The Dy. CIT., Circle-2, Surat V. The Prime Co-Operative Bank Ltd., Surat

ITA 1268/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2153 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J K CHANDNANI
• Assessee Lawyers: HIREN R VEPARIC A
• Keywords: Business income; Condonation of delay
• Section: 143(3)

Judgement Text

DCIT, CIRCLE-2,SURAT V PRIME CO.OPERATIVE BANK LTD./I.T.A. NO.1268/AHD/2015/A.Y. 10-11 PAGE 1 OF 8 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO. 1268/AHD/2015/SRT / A.Y.:2010-11 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT. VS. PRIME CO.OPERATIVE BANK LTD, 2 ND FLOOR, MERIDIAN TOWER, UDHNA DARWAJA, KHATODARA, SURAT-395 001. PAN:AAAAP5507G APPELLANT /RESPONDENT /ASSESSEE BY SHRI HIREN R. VEPARI,C.A. /REVENUE BY SHRI J. K. CHANDNANI, SR. D.R. / DATE OF HEARING: 21 .06. 2018 /PRONOUNCEMENT ON 06 .0 7 .2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, SURAT (CIT(A) FOR SHORT) DATED 07.01.2015 FOR THE A.Y. 2010-11 WHICH IN TURN HAS ARISEN FROM THE ORDER DATED 01.02.2013 PASSED BY DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2, SURAT (IN SHORT THE AO)UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). DCIT, CIRCLE,2, SURAT V. PRIME CO.OPERATIVE BANK LTD./I.T.A. NO. 1268/AHD/2015/A.Y. 10-11 PAGE 2 OF 8 2. GROUND NO. 3 RELATES TO CONDONATION OF DELAY OF 31 DAYS IN FILING OF APPEAL. 3. THE LEARNED SR. D.R. SUBMITTED THAT THERE IS A DELAY OF 31 DAYS IN FILING OF APPEAL. IT WAS SUBMITTED THAT THE A.O. WAS BUSY IN TIME BARRING ASSESSMENT AT THE RELEVANT TIME, THEREFORE, THE APPEAL COULD NOT BE FILED IN TIME. 4. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NO OBJECTION IF THE DELAY IS CONDONED. 5. WE HAVE CONSIDERED THE FACTS AND FIND THAT THE DELAY ON THE PART OF THE A.O. AS SHE WAS BUSY IN TIME BARRING ASSESSMENT AND HOUSING KEEPING JOB. IT IS A SETTLED LAW THAT THE COURT IS QUASI JUDICIAL BODIES AND EMPOWERED TO CONDONE THE DELAY IF THE LITIGANT SATISFIED THE COURT THAT THERE WERE SUFFICIENT REASON FOR AVAILING THE REMEDY AFTER EXPIRY OF LIMITATION. THE HONBLE SUPREME COURT IN THE CASE OF STATE OF WEST BENGAL VS. ADMINISTRATION HAWARA MUNICIPALITY AIR 1972 SC- 749 WHILE CONSIDERING THE SCOPE OF EXPRESSION OF SUFFICIENT CAUSE FOR CONDONATION OF DELAY, HAS HELD THAT THE COURT SHOULD HAVE LIBERAL CONSTRUCTION SAID EXPRESSION SHOULD RECEIVE SO AS TO ADVANCE SUBSTANTIAL JUSTICE WHEN NO NEGLIGENCE OR IN ACTION OR WANT OF BONAFIDE IMPUTABLE TO THE PARTY. WE FIND THAT THERE WAS NO MALAFIDE INTENTION ON THE PART OF A.O. THEREFORE, WE ARE OF THE VIEW THAT THE A.O. IS ABLE TO DEMONSTRATE DCIT, CIRCLE,2, SURAT V. PRIME CO.OPERATIVE BANK LTD./I.T.A. NO. 1268/AHD/2015/A.Y. 10-11 PAGE 3 OF 8 SUFFICIENT REASON FOR DELAY IN FILING OF APPEAL. THEREFORE, WE DEEM IT FIT TO CONDONE THE DELAY OF 31 DAYS AND ADMIT THE APPEAL AND DECIDE THE SAME ON MERIT. 6. GROUND NO.1 RELATES TO DELETING THE DISALLOWANCE OF RS.49,09,774/- MADE ON ACCOUNT OF SPECIAL LONG TERM FINANCE FUND EXPENSES CLAIMED U/S. 36(1)(VII) OF THE ACT. 7. THE A.O. OBSERVED THAT THE ASSESSEE HAS CLAIMED SPECIAL LONG TERM FINANCE FUND U/S. 36(1)(VIII) OF THE ACT OF RS.49,09,774/-. HOWEVER, IT WAS OBSERVED THAT IT IS NOT CLEAR WHETHER THE AMOUNT SET ASIDE BY IT CONSTITUTE 20% OF THE PROFIT DERIVED FROM THE ELIGIBLE BUSINESS COMPUTED UNDER THE HEAD PROFIT & GAINS OF BUSINESS AND PROFESSION CARRIED TO SUCH RESERVE ACCOUNT. THEREFORE, IT WAS NOT CLEAR FROM THE ASSESSEE SUBMISSION OR FACTS AVAILABLE ON RECORD THAT ASSESSEE HAS DERIVED RS.49,09,774/- FROM THE AMOUNT KEPT ASIDE FOR LONG TERM FINANCE FUND FROM THE ELIGIBLE BUSINESS PROFIT ONLY. IN VIEW OF THESE, THE CLAIM MADE BY THE ASSESSEE U/S. 36(1)(VII) WAS DELETED. 8. BEING AGGRIEVED, THE ASSESSEE HAS FILED APPEAL BEFORE CIT(A). THE CIT(A) NOTED THAT THIS ISSUE WAS ALSO IN THE A.Y. 2009-10 IN APPELLANT OWN CASE WHEREIN, THE CIT(A) VIDE HIS ORDER DTD.17.09.2012 HAS DELETED THE ADDITION. THE ITAT, AHMEDABAD VIDE ITS ORDER DTD.23.08.2013 IN ITA NO.2791/AHD/2012 FOR THE A.Y.2009-10 HAS DCIT, CIRCLE,2, SURAT V. PRIME CO.OPERATIVE BANK LTD./I.T.A. NO. 1268/AHD/2015/A.Y. 10-11 PAGE 4 OF 8 CONFIRMED THE ORDER OF THE CIT(A) WHILE DISMISSING APPEAL OF THE DEPARTMENT. 9. BEING AGGRIEVED, THE REVENUE FILED THIS APPEAL BEFORE US. THE LEARNED SR. D.R. RELIED ON THE ORDER OF THE A.O., WHEREAS, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE HAVE BEEN DULY COVERED BY THE DECISION OF TRIBUNAL IN THE FAVOUR OF THE ASSESSEE VIDE ORDER FOR A.Y. 2009-10 IN ITA NO.2791/AHD//2012 DTD.23.08.2013. 10. WE HAVE CONSIDERED THE FACTS AND RIVAL SUBMISSION. WE FIND THAT THE ISSUE HAS BEEN DULY COVERED BY THE DECISION OF TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2009-10 DTD.23.08.2013 WHEREIN, THE HONBLE TRIBUNAL OBSERVED AS UNDER : 9. BEFORE LD. CIT(A), ASSESSEES SUBMISSION WAS AS FOLLOWS : 3.2 DURING THE APPELLATE PROCEEDINGS, IT WAS EXPLAINED BY APPELLANT THAT DURING THE ASSESSMENT PROCEEDINGS COMPLETE DETAILS OF WORKING OUT THE 20% OF PROFITS DERIVED, WERE FURNISHED TO THE AO BUT THE SAME WERE IGNORED AS REGARDS GROUND NO.II ABOUT DEDUCTION U/S. 36(1)(VIII) FOR RS.50,09,000/- THE DETAILS HAVE BEEN FURNISHED AS PER PARA (2) OF LETTER DATED 06.08.2011 TO THE ASSESSING OFFICER IN COURSE OF ASSESSMENT PROCEEDINGS. THIS REPRODUCED . TOTAL INTEREST INC OME ON ADVANCES 1640.11 INTEREST INCOME ON HOUSING (86.41 TECS) AND SSI TERM LOAN (530.52) TECS 616.93 BANKING OPERATION INCOME. 665.79 SO TAXABLE INCOME FROM HOUSING LOAN AND SSI LONG TERM LOAN IS 250.44 20% SPECIAL PROVISION ON ABOVE. 50.09 BRANCH WISE PARTICULARS OF INTEREST ON HOUSING AND MACHINERY LOAN ARE FURNISHED. DCIT, CIRCLE,2, SURAT V. PRIME CO.OPERATIVE BANK LTD./I.T.A. NO. 1268/AHD/2015/A.Y. 10-11 PAGE 5 OF 8 10.AFTER TAKING INTO CONSIDERATION THE SUBMISSION OF THE ASSESSEE, LD. CIT(A) DELETED THIS ADDITION BY OBSERVING AS UNDER : 3.3 I HAVE CONSIDERED THE FACTS ON THE ISSUE, BASIS OF ADDITION MADE BY AO AND SUBMISSIONS OF APPELLANT. THE AOP HAS WRONGLY CONCLUDED THAT THE APPELLANT DID NOT PROVE THAT WHATEVER THE AMOUNT SET ASIDE BY IT, CONSTITUTES 20% OF PROFITS DERIVED FROM THE ELIGIBLE BUSINESS. ALL THE RELEVANT DETAILS ARE PRESENT IN THE P&L ACCOUNT ONLY AND AO HIMSELF COULD HAVE COMPUTED THE 20% OF PROFIT DERIVED FROM THE ELIGIBLE BUSINESS. THE APPELLANT HAS AGAIN FURNISHED ALL THE REQUIRED DETAILS AND WORKED OUT THE PROFIT AMOUNTING TO 250.44 LACS, 20% OF PROFIT THEREOF IS RS.50.09 LACS. AMOUNT CREDITED TO SPECIAL RESERVE IS RS.50,09,000/- WHICH IS 20% OF THE INCOME FROM HOUSING LOANS AND SSI LONG TERM LOANS. THIS WORKING HAS NOT BEEN CHALLENGE BY AO. IT IS THEREFORE, HELD THAT THE APPELLANT HAS CLAIMED EXPENSES UNDER THIS HEAD AS PER PROVISIONS OF SECTION 36(1)(VIII) WHICH ARE ALLOWABLE TO HIM. IN THE RESULT, APPEAL ON THIS GROUND IS ALLOWED. SINCE THE ABOVE FINDING OF THE LD. CIT(A) REMAINED UNCONTROVERTED AT THE TIME OF HEARING BEFORE US, WE FEEL NO NEED TO INTERFERE WITH THE ORDER PASSED BY HIM AND THE SAME IS HEREBY UPHELD. THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 9. IN VIEW OF ABOVE, SINCE THE FACTS ARE IDENTICAL, THEREFORE, RESPECTIVELY FOLLOWING TRIBUNAL ORDER DTD.23.08.2013, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE, THEREFORE, APPEAL OF THE REVENUE ON THIS GROUND IS DISMISSED. 10. GROUND NO.2 RELATES TO DISALLOWING THE ADDITION OF RS.3,59,301/- MADE ON ACCOUNT OF RECLASSIFICATION OF CAPITAL GAIN AS BUSINESS INCOME. 11. THE A.O. OBSERVED THAT THE ASSESSEE HAS CLAIMED INCOME FROM SALE OF SECURITIES WHICH WAS HELD AS INVESTMENT UNDER OBLIGATION TO RBI DCIT, CIRCLE,2, SURAT V. PRIME CO.OPERATIVE BANK LTD./I.T.A. NO. 1268/AHD/2015/A.Y. 10-11 PAGE 6 OF 8 GUIDELINES AS SHORT TERM CAPITAL GAIN OF RS.3,59,301/- BASED ON THE DURATION FOR WHICH THEY WERE HELD. IT WAS EXPLAINED THAT ALL THE BANK HAS TO MAINTAIN STATUTORY LIQUIDITY RATIO (SLR) ATO THE TUNE OF RS.25% OF TERM AND DEMAND LIABILITY AS PER RBI GUIDELINES. HOWEVER, THE A.O. WAS OF THE VIEW THAT THE PROFIT EARNED BY THE ASSESSEE ON SALE OF SECURITIES HELD UNDER OBLIGATION OF RBI GUIDE LINES OR OTHERWISE IS HEREBY CONSIDERED AS BUSINESS INCOME INSTEAD OF CAPITAL GAINS. SOURCE OF MONEY FOR INVESTING IN ALL THESE SECURITIES IN RECEIPTS OUT OF BANKING BUSINESS. WHATEVER THE INCOME EARNED OUT OF SALE OF THESE SECURITIES NATURALLY BECOMES BUSINESS INCOME. IN VIEW OF THESE FACTS RS.3,59,301/- SHOWN BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN IS HEREBY TREATED AS BUSINESS INCOME AND TAXED ACCORDINGLY. 12. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE CIT(A). THE CIT(A) OBSERVED THAT THE A.O. MISCONSTRUED FACTS AND LAW ARRIVING AT THE CONCLUSION BY TREATING CAPITAL GAIN OF RS.3,59,301/- AS BUSINESS INCOME. THE A.O. DID NOT ALLOW THE STCG FROM THE SALE AND ADDED UNDER THE BUSINESS INCOME. THE SLR SECURITIES EVEN INVESTED AS PER THE GUIDELINES OF RBI FOR ANY OTHER PURPOSE. SINCE, MAINTAINING THE SLR RATIO THEY ARE PURELY FOR RUNNING THE BUSINESS OF THE BANK HAS BEEN SHOWN AS INCOME FROM BUSINESS. MAINTAINING THE SLR TO THE TUNE OF 25% OF ITS TERM AND DEMAND LIABILITY THE STATUTORY REQUIREMENT OF BANK DCIT, CIRCLE,2, SURAT V. PRIME CO.OPERATIVE BANK LTD./I.T.A. NO. 1268/AHD/2015/A.Y. 10-11 PAGE 7 OF 8 WHICH THEY CANNOT BE PERMITTED BY RBI TO RUN THEIR BUSINESS. SINCE, THESE SLR SECURITIES ARE REQUIREMENT OF BUSINESS OF BANK, ANY INCOME EARNED OUT OF IT HAS TO BE TREATED AS BUSINESS INCOME. 13. BEING AGGRIEVED, THE ASSESSEE , THE REVENUE HAS FILED APPEAL BEFORE US. THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A) WHILE GIVING RELIEF TO THE ASSESSEE AS DISCUSSED IN THE CASE OF SARDAR INDRA SINGH AND SONS LTD. V. CIT CA NO.40 OF 1952 DTD.23.09.1953 RELIED BY THE A.O. WHILE MAKING THIS ADDITION IN THE A.Y. 2009-10. IT WAS SUBMITTED THAT SIMILAR ISSUE ARISE IN A.Y. 2009-10 HAS BEEN SENT BACK TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION IN THE LIGHT OF SUPREME COURT DECISION IN THE CASE OF SARDAR INDRA SINGH (SUPRA) . THE LEARNED COUNSEL ON THE OTHER HAND RELIEF ON THE ORDER OF LEARNED CIT(A) AND TRIED TO DISTINGUISH THE FACTS OF THE CASE OF FACTS OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SARDAR INDRA SINGH (SUPRA). EVEN THOUGH, THE TRIBUNAL IN ITANO.2795/AHD/2012A.Y.2009-10 DTD.23.08. 2013 HAS SET ASIDE THIS ISSUE TO THE FILE OF THE CIT(A) BY OBSERVING IN PARA 16 OF THE SAID ORDER AS UNDER : 16.AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT AO WHILE MAKING ADDITION OF RS.53,89,699/- BY TREATING SHORT TERM AND LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE AS BUSINESS INCOME OF THE ASSESSEE HAD PLACED RELIANCE ON THE DECISION OF SUPREME COURT IN THE CASE OF SARDAR INDRA SINGH (SUPRA) BUT THE LD. CIT(A) HAS TOTALLY IGNORED THIS FACT WHILE GIVING RELIEF TO THE ASSESSEE. THOUGH LEARNED COUNSEL OF THE DCIT, CIRCLE,2, SURAT V. PRIME CO.OPERATIVE BANK LTD./I.T.A. NO. 1268/AHD/2015/A.Y. 10-11 PAGE 8 OF 8 ASSESEE TRIED TO DISTINGUISH THE FACTS OF ASSESSES CASE WITH THAT OF SUPREME COURT DECISION IN THE CASE OF SARDAR INDRA SINGH (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT THIS EXERCISE SHOULD BE DONE BY HIM BEFORE LD. CIT(A) AS WE ARE INCLINED TO RESTORE THE MATTER BACK TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATION IN THE LIGHT OF SUPREME COURT DECISION IN THE CASE OF SARDAR INDRA SINGH (SUPRA). THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 14. SINCE, THE FACTS ON THE ISSUE ARE IDENTICAL AS THAT OF A.Y. 2009-10, THEREFORE, THIS ISSUE IS SET ASIDE TO THE FILE OF THE LEARNED CIT(A) FOR FRESH ADJUDICATION IN LIGHT OF DECISION OF S.C. IN THE CASE OF SARDAR INDRA SINGH. THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 15. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 16. ORDERED PRONOUNCED IN THE OPEN COURT ON 06.07.2018 SD/- SD/- ( . . /C.M. GARG) ( . . /O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER SURAT, DATED : 06.07.2018 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A), 4. PR. CIT 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT