Bank OF Maharashtra, Pune V. Deputy Commissioner of Income-tax, Range - 1, Pune

ITA 112/PUN/2018

AI Insights

The case involves the Bank of Maharashtra appealing against the orders of the Commissioner of Income Tax (Appeals)-1, Pune, which confirmed the additions made by the Assessing Officer under Section 154 of the Income Tax Act, 1961. The additions were related to incorrect deductions claimed under Section 36(1)(viia) for certain branches and the treatment of Non-Performing Assets (NPA) in violation of Rule 6EA of the Income Tax Rules, 1962. The Tribunal examined whether the reassessment was validly initiated and whether the additions were justifiable. The Tribunal concluded that the reassessment was not valid as it was based on a change of opinion and the facts necessary for the original assessment were fully disclosed by the bank.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137175 (ITAT-PUNE)
• Duration Of Justice: 5 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-12-2022
• Assessment Year: 2007-2008
• Appeal Filed On: 11-01-2018
• Other Referred Cases: CIT vs. Vasisth Chay Vyapar Ltd., 410 ITR 244 (SC), CIT vs. Deogiri Nagari Sahakari Bank Ltd., 379 ITR 24 (Bombay), DCIT vs. Western Maharashtra Development Corporation Ltd. in ITA No.899/PUN/2018 decided on 26.10.2021
• Laws Referred To: Income Tax Act, 1961, Companies Act, 1956, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 147; 148; 154; 143(3); 43D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA Nos.112 & 113/PUN/2018 िनधाᭅरण वषᭅ / Assessment Years : 2007-08 & 2008-09 Bank of Maharashtra, Lokmangal, 1501, Shivajinagar, Pune- 411005. PAN : AACCB0774B Vs. DCIT, Range-1, Pune. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: These are the appeals filed by the assessee directed against the separate orders of the ld. Commissioner of Income Tax (Appeals)-1, Pune [‘the CIT(A)’] dated 18.10.2017 for the assessment years 2007-08 and 2008-09 respectively. 2. Since the identical facts and common issues are involved in both the above captioned appeals of the assessee, we proceed to dispose of the same by this common order. Assessee by : Shri S. Ananthan & Mrs. Lalitha Rameshwaran Revenue by : Shri Keyur Patel Date of hearing : 15.12.2022 Date of pronouncement : 13.01.2023 ITA Nos.112 & 113/PUN/2018 2 3. For the sake of convenience and clarity, the facts relevant to the appeal of the assessee in ITA No.112/PUN/2018 for the assessment year 2007-08 are stated herein. ITA No.112/PUN/2018, A.Y. 2007-08 : 4. Briefly, the facts of the case that the appellant is a public sector bank incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of banking. The Return of Income for the assessment year 2007-08 was filed on 31.10.2007 disclosing total income of Rs.314,62,80,494/-. The same was revised on 30.03.2009 at loss of Rs.187,66,67,189/-. Against the said return of income, the assessment was completed vide order dated 31.12.2008 at total income of Rs.667,74,82,800/-. Subsequently, an order was passed u/s 154 of the Income Tax Act, 1961 (‘the Act’) dated 30.09.2013 assessing at total income of Rs.678,02,72,050/-. Subsequently, the Assessing Officer formed an opinion that the income got escaped assessment to tax on the ground that wrong deduction u/s 36(1)(viia) was claimed in respect of the following three branches :- S.No. Name of the branch Population of the place as per Census 2001. District Average advances as on 31.03.2007 (Rs. In lacs) 10% of the average advance (Rs. In lacs) 1 Lanji 11306 Balaghat 146.05 14.605 2 Katol 37,435 Nagpur 194.41 19.441 3 NIBM, Kondhwa Part of Pune city, City Population- 26,65,911 Pune 924.04 92.404 Total 1264.50 126.450 ITA Nos.112 & 113/PUN/2018 3 5. As the details of the area where the above branches are situated is more than 10,000 population, hence the deduction claimed u/s 36(1)(viia) to the extent of Rs.1,26,45,000/- was wrongly allowed. The deduction in respect of NPA assets was allowed in violation of Rule 6EA of the Income Tax Rules, 1962 (‘the Rules’). Similar addition was made in the assessment years 2010-11 and 2011-12 by the Assessing Officer and confirmed by the ld. CIT(A). Based on the above information, the Assessing Officer formed an opinion that the income had escaped assessment to tax. The Assessing Officer further alleged that the appellant bank had failed to make fully and truly all material facts necessary for the making the assessment for the assessment year 2007-08. The information gathered during the course of assessment proceedings for the subsequent assessment years i.e. A.Ys. 2010-11 and 2011-12 constitutes a tangible material enabling the Assessing Officer to form an opinion that the income escaped assessment to tax and, accordingly, issued notice u/s 148 on 29.03.2014. 6. In response to the said notice, the appellant bank filed a detailed submission stating that there was no income escaped assessment to tax. However, the appellant bank also filed return of income in response to the notice issued u/s 148 and the assessment was completed by the by the Dy. Commissioner of Income Tax, Circle-1(1), Pune (‘the Assessing Officer’) vide order dated ITA Nos.112 & 113/PUN/2018 4 23.03.2015 at a total income of Rs.690,96,44,704/- after making the addition of Rs.12,93,67,654/- on account of interest u/s 43D of the Act. 7. Being aggrieved by the above assessment order, an appeal was filed before the ld. CIT(A) contending that the very validity of notice issued u/s 148 and no addition u/s 43D was required to be made unless the appellant bank had failed to comply with the directions of the Reserve Bank of India (RBI) while recognizing the income. However, the ld. CIT(A) confirmed the validity of the reopening of the assessment and also directed the Assessing Officer to allow deduction u/s 43D r.w. Rule 6EA after verification. 8. Being aggrieved by the decision of the ld. CIT(A), the appellant is in appeal before us in the present appeal. 9. It is contended that the assessment was sought to be reopened beyond the period of 4 years from the end of the relevant assessment year under consideration and there was no failure on the part of the appellant bank to disclose fully and truly all material facts necessary for the purpose of making the assessment. It is further submitted that it is only duty of the appellant bank to disclose the facts, would not draw the inferences. It is further submitted that reopening the assessment was not permitted by mere change of opinion on the same set of information, as was available at the time of original assessment. Finally, it is submitted that the ITA Nos.112 & 113/PUN/2018 5 basis for reopening is the assessment proceedings for the assessment years 2010-11 and 2011-12 in which the identical addition was made on the same issue, which came to the deleted by this Tribunal and the Department had not preferred any appeal before the Hon’ble High Court. Thus, the issue had attained the finality for the assessment years 2010-11 and 2011-12 in favour of the assessee. Therefore, the basis for reopening the assessment no longer survives. On merits, it is submitted that the issue sought to be reopened the assessment is no longer res integra as it is settled by the Hon’ble Supreme Court in the case of CIT vs. Vasisth Chay Vyapar Ltd., 410 ITR 244 (SC), the Hon’ble Bombay High Court in the case of CIT vs. Deogiri Nagari Sahakari Bank Ltd., 379 ITR 24 (Bombay), and the Co-ordinate Bench of this Tribunal in the case of DCIT vs. Western Maharashtra Development Corporation Ltd. in ITA No.899/PUN/2018 decided on 26.10.2021. 10. On the other hand, ld. CIT-DR submits that failure on the part of the assessee bank to disclose that the provision for NPA account was not made in terms of Rule 6EA of the Rules establishes that the assessee bank not disclosed fully and truly all material facts necessary for the purpose of making the assessment. Thus, it is submitted that the proviso to section 147 stands satisfied. He further submits that the information gathered in the subsequent assessment proceedings enabled the Assessing Officer to form an ITA Nos.112 & 113/PUN/2018 6 opinion that the income got escaped assessment to tax amounts to a tangible material placing reliance on the decision of the Hon’ble Bombay High Court in the case of Multiscreen Media (P.) Ltd. vs. Union of India, 324 ITR 54 (Bombay). 11. We heard the rival submissions and perused the material on record. First, we shall take up the ground challenging the reassessment proceedings as it goes to the very root of the matter. Admittedly, in the present case, the assessment was sought to be reopened beyond the 4 years from the end of the relevant assessment year. The provisions of section 147 empower the Assessing Officer, who has reason to believe that any income chargeable to tax had escaped assessment for any assessment year after expiry of 4 years from the end of the relevant assessment year. In case, where the original assessment was made u/s 143(3) unless any income chargeable to tax had escaped assessment for such assessment year for the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of making the assessment for that assessment year. From the material on record, it is clearly indicated that the provision of NPA account was made in accordance with the direction of RBI. This claim was held to be tenable in the light of plethora of following judicial precedents :- ITA Nos.112 & 113/PUN/2018 7 (i) CIT vs. Vasisth Chay Vyapar Ltd., 410 ITR 244 (SC). (ii) CIT vs. Deogiri Nagari Sahakari Bank Ltd., 379 ITR 24 (Bombay). (iii) DCIT vs. Western Maharashtra Development Corporation Ltd. in ITA No.899/PUN/2018 decided on 26.10.2021 (Pune- Trib.). 12. Therefore, it is settled position of law that the primary duty of the assessee is only to disclose fully and truly all material facts necessary for the purpose of making the assessment and not draw the inferences. Thus, it cannot be said that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of making the assessment. Reliance in this regard can be placed on the decision of the Hon’ble Bombay High Court in the case of Kalpataru Ltd. vs. DCIT, 439 ITR 284 (Bombay). Thus, we are of the considered opinion that there is no satisfaction of the proviso to section 147 of the Act and the Assessing Officer was not entitled to reopen the assessment. 13. Even otherwise, it is admitted that the basis of reopening the assessment for the assessment years 2010-11 and 2011-12, wherein, similar addition was made by the Assessing Officer which came to be deleted by the Tribunal vide order dated 26.10.2021 (supra). It is also admitted fact that the decision of this Tribunal (supra) was not challenged by the Department before the Hon’ble High Court. Thus, the issue had attained finality. Therefore, the very basis of the re-assessment proceedings does not stand, as once the ITA Nos.112 & 113/PUN/2018 8 foundation is removed, the superstructure falls (sublato fundmento credit opus). 14. In the light of the above discussion, we are of the considered opinion that the Assessing Officer was not justified in initiating reassessment proceedings and the orders passed by the lower authorities are hereby reversed. 15. In the result, the appeal filed by the assessee in ITA No.112/PUN/2018 for A.Y. 2007-08 stands allowed. ITA No.113/PUN/2018, A.Y. 2008-09 : 16. Since the facts and issues involved in both the appeals of the assessee are identical, therefore, our decision in ITA No.112/PUN/2018 for A.Y. 2007-08 shall apply mutatis mutandis to the appeal of the assessee in ITA No.113/PUN/2018 for A.Y. 2008-09 respectively. Accordingly, the appeal of the assessee in ITA No.113/PUN/2018 for A.Y. 2008-09 stands allowed. 17. To sum up, both the above captioned appeals of the assessee stands allowed. Order pronounced on this 13 th day of January, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 13 th January, 2023. Sujeet ITA Nos.112 & 113/PUN/2018 9 आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-1, Pune. 4. The Pr. CIT-1, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.