DDIT (IT)-1(2), MUMBAI V. CITIBANK N.A, MUMBAI

ITA 1644/MUM/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71333 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 24-06-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 12-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDER KUMAR
• Assessee Lawyers: A V SONDE
• Keywords: Reopening of assessment; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

L IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI . . , . , BEFORE SHRI B.R. MITTAL, JM AND SHRI D. KARUNAKARA RAO, AM ./ I.T.A. NO. 1644 /M/2009 (AY: 2001 - 2002) DDIT (IT) - 1(2), R.NO.119, SCINDIA HOUSE, 1 ST FLOOR, BALLARD ESTATE, N.M. ROAD, MUMBAI 400 038. / VS. M/S. CITIBANK N A, 5 TH FLOOR, CITIBANK CENTRE, C - 61, BANDRA KURLA COMPLEX, G BLOCK, BANDRA (E), M UMBAI - 51. ./ PAN : AAACC 0462 F ( / APPELLANT) .. ( / RESPONDENT ) C.O. NO. 159 /M/2009 (AY 2001 - 2002) M/S. CITIBANK N A, 5 TH FLOOR, CITIBANK CENTRE, C - 61, BANDRA KURLA COMPLEX, G BLOCK, BANDRA (E), MUMBAI - 51. / VS. D DIT (IT) - 1(2), R.NO.119, SCINDIA HOUSE, 1 ST FLOOR,BALLARD ESTATE, N.M. ROAD, MUMBAI 400 038. ./ PAN : AAACC 0462 F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : MR. NARENDER KUMAR / RESPONDENT BY : MR. A.V. SONDE / DATE OF HEARING : 5.9.2013 / DATE OF PRONOUNCEMENT : 25. 9.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS ARE UNDER CONSIDERATION AND T HEY ARE CROSS APPEALS. BOTH THESE APPEALS ARE FILED AGAINST THE ORDER OF CIT (A) - XXXI, MUMBAI DATED 26.12.2008 FOR THE ASSESSMENT YEAR 2001 - 2002. FOR THE SAKE OF CONVENIENCE, BOTH THESE APPEALS ARE CLUBBED, HEARD COMBINED AND DISPOSED OF IN THIS COMMON O RDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. 2. FIRSTLY, WE SHALL TAKE UP ITA NO.1644/M/2009 (AY 2001 - 2002), WHICH IS FILED BY THE REVENUE ON 12.2.2009 AGAINST THE ORDER OF CIT (A) - XXXI, MUMBAI DATED 26.12.2008 AND THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN I) HOLDING THAT THE AMOUNT DEBITED AND REVERSED IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF HEAD OFFICER EXPENSES HAS N OTHING TO DO WITH ACTUAL ALLOWABILITY OF DEDUCTION UNDER SECTION 44C OF INCOME TAX ACT, 1961. II) HOLDING THAT THE ADDITION OF RS. 17,36,59,632/ - ON ACCOUNT OF HEAD OFFICE EXPENSES REVERSED IN THE BOOKS OF ACCOUNTS IS UNCALLED FOR AND DIRECTING THE AO TO DELET E THE SAME. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS THE INDIAN BRANCHES OF CITIBANK N.A., HAVING HEAD QUARTERS AT USA . ASSESSEE IS ENGAGED IN THE BANKING BUSINESS AND FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 6,20 ,5 4 , 94,855/ - . THE CASE WAS SELECTED FOR SC RUTINY U/S 143(2) OF THE ACT. A CCORDINGLY , THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 24.3.2004 RAISING A DEMAND OF RS. 20,60,99,499/ - . SUBSEQUENTLY, ASSESSMENT WAS REOPENED U/S 148 ON THE REASON ING THAT THE DEDUCTION ALLOWED U/S 44C FOR THE AYS 1998 - 99 AND 1999 - 2000 WERE MORE THAN THE AMOUNT ACTUALLY DEBITED TO P&L ACCOUNT . FINALLY, AO OBSERVED THAT THE DEDUCTION CLAIMED BY THE ASSESSEE AMOUNTING TO RS.17,36,59,632/ - AS THE HEAD OFFICE EXPENSES WAS NOT ALLOWABLE. AO PROPOSED TO REOPEN THE ASSESSMENT. IN RESPONSE TO THE NOTICED ISSUED IN CONNECTION WITH THE REOPENING OF THE ASSESSMENT, THE ASSESSEE SUBMITTED THE REQUISITE DETAILS BEFORE THE AO AND CONTENDED THAT NO INCOME HAS ESCAPED ASSESSMENT W ITHIN THE MEANING OF SECTION 147 OF THE ACT AND THEREFORE, THE REASSESSMENT IS WITHOUT JURISDICTION. FURTHER, ASSESSEE MENTIONED THAT THE AMOUNTS DEBITED IN THE PROFIT & LOSS ACCOUNT AS HEAD OFFICE EXPENSES WERE SUBSEQUENTLY ADDED IN THE COMPUTATION OF TOTAL INCOME AND THE SAME WERE MADE ON THE ESTIMATION BASIS WHICH IS THE USUAL PRACTICE OF THE BANK. THEREFORE, NO INCOME ON ACCOUNT OF HEAD OFFICE EXPENSES ESCAPED THE ASSESSMENT AND NO ADDITION IS CALLED FOR. NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE , AO MADE AN ADDITION OF RS.17,36,59,632/ - AND PASSED THE RE ASSESSMENT ORDER ON 27.12.2006 DETERMINING THE TOTAL INCOME AT RS. 5,19,87,12,370/ - . AGGRIEVED WITH THE ABOVE DECISION OF THE AO, ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHO RITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) ALLOWED THE ASSESSEES CLAIM OF DEDUCTION 3 U/S 44C OF THE ACT AND DELETED THE ADDITION MADE BY THE AO. PARA 3.3.1 OF THE CIT (A )S ORDER IS RELEVANT IN THIS REGARD. AGGRIEVED WITH THE DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, MR. NARENDER KUMAR , LD DR RELIED ON THE ORDER OF THE AO . 6. ON THE OTHER HAND, MR. A.V. SONDE , LD COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE HIM. HOWEVER, HE FILED A WRITTEN NOTE TOO SUBSTANTIATING HIS CLAIMS. 7. WE HAVE HEARD BOTH THE PARTIES AND PE RUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE MATERIAL PLACED BEFORE US. WE HAVE PERUSED THE RELEVANT PARA 3.3.1 OF THE CIT (A)S ORDER WHICH READ AS UNDER: 3.3.1. I HAVE CAREFULLY CONSIDERED THE FACTS. I FIND THAT DURING AY 1997 - 98 TO AY 1999 - 2000 THE AMOUNT OF HO EXPENSES WERE ALLOCATED TO BRANCH WERE RS. 133,41,86,872/ - AND DEDUCTION BEING 5% OF TOTAL INCOME WAS ALLOWED U/S 44C AT RS. 58,86 ,07,048/ - WHEREAS THE AMOUNT WAS DEBITED TO P &L ACCOUNT AT RS. 49,63, 64,899/ . THE AMOUNT DEBITED T O P&L ACCOUNT WAS ADDED BACK BY THE ASSESSEE WHILE COMPUTING THE TOTAL INCOME. THE AO HAS ALLOWED DEDUCTION U/S 44C AT RS. 58,86,07,048/ - WHILE IGNORING THE AMOU NT DEBITED IN THE P&L A/C. ASSESSEE CREDITED AN AMOUNT OF RS.17,36,59,632/ - PERTAINING TO AY 1 997 - 98 TO 1999 - 2000 BY MAKING REVERSAL OF ENTRY DURING AY UNDER CONSIDERATION. THUS, THE AMOUNT AS REVERSED IS NEVER CLAIMED AS DEDUCTION AND NOR DEDUCTION U/S 44C WAS ALLOWED WITH REFERENCE TO SAID AMOUNT AS THE DEDUCTION U/S 44C WAS ALLOWED WITH REFERENC E TOTAL INCOME @ 5% OF TOTAL ADJUSTED INCOME WHICH WAS LESS THAN THE AMOUNT ALLOCATED AND ATTRIBUTABLE BY HO TO BRANCH ON PRO - RATA BASIS. THUS, THE AMOUNT DEBITED AND REVERSED HAS NOTHING TO DO WITH ACTUAL ALLOWABILITY OF DEDUCTION U/S 44C OF THE ACT, THE REFORE, THE ADDITION OF RS 17,36,59,632/ - MADE BY LD AO IS UNCALLED FOR HENCE, THE SAME IS DIRECTED BE DELETED. THUS, GROUND NO.4 & 5 ARE ALLOWED. 8. FROM THE IT IS EVIDENT THAT THE ASSESSEE MADE CLAIM IN ACCORDANCE WITH THE PROVISIONS OF SECTION 44C OF THE ACT AND WHAT IS DEBITED IN THE P AND L ACCOUNT IS REVERSED. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE DECISION TAKEN BY THE CIT (A) IN DELETING THE ADDITION MADE BY THE AO IS FAIR AND REASONABLE AND WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A). THEREFORE, THE ORDER OF THE CIT (A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 4 C.O. NO.159/M/2009 (AY 2001 - 2002) 9. THIS CROSS OBJECTION IS FILED BY THE ASSESSEE ON 13.8.2009 AGAINST T HE ORDER OF CIT (A) - XXXI, MUMBAI DATED 26.12.2008 FOR THE ASSESSMENT YEAR2001 - 2002. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN THIS CO READS AS UNDER: THE CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN REOPENING THE ASSESSMENT U/S 147/148 O F THE ACT. THE RESPONDENTS SUBMIT THAT THE REOPENING OF ASSESSMENT IS VOID, IN WANT OF AND/OR IN EXCESS OF JURISDICTION AND OTHERWISE CONTRARY TO THE PROVISIONS OF THE ACT AND BAD IN LAW AND CONSEQUENTLY THE ORDER PASSED BY HIM SHOULD BE CANCELLED. 10. IN CONNECTION WITH THE CROSS OBJECTION, LD COUNSEL RELIED HEAVILY ON THE SUBMISSIONS MADE BY THE ASSESSEE AND MENTIONED THAT THE REOPENING U/S 147 / 148 IS BAD IN LAW. 11. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE CIT (A) IN GENERAL AND THE CONT ENTS OF PARA 2 AND ITS SUB - PARAS IN PARTICULAR. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES IN GENERAL AND THE RELEVANT PARAS 2.3.0 TO 2.3.3 IN PARTICULAR AND THE SAID PARAS READ AS UNDER: 2.3.0. I HAVE CAREFULLY C ONSIDERED THE FACTS. IT IS SEEN THAT REOPENING OF ASSESSMENT IS MADE ON 31.1.2006, WHICH FALL WITHIN FOUR YEAR OF THE END OF AY UNDER CONSIDERATION. RE - OPENING WITHIN FOUR YEAR CAN BE MADE WHERE EVEN NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE ALL MATER IAL FACTS NECESSARY. THE FACT OF REVERSAL OF ENTRY ON ACCOUNT OF HO EXPENDITURE OF RS. 17,37,59,632/ - WAS REMAINED TO BE EXAMINED DURING ORIGINAL ASSESSMENT AND NO EXPLANATION ON THE SAME WAS AVAILABLE ON RECORD THEREFORE, THE AO WAS JUSTIFIED IN REOPENING OF THE ASSESSMENT .THE LEARNED AO HAS CORRECTLY PLACED RELIANCE ON THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF DR. AMINS PATHOLOGY LABORATORY VS. DCIT (2001) 25 1 ITR 673 (BOM) WHICH APPLIES TO PRESENT CASE. HENCE RE - OPENING IS JUSTIFIED. 2.3.1. 1 ALSO RELY ON GUJ HC DECISION - GRUH FINANCE LTD V JCIT 243 ITR 482(GUJ) DTD 2ND FEB 2000 - WHEREIN IT WAS HELD THAT POWER TO MAKE RE - ASSESSMENT WITHIN FOUR YEAR FROM THE END OF RELEVANT ASSESSMENT YEAR CAN BE EXERCISED UNDER AMENDED S 147 EVEN IN CASE WHE RE THERE HAS BEEN COMPLETE DISCLOSURE OF ALL RELEVANT FACT S IN CASE OF A MISTAKE IN ASSESSMENT IN THE FIRST INSTANCE THOUGH THERE WAS MATERIAL AVAILABLE ON RECORD NO CONSCIOUS CONSIDERATION OF MATERIAL WAS MADE - IT WOULD TANTAMOUNT TO A MISTAKE IN NOT C ONSIDERING THE RELEVANT POINT OF TIME AND NOT A CHANGE OF OPINION AO IS NOT BARRED FROM EXERCISING POWER U/S 147 . 2.3.2. I ALSO RELY ON ITAT C BENCH , MUMBAI DECISION IN ITA NO.4405/M/05 (AY : 98 - 99) DTD 28/4/08 IN THE CASE OF FORBES GOKAK LTD V DCIT WHER EIN IT WAS HELD THAT ACCORDING TO SEC 147 OF THE ACT POWER TO MAKE ASSESSMENT OR RE - ASSESSMENT WITHIN 5 FOUR YEARS OF THE END OF RELEVANT ASSESSMENT YEAR WOULD BE ATTRACTED EVEN IN CASES WHERE THERE HAS BEEN A COMPLETE DISCLOSURE OF ALL RELEVANT FACTS UPON WHICH A CORRECT ASSESSMENT MIGHT HAVE BEEN BASED MADE IN THE FIRST INSTANCE AND WHERE IT IS AN ERROR OR FACT OR LAW THAT HAS BEEN DISCOVERED OR FOUND OUT JUSTIFYING THE BELIEF REQUIRED TO INI TIATE THE REOPENING PROCEEDINGS . THE TRIBUNAL DRAW SUPPORT FROM S C DECISION RAJESH JHAVERI 291 ITR 500 (SC) AND HELD THAT EXCESS RELIEF U/S 8OHHC THE AO ON REALIZATION OF THIS MISTAKE ISSUED NOTICE U/S 148 OF THE ACT. SUCH NOTICE HAS BEEN ISSUED WITHIN FOUR YEARS; THEREFORE, WE DO NOT FIND ANY ERROR IN REOPENING OF TH E ASSESSMENT.[COPY PLACED PG 7 - 10] 2.3.3. RELIANCE IS ALSO PLACED ON GRIND WELL NORTON LTD. V JAGDISH PRASAD JANGID ACIT AND OTHERS 267 ITR 673(BOM) WHEREIN IT WAS HELD THAT IF ONE READS EXPLANATION 2 TO SECTION 147 OF THE IT ACT INCLUDING THE PROVISO THER EFORE THEN IT IS CLEAR THAT WHERE THE DEPARTMENT RE - OPENS ASSESSMENT WITHIN A PERIOD OF 4 YEARS, IT CAN DO SO ON THE GROUND OF INCOME HAVING ESCAPED ASSESSMENT. EVEN IF THERE IS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FA CTS , H OWEVER , IN THE CASES OF REOPENING AFTER 4 YRS., THE A.O. MUST HAVE REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE IS DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, EXPLANATION 2 CAN NOT BE READ WITHOUT READING THE PROVISO TO SEC. 147. LN THIS CASE , MERE INFORMATION REGARDING CLAIM U/S. 801 AND 801A HAD BEEN PROVIDE D TO A.O. WHETHER COMPLETING THE ORIGINAL ASSESSMENT AND THERE WAS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY MATE RIAL FACTS THE RE - OPENING BEYOND 4 YEARS WAS NOT VALID. 2.3.4. IN THE LIGHT OF ABOVE FACTS AND JUDICIAL PRONOUNCEMENT S , I AM OF THE CONSIDERED VIEW THAT THE LEARNED AO WAS JUSTIFIED IN RE - OPENING OF ASSESSMENT . 13. FROM THE ABOVE, IT IS CLEAR THAT THE AO HAS NOT APPLIED HIS MIND IN THE ORIGINAL ASSESSMENT PROCEEDINGS ON THE IMPUGNED ISSUE AND HAS NOT FORMED ANY OPINION ON THE ISSUE ALTHOUGH THERE IS SOME INFORMATION ON THE FILE. AS SUCH IT IS THE CASE OF REOPENING WITH THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT AY. LD AR HAS PUT FORWARDED ANY SPECIFIC ARGUMENTS IN FAVOUR OF THE CO ALTHOUGH HE STRONGLY RELIED ON THE CROSS OBJECTIONS RAISED IN THE CO. ON PERUSAL OF THE ABOVE, WE FIND THAT THE ORDER OF THE CIT (A), IN UPHOLDING THE ACTION OF THE AO IN REOPENING THE ASSESSMENT U/S 147 / 148 OF THE ACT, IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND RAISED IN THE CO IS DISMISSED . 14. IN THE RESULT, THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED . ORDER IS PRONOU NCED IN THE OPEN COURT ON 25 TH SEPTEMBER 2013. SD/ - SD/ - (B.R. MITTAL) (D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 25 .9.2013 6 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI