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TMI Blog2017 (5) TMI 1611X X X X Extracts X X X X X X X X Extracts X X X X ..... or before due date before filing the return of income should be allowed as deduction. As far as direction of CIT to the AO to re-examine and reverify the contingencies liability of ₹ 2,55,66,000/- included in the provision under contingencies debited in profit and loss account, the ld. Counsel did not press the relevant ground of appeal and was agreeable for the AO making an enquiry on this aspect in the set aside proceedings. Hence this issue is decided against the assessee - Appeal decided partly in favour of assessee - I.T.A No. 877/Kol/2015 - - - Dated:- 12-5-2017 - Hon ble Sri N.V.Vasudevan, JM Shri M.Balaganesh, AM For the Appellant : Shri Soumitra Choudhury, Advocate For the Respondent : Shri G.Mallikarjuna, CIT(DR) ORDER Per N.V.Vasudevan, JM This is an appeal by the Assessee against the order dated 30.03.2015 of CITKol- 14, Kolkata passed u/s 263 of the Income Tax Act, 1961 (Act.). 2. The Assessee is a cooperative bank. For A.Y.2010-11 the assessee filed return of income disclosing total income of Rs.Nil. The assessment was taken up for scrutiny by the AO. The assessee in response to the notice u/s 142(1) of the Act dated 08.01.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or F.Y.2009-10 and was required to be added to the total income of the assessee. But A.O. failed to do so. (ii) As per Point No.6.2 of the Notes on Account (Schedule-17) the assessee provided ₹ 1,30,00,000/- for meeting of liability of leave encashment on superannuation during the F.Y.2009-10. As per provision of Section 43B of the I. T. Act, deduction for leave encashment is allowable only on payment basis. Therefore, provision of ₹ 1,30,00,000/- for leave encashment liability were required to be disallowed and added to the income. But A.O. failed to do so. (iii) Further, it is also noticed from (Schedule-12) of Balance Sheet that there was contingent liability of ₹ 2,55,66,000/- included in the provision and contingencies, debited in P L A/c. The contingent liability is not an allowable expenditure for income tax purpose and it was required to be disallowed and added to the total income. But A.O. failed to do so. 5. A show cause notice dated 14.07.2011 was issued to the assesee on the above issues. The assessee in reply pointed out that :- a) That provision contingencies included provision of ₹ 25,57,00,000/- on account of arrear payment d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to the bank. As such, the quantum of arrear wage was yet to be implemented/negotiated in the Co-operative Bank. Hence, liability of arrear payment was not accrued or ascertained for the financial year 2009-10. In course of assessment proceedings, A.O. did not verify the issue and take action accordingly. (ii) As per notes on Account, though the assessee bank was valuing its leave encashment liability on cash basis, it provided ₹ 1,30,00,000/- for meeting its liability of leave encashment on superannuation during F. Y. 2009-10. And as per submission filed during the course of proceedings u/s. 263 of the 1. T. Act, such payment was made during the F.Y. 2010-11 relevant to the A.Y. 2011-12. As per provision of section 43B of the 1. T. Act, deduction for leave encashment is allowable only on payment basis. In course of assessment proceedings, A.O. did not verify the quantum and period of actual payment made in this regard and take action accordingly. (iii) As per Balance Sheet, a contingent liability of ₹ 2,55,66,000/- was included in 'Provision Contingencies' which was debited in the Profit Loss account. The contingent liability is not an allowable ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al No.2218 of 1999 in the case of South Malabar Gramin Bank vs Co-ord. committee of S.M.G.B.Empl. Union Ors it has been held that there should be a parity between the employees of the Commercial Banks and the employees of the Regional Rural banks that as and when the pay structure of the employees of the nationalized banks got revised on the basis of any bipartite settlement, the Union Government should take a decision so far as the employees of the Regional Rural Banks are concerned within a reasonable time so that the parity could be maintained. It was the submission that in the light of the aforesaid circumstances prevailing in the case of the assessee the action of the AO in allowing the claim of the assessee for deduction on account of provision and contingent payment due to wage revision was a possible view and no fault could be found in the order of AO. It was his further submission that the AO has made due enquiries before completing the assessment on these aspects. Therefore exercising of jurisdiction by CIT u/s 263 of the Act on the ground that the AO before completing the assessment failed to make proper and adequate enquiries on this issue is untenable. 9. As far a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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