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TMI Blog2015 (9) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee there is no objection raised regarding this specific finding of CIT and hence, we find no infirmity in the order of the CIT because if the assessment order has been passed by the A.O. without enquiry, the same is erroneous. Regarding this aspect that it is prejudicial to the interest of revenue or not, we find that the AO has allowed deduction of ₹ 2.84 Crores claimed by the assessee in the revised return of income as business loss and as per written submissions of the learned AR of the assessee as reproduced above, the assessee has not debited the same in the Profit & Loss Account but the same was partly out of Statutory Reserves and partly out of Opening Credit balance of Profit & Loss Account. Generally business loss is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The learned CIT-I has treated the Assessment order dated 30/12/2010 passed by the ACIT, Range-2, Lucknow as erroneous and prejudicial to the interest of revenue due to following reasons. i. No copy of revised balance sheet and profit loss account was called for by the assessing officer. ii. The assessing officer did not examine the claim of deduction in accordance with the provision of section 36 (1)(viia) of the I.T. Act, 1961. iii. According to learned CIT, as per provision of section 36 (1)(viia) of the I.T. Act, 1961 in the case of the bank the amount of deduction shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 36 (l)(viia) of the I.T. Act, 1961 is not applicable. However the position of Statutory Reserve has been clarified in para 9 and 10 below. 4. The amount of ₹ 2,84,00,000/- should have been adjusted against the statutory reserve. During the financial year 2007-08 relevant to AY 2008-09, adjustment of ₹ 2,84,00,000/- has been done to the extent of ₹ 2,04,85,015.95 out of Statutory reserve and the remaining 7 balancing amount of ₹ 79,14,984.05 was adjusted out of the opening credit balance of Profit loss A/c F.Y.2005-06 and 2006-07. 3. The order of learned CIT is obviously erroneous as the learned CIT has mistaken the claim of business los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve bank takes deposits mainly from its members and it can give loans only to its members. The nature of banking business activities carried on by the assessee is such that the assessee bank has to keep its funds in other banks so that it earns sufficient income to pay interest on members deposits because loans and advances can be given only to members and deposits are much more than advances. The assessee bank can keep its surplus fund in deposits in banks and government securities only and not in any other company or institution. As such the assessee bank had to keep money in deposits in other banks. Such deposits were kept by the assessee in U.P. Cooperative Bank Limited and City Co-operative Bank. The City Cooperative Bank unfortunately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epares its accounts as per the format prescribed under the Banking Companies Act, 1949. 12. The adjustment of ₹ 2,84.00,000/- was done in the financial statements and hence the question of revised financial statements, i.e., revised balance sheet and profit loss account does not arise. The learned CIT-1 failed to appreciate that the amount under the head 'NPA Reserve' in the Balance sheet as on 31-03-2007 was ₹ 70,71,707.75 whereas on 31-03-2008 it was ₹ 3,54,71,707.75. Thus the amount of NPA was credited i.e. there was an increase of ₹ 2,84,00,000/- during the financial year 2007-08 out of Statutory reserve amounting to ₹ 2,04,85,015.95 and the remaining balancing amount of ₹ 79,14,984.05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 5. This is by now a settled position of law that if the assessment order is passed by the A.O. without enquiry or without application of mind, the assessment order is erroneous and prejudicial to the interest of the revenue and in that situation; the CIT gets the jurisdiction to pass revisionary order u/s 263. Learned CIT has observed in Para 3.1 of his order that it would be factually incorrect to hold that the AO made the assessment after enquiry and the order of the AO is found to have been passed without enquiry. In the written submissions of the learned AR of the assessee as reproduced above, there is no objection raised regarding this specific finding of CIT and hence, we find no infirmity in the order of the CIT because if th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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