OF THE PRESE NT CASE THE ASSESSEE HAD MADE PROVISION FOR BAD & DOUBTFUL DEBTS AT ABOUT RS.58 CRORES BUT HAD BEEN ALLOWED THE SAID DEDUCTION UNDER SE CTION 36(1)(VIIA) OF THE ACT AT RS.27.57 CRORES ONLY OUT OF WHICH PA RT AMOUNT HAS BEEN WITHDRAWN. IN VIEW OF THE SAID FACTS NO ADDITION WAS POSSIBLE. 14. THE SECOND PLEA RAISED BY THE LEARNED AUTHORIZED REP RESENTATIVE WAS THAT IN THESE JUMBLED UP FACTS NO ADDITION WAS POSSIB LE. OUR ATTENTION WAS DRAWN TO THE TABLE REPRODUCED BY THE CI T(A) UNDER PARA 6.1 AT PAGE 5 OF THE APPELLATE ORDER AND IT WAS POINTED O UT THAT IN ASSESSMENT YEARS 2007-08 AND 2008-09 THE TOTAL PROVIS ION FOR BAD & DOUBTFUL DEBTS WAS AT RS.34.33 CRORES AGAINST WHICH THE A SSESSEE HAD RECEIVED THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT AT RS.15.68 CRORES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE FURTHER POINTED OUT THAT IN ORDER TO AVOID SUCH ISSUES FIRST IN FIRST OUT (FIFO) METHOD SHOULD BE FOLLOWED. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THA T WHERE THE ASSESSEE WAS HOLDS SHARES IN THE DEPOSITORY ACCOUNT / D-MAT ACCOUNT AND IN VIEW OF THE MERGING OF SHARES NO DISTINCT NUMBER OF SHARES WERE AVAILABLE AND FIFO METHOD IS APPLIED AS PER ACT AND SIMILARLY FIFO METHOD SHOULD HAVE BEEN APPLIED BY THE ASSESSING OFFICER. 15. ANOTHER PLEA RAISED BY THE LEARNED AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE WAS THAT UNDER THE PROVISIONS OF SECTION 7 2 OF THE ACT ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 11 THERE IS PROVISION FOR CARRY FORWARD OF LOSSES AND THOUGH IT DOES NOT TALK OF FIFO METHOD BUT WHILE ADJUDICATING THE ADJUSTMENT S OF BROUGHT FORWARD LOSSES HOWEVER FIFO METHOD IS APPLIED. I N CASE THE SAID METHOD IS TO BE APPLIED THEN APPROXIMATE DISALLOWANCE IF ANY CAN BE WORKED OUT BY THE ASSESSEE. WITHOUT PREJUDICE TO THE ABOVE MENTIONED ARGUMENTS IT WAS STATED BY THE LEARNED AUTHO RIZED REPRESENTATIVE FOR THE ASSESSEE THAT A SUM OF RS.5.43 CR ORES AND A SUM OF RS.6.16 CRORES EACH WERE NOT ALLOWED AS DEDUCTION UNDER SECTION 148 OF THE ACT AFTER PASSING OF THE PRESENT ASSESSMENT OR DER. 16. THE ASSESSEE HAS RAISED ALTERNATIVE PLEA BY WAY OF G ROUND NO.3 THAT IN CASE THE ACTUAL DEDUCTION ALLOWED IS CONSIDERED A T RS.15 97 23 883/- THEN THE RELIEF WORKED OUT TO RS.8 69 56 000/- INSTEAD OF RS.6 29 58 000/-. 17. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE PLACING RELIANCE ON THE ORDER OF CIT(A) POINTED OUT THAT NO SUCH CONTENTION OF FOLLOWING FIFO METHOD WAS RAISED BEFORE THE A SSESSING OFFICER. HOWEVER IT WAS ADMITTED BY THE LEARNED DEPARTMEN TAL REPRESENTATIVE FOR THE REVENUE THAT THE ASSESSEE IS AT LIBERTY TO RAISE OBJECTION. FURTHER RELIANCE WAS PLACED ON THE FINDINGS OF ASSESSING OFFICER AND THE DECISION OF CIT(A). 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD . THE ASSESSEE IS A CO-OPERATIVE BANK REGISTERED UNDER SECTIO N 9(1) OF THE MAHARASHTRA CO-OPERATIVE SOCIETY ACT 1960. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD MADE REVERSAL OF EXCESS PROVISION CREDITED IN THE PROFIT & LOSS ACCOUNT BY REDUCING THE SA ME FROM PROFITS WHILE COMPUTING THE TAXABLE INCOME. THE ASSESSEE H AD ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 12 CREDITED A SUM OF RS.12 CRORES ON ACCOUNT OF EXCESS PRO VISION FOR BAD & DOUBTFUL DEBTS TO THE PROFIT & LOSS ACCOUNT AND FURTHE R THE SAID AMOUNT WAS REDUCED FROM THE INCOME IN THE COMPUTATION O F TOTAL INCOME. THE CLAIM OF THE ASSESSEE BEFORE THE AUTHORITIES B ELOW WAS THAT THE SAID ADJUSTMENTS WERE MADE AS PER THE GUIDEL INES AND DIRECTIONS ISSUED BY THE RBI AND FURTHER THE AMOUNT WAS DEBITED TO THE PROVISION FOR BAD & DOUBTFUL DEBTS. HOWEVER AS AGAINS T THE CLAIM OF ASSESSEE THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE A CT WAS ALLOWED ON A LESSER FIGURE. THE DETAILS OF PROVISIONS DEBITE D TO THE PROFIT & LOSS ACCOUNT AND DEDUCTION CLAIM ALLOWED UNDER SE CTION 36(1)(VIIA) OF THE ACT WERE AS UNDER:- ASSTT. YEAR PROVISION FOR BAD & DOUBTFUL DEBTS DEBITED IN P & L ACCOUNT (AS SUBMITTED BY THE APPELLANT) DEDUCTION U/S 36(1)(VIIA) RS. (AS MENTIONED BY THE A.O. ON PAGE 5 OF THE ASSTT. ORDER. 2001-02 62635000 6 62 058 2002-03 39402000 7 23 020 2003-04 45389000 15 00 355 2004-05 57581000 5 43 29 400 2005-06 31617000 6 16 64 497 2006-07 -- -- 2007-08 153447000 7 66 15 100 2008-09 189962000 8 02 23 350 TOTAL 58 00 33 000 27 57 17 780 19. THE ASSESSEE HAD MADE PROVISION FOR BAD & DOUBTFUL DE BTS AT RS.58 00 33 000/- AGAINST WHICH THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT WAS ALLOWED AT RS.27 57 17 780/-. HOWEVE R THE DEDUCTION ALLOWED IN ASSESSMENT YEAR 2004-05 AT RS.5.43 C RORES AND IN ASSESSMENT YEAR 2005-06 AT RS.6.16 CRORES HAS BEEN WITHDRAWN BY ISSUE OF NOTICE FOR RE-ASSESSMENT UNDER SECTION 148 OF TH E ACT. AS PER THE ASSESSEE HENCE NO SUCH DEDUCTION IS DEEMED TO HAV E BEEN ALLOWED TO ASSESSEE. DURING THE YEAR UNDER CONSIDERATION THE A SSESSEE HAD CREDITED A SUM OF RS.12 CRORES ON ACCOUNT OF EXCESS PROVISION MADE FOR BAD & DOUBTFUL DEBTS TO ITS PROFIT & LOSS ACCOUNT. HOWEV ER THE SAID ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 13 AMOUNT WAS REDUCED FROM THE INCOME WHILE COMPUTING TOTAL INCOME FOR THE YEAR UNDER APPEAL. THE ISSUE RAISED BEFORE US IS WHETHER THE SAID EXCESS PROVISION MADE FOR BAD & DOUBTFUL DEBTS WHICH HAS BEEN REVERSED BY THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION IS TAXABLE IN THE HANDS OF THE ASSESSEE IN WHOLE OR IN PART. ADMITTEDLY THE ASSESSEE WAS MAKING PROVISION FOR BAD & DOUBTFUL DEBT S IN VIEW OF THE RBI GUIDELINES FROM YEAR TO YEAR AND DEBITING THE SAM E TO THE PROFIT & LOSS ACCOUNT. HOWEVER COMPLETE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT I.E. EQUAL TO THE PROVISION MADE ON THIS A CCOUNT HAS NOT BEEN ALLOWED TO THE ASSESSEE. THE ASSESSEE HA D PARTLY REVERSED THE PROVISION MADE ON ACCOUNT OF BAD & DOUBTFU L DEBTS TO THE EXTENT OF RS.12 CRORES. HOWEVER THE ASSESSEE IS NOT IN A POSITION TO FILE EVIDENCE AS TO THE YEAR TO WHICH SUCH WRITE BACK OF R S.12 CRORES RELATES. THE ASSESSING OFFICER HAD APPLIED THE DEEMING PRO VISIONS OF SECTION 41(1) OF THE ACT TO HOLD THAT THE AMOUNT WRITTEN BACK BY THE ASSESSEE RELATES TO THE AMOUNT ALLOWED AS EXPENDITURE A ND THE SAME IS TO BE TAXED IN THE HANDS OF THE ASSESSEE. THE CIT(A) H OWEVER APPLIED THE RATIO OF 47.535% I.E. THE RATIO OF DEDUCTION CLAIMED VIS-- VIS THE PROVISION MADE ON ACCOUNT OF BAD & DOUBTFUL DEBTS AND HE LD THAT A SUM OF RS.5.70 CRORES IS TAXABLE IN THE HANDS OF THE ASSE SSEE. IN THE ABSENCE OF THE DETAILS AVAILABLE AS TO THE YEAR TO WHICH SUCH WRITE BACK RELATES THE ISSUE IS TO BE DECIDED AS TO THE TAXABILITY OF SUCH WRITE BACK. THE PLEA OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR ASSESSEE IN THIS REGARD IS THAT PRINCIPLE OF FIFO BE APPLIED TO DETER MINE THE AMOUNT OF WRITE BACK VIS--VIS PROVISION MADE. 20. UNDER THE PROVISIONS OF SECTION 45(2A) OF THE ACT THE COST OF ACQUISITION AND THE PERIOD OF HOLDING ANY SECURITIES IN THE D EPOSITORY ACCOUNTS SHALL BE DETERMINED ON THE BASIS OF FIFO METHOD . IN OTHER ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 14 WORDS WHERE THE ASSESSEE IS HOLDING THE SHARES IN THE D EPOSITORY ACCOUNT I.E. D-MAT ACCOUNT THEN IN THE ABSENCE OF ANY D ISTINCTIVE NUMBER THERE IS MERGER OF THE SHARES ACQUIRED BY THE P ERSON FROM YEAR TO YEAR AND ON ITS SALE WHILE COMPUTING THE GAINS AR ISING ON THE SAID TRANSFER SECTION 45(2A) OF THE ACT PROVIDES THAT THE COST OF ACQUISITION AND THE PERIOD OF HOLDING OF SUCH SECURITIES IS TO BE DETERMINED ON THE BASIS OF FIFO METHOD. 21. SIMILAR PROPOSITION IN RESPECT OF CARRY FORWARD OF LOSSES OF DIFFERENT YEARS AND THEIR ADJUSTMENT ON THE BASIS OF THE FIFO METHOD IS RECOGNIZED BY SECTION 72 OF THE ACT. 22. THE ASSESSEE IN ASSESSMENT YEARS 2001-02 TO 2003 -04 HAD MADE PROVISION FOR BAD & DOUBTFUL DEBTS AT ABOUT RS.15 CR ORES AGAINST WHICH IT HAD BEEN ALLOWED DEDUCTION TO THE EXTENT OF RS.29 LACS. IN CASE THE PRINCIPLE OF FIFO METHOD BE APPLIED THEN THE CLA IM OF WRITE BACK OF RS.12 CRORES IS RELATABLE TO THE ASSESSMENT YEA RS 2001-02 TO 2003-04 SINCE AGAINST THE PROVISION FOR BAD & DOUBTFUL DEB TS AT RS.15 CRORES ONLY A SUM OF RS.29 LACS HAS BEEN ALLOWED AS DEDU CTION UNDER SECTION 36(1)(VIIA) OF THE ACT. IN ASSESSMENT YEARS 2003-04 AND 2004- 05 THOUGH INITIALLY THE ASSESSEE WAS ALLOWED DEDUCTION UN DER SECTION 36(1)(VIIA) OF THE ACT AT RS.5.43 CRORES AND RS.6.16 CRORES RE SPECTIVELY BUT THE SAME HAS BEEN WITHDRAWN AFTER ISSUE OF NOTICE FO R RE- ASSESSMENT UNDER SECTION 148 OF THE ACT. THE PERUSAL O F THE DETAILS FURTHER REFLECT THAT IN ASSESSMENT YEARS 2007-08 AND 20 08-09 THE ASSESSEE HAD MADE PROVISION FOR BAD & DOUBTFUL DEBTS AT RS.34.33 CRORES AGAINST WHICH IT HAD CLAIMED THE DEDUCTION UNDER S ECTION 36(1)(VIIA) OF THE ACT AT RS.15.68 CRORES IMPLYING THEREBY THA T THE PROVISION MADE BY THE ASSESSEE FROM YEAR TO YEAR ON AC COUNT OF BAD & ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 15 DOUBTFUL DEBTS WAS MUCH HIGHER THAN THE DEDUCTION ALLOWED IN THE HANDS OF THE ASSESSEE. THE PROVISION FOR BAD & DOUBTFUL D EBTS HAS BEEN MADE IN THE BOOKS OF ACCOUNT AS PER RBI NORMS BUT THE SAME HA S BEEN ALLOWED AS A DEDUCTION IN VIEW OF THE PROVISIONS OF THE ACT I.E. SECTION 36(1)(VIIA) OF THE ACT. THE DEDUCTION IS ALLOWABLE IN TH E HANDS OF THE ASSESSEE BEING RELATABLE TO AN AMOUNT NOT EXCEED ING 7 % OF THE TOTAL INCOME COMPUTED BEFORE ALLOWING ANY DEDUCTION UN DER THE SAID CLAUSE OR UNDER CHAPTER VIA OF THE ACT AND AN AMO UNT NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNE R. IN OTHER WORDS THE PROVISION MADE FOR BAD & DOUBTFUL DEBTS IS ON A DIFFERENT PLATFORM THAN THE DEDUCTION ALLOWED TO THE ASSESSEE BUT IN BOTH THE SCENARIOS THE ITEMS OR THE PARTIES ARE NOT IDENTIFIED. FUR THER THE ASSESSEE HAD REVERSED AND WRITTEN BACK A SUM OF RS.12 CRORES TO THE PROVISION FOR BAD & DOUBTFUL DEBTS AGAINST WHICH IT HAS NO DETAILS. IN THE CIRCUMSTANCES WHERE THE ASSESSEE HAS FAILED TO IDENT IFY THE BAD & DOUBTFUL DEBTS WHICH IT HAS WRITTEN BACK WE FIND MERIT IN TH E ORDER OF THE CIT(A) THAT THE TOTAL AMOUNT REVERSED BACK IS NOT T O BE ALLOWED AS A DEDUCTION IN THE HANDS OF THE ASSESSEE. HOWEVER THE PERCENTAGE APPLIED BY THE CIT(A) FOR WORKING OUT THE DISALLOWANCE CANNO T BE APPLIED SINCE THE DEDUCTION ALLOWED FOR ASSESSMENT YEARS 2 004-05 AND 2005-06 HAS BEEN REVERSED. IN THE ENTIRETY OF THE FACT S AND CIRCUMSTANCES WE DIRECT THE ASSESSING OFFICER TO RE-COMPU TE THE DISALLOWANCE IN THE HANDS OF THE ASSESSEE ON THE BASIS OF THE PROVISION MADE ON ACCOUNT OF BAD & DOUBTFUL DEBTS FROM YEAR TO YEAR AND THE DEDUCTION ALLOWED UNDER SECTION 36(1)(VIIA) OF THE ACT. 23. THE ASSESSEE BY WAY OF GROUND NO.3 HAS RAISED AN A LTERNATE PLEA THAT THE DEDUCTION RELATING TO WRITE BACK NOW WORKS OUT TO ITA NO.2414/PN/2012 M/S. THE JALNA DIST CENTRAL CO OP BANK LTD. 16 RS.8 69 56 000/- INSTEAD OF RS.6 29 58 000/- WORKED OUT BY THE CIT(A). WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE REL IEF IN THE HANDS OF THE ASSESSEE AFTER AFFORDING REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE. THE GROUNDS OF APPEAL NOS.2 AND 3 AR E THUS PARTLY ALLOWED. 24. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF NOVEMBER 2014. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 26 TH NOVEMBER 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A) AURANGABAD; 4) THE CIT AURANGABAD; 5) THE DR A BENCH I.T.A.T. PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T. PUNE