Chennai Central Co-operative Bank Limited, CHENNAI V. ACIT, CHENNAI

ITA 1118/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7999 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 28-09-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2016
• Court: TRIBUNAL
• Department Lawyers: M M BHUSARI
• Keywords: Retrospective amendment; Question of law; Bad and doubtful debts; Non compliance; Revised return
• Section: 143(3); 142(1); 234B; 263; 12; 11

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER I . T.A. NO S . 11 17 AND 1118 /MDS/201 6 ASSESSMENT YEAR S : 20 11 - 12 & 12 - 13 M/S. CHENNAI CENTRAL CO - OPERATIVE BANK LTD., C/O M/S. RAMESH AND RAMACHANDRAN, C.A., NEW NO. 39, OLD NO. 29/3, VISWANATHAPURAM MAIN ROAD, KODAMBAKKAM, CHENNAI 600 024. [PAN:AAA AC0982C ] VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 8, CHENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI Y. SRIDHAR, C. A . / RESPONDENT BY : SHRI M.M. BHUSARI , CIT / DATE OF HEARING : 28 . 0 9 .201 6 / DATE OF P RONOUNCEMENT : 25 . 1 1 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S FILED BY THE SAME ASSESSEE ARE DIRECTED AGAINST THE ORDER UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] OF THE LD. PRINCIPAL COMMISSI ONER OF INCOME TAX 8 , CHENNAI BOTH DATED 2 4 . 03 .20 1 6 RELEVANT TO THE ASSESSMENT YEAR S 20 11 - 12 AND 12 - 13 . IN BOTH THE APPEALS, THE ASSESSEE HAS CHALLENGED THE ORDER PASSED UNDER SECTION 263 OF THE ACT FOR BOTH THE ASSESSMENT YEARS PROPOSING THE DISALLOWANCE UNDER SECTION I.T.A. NO . 1117 & 1118 /M/ 16 2 40(A)(IA) OF THE ACT ON THE CLAIM OF DEDUCTION OF .98.17 CRORES AS INTEREST ON BORROWINGS SINCE TDS HAS NOT BEEN DEDUCTED ON THE PAYMENT OF INTERESTS EXCEEDING .10,000/ - AS PER SECTION 194A OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE BANK, FILED ITS RETURN FOR TH E ASSESSMENT YEAR 2011 - 12 ON 30.09.2011 DECLARING TOTAL INCOME OF .53,41,70,568/ - . FIRST REVISED RETURN WAS FILED ON THE SAME DAY ADMITTING THE SAME INCOME. SINCE THERE WAS A DIFFERENCE OF .1,42,378/ - IN THE RETURN OF INCOME AND THE INCOME WORKED OUT IN THE COMPUTATION OF TOTAL INCOME, SUCH DIFFERENCE AMOUNT WAS INCLUDED AND IN T HE SECOND REVISED RETURN AND FILED ON 14.10.2011 ADMITTING THE TOTAL INCOME AT .53,43,12,946/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SU BSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 24.09.2012 AND DULY SERVED ON THE ASSESSEE. 2.1 FROM THE COMPUTATION OF INCOME AS PER ORIGINAL, REVISED AND IN THE RE - REVISED RETURNS, THE ASSESSEE HAS CLAIMED DEDUCTION UNDER THE FOLLOWING HEADS: 1. PROVISION FOR EDUCATION FUND . 84,90,896/ - 2. PROVISION FOR RESEARCH AND DEVELOPMENT FUND . 1,27,36,344/ - 3. PROVISION FOR PCD FUND . 2,12,27,240/ - 4. PROVISION FOR DOUBTFUL DEBTS AS PER IT ACT [36(1)(VIIA)] . 4,42,04,470/ - TOTAL . 8,66,58,950/ - I.T.A. NO . 1117 & 1118 /M/ 16 3 THE ASSESSEE HAS FILED THIRD REVISED RETURN OF INCOME ON 31.01.2013 WITHDRAWING THE CLAIM OF DEDUCTION UNDER THE PROVISION FOR DOUBTFUL DEBTS AS PER INCOME TAX ACT OF .4,42,04,470/ - AS WELL AS THE DIFFERENCE IN THE COMPUTATION OF INCOME AND IN THE ORIGINAL RETURN OF INCOME OF .1,42,378/ - HAVE BEEN CONSIDERED IN THE THIRD REVISED RETURN AND ADMITTED THE TOTAL INCOME OF .62,09,71,900/ - . THE DUE TAXES THEREON INCLUDING INTEREST UNDER SECTION 234B AND 234C OF THE ACT TOTALLING TO .3,83,13,420/ - HAVE BEEN PAID ON 31.01.2013. SUBSE QUENTLY, THE CASE OF THE ASSESSEE WAS ASSIGNED TO THE JCIT AND ACCORDINGLY, NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT HAVE BEEN ISSUED AND DULY SERVED ON THE ASSESSEE. IN RESPONSE THERETO, THE AR OF THE ASSESSEE APPEARED AND FILED WRITTEN SUBMISSI ONS AND PRODUCED THE BOOKS OF ACCOUNTS. AFTER EXAMINING THE DETAILS FILED BY THE ASSESSEE, THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 31.03.2014 BY ASSESSING TOTAL INCOME OF THE ASSESSEE AT .62,11,87,358/ - . 3. ASSUMING JURISDICTION UNDER SECTION 263 OF THE ACT, THE LD. PCIT SHOW - CAUSED THE ASSESSEE ON 16.11.2015 FOR THE FOLLOWING REASON: PERUSAL OF RECORDS SHOWS THAT YOU HAD CLAIMED DEDUCTION OF .98.17 CRORES AS INTEREST ON BORROWINGS. BUT, TAX HAS NOT BEEN DEDUCTED AT SOURCE ON INTEREST PAYMENTS EXCEEDING .10,000/ - AS PER SECTION 194A OF THE INCOME TAX ACT. NON COMPLIANCE OF THE SAID PROVISIONS ATTRACT DISALLOWANCE U/S 40(A)(IA) OF THE INCOME TAX ACT. 3.1 AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE AS WELL AS VERIFICATION OF RECORDS, THE LD. PCIT HAS OBSERVED THAT THE ASSESSEE HAS NOT I.T.A. NO . 1117 & 1118 /M/ 16 4 DEDUCTED TAX AT SOURCE ON INTEREST PAYMENTS EXCEEDING .10,000/ - AS PER SECTION 194A(1) R.W.S. 194A(I)(B) OF THE ACT. NON COMPLIANCE OF THE SAID P ROVISIONS ATTRACTS DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. THEREFORE, THE LD. PCIT HAS HELD THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND DIRECTED THE ASSESSING OFFICER TO PAS S FRESH ASSESSMENT TO CONSIDER THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER PASSED UNDER SECTION 263 OF THE ACT AND CHALLENGED THAT THE AMENDMENT MADE TO SUB - SECTION (3) OF SECTION 194A W.E.F. 01.06.2015 HAS ONLY PROSPECTIVE OPERATION AND NOT APPLICABLE TO EARLIER ASSESSMENT YEARS. BY RELYING ON THE DECISION IN THE CASE OF COIMBATORE DISTRICT CENTRAL CO - OPERATIVE BANK LTD. V. ITO [2016] 65 TAXMANN.COM 1(MADRAS) , THE LD. COUNSEL FOR THE ASSESSEE HAS PLEADED THAT THE ORDER PASSED UNDER SECTION 263 OF THE ACT SHOULD BE QUASHED. 5. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. PCIT, EVEN THOUGH FAIRLY CONCEDED THAT THE AMEND MENT MADE TO SUB - SECTION (3) OF SECTION 194A W.E.F. 01.06.2015 HAS ONLY PROSPECTIVE EFFECT. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE BEFORE US FOR ADJUDICATION I.T.A. NO . 1117 & 1118 /M/ 16 5 IS WHETHER THE AMENDMEN T TO SUB - SECTION (3) OF SECTION 194A W.E.F. 01.06.2015 IS APPLICABLE TO THE ASSESSMENT YEAR 2011 - 12 AND 2012 - 13 OR NOT. IT IS NOT UNDER DISPUTE THAT THE SAID AMENDMENT TO SUB - SECTION (3) TO SECTION 194A OF THE ACT HAS BEEN INSERTED BY THE FINANCE ACT, 2015 , MORE SPECIFICALLY W.E.F. 01.06.2015, WHICH CLEARLY SHOWS THAT THE SAID AMENDMENT IS APPLICABLE TO THE FINANCIAL YEAR 2015 - 16 RELEVANT TO THE ASSESSMENT YEAR 2016 - 17 ONWARDS AND NOT PRIOR TO THIS ASSESSMENT YEAR. THE ASSESSMENT YEARS UNDER CONSIDERATION B EFORE US ARE 2011 - 12 AND 2012 - 13 AND MOREOVER THE AMENDMENT IS NOT WITH RETROSPECTIVE EFFECT AND ONLY PROSPECTIVE EFFECT FROM 01.06.2015. 6.1 ON SIMILAR FACTS AND CIRCUMSTANCES, IN THE CASE OF COIMBATORE DISTRICT CENTRAL CO - OPERATIVE BANK LTD. V. ITO (SUP RA), THE HON BLE JURISDICTIONAL HIGH COURT HAS OBSERVED AND HELD AS UNDER: 63. IT CAN BE SEEN FROM THE LAST PART OF THE PORTION EXTRACTED ABOVE THAT THE VERY NOTE EXPLAINING THE CLAUSE WAS SPECIFIC TO THE EFFECT THAT THE PROPOSAL WAS TO BRING FORTH AN AM ENDMENT WITH PROSPECTIVE EFFECT FROM L.6.2015. THERE IS NO DISPUTE NOW THAT ON AND FROM 1.6.2015 THE APPELLANT CANNOT ESCAPE THE LIABILITY FROM DEDUCTION OF TAX AT SOURCE. 64. ONCE AN AMENDMENT IS INTRODUCED, FOR THE PURPOSE OF REMOVING THE ANOMALOUS SI TUATION OR FOR THE PURPOSE OF REMOVING THE CONFUSIONS BOTH IN THE MANNER IN WHICH THE PROVISIONS STOOD AND THE MANNER IN WHICH THEY WERE UNDERSTOOD, THE SAME COULD BE TAKEN ONLY TO HAVE PROSPECTIVE EFFECT. IT MUST BE POINTED OUT THAT THE PARLIAMENT DID NOT CHOOSE TO ANSWER A QUESTION. RATHER IT CHOSE TO AMEND THE PROVISIONS. IT IS NOW WELL SETTLED THAT AN AMENDMENT CAN ONLY BE PROSPECTIVE UNLESS IT IS MADE RETROSPECTIVE BY EXPRESS LANGUAGE OR NECESSARY IMPLICATION. APART FROM THE FACT THAT THE EXPRESS LANGU AGE OF SECTION 194A AFTER AMENDMENT DOES NOT INDICATE ANY RETROSPECTIVITY, THE NOTE EXPLAINING I.T.A. NO . 1117 & 1118 /M/ 16 6 THE CLAUSES GOES ONE STEP FURTHER IN MAKING IT CLEAR THAT IT WAS INTENDED TO HAVE PROSPECTIVE EFFECT FROM 1.6.2015. 65. THEREFORE, OUR ANSWER TO THE FIRST SUB STANTIAL QUESTION OF LAW WOULD BE IN FAVOUR OF THE ASSESSEE. THE ABOVE CASE LAW WAS ALSO PLACED BEFORE THE LD. PCIT, HOWEVER, THE LD. PCIT HAS NOT ACCEPTED THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT SINCE THE DEPARTMENT HAS SEND A PROPOSAL FOR FILING SLP BEFORE THE HON BLE SUPREME COURT. HOWEVER, THE LD. DR COULD NOT CONTROVERT THE FINDINGS OF THE HON BLE HIGH COURT OR FILED ANY HIGHER COURT DECISION HAVING MODIFIED OR REVERSED THE FINDINGS OF THE HON BLE HIGH COURT. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ORDER PASSED BY THE LD. PCIT UNDER SECTION 263 OF THE ACT FOR THE ASSESSMENT YEARS 2011 - 12 AND 2012 - 13 CANNOT BE SUSTAINED UNDER LAW AND ACCORDINGLY, THE ORDERS PASSED BY THE LD. PCIT STAND QUASHED FOR BOTH THE ASSESSMENT YEARS. 7 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THE 25 TH NOVEMBER, 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, TH E 25 . 1 1 .201 6 VM/ - I.T.A. NO . 1117 & 1118 /M/ 16 7 / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.