DCIT, Circle-3(2), Hyd, Hyderabad V. State Bank of Hyderabad, Hyd, Hyderabad

ITA 1386/HYD/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2444 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-12-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 11-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Assessee Lawyers: LAXMINIWAS SHAR MA
• Keywords: Rectification of order
• Section: 143(3); 115JB; 263; 154; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1386/HYD/2015 ASSESSMENT YEAR: 2006-07 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(2), HYDERABAD. VS. STATE BANK OF HYDERABAD, HYDERABAD. PAN AADCS 4009H (APPELLANT) (RESPONDENT) REVENUE BY : SHRI P. CHANDRA SEKHAR ASSESSEE BY : SHRI LAXMINIWAS SHARMA DATE OF HEARING : 14-03-2017 DATE OF PRONOUNCEMENT : 09-06-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS IS AN APPEAL OF THE REVENUE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - 3, HYDE RABAD, DATED 30/09/ 2015 FOR AY 2006-07. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME FOR AY 2006-07 ON 30/11/2006 ADMITTING IN COME OF RS. 57,77,29,077/-. THE TAXABLE INCOME U/S 143(3) OF TH E ACT WAS DETERMINED AT RS. 5,69,15,75,328/-. IN THE SCRUTINY ASSESSMENT, THE AO HELD THAT THE ASSESSEE FALLS WITHIN THE DEFINITI ON OF COMPANY AS DEFINED U/S 2(17) OF THE ACT AND HELD THAT PROVISIO NS OF SECTION 115JB ARE APPLICABLE TO THE ASSESSEE. HOWEVER, THE TAX PA YABLE UNDER NORMAL PROVISIONS WAS MORE THAN THE TAX PAYABLE U/S 115JB. 2 ITA NO. 1386/H/15 STATE BANK OF HYDERABAD, HYD. ACCORDINGLY, INCOME WAS DETERMINED UNDER NORMAL PRO VISIONS OF THE ACT. 3. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A) AND ONE OF THE GROUNDS RAI SED BY THE ASSESSEE WAS THAT MAT PROVISIONS WERE NOT APPLICABL E TO THE BANK. THE CIT(A) IV IN HIS ORDER DATED 31/03/2009 HELD THAT THE ASSESSEE WAS ASSESSED IN THE STATUS OF COMPANY PRIOR TO 1969 -70. THEREFORE, THE ASSESSEE WAS A COMPANY AS DEFINED U/S 2(17)(III ), THEREFORE, PROVISIONS OF SECTION 115JB ARE APPLICABLE. 4. ON FURTHER APPEAL TO ITAT, HYDERABAD, THOUGH THE ASSESSEE TOOK GROUND OF APPEAL ON THE ISSUE OF 115JB, THE SA ME WAS NOT ENTERTAINED BY THE ITAT ON THE GROUND THAT THE ASSE SSEE DID NOT OBTAIN THE APPROVAL FROM COD TO PURSUE SUCH ISSUE. 5. CONSEQUENT TO VARIOUS ORDERS PASSED BY THE CIT(A )/ITAT/263 ORDER, IN WHICH THE TAXABLE INCOME WAS DETERMINED U NDER NORMAL PROVISIONS SINCE THE TAX PAYABLE WAS MORE IN THE C ASE OF NORMAL PROVISIONS. CONSEQUENT TO RECENT CONSEQUENTIAL ORD ER PASSED BY THE ITAT IN ITA NO. 509/HYD/2010, AO PASSED CONSEQUENTI AL ORDER ON 28/03/2014 IN WHICH TAXABLE INCOME WAS AGAIN DETERM INED UNDER NORMAL PROVISIONS. 6. IN THE ABOVE CONSEQUENTIAL ORDER, AO NOTICED THA T THERE IS A MISTAKE APPARENT FROM RECORD I.E. TAX PAYABLE U/S 1 15JB IS HIGHER THAN THE TAX LIABILITY UNDER NORMAL PROVISIONS. ACC ORDINGLY, HE PASSED RECTIFICATION ORDER U/S 154 AFTER GIVING OPPORTUNIT Y OF BEING HEARD TO ASSESSEE. 7. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED AN APPEAL BEFORE THE CIT(A) 3, HYDERABAD. 3 ITA NO. 1386/H/15 STATE BANK OF HYDERABAD, HYD. 8. LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, VARIOUS CASE LAWS SUBMITTED BY THE ASSESSEE AS WELL AS THE DECISION OF ITAT, MUMBAI IN THE CASE OF MAHARASHTRA STATE EL ECTRICITY BOARD AND ASSESSEES OWN CASE FOR AY 2007-08 IN ITA NO. 5 78/HYD/2010, DATED 07/09/2012 AND THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF VOLKAR BROTHERS, 821 ITR 50, HELD THAT IN T HE GIVEN CASE, THE FACT WHETHER 115JB IS APPLICABLE TO BANKING COMPANY OR NOT WAS A SUBJECT MATTER OF APPEAL ON WHICH CIT(A) AND HONBL E ITAT TOOK DIFFERENT VIEWS. HOWEVER, IN ACCORDANCE WITH SECTIO N 154(1)(A) THE ISSUE WHICH WAS THE SUBJECT MATTER OF APPEAL CANNOT BE CONSIDERED U/S 154. ACCORDINGLY, HE ALLOWED THE APPEAL OF THE ASSESSEE. 9. AGGRIEVED WITH THE ABOVE ORDER, REVENUE IS IN AP PEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (A) ERRED ON BOTH LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT (A) ERRED IN CANCELLING THE ORDE R PASSED ON 12/02/2015 U/S 154 IN WHICH DEMAND OF RS.52,17,63,8 00/ -, WAS RAISED BY INVOKING PROVISIONS OF SECTION 115JB, BY HOLDING THAT APPLICABILITY OF PROVISIONS OF SECTION 115JB TO THE ASSESSEE IS DEBATABLE. 3. THE LD.CIT(A) FAILED TO APPRECIATE THAT THE ISSU E OF APPLICABILITY OF PROVISIONS OF SECTION 115JB HAS NO T BEEN DECIDED AFRESH IN THE ORDER DATED 12/02/2015. 4. THE LD.CIT(A) FAILED TO APPRECIATE THAT A MISTAK E HAS CREPT IN WHILE GIVING EFFECT TO THE ORDERS OF HIGHER AUTHORI TIES, WHICH WAS RECTIFIED IN THE ORDER DATED 12/02/2015. 5. THE LD.CIT(A) FAILED TO APPRECIATE THAT NO FRESH ISSUE WAS DECIDED IN THE ORDER DATED 12/02/2015, AS THE ISSUE OF APPLICABILITY OF PROVISIONS OF SECTION 115JB TO THE ASSESSEE FOR AY 2006-07 HAS REACHED A FINALITY BY THE ORDER OF H ON'BLE ITAT NO:827/HYD/2009 DATED 06/08/2010. 6. THE LD.CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT NOT CONSIDERING THE INCOME TAXABLE U/S 115JB IN THE CON SEQUENTIAL ORDER DATED 28/02/2014 WAS ONLY A MISTAKE APPARENT FROM RECORDS, WHICH WAS ORIGINALLY CONSIDERED BOTH IN TH E ASST.ORDER DATED 28/12/2007 AND IN THE CONSEQUENTIAL ORDER DAT ED 01/03/2010, GIVING EFFECT TO THE ORDER OF LD.CIT(A) DT.31/03/2009. 4 ITA NO. 1386/H/15 STATE BANK OF HYDERABAD, HYD. 10. LD. DR SUBMITTED THAT ORIGINAL ASSESSMENT U/S 1 43(3) WAS COMPLETED BY THE AO INVOKING SECTION 115JB OF THE A CT, STATING THAT THE SAID SECTION IS APPLICABLE TO THE ASSESSEE CONS IDERING THE FACT THAT THE ASSESSEE IS A COMPANY AND ASSESSED TO TAX AS SUCH UNTIL AY 1969-70. ASSESSEE IS FALLING UNDER THE DEFINITION O F SECTION 2(17)(III), HENCE, THE TAX LIABILITY WAS DETERMINED UNDER THE N ORMAL PROVISIONS AS WELL AS U/S 115JB CONSIDERING THE FACT THAT TAX LIA BILITY UNDER NORMAL PROVISIONS IS MORE THAN BOOK PROFIT AND ACCORDINGLY ASSESSED TO TAX. SUBSEQUENTLY, AGGRIEVED WITH THE ORDER OF THE AO AN D CIT(A), ASSESSEE RAISED GROUND OF APPEAL BEFORE THE ITAT, W HICH WAS NOT APPROVED BY COD AND ITAT DISMISSED THE APPEAL OF AS SESSEE. LD. DR SUBMITTED THAT CONSIDERING THE FACT THAT COD HAS DECLINED AT THAT TIME WHEN THE GROUND WAS RAISED BY THE ASSESSEE, HE SUBMITTED THAT ASSESSEE CANNOT INVOKE THE SAME HERE. HE SUBMITTED THAT THE ISSUE IS PART AND PARCEL OF ASSESSMENT, AO WAS RIGHT INVOKIN G SECTION 154 AS THE MISTAKE WAS APPARENT FROM RECORD. HE FURTHER SU BMITTED THAT THE FINANCE ACT, 2012, WITH EFFECT FROM 01/04/2013, IN WHICH EXPLANATION 3 WAS INSERTED. THE ABOVE AMENDMENT IS CLARIFICATOR Y IN NATURE AND, HENCE, RETROSPECTIVE IN NATURE AS HELD BY THE HONB LE SUPREME COURT IN THE CASE OF ALLIED MOTORS WHILE DEALING WITH THE DISALLOWANCE U/S 43B. HE FURTHER SUBMITTED THAT CIT(A) HAS WRONGLY A LLOWED THE APPEAL OF THE ASSESSEE OVERLOOKING THE FACT THAT AO HAS RE CTIFIED THE GENUINE MISTAKE ARISING OUT OF THE ASSESSMENT ORDER. 11. LD. AR SUBMITTED THAT PRIOR TO AMENDMENT U/S 11 5 JB IN FINANCE ACT, 2012, THE MAT PROVISIONS WERE NOT APPLICABLE T O BANKING COMPANIES AS HELD BY VARIOUS COURTS. HE SUBMITTED T HAT IT IS NOT A COMPANY UNDER THE COMPANIES ACT AS ENVISAGED, BUT, IS A COMPANY AS PER THE BANKING REGULATION ACT, THEREFORE, PROVI SIONS OF SECTION 115JB WILL BE APPLICABLE ONLY TO THE COMPANIES WHIC H FOLLOWS PROVISIONS OF PART II OF SCHEDULE VI TO THE COMPA NIES ACT, 1956. HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE, THE ASS ESSEE IS NOT FOLLOWING THE ABOVE SCHEDULE VI AND IT IS FOLLOWI NG P&L A/C AS PER 5 ITA NO. 1386/H/15 STATE BANK OF HYDERABAD, HYD. THE BANKING REGULATION ACT AND, ACCORDINGLY, PROVIS IONS OF SECTION 115JB WILL HAVE NO APPLICATION TO THE CASE OF ASSE SSEE. HE FURTHER SUBMITTED THAT THE COORDINATE BENCH OF ITAT, HYDERA BAD IN ASSESSEES OWN CASE FOR AY 2007-08 HELD THAT PROVIS IONS OF SECTION 115JB WILL NOT BE APPLICABLE TO THE ASSESSEE, A COP Y OF WHICH IS PLACED ON RECORD. ACCORDINGLY, HE SUBMITTED THAT TH E ISSUE UNDER CONSIDERATION, IS DEBATABLE IN NATURE, FOR WHICH, P ROVISIONS OF SECTION 154 CANNOT BE INVOKED. 12. IN THE REJOINDER, THE LD. DR SUBMITTED THAT THE ISSUE WAS ALREADY PART OF ASSESSMENT ORDER AND ACCORDINGLY, AO HAS PA SSED RECTIFICATION ORDER U/S 154 AS THE MISTAKE WAS APP ARENT IN THE ASSESSMENT ORDER. 13. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE ISSUE BEFORE US IS WHETHER AO WAS RI GHT IN INVOKING SECTION 154 IN THE GIVEN CASE. THE FACTS ARE, ASSES SEE HAS RAISED THE APPLICABILITY OF SECTION 115JB IN THE ORIGINAL ASSESSMENT PASSED U/S 143(3), WHICH WAS THE SUBJECT MATTER OF APPEAL BEFORE THE CIT(A)/ITAT. THE COORDINATE BENCH OF THIS TRIBUNAL IN ITS ORDER DATED 06/08/2010 DECLINED TO ENTERTAIN THE APPEAL OF THE ASSESSEE FOR WANT OF COD APPROVAL. IT IS WORTH TO NOTE THAT ISSUE OF 115JB WAS NOT MATERIAL MAINLY BECAUSE IT HAS NO IMPACT ON THE TAX ABLE INCOME OF THE ASSESSEE. SUBSEQUENTLY, THE APPEAL ON THE ORIGINAL ASSESSMENT AND FURTHER MODIFICATIONS MADE BY CIT U/S 263 ORDER WER E APPEALED BEFORE THE ITAT. WHEN THE CONSEQUENTIAL ORDERS WERE ISSUED, 115JB PROVISIONS WERE OVERLOOKED CONSIDERING THE FACT THA T TAXABLE INCOME UNDER NORMAL PROVISIONS WAS MORE THAN THE PROVISION S OF SECTION 115JB. HOWEVER, AO OBSERVED SUBSEQUENTLY THAT THE T AX LIABILITY U/S 115JB IS HIGHER THAN THE NORMAL PROVISIONS. ACCORDI NGLY, HE SERVED A NOTICE TO ASSESSEE U/S 154. ACCORDINGLY, ASSESSEE R AISED OBJECTION TO SUCH NOTICE, HOWEVER, AO DECLINED TO ENTERTAIN THE OBJECTIONS OF ASSESSEE AND ISSUED ORDER U/S 154. WHEN THE ASSESSE E CARRIED THE 6 ITA NO. 1386/H/15 STATE BANK OF HYDERABAD, HYD. MATTER IN APPEAL BEFORE THE CIT(A), THE CIT(A) DECI DED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE REVENUE IS IN APPEAL AG AINST THE ORDER OF CIT(A). THE ISSUE BEFORE IS WHETHER THE RECTIFICATI ON DONE U/S 154 IS THE MISTAKE APPARENT ON RECORD CONSIDERING THE FACT THAT THE ISSUE HAS ALREADY ARISEN IN THE ORIGINAL ASSESSMENT ORDER PAS SED U/S 143(3). IN OUR CONSIDERED VIEW, NO DOUBT THE AO HAS APPLIED TH E PROVISIONS OF SECTION 115JB TREATING THE ASSESSEE AS COMPANY AS P ER SECTION 2(17)(III) OF THE ACT. WHEREAS THE ASSESSEE IS A BA NKING COMPANY AS PER THE BANKING REGULATION ACT, AS THE ISSUE WAS DE BATABLE PRIOR TO AMENDMENT IN FINANCE ACT, 2012. THE PROVISIONS OF S ECTION 115JB, DURING THAT PERIOD BEFORE AMENDMENT, IS APPLICABLE TO THOSE COMPANIES WHICH PREPARES ITS P&L A/C IN ACCORDANCE WITH THE PROVISIONS OF PART II OF SCHEDULE VI OF THE COM PANIES ACT, 1956. IT IS A FACT THAT ASSESSEE HAS NEVER FOLLOWED PART I I OF SCHEDULE VI TO THE COMPANIES ACT, 1956 AND ALSO ITS FINANCIAL S TATEMENTS ARE NOT PLACED BEFORE ANNUAL GENERAL MEETINGS. ACCORDINGLY, PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO THE ASSESSEE. T HE SAME VIEW WAS CONFIRMED BY VARIOUS JUDICIAL PRONOUNCEMENTS AND AL SO IN ASSESSEES OWN CASE FOR AY 2007-08 BY THE COORDINATE BENCH OF THIS TRIBUNAL. CONSIDERING THE FACT THAT THIS ISSUE IS DEBATABLE, WHEN THE RECTIFICATION ORDER U/S 154 WAS PASSED BY THE AO. H OWEVER, THIS ISSUE WAS PUT TO REST BY THE AMENDMENT IN FINANCE ACT, 20 12. AS PER THE PROVISIONS OF SECTION 154, MISTAKE APPARENT ON RECO RD CAN BE RECTIFIED BY THE AO PROVIDED WHERE THE PARTIES AGREE THAT TW O VIEWS ON THE POINT INVOLVED, NOT POSSIBLE AS HELD BY THE GUJARA T HIGH COURT IN THE CASE OF SARANGAPUR COTTON MANUFACTURERS, 152 ITR 25 1 (GUJ.) HELD THAT IT IS A DISPUTED QUESTION ON WHICH TWO VIEWS ARE POSSIBLE WOULD DEPEND UPON THE APPROACH TO THE CASE AND THE ATTITU DE OF THE PARTIES IN THE CASE. IF THE PARTIES DO NOT FEEL THAT TWO VI EWS ARE POSSIBLE, THEN, THERE IS NO SCOPE FOR CONSIDERATION OF SUCH Q UESTION. IF COMPUTATION, HOWEVER DIFFICULT IT MAY BE, IS MADE B Y THE ITO WITH SUCH COMPUTATION THE ASSESSEE HAS NO GRIEVANCE WHAT REMA INS THERE FOR A COURT TO DOUBT, RECTIFICATION U/S 154 OF THE INCOME TAX ACT, IS DONE. 7 ITA NO. 1386/H/15 STATE BANK OF HYDERABAD, HYD. HENCE, IT IS CLEAR THAT RECTIFICATION IS POSSIBLE W HEN OTHER PARTIES AGREES THAT IT HAS NO TWO POSSIBLE VIEWS. HENCE, RE CTIFICATION ORDER PASSED BY THE AO IS WRONG CONSIDERING THE FACT THAT THE ISSUE INVOLVED IS DISPUTED ONE AS VARIOUS TRIBUNALS HAS G IVEN FINDING THAT PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO A BANKING COMPANY PRIOR TO AMENDMENT IN FINANCE ACT, 2012. PRIOR TO A MENDMENT OF FINANCE ACT, THE ISSUE WAS SETTLED IN FAVOUR OF THE ASSESSEE, EVEN THOUGH, THE ISSUE WAS RAISED BY THE AO IN THE ORIGI NAL ASSESSMENT ORDER. SIMILAR ISSUE WAS RAISED IN SUBSEQUENT AY 20 07-08 BEFORE THE TRIBUNAL, THE COORDINATE BENCH HAS ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE THAT PROVISIONS OF SECTION 115JB ARE N OT APPLICABLE TO THE ASSESSEE. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR VIEW, THE ISSUE INVOLVED IN THE RE CTIFICATION ORDER IS A DEBATABLE ISSUE, ACCORDINGLY, RECTIFICATION ORDER P ASSED BY THE AO IS NOT PROPER. ACCORDINGLY, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE CIT(A) AS HIS DECISION IS IN CONSONANCE WITH TH E DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2007 -08 AND UPHOLDING THE ORDER OF CIT(A), WE DISMISS THE GROUN DS RAISED BY THE REVENUE. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 9 TH JUNE, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 9 TH JUNE, 2017. KV 8 ITA NO. 1386/H/15 STATE BANK OF HYDERABAD, HYD. COPY TO:- 1) DCIT, CIRCLE 3(2), 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYD. 2) M/S STATE BANK OF HYDERABAD, GUNFOUNDRY, HYDERAB AD. 3) CIT(A) - 3, HYDERABAD 4 PR. CIT -3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE