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TMI Blog2025 (3) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same by the assessee is bad in law.
AO and that of CIT(A) have erred in making addition of interest accrued on NPA based on the foot note shown in the balance sheet of the assessee and hence we set aside the order of the ld.CIT(A) by allowing the grounds raised by the assessee. Thus, we direct the AO to delete the addition of accrued interest on NPA and recompute the income of the assessee. Decided in favour of the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... w of Profit & Loss Account. It should be included in the Profit and Loss Account invariably. As such the interest accrued to member loan of 18,76,884/- and overdue interest of 1,00,16,535 are added to the income returned by the assessee. Likewise, an amount of 1,30,110/- is also added back to the income returned by the assessee in the light of section 40(a)(ii) of the Income Tax Act, as the said expenditure i.e. income tax interest due is not admissible expenditure. Based on the above, the assessment is completed as under:- Income assessed as per original order u/s 143(3) - 21,45,820 Add : Addition made towards. 1. Over due ineptest - 1,00,16,535 2. Accrued Interest - 18,76,894 3. Rent, Taxes and Insurance disallowed 4. Under Sec. 40(a)(ii) - 1,30,110 Total income assessable 1,41,69,359...." Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A), NFAC, Delhi. 6. Since, the assessee did not respond to any of the notices issued by the Ld.CIT(A) from 25.01.2021 to 21.09.2023, the Ld.CIT(A) passed an order dated 06.10.2023 by confirming the addition made by the AO by dismissing the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars). In the final assessment order, no reason is given why the case is taken up for reassessment for the second time. The assessing officer has picked up figures disclosed in the Balance Sheet and Profit and Loss account relating to accrued interest on NPA Loans to Members & other parties and added the same as Income on some incorrect reasoning and without any fresh tangible material. The ld.AR relied on the following judicial precedents in support of his argument on reopening of assessment was bad in law. - Dy. Commissioner of Income Tax vs. Royal Palms India Ltd and vice versa 2016(6) TNMI 105, the Hon'ble ITAT Mumbai - Dy. Commissioner of Income Tax Vs. Gujarat State Fertilizer and Chemicals Ltd 2015(9) TMI 748 - Gujarat High Court 10. Further, the ld.AR submitted that the assessee being a Co-op Bank, as per RBI guidelines certain loan accounts are classified as NPA accounts and interest should not be charged and accounted on NPA Loans. As per co-operative accounting practice, the interest accrued on NPA Loans are accounted and shown as contra entries on the Asset side and Liability side of the Balance Sheet and not taken to Profit and Loss Account. It is the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit and that as per Hon'ble Supreme Court decision in UCO bank case interest on sticky advances are to be recognised as income only when actually received. c) Bombay high court based on Gujarat High Decision & Punjab & Haryana High Court Decisions held that even though the amendment of section 43D is not retrospective, it is curative in nature. THE PR. COMMISSIONER OF INCOME TAX-6, PUNE VERSUS THE SOLAPUR DISTRICT CENTRAL COOP. BANK LTD., AND. THE LAXMI COOPERATIVE BANK LTD. 2019 (2) TMI 238 - BOMBAY HIGH COURT. d) The ITAT PUNE has held in the case of HE NANDED DISTRICT CENTRAL CO-OP. BANK LTD. VERSUS DY. COMMISSIONER OF INCOME TAX [2015] 37 ITR (Trib) 532 (ITAT [Pune]) 2014 (10) TIMI 613 - ITAT PUNE, that The assessee is a cooperative bank and it is not in dispute that it is also governed by the Reserve Bank of India - the directions with regard to the prudential norms issued by the Reserve Bank of India are equally applicable to the assessee as it is applicable to the companies registered under the Companies Act - as decided in M/s Southern Technologies Ltd. Versus Joint Commnr. of Income Tax, Coimbatore [2010 (1) TMI 5 - SUPREME COURT OF INDIA] - the provision of 45Q of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out crediting the same to the Profit and loss account. These amounts are need to be credited to the Profit and loss account only on receipt basis. The AO and the of ld.CIT(A) have made an addition of the accrued interest on NPA for the A.Y.2008-09 stating that income tax law does not allow exemption of the same. 16. In relation to the present case, it is pertinent to note the following judicial precedents have held that section 43D of the Act cannot override the provisions of the RBI Act and hence the levy tax on accrued interest without realization of the same by the assessee is bad in law. a) THE PRINCIPAL COMMISSIONER OF INCOME TAX-3, LUDHIANA VERSUS THE LUDHIANA CENTRAL CO-OP. BANK LTD., LUDHIANA, 2018 (11) TMI 442 - PUNJAB AND HARYANA HIGH COURT b) The ITAT Ahmedabad in KARNAVATI CO-OP. BANK LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11 [2012] 14 ITR 175, [2012] 134 ITD 486, [2012] 144 TTJ 769 c) THE PR. COMMISSIONER OF INCOME TAX-6, PUNE VERSUS THE SOLAPUR DISTRICT CENTRAL COOP. BANK LTD., AND. THE LAXMI COOPERATIVE BANK LTD. 2019 (2) TMI 238 - BOMBAY HIGH COURT. d) THE NANDED DISTRICT CENTRAL CO-OP. BANK LTD. VERSUS DY. COMMISSIONER OF INCOME TAX [2015] 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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