Assistant Commissioner of Income-tax, V. Hutatma Sahakari Bank Ltd., Sangli

ITA 1167/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9189 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 31-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Assessee Lawyers: MRS J R CHANDEKAR
• Keywords: Depreciation; Principle of natural justice
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1167/PUN/2016 / ASSESSMENT YEAR : 2011-12 THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE 1, SANGLI. . / APPELLANT V/S HUTATMA SAHAKARI BANK LTD., AT. WALWA TAL.: WALWA, DIST. SANGLI. PAN : AAAAH0140B. . / RESPONDENT ASSESSEE BY : MRS. J.R. CHANDEKAR. REVENUE BY : SHRI MUKESH JHA, JCIT. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 1, KOLHAPUR DT.08.03.2016 FO R THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A CO-OPERATIVE BANK STATED TO BE ENGAG ED IN THE BUSINESS OF BANKING. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME / DATE OF HEARING : 14.03.2018 / DATE OF PRONOUNCEMENT: 15.03.2018 2 FOR A.Y. 2011-12 ON 27.09.2011 DECLARING TOTAL INCOME OF RS.68,27,391/-. THE CASE WAS SELECTED FOR SCRUTINY AND T HEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.28.03.20 14 AND THE TOTAL INCOME WAS DETERMINED AT RS.1,39,89,101/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFOR E LD.CIT(A) WHO VIDE ORDER DT. 08.03.2016 (IN APPEAL NO.SLI/175/14-15) DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLO WING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.50,83,5 85/- ON ACCOUNT OF PROVISIONS FOR DEPRECIATION ON SECURITIES HELD TO M ATURITY (HTM). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, IT CAN BE SEEN THAT THE CIT(A) HAS NOT BROUGHT ON RECORD ANY FACTS TO S HOW THAT THE SECURITIES CATEGORIZED AS 'HELD TO MATURITY' WERE S HIFTED TO THE CATEGORY OF 'AVAILABLE FOR SALE' OR 'HELD FOR TRADING' BY GI VING EFFECT IN AUDITED ACCOUNTS AND NOTES ON ACCOUNTING POLICY. 3. THE CIT(A) ERRED IN IGNORING THAT ASSESSEE DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS AND IN STATEMENT OF FACTS CL AIMED' THAT THE INVESTMENT WERE OF THE NATURE OF HTM CATEGORY. THE CIT (A), WITHOUT PROVIDING OPPORTUNITIES TO THE ASSESSING OFFICER, A S PER RULE 46A(3) OF I.T. RULES, 1962, ADMITTED CHANGE OF STAND THAT INV ESTMENT IN SECURITIES WERE 'AFS' CATEGORY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) ERRED IN ALLOWING THE DEDUCTION IN THE FORM OF PROVISION FOR DEPRECIATION, WITHOUT EXAMINING THE MARKET VALUE AND ITS BASIS OF VALUATI ON AT THE END OF RELEVANT FINANCIAL YEAR. 3. BEFORE US, AT THE OUTSET, LD.D.R. SUBMITTED THAT THOUGH THE REVENUE HAS RAISED VARIOUS GROUNDS BUT ALL THE GROUNDS ARE INTER- CONNECTED AND ARE ON A SINGLE ISSUE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOT ICED THAT ASSESSEE HAD CLAIMED RS.50,83,585/- AS PROVISION FOR DEPREC IATION ON 3 HTM SECURITIES. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE DEPRECIATION CLAIMED SHOULD NOT BE DISALLOWED IN VIEW OF THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. I NG VYSYA BANK LTD REPORTED IN 356 ITR 532. ASSESSEE INTER-ALIA S UBMITTED THAT HTM SECURITIES HAVE BEEN HELD BY THE ASSESSEE AS INVEST MENTS AND NOT AS STOCK-IN-TRADE AND IT HAS PROPORTIONATELY AMORT IZED THE PREMIUM ACTUALLY PAID AT THE TIME OF PURCHASE OF SECURITIES ABOVE THE FACE VALUE TILL THE YEAR OF MATURITY. THE SUBMISSION OF THE A SSESSEE WAS NOT FOUND ACCEPTABLE TO THE AO AS HE WAS OF THE VIE W THAT HTM SECURITIES ARE NOT HELD FOR TRADING AND ARE INVESTMENTS H ELD TILL MATURITY AND THEREFORE THEY ARE CAPITAL IN NATURE. AO WA S THEREFORE OF THE VIEW THAT ANY INCREASE OR DECREASE IN THE VALUE OF THESE INVESTMENTS CANNOT BE MARKED TO MARKET AND NO DEPREC IATION CAN BE CLAIMED THEREOF. HE THEREFORE, FOLLOWING THE DECISION OF HONB LE KARNATAKA HIGH COURT IN THE CASE OF ING VYSYA BANK LTD ., (SUPRA) DISALLOWED THE CLAIM OF DEPRECIATION ON HTM SECURITIES OF RS.50,83,585/-. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE CARRIED THE MATTER BEFORE LD.CIT(A), WHO DECIDED THE ISSUE BY HOLD ING AS UNDER : 10. IN THIS GROUND OF APPEAL THE APPELLANT HAS RAI SED THE ISSUE OF DEPRECIATION ON INVESTMENTS MADE BY THE BANK AND HE LD UNDER THE AVAILABLE FOR SALE (AFS) CATEGORY. HOWEVER, IT IS S EEN THAT THE APPELLANT HAS CLAIMED THE SAID SECURITIES AS HELD UNDER HELD TO MATURITY (HTM) CATEGORY AT THE TIME OF ASSESSMENT AND WHILE MAKING REPRESENTATION BEFORE THE ASSESSING OFFICER. HOWEVER, DURING THE A PPELLATE PROCEEDINGS, REALIZING THEIR MISTAKE, THE AUTHORIZE D REPRESENTATIVE OF THE APPELLANT HAS BROUGHT TO MY ATTENTION THAT SAID SECURITIES WERE HELD UNDER AFS CATEGORY AND NOT UNDER HTM CATEGORY. 11. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE SUBMISSION MADE BEFORE ME ALONG WITH NECESSARY EVIDENCES. IT C AN BE SEEN FROM ALL THE DOCUMENTS LAID BEFORE ME THAT THE IMPUGNED SECU RITIES WERE HELD BY THE BANK UNDER AFS CATEGORY AND NOT HTM CATEGORY . THESE SECURITIES IN QUESTION HAVE BEEN SHIFTED VIDE A RES OLUTION OF THE BOARD 4 OF DIRECTORS OF THE BANK DURING THE FINANCIAL YEAR 2010-11 RELEVANT TO ASSESSMENT YEAR 2011-12. IT CAN BE SEEN FROM THE RB I CIRCULAR ENCLOSED THAT THE BANK WAS ALLOWED TO SHIFT TO AND FROM HTM CATEGORY AND THAT THEY WERE TO BE SHIFTED AT THE AMORTIZED COST. THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT HAS SUBMITTED IN TH EIR SUBMISSION THAT THE MISREPRESENTATION BEFORE THE ASSESSING OFFICER WAS ON ACCOUNT OF OVERSIGHT. FURTHER, THE ASSESSING OFFICER HAS ALSO NOT VERIFIED THE NATURE OF THE SECURITIES IN QUESTION WHILE COMPLETING THE ASSESSMENT. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APP EAL BEFORE US. 5. BEFORE US, LD.D.R. TOOK US THROUGH THE ORDER OF AO AND POINTED OUT THAT BEFORE AO IT WAS ASSESSEES STAND THAT THE INVESTMENTS WERE HELD AS HTM SECURITIES WHEREAS BEFORE LD.CIT(A), IT WAS ASSE SSEES SUBMISSION THAT THE SECURITIES WERE HELD UNDER AFS CAT EGORY AND NOT AS HTM CATEGORY AND THE MISS-REPRESENTING BEFORE THE AO WAS ON ACCOUNT OF OVERSIGHT. HE POINTED TO THE OBSERVATIONS O F LD.CIT(A), WHEREIN IT WAS NOTED BY LD.CIT(A) THAT THE AO HAS NOT V ERIFIED THE NATURE OF SECURITIES IN QUESTION WHILE COMPLETING THE ASSESS MENT. HE FURTHER SUBMITTED THAT NO OPPORTUNITY WAS GRANTED TO T HE AO DURING THE APPELLATE PROCEEDINGS AND NO REMAND REPORT WAS CALLE D FOR BY LD.CIT(A). HE THEREFORE SUBMITTED THAT THE PRINCIPLES OF NAT URAL JUSTICE DEMANDS THAT AN OPPORTUNITY BE GRANTED TO THE AO AND THE MATTER BE REMITTED TO AO. LD.A.R. DID NOT CONTROVERT TH E SUBMISSIONS MADE BY LD.D.R. BUT HOWEVER SUPPORTED THE ORDER OF LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO ALLOWIN G THE DEPRECIATION ON INVESTMENTS. IT IS AN UNDISPUTED FACT THAT BEFORE AO ASSESSEE SUBMITTED THAT THE SECURITIES WERE HELD UND ER HTM CATEGORY BUT BEFORE LD.CIT(A) ASSESSEES CONTENTION WAS THAT THE 5 SECURITIES WERE HELD UNDER AFS CATEGORY. NO SUBMISSIONS WERE MADE BY ASSESSEE BEFORE AO THAT THE SECURITIES WERE HELD BY IT UNDER AFS CATEGORY AND CONSEQUENTLY THERE IS NO FINDING OF THE AO ON IT. WE FIND THAT LD.CIT(A) HAS ALSO NOTED THAT THE AO HAS NOT VE RIFIED THE NATURE OF SECURITIES WHILE COMPLETING THE ASSESSMENT. WE FU RTHER FIND THAT NO REMAND REPORT WAS CALLED FOR BY LD.CIT(A) AND HE HAD RELIED ON THE EVIDENCE FILED BY ASSESSEE WHILE DECIDING THIS ISSUE. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT FOLLOWING THE PR INCIPLES OF NATURAL JUSTICE, AO SHOULD BE GRANTED AN OPPORTUNITY TO EXAMINE THE EVIDENCES SUBMITTED BY ASSESSEE BEFORE LD.CIT(A). WE THER EFORE REMIT THE GROUND TO THE FILE OF AO AND DIRECT HIM TO DECIDE THE ISSUE AFTER CONSIDERING THE EVIDENCES AND SUBMISSIONS OF ASSESSEE IN A CCORDANCE WITH THE LAW. NEEDLESS TO STATE THAT AO SHALL GRANT REA SONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. WITH THESE D IRECTIONS, WE RESTORE THE ISSUE TO THE FILE OF AO. THUS, THE GROUNDS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF REVENUE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED ON 15 TH DAY OF MARCH, 2018. SD/- SD/- ( VIKAS AWASTHY ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 15 TH MARCH, 2018. YAMINI 6 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-1, KOLHAPUR / CIT(A) CONCERNED. THE ADDL.CIT / JT.CIT / CIT CONCERNED. '#$ %%&',) &', / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.