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TMI Blog2023 (8) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... st one is factually incorrect and in the second observation, AO has not visualize the provision u/s 36(viia) - He has not pinpointed, which provision has been made illegally. Assessee being a non-scheduled Bank is entitled to make provision. If there were some error that has not been demonstrated in the reason. Therefore, AO failed to pinpoint the failure at the end of the assessee to disclose all material facts fully and truly, which led the escapement of income from taxation. Apart from the above, it is further observed that under the original assessment, loss was determined at Rs. 1,73,54,450/- In the re-assessment order, this loss has been reduced to Rs. 1,05,47,793/-. The only fact is that loss has been reduced. The loss has not claimed as a carry forward. There is no impact on taxation. It is just an academic exercise undertaken by the ld. Assessing Officer. Had the AO verified subsequent return, then, he would have dropped the proceedings. On going through all these aspects, we are of the view that reopening is not sustainable. Decided in favour of assessee. - Shri Rajpal Yadav, Vice-President And Shri Rajesh Kumar, Accountant Member For the Assessee : Shri M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of carry forward of unabsorbed business loss arrived at after passing of order U/s 143(3). Further examination of accounts and its schedule annexure reveals that the assessee has made a provisions for NPA of Rs. 68,06,656.42 before claiming deduction. As the case was assessed at loss, NPA provisions was made is not allowable and hence illegal and out of purview of the IT Act. More so, on examination of the accounts of the cooperative bank - assessee it reveals that interest income of Rs. 95,84,258.41 has been shown from Investment deposits with banks and other institutions. Total such deposits/cash investment has been shown in the balance sheet as on 31/03/2006 is Rs. 19,58,24,668.37. and the same deposits/investments are not related to the business activities of the Co-Operative society (herein called the assessee). As the assesee has not shown details/breakup of such interest income, the shown interest income is taken as interest income from surplus fund invested /deposited in banks or in Govt. Securities. Hon ble Supreme court in the case of M/s The Totgars Co-Operative Sale society Limited -in SLP-C. No.7572 of 2009 held that Interest income from surplus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces it is totally baseless that a coop. bank cannot make provision for bad debts. (9) That the Honorable ACIT Circle 3 cited the case M/s Totgar s Co-Op sale society Ltd case of the Apex Court but never applied the above case in the assessment proceeding. In the above case it was held that income from surplus fund not immediately required for business as income from other source. But the Learned ACIT never applied the above ruling in the whole assessment and only the provision for bad debts was disallowed, which was legally made. So the reason for reopening the above case as per above decision was also failed The bank collected deposit from public on interest and make investment and loans to earn interest. There is no surplus fund. If it does not earn interest how it will be able to pay interest to its deposits. (10) That proviso to section 147 provides that where an assessment under sub-section 3 of section 143 has been made no action shall be taken under section 147 after expiry of four years from the end of the relevant assessment unless any income chargeable to tax has escaped assessment by the reasons of failure on the part of the assessee to make return under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the assessee did not claim carry forward of loss in the income-tax return for the assessment year 2007-08 and only shown the loss for A.Y. 2007-08. He drew our attention towards the copy of the return for A.Y. 2007-08 available on record. Therefore, according to him, the first-fold of reasoning does not survive for the formation of belief that income has escaped assessment. 8. With regard to the second-fold of reasoning assigned by the ld. Assessing Officer, he submitted that ld. Assessing Officer has observed that assessee is a non-scheduled Bank and it has made a provision for NPA of Rs. 68,06,656/- before claiming deduction. The ld. Assessing Officer observed that the income of the assessee was assessed at a loss, the NPA could not be made and not allowable, hence illegal. The stand of the assessee is that being a Cooperative Bank, it is eligible to make a provision for bad and doubtful debts under section 36(viia) of the Act and this aspect was already gone into by the ld. Assessing officer in the assessment order passed under section 143(3). Similarly ld. Counsel for the assessee pointed out that all other aspects enumerated in the reasons have been taken into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as led to escapement of income. The ld. Counsel for the assessee has demonstrated that two-fold of reasoning assigned by ld. Assessing Officer, namely that assessee has claimed carry forward of losses, i.e. the first-fold of reasoning and the second fold of reasoning is that a provision for NPA has been made which is not allowable in case loss is concern, the first one is factually incorrect and in the second observation, ld. Assessing Officer has not visualize the provision under section 36(viia) of the Act. He has not pinpointed, which provision has been made illegally. The assessee being a non-scheduled Bank is entitled to make provision. If there were some error that has not been demonstrated in the reason. Therefore, ld. Assessing Officer failed to pinpoint the failure at the end of the assessee to disclose all material facts fully and truly, which led the escapement of income from taxation. Apart from the above, it is further observed that under the original assessment, loss was determined at Rs. 1,73,54,450/- In the re-assessment order, this loss has been reduced to Rs. 1,05,47,793/-. The only fact is that loss has been reduced. The loss has not claimed as a carry forward. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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