The Phaltan Urban Co.op Bank Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 1074/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7490 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 05-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reasonable cause; Bad and doubtful debts
• Section: 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 1074/PUN/2015 / ASSESSMENT YEAR : 2009-10 THE COSMOS COOPERATIVE BANK LTD., (BEING THE SUCCESSOR OF MERGED BANK THE PHALTAN URBAN COOPERATIVE BANK LTD.,) COSMOS TOWERS, S.NO.132/B, ICS COLONY, GANESHKHIND ROAD, SHIVAJINAGAR, PUNE 411007 PAN : AAAAT3411B . /APPELLANT V/S DCIT, SATARA CIRCLE, SATARA . /RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : SHRI AJAY MODI / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF CIT(A)-III, PUNE DATED 25-09-2014 FOR THE ASSESSMENT YEAR 2009- 10. 2. THERE IS DELAY OF 240 DAYS IN FILING OF THIS APP EAL BY THE ASSESSEE. REFERRING TO THE AFFIDAVIT FILED BY THE ASSESSEE, T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT TAX CONSULTANTS OF M/S. S.D . MEDADKAR AND COMPANY HAVE RESIGNED THE ASSIGNMENT ON 05-11-2014. IN ITS PLACE M/S. VISHRAM DESHPANDE AND ASSOCIATES WERE APPOINTED AS NEW TAX AUDITORS OF THE COSMOS COOPERATIVE BANK LTD., THIS COMPANY ALSO RES IGNED ON 10-01-2015. IN THE MEANTIME, ELECTIONS OF THE BOARD OF DIRECTOR S TOOK PLACE. DUE TO THE / DATE OF HEARING : 31.08.2017 / DATE OF PRONOUNCEMENT: 31.08.2017 2 ITA NO.1074/PUN/2015 THE COSMOS COOPERATIVE BANK LTD., CHANGE IN THE INCUMBENTS, THE ASSESSEE LOST THE TRA CK OF THE IMPUGNED ORDER OF CIT(A). IT IS ALSO A FACT THAT M/S. S.D. MEDADK AR & COMPANY, THE ERSTWHILE TAX AUDITORS HAD ALSO CONTESTED IN THE ELECTION. THE AFORESAID FACTS RESULTED IN LACK OF ADVICE TO THE ASSESSEE AND HENCE, THE DE LAY OF 240 DAYS IN FILING THIS APPEAL. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THERE IS REASONABLE CAUSE ON THE PART OF THE ASSESSEE AND PRAYED FOR CONDONIN G THE DELAY. 3. AFTER HEARING BOTH THE PARTIES, WE FIND THERE I S SUFFICIENT CAUSE ON THE PART OF THE ASSESSEE ATTRIBUTED TO THE DELAY IN FIL ING IN THIS APPEAL. FOR THE SAKE OF COMPLETENESS, WE FIND IT NECESSARY TO REPRO DUCE THE MAIN REASONS FURNISHED BY THE ASSESSEE IN THE AFFIDAVIT AND THE SAME ARE EXTRACTED AS UNDER: 5. THE APPELLANT MOST RESPECTFULLY SUBMITS THAT ON 05-11-2014, M/S. S.D. MEDADKAR AND COMPANY, THE TAX AUDITORS AND TAX CONS ULTANTS AND THE COSMOS COOP BANK LTD. PUNE RESIGNED THE ASSIGNMENT. 6. M/S. VISHRAM DESHPANDE AND ASSOCIATES CHARTERED ACCOUNTANT WERE APPOINTED AS NEW TAX AUDITORS OF THE COSMOS CO-OP. BANK LTD. PUNE W.E.F. 22-11-2014, WHO ALSO RESIGNED W.E.F. 10-01-2015. 7. THE ELECTIONS OF BOARD OF DIRECTORS OF THE COSMO S CO-OP. BANK LTD. WERE SCHEDULED ON 28-12-2014. 8. THE RESULTS OF THE ELECTION WERE DECLARED ON 01- 01-2015 AND THE FIRST MEETING OF THE BOARD OF DIRECTORS OF THE COSMOS CO- OP. BANK LTD. WAS HELD ON 04-01-2015. 9. DUE TO ELECTIONS OF THE BOARD OF DIRECTORS AND F REQUENT CHANGES IN TAX AUDITORS, THE APPELLANT LOST THE TRACK OF THE IMPUG NED APPELLATE ORDER. 10. IT IS PERTINENT TO NOTE THAT MR. SURENDRA WAIKA R THE PARTNER OF M/S. S.D. MEDADKAR AND COMPANY THE ERSTWHILE TAX AUDITOR S AND TAX CONSULTANTS OF THE COSMOS CO-OP. BANK LTD. PUNE HAD ALSO CONTESTED THE ELECTION DUE TO WHICH NOBODY WAS THERE TO GUIDE THE BANK. IN THE C IRCUMSTANCES THERE WAS COMPLETE LACK OF COMMUNICATION BETWEEN THE ERSTWHIL E TAX AUDITORS AND BANK OFFICIALS. 4. IN VIEW OF THE AFOREMENTIONED FACTUAL MATRIX, WE ARE OF THE VIEW THAT THE DELAY IN FILING OF THE APPEAL NEEDS TO BE CONDO NED. 3 ITA NO.1074/PUN/2015 THE COSMOS COOPERATIVE BANK LTD., 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE BROU GHT OUR ATTENTION TO THE ADDITIONAL GROUND FILED BEFORE US AND THE SAME READ S AS UNDER : IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED APPELLATE ORDER PASSED BY THE LD.CIT(A) AND THE IMP UGNED ASSESSMENT ORDER PASSED BY THE LD. AO BEING PASSED IN THE NAME OF TH E MERGED BANK, THE SAME ARE BAD IN LAW AND WITHOUT JURISDICTION AND BE ING PATENTLY ILLEGAL THE SAME MAY PLEASE BE VACATED. 6. AFTER HEARING THE REPRESENTATIVES OF THE PARTIES , CONSIDERING LEGAL NATURE, WE PROCEED TO ADMIT THE SAME. 7. BRIEF FACTS RELEVANT TO THE CASE ARE THAT THE AS SESSEE IS A AOP AND FILED ITS E-RETURN OF INCOME ON 12-09-2009 DECLARING TOTA L LOSS OF RS.93,04,997/-. NOTICES U/S.143(2), 142(1) WERE ISSUED ON THE ASSES SEE. REJECTING THE EXPLANATIONS GIVEN BY THE ASSESSEE THE AO DISALLOWE D AN AMOUNT OF RS.64,628/- ON ACCOUNT OF AMORTIZATION OF PREMIUM O N GOVT. SECURITIES (HTM CATEGORY), AN AMOUNT OF RS.59,232/- FOR NON-DEDUCTI ON OF TAX ON ACCOUNT OF PIGMY COMMISSION, AND RS. 1,31,199/- ON ACCOUNT OF UNCLAIMED DEPOSITS, RS.2,63,71,983/- ON ACCOUNT OF BAD AND DOUBTFUL DEB TS. CIT(A) GAVE PARTIAL RELIEF WITH REGARD TO THE ISSUE OF BAD AND DOUBTFUL DEBTS. AGGRIEVED WITH THE SAME, THE ASSESSEE IS IN APPEAL BEFORE US WITH THE GROUNDS REFERRED THEREIN. 8. EXPLAINING THE BACKGROUND FACTS OF THE CASE RELA TING TO THE ADDITIONAL GROUND, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR AT TENTION TO THE CAUSE TITLE OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE ADDR ESS MENTIONED AGAINST THE TITLE SHEET READS AS THE COMPANY NAME OF THE ME RGED COMPANY, I.E. THE PHALTAN URBAN COOPERATIVE BANK LTD., BEARING PAN NO . AAAAT3411B. THE FIRST APPELLATE AUTHORITY ALSO ADJUDICATED THE ISSU E IN THE SAME NAME VIDE ITS APPEAL NO.PN/CIT(A)-III/SATARA CIR/229/2011-12/349 ORDER DATED 25-09-2014, THE MERGED COMPANY. THE FACT OF MERGER IS IN THE K NOWLEDGE OF THE AO AND THE SAME IS EVIDENT FROM THE CONTENTS OF PARA 2 OF THE ASSESSMENT ORDER. IT IS 4 ITA NO.1074/PUN/2015 THE COSMOS COOPERATIVE BANK LTD., EVIDENT FROM THE SAID PARAGRAPH THAT THE AO ISSUED NOTICE U/S.142(1) ALONG WITH THE QUESTIONNAIRE TO THE SAID MERGED COMPANY, EVEN BEING AWARE OF THE FACT THE SAME IS MERGED WITH THE COSMOS COOPERATIV E BANK LTD., 9. ON THESE FACTS, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSMENT MADE ON SUCH NAMES OF MERGED ENTITIES IS NOT SUSTAINABLE IN LAW. FOR THIS PROPOSITION, HE BROUGHT OUR ATTENTION TO T HE JUDGMENT IN THE CASE OF JITENDRA CHANDRALAL NAVLANI & ANOTHER AND OTHERS VS . UNION OF INDIA IN WRIT PETITION NO.1069 OF 2016 DATED 08-06-2016 AND SUBMI TTED THAT IT IS A CASE OF DISSOLVED COMPANY WHERE THE JURISDICTIONAL HIGH COU RT OF BOMBAY HELD THAT THE ASSESSMENT FRAMED IN RESPECT OF THE NON-EXISTIN G ENTITIES IS UNSUSTAINABLE AS THE ISSUE UNDER CONSIDERATION GOES TO THE ROOT O F THE JURISDICTION OF THE AO TO ASSESS A NON-EXISTING COMPANY. HE ALSO RELIED ON VARIOUS DECISIONS WHICH ARE FILED BEFORE US. 10. ON THE ISSUE OF ADDITIONAL GROUND, WE FIND THE CASE OF THE ASSESSEE IS IDENTICAL IN PRINCIPLE TO THE CASES RELIED FILED BE FORE US. WE HAVE CAREFULLY EXAMINED THE SAID CASE LAWS FILED BY THE LD. COUNSE L FOR THE ASSESSEE. WE FIND, IN THE CASE OF JITENDRA CHANDRALAL NAVLANI & ANOTHER (SUPRA) HAD AN OCCASION TO DECIDE AN IDENTICAL ISSUE AND WE FIND I T RELEVANT TO EXTRACT PARA NO.4 OF THE JUDGMENT OF HONBLE BOMBAY HIGH COURT I N THE CASE OF JITENDRA CHANDRALAL NAVLANI & ANOTHER (SUPRA). THE CONTENTS OF PARA 4 READS AS UNDER: NORMALLY, WE WOULD NOT HAVE ENTERTAINED A PETITION AS AN ALTERNATIVE REMEDY TO FILE AN APPEAL IS AVAILABLE TO THE PETITIONERS. HOWEVER, PRIMA-FACIE, THE IMPUGNED NOTICE HAS BEEN ISSUED IN RESPECT OF A NON -EXISTING ENTITY AS M/S. ADDLER SECURITY SYSTEMS PVT. LTD., WHICH STANDS DIS SOLVED, HAVING BEEN STRUCK OFF THE ROLLS OF THE REGISTRAR OF COMPANIES MUCH BE FORE ITS ISSUE. CONSEQUENTLY, THE ASSESSMENT HAS BEEN FRAMED ALSO I N RESPECT OF THE NON- EXISTING ENTITY. THIS DEFECT IN ISSUING A REOPENI NG NOTICE TO A NON-EXISTING COMPANY AND FRAMING AN ASSESSMENT CONSEQUENT THERET O IS A ISSUE WHICH GOES TO THE ROOT OF THE JURISDICTION OF THE ASSESSI NG OFFICER TO ASSESS THE NON- EXISTING COMPANY. THUS, PRIMA-FACIE, BOTH THE IMPU GNED NOTICE DATED 24 TH MARCH, 2015 AND THE ASSESSMENT ORDER DATED 28 TH MARCH, 2016, ARE WITHOUT JURISDICTION. 5 ITA NO.1074/PUN/2015 THE COSMOS COOPERATIVE BANK LTD., 11. FURTHER, WE ALSO EXAMINED ANOTHER CASE RELIED U PON BY THE LD. COUNSEL FOR THE ASSESSEE (THE CIT AND ANOTHER VS. M/S. CALC UTTA INSTALMENT PVT. LTD. 2016 (11) TMI 332 ALLAHABAD HIGH COURT) WHERE IT IS A CASE OF AMALGAMATION. IN THAT CASE, ASSESSMENT WAS MADE IN THE NAME OF AN AMALGAMATED COMPANY, I.E. M/S.CALCUTTA INSTALMENT P VT. LTD. THE HONBLE ALLAHABAD HIGH COURT ON SIMILAR ISSUE HELD THE ASS ESSMENT MADE IN THE SAID AMALGAMATED COMPANY IS UNSUSTAINABLE AS THE SAID CO MPANY STANDS AMALGAMATED WITH M/S. MODIFIN PVT. LTD. THE CONTEN TS OF PARA NO.19 OF THIS JUDGMENT IS RELEVANT AND THE SAME IS EXTRACTED AS U NDER : 19. IT IS NOT I N DIS P UTE THAT ON THE DATE WHEN NOTICE WAS ISSUED ON 5.10.1998 IN THE NAME OF M/S. CALCUTTA INSTALMENT PV T . LTD. O R WHEN ASSESSMENT ORDER WAS PASSED I N NAME OF M/S . CALCUTTA INSTALMENT PVT . LTD. , IT HAD RE A DY CEASE D T O B E I N EX I S T ENCE HAVIN G BEEN AMALGAMATED WITH M/S . MODIFIN ( P) LTD . THE FACTUM OF AMALGAMA T ION WAS WELL W I THIN KNOWLEDGE OF ASSESSING OFFICER ON THE DATE WHEN ASSESSMENT WAS M ADE STILL IT P ROCEEDED TO ISSUE NOT I CE DATED 5.10 . 1998 AND MADE ASSESSMENT IN RESPEC T T O A L E G A L PERSON WHICH H A D A L READY CEASED EX I STENCE AFTER AMALGAMATION WITH ANO T HER COMPAN Y . ASS E SSME NT C A N BE MADE A G A I NS T A PERSON WHO I S I N EX I S T ENCE. WHEN AFTER AMA LG AMA TI ON , COM P A NY UND E R G ONE AMALGAM A TI ON HAS CEASED T O EX I ST , ASSESSMENT AGAINST A NON EST ENTIT Y I S I L L E G A L AND VOI D . 12. FURTHER, WE FIND SIMILAR VIEW IS TAKEN IN THE C ASE OF CIT VS. DIMENSION APPARELS PVT. LTD. WHERE THE HONBLE DELHI HIGH COU RT IN ITS JUDGMENT DATED 08-07-2014 DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE. THIS IS ALSO A CASE WHERE THE COMPANY STANDS AMALGAMATED WITH ANOTHER C OMPANY AND WHICH APPLIES TO THE CASE OF THE ASSESSEE. 13. CONSIDERING THE ABOVE STATED POSITION IN LAW ON THE ISSUE RAISED IN THE ADDITIONAL GROUND, WE ARE OF THE OPINION THAT THE A DDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWABLE IN FAVOUR OF THE ASSESSEE . ACCORDINGLY, WE DECIDE THE ADDITIONAL GROUND IN HIS FAVOUR. 6 ITA NO.1074/PUN/2015 THE COSMOS COOPERATIVE BANK LTD., 14. SINCE THE LEGAL ISSUE IS DECIDED IN FAVOUR OF T HE ASSESSEE, ADJUDICATION OF ISSUES RAISED IN THE GROUNDS ON MERITS BECOMES A N ACADEMIC EXERCISE. THEREFORE, THE SAME ARE DISMISSED AS ACADEMIC. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF AUGUST, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 31 ST AUGUST, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) - III, PUNE 4. CIT - III, PUNE 5. , , B BENCH PUNE; 6. / GUARD FILE.