M/S. ICICI BANK LTD, MUMBAI V. PR.CIT-2, MUMBAI

ITA 1027/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2699 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2013-2014
• Appeal Filed On: 22-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AWUNGSHI GIMSON
• Keywords: Business income; Revision of order; Depreciation; Opportunity of being heard; Bad and doubtful debts; Right to appeal; Revised return
• Section: 143(3); 115JB; 263; 28; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.1027/M/2018 ASSESSMENT YEAR: 2013-14 M/S. ICICI BANK LTD., ICICI BANK TOWERS, NORTH EAST WING, GROUND FLOOR, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 034 PAN: AAACI 1195H VS. PR. CIT -2, ROOM NO.344, 3 RD FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : MS. AARTI VISSANJI, A.R. REVENUE BY : SHRI AWUNGSHI GIMSON, D.R. DATE OF HEARING : 09.01.2019 DATE OF PRONOUNCEMENT : 19.02.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 29.12.2017 OF THE PR. COMMI SSIONER OF INCOME TAX [HEREINAFTER REFERRED TO AS THE PR. CIT] RELEVANT TO ASSESSMENT YEAR 2013-14. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSMENT WAS F RAMED UNDER SECTION 143(3) VIDE ORDER DATED 23.01.2017 AS SESSING THE TOTAL INCOME AT RS.11924.75 CRORES AS AGAINST RS.8 ,570.52 CRORES. THEREAFTER, THE LD. PR. CIT ISSUED A SHOW CAUSE NOTICE U/S 263 OF THE ACT DATED 29.11.2017 BY EXERCISING THE REVISIONARY JURISDICTION UNDER SECTION 263 PROPOSIN G TO REVISE ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 2 THE ASSESSMENT ORDER. THE SAID SHOW CAUSE NOTICE I S REPRODUCED AS UNDER: SUB: SHOW CAUSE NOTICE U/S 263 OF THE INCOME TAX AC T, 1961 FOR A.Y. 2013-14-REG. KINDLY REFER TO THE SUBJECT CAPTIONED ABOVE. 2. IN THIS CASE THE ASSESSEE FILED ITS RETURN OF IN COME FOR A.Y. 2013-14 ON 29.11.2013 DECLARING TOTAL INCOME AT RS. 8582,23,14 ,680/-. ASSESSEE FILED REVISED RETURN OF INCOME ON 31.3.2015 DECLARING INCOME AT R S. 8570,52,53.270/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS. THE ASSESSMENT U/S 143(3) R.W.S. 144C(3) OF THE ACT WAS COMPLETED ON 2 3.1.2017 DETERMINING TOTAL INCOME AT RS. 11924,75,81,4297- UNDER NORMAL PROVIS IONS AND RS. 11035,78,82,068/-U/S 115JB OF THE ACT.-. 3. ON EXAMINATION OF RECORDS, IT IS OBSERVED THAT T HE ASSESSMENT ORDER DATED 23.1.2017, PASSED BY THE ASSESSING OFFICER IS ERRON EOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE DUE TO THE FOLLOWING REASONS:- (I) IN STATEMENT-17 OF COMPUTATION- THE ASSESSEE HAS SHOWN BAD DEBTS OF RS.1113,01,90,428/- FROM CREDIT CARD BUSINESS AS BA D DEBTS U/S 36(1)(VII) OF THE IT ACT, 1961. DEDUCTION CANNOT BE CLAIMED FOR B AD DEBT UNLESS: A. SUCH AMOUNT HAS BEEN TAKEN INTO ACCOUNT IN COMPU TING THE INCOME IN THIS PREVIOUS YEAR OR AN EARLIER PREVIOUS YEAR OR B. REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY LENDING THE ASSESSEE IS A BANKING COMPANY AND CREDIT CARD B USINESS IS DIFFERENT FROM BANKING BUSINESS IN THAT- THE BANKING REGULATION AC T 1949 DEFINES BANKING AS; 'BANKING' MEANS THE ACCEPTING, FOR THE PURPOSE OF L ENDING OR INVESTMENT, OF DEPOSITS OF MONEY FROM THE PUBLIC, REPAYABLE ON DEM AND OR OTHERWISE, AND WITHDRAWAL BY CHEQUE, DRAFT, ORDER OR OTHERWISE; A CREDIT CARD IS ESSENTIALLY A PAYMENT CARD ISSUED TO USERS (CARDHOLDERS) TO ENABLE THE CARDHOLDER TO PAY A MERCHANT FOR GOODS A ND SERVICES BASED ON THE CARDHOLDER'S PROMISE TO THE CARD ISSUER TO PAY THEM FOR THE AMOUNTS SO PAID. THIS IS A PAYMENT SERVICE AND NOT A BUSINESS OF BANKING OR MONEY LENDING AS DEFINED IN THE BANKING REGULATION ACT 19 49 - THE CARD ISSUER (ASSESSEE IN THIS CASE) EARNS A SERVICE FEE AND IN NOT-SO-REGULAR CASES WHEN THE CARDHOLDER DEFAULTS, A PENAL INTEREST IS CHARGE D ON THE CARDHOLDER FOR NOT HONORING HIS PROMISE TO THE CARD ISSUER. IN VIE W OF THE ABOVE - THE BAD DEBT CLAIM OF CREDIT CARD BUSINESS FAILS ON BOTH RE STRICTIONS IMPOSED IN 36(2)(I) ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 3 A. THE CREDIT CARD BAD DEBTS WERE NEVER TAKEN INTO ACCOUNT FOR COMPUTING INCOME AND B. THIS DOES NOT REPRESENT MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKING THEREFORE, THIS AMOUNT DOES NOT QUALIFY TO BE CLAIM ED U/S 36(1)(VII) OF THE IT ACT, 1961. AN AMOUNT OF RS.1113,01,90,428/- FROM CR EDIT CARD BUSINESS HAS BEEN ALLOWED AS BAD DEBTS WHICH HAS RENDERED THE AS SESSMENT ORDER DATED 23.1.2017 ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. (II) IN STATEMENT 20 OF COMPUTATION- THE ASSESSEE C LAIMED AN AMOUNT OF RS.710,78,15,170/- AS SPECIAL RESERVE, IN THE WORKI NG OF SPECIAL RESERVE, THE ASSESSEE HAS SET OFF INTEREST COST AMOUNTING TO RS. 300,91,53,9317- AGAINST NON-FUND BASED INCOME LIKE GAINS IN TRADING, COMMIS SION ETC. ARBITRARILY AT 80% OF INCOME FROM GAINS IN TRADING. THIS HAS THE E FFECT OF INCREASING INCOME FROM FINANCE BUSINESS. FURTHER, ON THIS INCREASED INCOME FROM FINANCE BUSI NESS 45.41% HAS BEEN CLAIMED AS INCOME FROM LONG TERMS FINANCE ARBITRARI LY. THIS HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER AND WHETHER THIS IS INDEED INCOME FROM ELIGIBLE LONG TERM FINANCE BUSINESS HAS NOT BEEN VE RIFIED. IT IS APPARENT THAT APART FROM THIS ARBITRARY CALCU LATION THERE IS NO ACCOUNT OF HOW THE PROFIT DERIVED FROM PROVIDING LONG-TERM FIN ANCE FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT, DEVELOPMENT OF INFRASTRUC TURE FACILITY IN INDIA, OR DEVELOPMENT OF HOUSING IN INDIA HAS BEEN ARRIVED AT . THEREFORE, THE WORKING PROVIDED FOR CALCULATION OF SPECIAL RESERVE U/S 36(1)(VIII) IS ERRONEOUS. ALSO, ASSESSEE HAS SET OF F INTEREST COST AMOUNTING TO RS.300,91,53.931/-AGAINST NON-FUND BASED INCOME LIK E GAINS IN TRADING, COMMISSION ETC. ARBITRARILY AT 80% OF INCOME FROM G AINS IN TRADING TO ARTIFICIALLY INCREASE INCOME FROM FINANCE BUSINESS WHICH IN-TUM HAS THE EFFECT OF INCREASING THE AMOUNT FOR SPECIAL RESERVE . THEREFORE, THE COMPUTATION HAS RENDERED THE ASSESSMENT ORDER DATED 23.1.2017 ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. (III) THE ASSESSEE HAS RAISED AN AMOUNT OF RS.3142, 30,08,000/- AS PERPETUAL DEBT INSTRUMENTS. PERPETUAL BOND IS A BOND WITH NO MATURITY DATE AND THEREFORE, IT SHOULD BE TREATED AS EQUITY, NOT AS D EBT ISSUERS PAY COUPONS ON PERPETUAL BONDS FOREVER, AND THEY DO NOT HAVE TO RE DEEM THE PRINCIPAL. PERPETUAL BOND CASH FLOWS ARE, THEREFORE, THOSE OF A PERPETUITY. THE EXAMINATION OF ACCOUNTS DID NOT REVEAL ACCOUNTING F OR PAYMENT OF COUPONS AND IT IS HIGHLY LIKELY THAT THE COUPON PAYMENTS HA S BEEN SUBSUMED IN THE INTEREST COST. HOWEVER, INTEREST RELATING TO PERPET UAL BONDS IS NOT ALLOWABLE AS DEBIT TO P&L A/C. THE ACCOUNTING TREATMENT OF PA YMENT OF COUPONS HAS NOT BEEN VERIFIED BY THE ASSESSING OFFICER THEREBY RENDERING THE ASSESSMENT ORDER DATED 23.1.2017 ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 4 4. IN VIEW OF THE AFORESAID REASONS, IT IS PROPOSED TO REVISE THE ASSESSMENT ORDER DT. 23.1.2017 UNDER SECTION 263 OF THE INCOME TAX ACT, 1961, BEING ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE. 5. YOU ARE HEREBY GIVEN AN OPPORTUNITY TO REPRESENT YOUR CASE AS TO WHY THE PROPOSED ACTION U/S 263 BE NOT PURSUED AND NECESSAR Y ORDER BE PASSED ON THE ISSUES DISCUSSED ABOVE AS WELL AS OTHER ISSUES THAT MAY COME TO THE NOTICE OF THE UNDERSIGNED DURING THIS PROCEEDING. Y OU OR ANY DULY AUTHORIZED PERSON CAN APPEAR ON 11.12.2017 AT 04.00 P.M. IN ROOM NO.344 AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020. FAILURE TO COMPLY WILL LEAD TO THE CONCLUSION THAT YOU HAVE NOTHING TO OFFER AND Y OU ARE AGREEABLE TO THE PROPOSED ACTION AS DEEMED FIT ON THE MATERIALS AVAI LABLE ON RECORD OR GATHERED DURING THIS PROCEEDING. 3. THE SAID SHOW CAUSE NOTICE WAS REPLIED BY THE AS SESSEE VIDE WRITTEN SUBMISSION DATED 18.12.2017 WHICH IS R EPRODUCED AS UNDER: PLEASE REFER TO THE SHOW CAUSE NOTICE DATED NOVEMB ER 29, 2017 ISSUED UNDER SECTION 263 OF THE INCOME TAX ACT (THE ACT) FOR THE ABOVE MENTIONED ASSESSMENT YEAR. AS PER THE SAID NOTICE, YOUR HONOUR PROPOSES TO REVISE THE ASSESSMENT ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME-TAX 2(3}{2), MUMBAI (ASSESSING OFFICER) UNDER SECTION 143(3) READ WITH SECTION 144 C(3) DATED JANUARY 23, 2017 ON THE GROUND THAT IT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE REASONS STATED THEREIN. WE GIVE BELOW OUR SUBMISSION WITH RESPECT TO EACH O F THE ISSUES IN RESPECT OF WHICH YOUR HONOUR HAS ISSUED THE CAPTIONED NOTICE. 1. DEDUCTION CLAIMED UNDER SECTION 36(1)(VI'I) O F THE ACT IN RESPECT OF WRITE OFF OF CREDIT CARDS. 1.1 ICICI BANK HAS CLAIMED A DEDUCTION OF RS.1280 ,71,14,688 UNDER SECTION 36(1)(VII) OF THE ACT DURING THE ABOVE MENTIONED AS SESSMENT YEAR AFTER REDUCING THE CREDIT BALANCE IN PROVISION FOR BAD AND DOUBTFU L DEBTS ACCOUNT MADE UNDER SECTION 36(1}(VIIA) OF THE ACT. (GROSS BAD DEBTS RS .1845,52,59,747 LESS OPENING BALANCE UNDER SECTION 36(1)(VIIA) RS.564,81,45,059) . THE BANK'S BAD DEBT CLAIMS COMPRISE OF BAD DEBTS WRITTEN OFF ON RETAIL AND COR PORATE PORTFOLIO. 1.2 THE RETAIL PORTFOLIO INCLUDES BAD DEBTS WRITTEN OFF IN RESPECT OF VEHICLE LOAN, HOME LOAN AND OTHER LOANS GIVEN AND ALSO IN RESPECT OF CREDIT CARDS ISSUED TO CUSTOMERS. THE DEDUCTION FOR WRITE OFF OF BAD DEBTS IS ALLOWED UNDER SECTION 36(1)(VII) OF THE ACT. THE SECTION STATES THE AMOUN T OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUN TS OF THE ASSESSEE IS TO BE ALLOWED AS DEDUCTION. 1.3 THE BANK SUBMITS THAT THE BAD DEBTS CLAIMED HAVE BEEN WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE AN D FULFILL ALL THE CONDITIONS LAID DOWN UNDER SECTION 36(2} OF THE ACT. THESE DEBTS RE PRESENT MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF THE BANK WHICH HAVE TURNED BAD AND HENCE WRITTEN OFF AS PER THE SYSTEM OF WRITE OFF FOLLOWED BY THE BANK. ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 5 1.4 THE BANK DURING THE COURSE OF ASSESSMENT PROCEE DINGS HAD EXPLAINED THE CLAIM MADE UNDER SECTION 36{1)(VII) OF THE ACT VIDE LETTE R DATED AUGUST 12, 2016. THE ASSESSING OFFICER AFTER FULL SCRUTINY OF THE ENTIRE CLAIM OF BAD DEBTS HAS ALLOWED THE SAME FOR THE AFORESAID ASSESSMENT YEAR. 1.5 WITH RESPECT TO YOUR HONOUR'S CONTENTION THAT T HE AMOUNT OF CREDIT CARD WRITE OFF OF RS.1113,01,90,428 DOES NOT QUALIFY FOR DEDUC TION UNDER SECTION 36(1)(VII) OF THE ACT, WE SUBMIT AS UNDER: A. THE ISSUE OF CREDIT CARDS, DEBIT CARDS, PREPA ID CARDS ARE A PART OF BANK'S BUSINESS OF LENDING AND THE RBI HAS ISSUED GUIDELIN ES WITH RESPECT TO THE SAME. B. AS PER RBI GUIDELINES, BANKS IN INDIA CAN UND ERTAKE CREDIT CARD BUSINESS EITHER DEPARTMENTALLY OR THROUGH A SUBSIDIARY COMPANY SET UP FOR THE PURPOSE. BANKS CAN ALSO UNDERTAKE DOMESTIC CREDIT CARD BUSINESS BY ENT ERING INTO TIE-UP ARRANGEMENTS WITH ONE OF THE BANKS ALREADY HAVING BUSINESS OF IS SUE OF CREDIT CARDS. BANKS DESIROUS OF UNDERTAKING CREDIT CARD BUSINESS EITHER INDEPENDENTLY OR IN TIE-UP ARRANGEMENT WITH OTHER CARD ISSUING BANKS CAN DO SO WITH APPROVAL OF THEIR BOARD AND NO PRIOR APPROVAL OF RBI IS REQUIRED. C. WHEN CREDIT CARDS ISSUED BY THE BANK ARE USED BY A CUSTOMER TO PAY FOR PURCHASE OF GOODS OR SERVICES, THE BANK MAKES THE P AYMENT TO THE VENDOR ON BEHALF OF THE CUSTOMER WHICH TANTAMOUNTS TO LENDING BY THE BANK TO THE CUSTOMERS. THIS FACILITY ENABLES THE CUSTOMERS TO R EPAY THE BANK IN INSTALMENTS. ON DELAYED PAYMENTS THE BANK CHARGES INTEREST. IN THE EVENT THE BANK IS UNABLE TO RECOVER FROM THE CUSTOMER THE AMOUNT IT HAS PAID ON THEIR BEHALF, IT IS COMPELLED TO WRITE OFF SUCH BALANCES AS IRRECOVERABLE AND THE W RITE OFF OF THE SAME WOULD QUALIFY FOR A DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT . 1.6 WITHOUT PREJUDICE TO THE AFORESAID WE SUBMIT TH AT IF THE CLAIM OF CREDIT CARD WRITE OFF DOES NOT QUALIFY UNDER SECTION 36(1)(VII) OF THE ACT THE SAME OUGHT TO BE ALLOWED AS A BUSINESS LOSS AS PER PROVISIONS OF SEC TION 28 OF THE ACT. THE FACT THAT THE BANK HAS WRITTEN OFF THE IRRECOVERABLE AMOUNT I N RESPECT OF CREDIT CARDS IS NOT IN DISPUTE AND THUS THE LOSS INCURRED MUST BE ALLOWED TO THE BANK EITHER UNDER SECTION 36{1)(VII) OR SECTION 28. 1.7 THE EFFECT OF THE AMOUNTS WRITTEN OFF BEING ALL OWED UNDER SECTION 36(1)(VII) OR SECTION 28 IS DEMONSTRATED IN THE TABULATED STATEME NT GIVEN BELOW: PARTICULARS AS PER ASSESSMENT ORDER DATED JANUARY 23,2017 WORKING CONSIDERING WRITE OFF AS BUSINESS LOSS BAD DEBTS WRITTEN OFF 8,47,28,622 8,47,28,622 REPOSSESSED VEHICLES ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 6 CORPORATE BAD DEBTS 37,69,69,692 37,69,69,692 VEHICLE / HOME 598,87,47,825 598,87,47,825 CREDIT CARDS 1113,01,90,428 - OTHERS 87,46,23,180 87,46.23,180 TOTAL BAD DEBTS 1845,52,59,747 732,50,69,319 LESS: OPENING BALANCE U/S.36(1)(VIIA) 564,84,45,059 564,84,45,059 BAD DEBTS U/S 36(1)(VII) (A) 1280,68,14,688 167,66,24,260 BUSINESS LOSS DISCREPANT NOTES 1,43,52,282 1,43,52,282 FRAUD CASES 6,99,69,319 6,99,69,319 GAIN/LOSS ON SALE/DISPOSAL -NON BANKING ASSETS (59,29,835) (59,29,835) OTHERS 13,34,59,564 13,34,59,564 CREDIT CARDS 0 1113,01,90,428 TOTAL BUSINESS LOSS (B) 21,18,60,330 1134,20,50,758 TOTAL BAD DEBTS AND BUSINESS LOSS (A + B) 1301,86,75,018 1301,86,75,018 IT IS THEREFORE INCORRECT TO DESCRIBE THE CREDIT CARD BUSINESS AS A PAYMENT SERVICE. IN THE CASE OF CREDIT CARDS, INSTEAD OF THE BANK LENDING MONE Y TO THE CUSTOMER AND THE CUSTOMER USING THE BORROWED FUND TOWARDS PAYMENT FOR PURCHASES OR SERVICES, THE BANK DIRECTLY DISCHARGES THE LIABILITY OF THE CUSTOMER TO THE VENDOR OR SERVICE PROVIDER AND ALLOWS THE CUSTOMER TIME TO PAY THE SAID AMOUNT. 2. DEDUCTION OF SPECIAL RESERVE CLAIMED UNDER SE CTION 36{1){VIII) 2.1 THE BANK HAS CLAIMED A DEDUCTION UNDER SECTION 36( 1}(VIII) OF THE ACT IN THE REVISED RETURN OF INCOME AMOUNTING TO 710,78,15,170, THE SA ID WORKING WAS REVISED DURING THE COURSE OF ASSESSMENT PROCEEDING VIDE LETTER DATED NOVEMBER 22, 2016 TO RS.657,83,50,134. SECTION 36(1)(VIII) OF THE ACT PROVI DES THAT A BANKING COMPANY WHICH IS ENGAGED IN PROVIDING LONG TERM FINANCE FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT OR DEVELOPMENT OF INFRASTRUCTURE FACILITY CAN GET A DEDUCT ION NOT EXCEEDING TWENTY PERCENT OF ITS PROFITS DERIVED FROM SUCH BUSINESS OF PROVIDING LONG TE RM FINANCE. THE INTENTION OF THE SECTION IS TO ENCOURAGE THE INDUSTRIAL DEVELOPMENT AN D THE CAPITA! FORMATION IN THE COUNTRY BY ALLOWING A SPECIAL DEDUCTION FROM THE PROFITS FROM TERM LENDING BUSINESS VIZ. LOANS AND ADVANCES EXTENDED FOR FIVE OR MORE YEARS. 2.2 THE BANK CARRIES ON A SINGLE INDIVISIBLE BUSINESS HAVING A COMMON POOL OF RESOURCES AND OVERHEADS. THE BANK DOES NOT MAINTAIN SEPARATE BOO KS OF ACCOUNTS OF INCOME FROM LONG TERM FINANCE ELIGIBLE FOR SPECIAL RESERVE AND O THER BUSINESS INCOME. THEREFORE, IN OUR CASE DUE TO THE NATURE OF THE BUSINESS CARRIED OUT, IT IS DIFFICULT TO ISOLATE PROFITS FROM LONG ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 7 TERM FINANCE FROM OTHER BUSINESS PROFITS. SECTION 36(1 )(VIII) OF THE ACT DOES NOT PRESCRIBE A FORMULA FOR WORKING OUT SPECIAL RESERVE. IN THE ABSEN CE OF ANY SPECIFIC METHOD LAID DOWN UNDER THE PROVISIONS OF THE ACT, THE ASSESSING OFFICER, FOR ASSESSMENT YEAR 2000-01 IN THE CASE OF ERSTWHILE ICICI LIMITED, HAD LAID DOWN THE M ETHOD BY SEGREGATING ITEMS OF INCOME FROM FINANCE AND APPLYING RATIO TO DERIVE PROFITS F ROM LONG TERM FINANCE FOR WORKING OUT THE DEDUCTION UNDER SECTION 36(1)(VIII}. THE BA NK HAS ADOPTED THE SAME METHOD CONSISTENTLY IN THE ASSESSMENT YEARS 2001-02 TO 200 2-03 IN THE CASE OF ERSTWHILE ICICI LIMITED AND FROM ASSESSMENT YEAR 2003-04 ONWA RDS IN THE BANK'S OWN CASE. THE METHOD OF WORKING OUT SPECIAL RESERVE HAS ALSO BEEN APPROVED BY THE STATUTORY AUDITORS, US GAAP AUDITORS AND REGULATORY AUDITORS LIKE RBI. 2.3 WITH RESPECT TO THE REASONS GIVEN IN THE SHOW C AUSE NOTICE THAT THE BANK HAS SET OFF INTEREST COST AMOUNTING TO 300,91,53,931 A S AGAINST NON FUND BASED INCOME ARBITRARILY AT 80%, WE SUBMIT THAT THE ASSES SING OFFICER IN THE ASSESSMENT ORDER FOR AY 2000-01 IN THE CASE OF ERSTWHILE ICICI LIMITED HAS ALLOCATED 80% OF THE INTEREST COST TO CERTAIN STREAMS OF NON-FUND BASED INCOME ON THE GROUND THAT THOSE STREAM OF INCOME THOUGH NOT IN THE NATURE OF FINANC E BUSINESS DO INVOLVE A FUND COST. WE ENCLOSE THE RELEVANT EXTRACT OF THE ASSESS MENT ORDER FOR ASSESSMENT YEAR 2000-01 WHEREIN YOUR HONOUR WOULD FIND THAT INTERES T COST HAS BEEN ALLOCATED BY THE ASSESSING OFFICER HIMSELF. WE SUBMIT THAT THIS ISSUE HAS BEEN INQUIRED INTO BY THE ASSESSING OFFICER ALSO IN THE PRESENT YEAR AS I S EVIDENT FROM PARA 15.1 OF THE ASSESSMENT ORDER DATED JANUARY 23, 2017 AND REQUIRE S NO FURTHER VERIFICATION AS THE ASSESSMENT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 2.4 WITH REGARD TO THE PERCENTAGE OF LONG TERM FINA NCE WORKED OUT AT 45.41% WE SUBMIT THAT THE SAME IS NOT ARBITRARY. THE BANK HAS ARRIVED AT THE TOTAL INCOME FROM FINANCE AFTER IDENTIFYING THE LONG TERM FINANCE INC OME WHICH COMPRISES OF LOANS GIVEN FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT, D EVELOPMENT OF INFRASTRUCTURAL FACILITIES AND DEVELOPMENT OF HOUSING IN INDIA AND APPLYING THE RATIO. THE ASSESSING OFFICER HAS EXAMINED THE BANK'S CLAIM FOR DEDUCTION IN THIS YEAR IN PARA 15.1 AND ACCEPTED THE BASIS ADOPTED FOR DETERMINING LONG TER M FINANCE AS IN THE PREVIOUS YEARS. THE ASSESSING OFFICER HAS FOLLOWED THE BASIS ADOPTED BY HIM STARTING FROM AY 1996-97 ONWARDS. SINCE THE ASSESSING OFFICER AFTER EXAMINING HAS TAKEN A PARTICULAR VIEW ON IDENTICAL FACTS AND SUPPORTED BY PRESUMPTIO N THAT THE SAME IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 3. PERPETUAL DEBT INSTRUMENTS (IPD1) 3.1 THE BANK HAD ISSUED INNOVATIVE PERPETUAL DEBT I NSTRUMENTS (IPDL) WHICH QUALIFY AS TIER I CAPITAL OF BANK AND ARE DISCLOSED IN SCHE DULE 4 I (VI) - BORROWINGS IN INDIA. THE DETAILS OF SAID BONDS ARE AS UNDER: SR. NO SERIES ALLOTMENT DATE BOOK VALUE DATE OF REPAYMENT AMOUNT OF REPAYMENT 1. DAG06RRB AUGUST 9, 2006 233,00,00,000 AUGUST 9, 2016 233,00,00,000 '> DJA07RB1 JANUARY 15, 2007 18,00,00,000 APRIL 30, 2017 18,00,00,000 ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 8 3. DJA08RB1 OCTOBER 1, 2008 500,00,00,000 APRIL 30, 500,00,00,000 4. DSP06RRB SEPTEMBER 13,2006 550,00,00,000 SEPTEMBER 13, 2016 500,00,00,000 1301,00,00,000 1301,00,00,000 3.2 THESE BONDS HAVE BEEN ISSUED TO VARIOUS INSURAN CE COMPANIES, MUTUAL FUNDS, PROVIDENT FUNDS AND INDIVIDUALS. THESE BONDS ARE IN THE NATURE OF DEBENTURES AND HAVE SUPERIOR CLAIMS OVER EQUITY AND PERPETUAL NON- CUMULATIVE PREFERENCE SHARES OF THE BANK. THEY HAVE A FIXED INTEREST RATE AND TH E INTEREST IS PAID OUT OF DISTRIBUTABLE PROFITS OF PREVIOUS YEAR OR CURRENT Y EAR. THE BANK HAS DISCRETION TO EXERCISE THE CALL OPTION FOR THE SAID BONDS AS PER APPLICABLE GUIDELINES. 3.3 THE BANK HAS EXERCISED OR WILL EXERCISE THE CAL L OPTION FOR THE ABOVE-MENTIONED BONDS ON THE DATES MENTIONED IN THE AFORESAID TABLE AT THE BOOK VALUE APPEARING IN ITS BOOKS. 3.4 IN RESPECT OF PERPETUAL BONDS ISSUED OUTSIDE IN DIA, WE SUBMIT THAT SAME WERE ISSUED BY THE BAHRAIN BRANCH. THE BANK HAS EXERCISE D THE CALL OPTION IN OCTOBER 2016 IN RESPECT OF THE SAID BONDS. 3.5 THE BANK HAS PAID INTEREST TO THE BONDHOLDERS A FTER DEDUCTING TAX AT SOURCE WHERE APPLICABLE AT THE RATES PRESCRIBED. THE SAID INTEREST PAID ON THESE BONDS HAS BEEN CLAIMED AS INTEREST EXPENSE UNDER SECTION 36(1 )(III) OF THE ACT. 3.6 FURTHER, SINCE THE INTEREST PAID TO THE BONDHOL DERS UNLIKE DIVIDEND INCOME IS NOT EXEMPT AS PER PROVISIONS OF THE ACT AND THE BON DHOLDERS WOULD HAVE ACCORDINGLY OFFERED THE SAME TO INCOME IN THEIR RES PECTIVE RETURNS, DISALLOWANCE OF THE SAID INTEREST WOULD RESULT IN DOUBLE TAXATION O F THE SAME INCOME. 4. WE SUBMIT THAT IN ORDER TO INVOKE PROVISIONS OF SECTION 263 THE ORDER SOUGHT TO BE REVISED SHOULD BE BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT HAS BEEN HELD BY SUPREME COURT IN MALABAR INDUST RIAL CO. LTD. VS. COMMISSIONER OF INCOME TAX (243 ITR 83 (SC), CIT V MAX INDIA 295 ITR 282, CIT V. AMITABH BACHHAN 384 ITR 200 AT 216, PARA 21] THAT IF ONE OF THE CONDITIONS IS ABSENT RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT . ACCORDING TO THE COURT THE PROVISIONS CANNOT BE INVOKED TO CORRECT EACH AND EV ERY TYPE OF MISTAKE OR ERROR. 5. WE FURTHER SUBMIT THAT THE ISSUES WITH RESPECT T O BAD DEBTS ALLOWED UNDER SECTION 36(1)(VII) AND DEDUCTION UNDER SECTION 36(1 )(VIII) OF THE ACT HAVE BEEN EXAMINED BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS AND A POSSIBLE VIEW HAS BEEN TAKEN. THE ASSESSMENT ORDER PASSED TH EREFORE CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL THE INTERESTS OF THE REVE NUE. ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 9 WE REITERATE THAT THE ORDER PASSED UNDER SECTION 14 3(3) R.W.S. 144C(3) IS NEITHER ERRONEOUS NOR PREJUDICIAL AND THE PROCEEDINGS UNDER SECTION 263 OUGHT TO BE DROPPED. 4. THE REPLY OF THE ASSESSEE DID NOT FIND FAVOUR WI TH THE LD. PR. CIT AND HE DIRECTED THE ASSESSMENT TO BE REVIS ED ON THREE ISSUES NAMELY VIDE ORDER DATED 29.12.2017; (I) CREDIT CARD WRITE OFF ARE NOT ALLOWABLE UNDER S ECTION 36(1) (2) (II) WORKING OF DEDUCTION IN RESPECT OF SPECIAL RES ERVE ALLOWABLE UNDER SECTION 36(1)(8) (III) INTERESTS ON PERPETUAL POINT ARE NOT ALLOWABL E. 5. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE THE BEN CH THAT THE ORDER PASSED BY LD. CIT SETTING ASIDE THE ASSE SSMENT ORDER PASSED BY THE AO BY GIVING SPECIFIC DIRECTION TO BE FOLLOWED AND IMPLEMENTED IS BAD IN LAW AND SHOULD BE SET ASIDE. THE LD. A.R. SUBMITTED THAT LD. PR. CIT HAS GIVEN SPECIFIC FINDI NGS ON EACH OF THE THREE ISSUES WHICH WERE SUBJECT MATTER OF THE R EVISIONARY PROCEEDINGS AND DIRECTED THE AO TO MODIFY THE ASSES SMENT AS PER HIS FINDINGS. THE LD. A.R. SUBMITTED THAT THE FIRST ITEM OF DISALLOWANCE AS DIRECTED BY THE LD. CIT IS WITH RE SPECT TO DISALLOWANCE OF CREDIT CARD WRITE OFF. THE LD. A.R . SUBMITTED THAT ACCORDING TO THE LD. PR. CIT THE SAID BAD DEBT S INCURRED WITH REGARD TO THE ISSUANCE AND SERVICE OF CREDIT C ARD WERE NEITHER RELATED TO BANKING ACTIVITIES NOR BUSINESS OF MONEY LENDING IN THE CONTEXT OF PROVISION OF SECTION 36(1 )(VII) OF THE ACT. IN RESPECT OF SECOND ITEM OF DISALLOWANCE OF DEDUCT ION OF SPECIAL RESERVE THE LD. PR. CIT NOTED THAT ASSESSEE BANK HA S ALLOCATED 80% OF THE INTEREST COST AGAINST NON FUND BUSINESS AND PERCENTAGE OF LONG TERM FINANCE BUSINESS 45.41% ON ESTIMATED BASIS. THE ASSESSEE HAS JUSTIFIED THE SAID ALLOCAT ION ON ESTIMATED BASIS FOR THE REASON THAT IT HAS BEEN DON E ON THE ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 10 SAME LINES IN THE PAST AND ACCEPTED BY THE REVENUE IN ALL THE EARLIER YEARS ALSO. THE LD. CIT REJECTED THE JUST IFICATION OF THE ASSESSEE AND CAME TO THE CONCLUSION THAT CORRECT CO MPUTATION OF CLAIM OF DEDUCTION HAS TO BE MADE BY REASONING THAT ONUS IS ON THE ASSESSEE TO MAKE CORRECT ALLOCATION AND THUS RE JECTED THE SAME. IN RESPECT OF THIRD ITEM OF DISALLOWANCE I.E . INTEREST OF PERPETUAL DEBT INSTRUMENT, ACCORDING TO THE LD. CI T AS PER THE PROVISIONS OF SECTION 36(1)(VI) OF THE ACT DEDUCTI ON IS ALLOWED IN RESPECT OF INTEREST ON BORROWED CAPITAL FOR BUSINES S AND PROFESSION. HOWEVER, ACCORDING TO THE LD. CIT, AO HAS NOT EXAMINED WHETHER THE ISSUE OF PERPETUAL BOND QUALIF IES AS BORROWING FOR THE PURPOSE OF SAID SECTION. THE LD. A.R. VEHEMENTLY SUBMITTED THAT BY DIRECTING THE AO TO MA KE THE ASSESSMENT BY MAKING THE DISALLOWANCES ON THREE ACC OUNTS AS STATED HEREINABOVE THE LD. CIT HAS EXCEEDED HIS JU RISDICTION UNDER SECTION 263 OF THE ACT WHILE SIMULTANEOUSLY S ETTING ASIDE OF ASSESSMENT ORDER WITH THAT DIRECTION TO AO TO PA SS FRESH ASSESSMENT AFTER GIVING OPPORTUNITY TO THE ASSESSEE . THE LD. A.R. SUBMITTED THAT BEFORE EXERCISING THE REVISIONA RY JURISDICTION THE TWIN CONDITIONS HAVE TO BE SATISFIED THAT THE O RDER OF THE AO HAS TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE I NTEREST OF THE REVENUE. THE LD. A.R. SUBMITTED THAT THE PROVISION S OF SECTION 263 DOES NOT POSTULATE AND PROVIDE FOR THE PASSING OF FRESH ASSESSMENT AS PER THE FINDINGS OF LD. CIT. IN DEFE NCE OF HIS ARGUMENT THE LD. A.R. RELIED ON THE DECISION OF CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. VED PRAKA SH CONTRACTORS VS. CIT IN ITA NO.573/CHD/2013 A.Y. 201 0-11. THE LD. A.R. SUBMITTED THAT IN THE PRESENT CASE IT IS N OT A CASE WHERE NO ENQUIRY WAS CONDUCTED BY THE AO IN THE REGULAR A SSESSMENT ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 11 PROCEEDINGS AND HAS APPLIED HIS MIND TO THE ASSESSE ES CLAIM OF BAD DEBTS AS WELL AS DEDUCTION OF SPECIAL RESERVE U NDER SECTION 36(1)(VIII) BY CALLING FOR THE NECESSARY DETAILS IN RESPECT OF BAD DEBTS WHICH WERE REPLIED BY THE ASSESSEE VIDE REPLY DATED 12.08.2016 PARA 1.5 WHICH CONTAINS THE TABULATED ST ATEMENT AND THE DETAIL BREAK UP OF BAD DEBTS CLAIMED. THER EAFTER, THE AO ALLOWED THE BAD DEBT CLAIM OF THE ASSESSEE INCLU DING AMOUNT IRRECOVERABLE ON ACCOUNT OF CREDIT CARD AFTER DUE C ONSIDERATION OF THE ISSUES. SIMILARLY THE ASSESSEE HAS CALCULATED T HE DEDUCTION FOR SPECIAL RESERVE CLAIMED UNDER SECTION 36(1)(VII I) OF THE ACT ON THE SAME BASIS THAT HAS BEEN ACCEPTED IN THE PAST. THE LD. A.R. FURTHER SUBMITTED THAT THE ASSESSEE CARRIES ON SING LE/INDIVIDUAL BUSINESS HAVING A COMMON POOL OF RESOURCES, EXPENSE S AND THE ASSESSEE DOES NOT MAINTAIN SEPARATE BOOKS OF ACCOUN TS OF INCOME FOR LONG TERM FINANCES WHICH IS ELIGIBLE FOR SPECIAL RESERVE AND OTHER BUSINESS INCOME. THE LD. A.R. SUBMITTED THAT ASSESSEE HAS ALLOCATED TO NON FUND BASED INCOME TO THE TUNE OF 80% OF NON FUND BASED INCOME OTHER THAN COMMISSION AND FEES. THE LD. A.R. INVITED THE ATTENTION OF THE BENCH TO PARA 12.7 AND 12.13 OF ASSESSMENT ORDER FOR A.Y. 2000-01 IN THE C ASE OF THE ASSESSEE WHICH IS FILED AT PAGE NO.36 & 38 OF THE PAPER BOOK AND SUBMITTED THAT THE SAID BASIS HAS BEEN ACCEPTED BY THE HONBLE ITAT IN ALL THE SUBSEQUENT YEARS IN ASSESSE ES OWN CASE STARTING FROM A.Y. 2001-02 TILL 2011-12. THE LD. A .R. SUBMITTED THAT AO AFTER DUE CONSIDERATION OF ALL THESE FACTS AND PRECEDENTS ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF THE BAD DEBTS INCLUDING ONES ARISING FROM THE CREDIT CARD RECEIVA BLE AS WELL AS WORKING OF SPECIAL RESERVE AND THUS AO TOOK ONE OF THE POSSIBLE VIEWS AND IT IS NOT OPEN TO THE PR. CIT TO EXERCISE REVISIONARY ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 12 JURISDICTION QUA THE SAME. THUS THE AO HAS EXPRESSE D ONLY POSSIBLE VIEW. IN DEFENCE OF HIS ARGUMENT THE LD. A .R. RELIED HEAVILY ON THE SERIES OF DECISIONS NAMELY; MALABAR INDUSTRIAL CO. LTD. VS. CIT (SC) 243 ITR 8 3 CIT VS. ARVIND JEWELLERS (SC) 259 ITR 502 CIT VS. MAX INDIA (SC) 295 ITR 282. THE LD. A.R. SUBMITTED THAT IN ALL THESE ABOVE DEC ISIONS THE APEX COURT HAS HELD THAT IF ONE OF THE TWO POSSIBLE VIEWS IS TAKEN BY THE AO WHILE FRAMING THE ASSESSMENT, THEN LD. CIT CAN NOT EXERCISE REVISIONARY JURISDICTION UNDER SEC TION 263 TO SET ASIDE THE ASSESSMENT /ORDER PASSED BY THE AO ON SUC H ISSUES. IN VIEW OF THESE RATIOS LAID DOWN, THE LD. A.R. SUB MITTED THAT THE REVISIONARY JURISDICTION EXERCISED BY THE LD. PR. C IT UNDER SECTION 263 SHOULD BE QUASHED AS SAME IS INVALID AN D VOID AB- INITIO. 6. THE LD. D.R., ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF LD. CIT BY SUBMITTING THAT CREDIT CARD BUSINESS IS NOT BANKING ACTIVITY AND THEREFORE THE BAD DEBTS ALLOWED ON ACC OUNT OF IRRECOVERABLE CREDIT CARD DUES ARE NOT COVERED BY T HE PROVISION OF SECTION 36(1)(VII) OF THE ACT. SIMILARLY, ON THE A LLOCATION OF 80% OF THE INTEREST TO NON FUND BASED INCOME THE LD. D. R. SUBMITTED THAT THERE IS NO BASIS FOR THAT THOUGH THE SAME HAS BEEN ACCEPTED IN THE EARLIER YEARS WOULD NOT BE AN ESTOP PELS NOT TO CORRECT THE ANOMALY IN THE CURRENT YEAR. THE SAID ALLOCATION IS ARBITRARY AND WHIMSICAL AND THEREFORE HAS TO BE SET ASIDE AS THE SAME IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F THE REVENUE. THE LD. D.R. ARGUED THAT THE PRINCIPLE OF RES-JUDIC ATA DOES NOT APPLY TO THE INCOME TAX PROCEEDING. THE LD. D.R. S UBMITTED THAT THE AO SHOULD HAVE MADE INQUIRIES WHICH HE HAS TOTA LLY FAILED TO ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 13 DO SO. SIMILARLY, ON THE ISSUE OF INTEREST ON PERP ETUAL DEBT INSTRUMENT THE LD. D.R. SUBMITTED THAT THE PERPETUA L DEBT INSTRUMENT ARE NOT BEING BORROWED BY THE ASSESSEE A ND THEREFORE INTEREST PAID ON SUCH INSTRUMENTS IS NOT ADMISSIBLE UNDER SECTION 36(1)(III) OF THE ACT. THE LD. D.R. SUBMITTED THAT BEFORE ALLOWING INTEREST UNDER SECTION 36(1)(III), THE AO WAS UNDER OBLIGATION WHETHER THE ISSUE OF PERPETUAL BON D QUALIFIES AS BORROWING FOR THE PURPOSE OF SAID SECTION. THE LD. D.R. SUBMITTED THAT THERE IS NO OBLIGATION TO REFUND OR REPAYMENT WHICH IS MUST IN THE CONCEPT OF BORROWING AND IF TH EREIS NO OBLIGATION TO REFUND THE CAPITAL PROVIDED, THEN IN TEREST ON SUCH CAPITAL IS NOT DEDUCTIBLE UNDER SECTION 36(1)(III) OF THE ACT. THE LD. D.R. SUBMITTED THAT THE AO HAS COMPLETELY FAILE D IN CONSIDERING ALL THESE ISSUES AND THUS ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE AND THUS JUSTIFIED THE REVISIONARY ORDER BY THE LD CIT. IT IS ALSO WRONG THAT AO HAS TAKEN ONE OF THE TWO POSSIBLE VIE WS IN ALL THESE THREE ISSUES. THEREFORE, THE LD. D.R. SUBMIT TED THAT THE ORDER OF LD. PR. CIT UNDER SECTION 263 IS VALID AND AS PER THE PROVISIONS OF THE ACT AND NEEDS TO BE AFFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DE CISIONS CITED BY THE LD. A.R. DURING THE COURSE OF HEARING. THE UNDISPUTED FACTS ARE THAT THE ASSESSMENT WAS FRAMED UNDER SECT ION 143(3) ON 23.01.2017. THEREAFTER, THE LD. CIT EXERCISED REVISIONARY JURISDICTION UNDER SECTION 263 OF THE ACT SETTING A SIDE THE ASSESSMENT FRAMED BY THE AO ON THREE COUNTS NAMELY (I)CREDIT CARD WRITE OFF NOT ALLOWABLE UNDER SECTION 36(1)(VI I) OF THE ACT (II) WRONG CALCULATION ON CLAIM OF SPECIAL RESERVE ALLOW ABLE UNDER ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 14 SECTION 36(1)(VIII) OF THE ACT AND (III) INTEREST O N PERPETUAL BOND WRONGLY ALLOWED BY THE AO. ACCORDING TO THE LD. C IT, THE ORDER PASSED BY THE AO IS ERRONEOUS IN SO FAR AS IT IS P REJUDICIAL TO THE INTEREST OF THE REVENUE AS THE AO HAS PASSED THE OR DER WITHOUT MAKING ANY ENQUIRIES OR VERIFICATION WHICH HE SHOULD HAVE MADE. THUS THE LD. CIT CONCLUDED THAT THE CASE OF THE ASSESSEE IS COVERED BY CLAUSE (A) OF EXPLANATION TO SECTION 263 ( AS AMENDED BY FINANCE ACT, 2015 W.E.F. 01.06.2015). W E ALSO OBSERVE FROM THE PERUSAL OF THE REVISIONARY ORDER THAT LD. CIT HAS DIRECTED THE AO TO PASS FRESH ASSESSMENT ORDER ON THE ISSUES MENTIONED IN THE REVISIONARY ORDER AFTER GIV ING OPPORTUNITY TO THE ASSESSEE AND DIRECTED THE AO TO MODIFY THE ASSESSMENT ORDER TO THAT EXTENT. THE RELEVANT PARA FROM THE CIT ORDER IS EXTRACTED BELOW: 9. ACCORDINGLY, THE ASSESSMENT ORDER IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO PASS A FRESH ASSESSMENT ORDER ON THE IS SUES MENTIONED IN THIS ORDER AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF HEARING . THE ASSESSMENT ORDER WILL BE MODIFIED BY THE AO TO THIS EXTENT. 8. IT IS CLEAR FROM THE ORDER OF LD. CIT AS REPROD UCED ABOVE THAT LD. CIT HAS GIVEN A DIRECTION TO THE AO TO PA SS THE ORDER IN A SPECIFIED MANNER BY GIVING THE ASSESSEE AN OPPORT UNITY OF BEING HEARD BEFORE PASSING THE ORDER AND CLEARLY NO TED THAT ASSESSMENT ORDER WILL BE MODIFIED TO THAT EXTENT. AS PER THE PROVISIONS OF SECTION 263, THE LD. CIT HAS THE POW ER TO EXAMINE THE ASSESSMENT ORDER PASSED BY THE AO AND IF HE IS OF THE VIEW THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE THEN THE LD. CIT MAY D IRECT THE AO TO REDO THE ASSESSMENT. HOWEVER, SECTION 263 DOES NOT CONTEMPLATE SETTING ASIDE AN ASSESSMENT ORDER WITH A DIRECTION TO PASS THE FRESH ASSESSMENT AS PER FINDINGS AND D IRECTIONS OF ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 15 LD. CIT. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE LD CIT HAS NOT EXERCISED HIS REVISIONARY JURISDICTION AS P ER THE PROVISIONS OF SECTION 263 OF THE ACT. THE CASE OF T HE ASSESSEE IS SUPPORTED BY A DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. DEV PRAKASH CONTRACTOR VS. CIT IN ITA NO.573/CHD/2015 A.Y. 2010-11 VIDE ORDER DATED 03.11 .2015. THE RELEVANT PART OF THE ORDER IS REPRODUCED BELOW: 17. FROM THE ABOVE, IT IS ABUNDANTLY CLEAR THAT CI T HAS EXCEEDED ITS JURISDICTION IN VIRTUALLY REASSESSING THE CASE. IT IS TRUE THAT THE REVISIONAL AUTHORITY ITSELF HAS WIDE POWER TO EXAMINE THE CASE WHETHER THE DECISION HAS BEEN ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND IN EXERC ISE OF THESE POWER MODIFICATIONS ARE PERMISSIBLE, AND FURTHERMORE THAT IF THE COMMIS SIONER COMES TO THIS CONCLUSION THAT THE ASSESSMENT IS REQUIRED TO BE REDONE, THAT SUCH DIRECTION CAN STILL BE ISSUED TO THE ASSESSING OFFICER. HOWEVER, IT IS TRITE LAW THAT IT IS NOT PERMISSIBLE FOR THE CIT BEING A REVISIONAL AUTHORITY TO STEP INTO THE SHOES OF THE ASSESSING OFFICER AND TO REDO THE ASSESSMENT AND PASS FRESH ASSESSMENT ORDER . IN THE INSTANT CASE, THE COMMISSIONER HAS SET ASIDE THE ORDER OF THE ASSESSI NG OFFICER ON THE AFORESAID ISSUES WITH A DIRECTION TO THE ASSESSING OFFICER TO PASS A FRESH ASSESSMENT ORDER. AT THE SAME TIME, THE LD. COMMISSIONER HAS DIRECTED TH E ASSESSING OFFICER TO MAKE THE ADDITION OF RS. 5,95,970/- ON ACCOUNT OF UNDERSTATE MENT OF CLOSING STOCK, DISALLOW INTEREST U/S / 36(L)(III) IN RESPECT OF MIXING PLAN T AND DEPRECIATION IN RESPECT OF MIXING PANT AND DISALLOW OF DEDUCTION ON ACCOUNT OF INTEREST, SALARY ETC. PAID TO THE PARTNERS. IN OUR CONSIDERED VIEW, REMANDING THE MAT TER TO THE ASSESSING OFFICER IS OF NO CONSEQUENCE, PARTICULARLY WHEN THE CIT HIMSEL F HAS REFRAINED THE ASSESSMENT. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE THE CIT HAS NOT LEFT ANY SCOPE FOR THE ASSESSING OFFICER TO REDO THE ASSESSMENT OR PAS S A FRESH ASSESSMENT ORDER. IT IS ALSO OBSERVED THAT LD. CIT HAS DIRECTED THE ASSESSI NG OFFICER TO GIVE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE PASSING THE F RESH ASSESSMENT ORDER. IN OUR VIEW, GIVING OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE BY THE ASSESSING OFFICER IS ALSO MEANINGLESS, PARTICULARLY WHEN THE LD. CIT HIM SELF HAS REFRAMED THE ASSESSMENT ORDER. THE DIRECTIONS GIVEN BY THE LD. C IT IN PARA 7 OF THE IMPUGNED ORDER ARE ALSO CONTRARY TO THE SETTLED POSITION OF LAW. WHEN THE LD. CIT DIRECTS THE ASSESSING OFFICER TO PASS A FRESH ASSESSMENT ORDER, THE ONLY PROPER COURSE FOR THE COMMISSIONER WAS NOT TO EXPRESS ANY FINAL OPINION A S REGARDS TO THE CONTROVERSIAL POINTS. WHILE TAKING SUCH A VIEW, WE ARE FORTIFIED BY THE DECISION OF HON'BLE GUJRAT HON'BLE HIGH COURT IN THE CASE OF ADDL. CIT V MUKUR CORPORATION (1978) 111 ITR 312 (GUJARAT). IT IS ALSO OBSERVED THAT IN THE CONCLUDI NG PART OF THE ORDER OF THE COMMISSIONER HE HAS ISSUED A DIRECTION TO THE ASSES SING OFFICER TO PASS A FRESH ASSESSMENT ORDER THEN HE WAS NOT REQUIRED TO EXPRES S ANY FINAL VERDICT AS REGARDS THE CONTROVERSIAL POINTS. IN THIS CASE, THE COMMISS IONER HAS DIRECTED THE ASSESSING OFFICER TO MAKE THE SPECIFIC ADDITIONS / DISALLOWAN CES, AS MENTIONED IN THE IMPUGNED ORDER. THEREFORE, THE DIRECTIONS GIVEN TO THE ASSESSING OFFICER TO FRAME A FRESH ASSESSMENT ORDER IS BAD IN LAW AS THIS IS CLE ARLY A CASE IN WHICH THE LD. CIT HAS ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 16 EXCEEDED HIS JURISDICTION IN REASSESSING THE CASE. EVEN THE DIRECTION GIVEN BY THE CIT TO THE ASSESSING OFFICER TO PROVIDE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IS ALSO OF NO CONSEQUENCE. 18. IT IS RELEVANT TO OBSERVE HERE THAT WHILE DECID ING THE APPEAL ON MERITS WE HAVE CONCLUDED THAT THE ASSESSMENT ORDER PASSED BY THE A SSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE, THEREFORE, THE ORDER PASSED U/S 263 OF THE ACT IS NOT MAINTAINABLE . AT THE SAME TIME, WE HAVE ALSO CONCLUDED THAT THE IMPUGNED ORDER IS NOT TENABLE ON THE GROUND THAT THE LD. COMMISSIONER HAS EXCEEDED HIS JURISDICTION IN VIRTU ALLY REASSESSING THE CASE INSTEAD OF REMANDING THE MATTER TO THE ASSESSING OFFICER FO R FRESH ASSESSMENT ORDER WITHOUT RECORDING HIS FINAL CONCLUSION ON THE POINT S OF ISSUES INVOLVED. WE ALSO AGREE WITH THIS SUBMISSION OF THE LD. COUNSEL OF TH E ASSESSEE THAT WHEN A FRESH ASSESSMENT IS DONE, THERE COULD ALWAYS BE GR O9NDS ON WHICH ONE OF THE PARTIES IS AGGRIEVED AND THE LAW PRESCRIBES A CORRECTIVE RE MEDY BY WAY OF APPEAL, REVISION ETC. IF THE CIT WHO IS A HIGHLY PLACED AUTHORITY O F THE REVENUE, IS TO EXERCISE THE POWERS OF WHICH DOING A FRESH ASSESSMENT, THEN THE RIGHT OF APPEAL, REVISION ETC. IS TOTALLY ANNIHILATED AND THIS COULD NEVER BE THE INT ENTION OF THE LEGISLATURE. WE FULLY ENDORSE THE ABOVE SUBMISSIONS MADE BY SHRI ASHWANI KUMAR, LD. COUNSEL FOR THE ASSESSEE. 9. THUS IT IS CLEAR FROM THE ABOVE THAT BY SETTING ASIDE THE ASSESSMENT ORDER , THE LD. CIT HAS EXCEEDED HIS JU RISDICTION BY DIRECTING THE AO TO PASS THE ORDER ON THE ISSUES AS RAISED BY THE LD. CIT IN THE REVISIONARY ORDER PASSED ESPECIALLY BY DIRECTING THAT THE ASSESSMENT ORDER WOULD BE MODIFIED TO THA T EXTENT AND AS SUCH THE ORDER U/S 263 OF THE ACT CAN NOT BE SUS TAINED AS THE LD CIT HAS EXPRESSED FINAL OPINION AND HAS LEF T NO SCOPE FOR AOS VERIFICATION OF THE CONTROVERSIAL ISSUES. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THE TRIBUNAL, ARE INCLINED TO QUASH THE IMPUGNED OR DER PASSED BY THE LD CIT U/S 263 OF THE ACT. 10. SINCE WE HAVE ALREADY DECIDED THE ISSUE ON TECH NICAL ASPECT IN FAVOUR OF THE ASSESSEE, THE MERIT RAISED BY THE ASSESSEE NEEDS NOT BE ADJUDICATED. ITA NO.1027/M/2018 M/S. ICICI BANK LTD. 17 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.02.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 19.02.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.