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2024 (6) TMI 1020 - AT - Income TaxAddition u/s 36(1)(viia)(d) - contingent provision against standard assets - AO disallowed the said amount on the ground that it was a contingent unascertained liability and hence not allowable as deduction - as argued CIT(A) erred not appreciating the contention of the appellant that the provision @0.40% made on standard assets was as per the as per the NPA provisions norms and guidelines issued by Reserve Bank of India - HELD THAT - AR filed additional evidence. Ld.AR submitted that Finance Act 2016 has introduced section 36(1)(viia)(d) w.e.f. 01.04.2017. As per said provision NBFC s are allowed to make provision for bad and doubtful debts of an amount not exceeding 5% of the total income. Ld.AR submitted that both ld.CIT(A) and AO failed to consider the provisions of the Act introduced w.e.f 01.04.2017. On perusal of the assessment order and ld.CIT(A) s order it is observed that both these authorities have not considered the section 36(1)(viia)(d) introduced w.e.f. 01.04.2017. Since AO and CIT(A) failed to consider the provisions of 36(1)(viia)(d) and assessee had filed additional evidence to substantiate this claim in the interest of substantial justice we set- aside the addition made by AO to the Assessing Officer for denovo adjudication. Addition u/s 68 - assessee has received cash in old currency during the demonetization period - as submitted cash accepted during the demonetization period was towards the instalment of outstanding loan account of the borrower - HELD THAT - To invoke section 68 of the Act the AO has to prove that assessee failed to file identity of the depositors genuineness of the transaction and creditworthiness. In this case the assessee had submitted the names of the persons from whom cash was received during the demonetization period in the form of demonetized currency. Assessee also submitted that assessee maintains all KYC documents of all these persons. The AO had not asked the assessee to produce the said KYC Documents. Rather AO has not challenged the identity of the depositors genuineness of the transactions and creditworthiness of the depositors. In these facts and circumstances of the case we are of the opinion that no addition can be made u/s 68 of the Act. See M/s. Bhagur Urban Credit Co-operative Society Ltd. 2023 (1) TMI 1384 - ITAT PUNE - Decided in favour of assessee.
Issues involved:
The issues involved in the judgment are: 1. Addition of Rs. 6,66,151/- made under section 143(3) of the Income Tax Act, 1961. 2. Addition of Rs. 12,34,000/- made under section 68 of the Act. Issue 1: Addition of Rs. 6,66,151/- The appellant raised concerns regarding the addition of Rs. 6,66,151/-, arguing that the provision made on standard assets was in line with NPA provisions norms issued by RBI. The Assessing Officer disallowed this amount as a contingent unascertained liability. The CIT(A) upheld this decision. However, the appellant submitted additional evidence related to Section 36(1)(viia)(d) introduced in the Finance Act, 2016, allowing NBFCs to make provisions for bad debts. As the authorities failed to consider this provision, the Tribunal set aside the addition for reassessment, granting relief to the appellant. Issue 2: Addition of Rs. 12,34,000/- under section 68 The appellant received Rs. 12,34,000/- in old currency during the demonetization period, which the AO added under section 68 of the Act. The AO contended that as an NBFC, the appellant was not authorized to accept demonetized currency. However, the appellant argued that the cash received was from customers towards loan installments, supported by KYC documents. The Tribunal noted that the AO did not challenge the identity, genuineness, or creditworthiness of the depositors. Citing a similar ITAT Pune Bench case, the Tribunal directed the AO to delete the addition under section 68. Consequently, the Tribunal allowed the appeal partly, dismissing a general ground.
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