Assistant Commissioner of Income-tax, Circle - 6, Pune V. M/s. Janata Sahakari Bank Ltd, Pune

ITA 2628/PUN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9386 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 13-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.2628/PUN/2017 / ASSESSMENT YEAR : 2014-15 ACIT, CIRCLE-6, PUNE. ....... / APPELLANT / V/S. M/S. JANATA SAHAKARI BANK LTD., 1444, BAJIRAO ROAD, SHUKRAWAR PETH, PUNE-411002. PAN : AAAJJ0073G / RESPONDENT REVENUE BY : SHRI DEEPAK GARG ASSESSEE BY : SHRI NIKHIL PATHAK / DATE OF HEARING : 13.08.2020 / DATE OF PRONOUNCEMENT : 17.08.2020 / ORDER PER PARTHA SARATHI CHAUDHURY, JM: THIS APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(APPEALS)-4, PUNE DATED 15.06.2017 FOR THE ASSESSMENT YEAR 2014-15 AS PER THE FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. ON THE FACT AND THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE AMOUNT OF RS. 6,91,45,448/- BEING DEPRECIATION IN RESPECT OF INVESTMENT IN HTM CATEGORY HELD BY THE BANK. 2. ON THE FACT AND THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2,68,10,000/- MADE BY THE AO ON ACCOUNT OF LOSS ON SALE OF HTM SECURITIES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT(A) HAS ERRED IN PLACING RELIANCE ON THE DECISION OF THE ITAT, PUNES DECISION IN THE ASSESSEES OWN CASE, WHEN THE REVENUE HAS CONTESTED THESE DECISIONS IN HIGH COURT FOR ADJUDICATION. 4. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE HONBLE TRIBUNAL. 2 ITA NO.2628/PUN/2017 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF COOPERATIVE BANKING. THE RETURN OF INCOME WAS FILED ON 30.11.2014 DECLARING TOTAL INCOME OF RS.NIL. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 27.12.2016 DETERMINING THE TOTAL INCOME AT RS.3,23,29,929/- THEREBY RAISING DEMAND OF RS.77,03,780/-. THE ADDITIONS WERE OF THE FOLLOWING NATURE :- (I) DISALLOWANCE ON ACCOUNT OF DEPRECIATION ON GOVERNMENT SECURITIES HELD TILL MATURITY (HTM) - RS.6,91,45,448/ - (II) DISALLOWANCE ON ACCOUNT OF LOSS ON SALE OF HTM SECURITIES - RS.2,68,10,000/ - 3. THE CONTENTION RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) IS THAT THE ASSESSING OFFICER ERRED IN DISALLOWING THE CLAIM OF DEPRECIATION IN RESPECT OF INVESTMENTS IN HTM CATEGORY HELD BY THE BANK AMOUNTING TO RS.6,91,45,448/- AND NOT FOLLOWING THE DECISION OF THE ITAT PUNE BENCH AND THE CIT(A)-3, PUNE IN RESPECT OF ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2007-08, 2009-10 & 2010-11. THE LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE ASSESSEE HELD AS FOLLOWS :- 5.3 I HAVE PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT AS ABOVE CAREFULLY. ADVERTING TO THE DECISION OF THE HONBLE ITAT VIDE ITA NO.522 & 523/PN/2013 AND ITA NO.1872/PN/2013 DATED 25.02.2015 IN THE APPELLANTS OWN CASE FOR A.YS. 2007-08, 2009-10 & 2010-11, THE HONBLE ITAT HAS HELD THAT THE CHANGE IN METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT FOR VALUING ITS HTM SECURITIES AT LOWER OF COST OR MARKET PRICE IS A BONAFIDE CHANGE AND THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEPRECIATION ON VALUE OF HTM SECURITIES. AS THE LOSS ARISING ON ACCOUNT OF AFS AND HFT SECURITIES HAVE ALREADY BEEN ACCEPTED, THE AO WAS DIRECTED TO ALLOW THE CLAIM ARISING ON ACCOUNT OF DEPRECIATION ON VALUE OF HTM SECURITIES. IN VIEW OF THE HONBLE ITATS ORDER (SUPRA), THE AO IS DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF DEPRECIATION CLAIMED ON GOVERNMENT SECURITIES (HTM) OF RS 6,91,45,448/-. GROUND NO.1 RAISED BY THE APPELLANT IS ACCORDINGLY ALLOWED. 4. WITH REGARD TO THE SECOND GROUND IN RESPECT OF RS.2,68,10,000/- ON ACCOUNT OF LOSS ON SALE OF HTM SECURITIES. THE ASSESSEE HAD PRESSED SUBMISSIONS BEFORE THE LD. CIT(A) WHICH ARE ON RECORD. THE SUBMISSIONS INCLUDE THAT BOTH THE GROUNDS BEFORE THE LD. CIT(A) ARE INTERCONNECTED AND IF 3 ITA NO.2628/PUN/2017 GROUND NO.1 IS ALLOWED, OTHER GROUND WILL ALSO BE AUTOMATICALLY ALLOWED. THE RELEVANT PORTION OF THE ASSESSEES SUBMISSION IS EXTRACTED HEREINBELOW :- WE WOULD RESPECTFULLY LIKE TO SUBMIT THAT IF OUR GROUND NO. 1 IS ALLOWED THEN AUTOMATICALLY THE LOSS ON SALE OF HTM SECURITIES WHICH IS DISALLOWED WILL BECOME ALLOWABLE. THE LEARNED A.O. HAS DISALLOWED ONLY THE LOSS ON SALE OF HTM SECURITIES. HOWEVER, AS PER THE I.T.A.T. DECISION IN CASE OF OUR BANK ALL SECURITIES HELD BY THE BANK ARE STOCK IN TRADE AND AS SUCH, DEPRECIATION IN THEIR VALUATION AS WELL AS LOSS ON SALE OF ANY SECURITY ARE ALLOWABLE. 5. THE LD. CIT(A) ON CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FACTS OF THE CASE AND DOCUMENTS PLACED ON RECORD HELD AS FOLLOWS :- 6.3 I HAVE PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT AS ABOVE CAREFULLY. I FIND THAT GROUND NO.2 AND GROUND NO.1 ARE INTER- RELATED. I HAVE DECIDED GROUND NO. 1 IN FAVOUR OF THE APPELLANT FOLLOWING THE DECISION OF HONBLE ITAT (SUPRA). THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. 6. AT THE TIME OF HEARING, LD. DR PLACED STRONG RELIANCE ON THE FINDINGS OF THE ASSESSING OFFICER AND SUBMITTED VEHEMENTLY THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE CALCULATION FURNISHED BY THE ASSESSEE WITH REGARD TO THE HTM SECURITIES. PER CONTRA , THE LD. AR SUBMITTED REFERRING TO THE ORDER OF THE ASSESSING OFFICER AT PARA 4.6 WHEREIN IT IS STATED THAT THE WORKING OF PROFIT/LOSS ON SALE OF HFT, AFS & HTM SECURITIES HAVE BEEN SUBMITTED BY THE ASSESSEE FROM WHICH IT IS NOTICED THAT AN AMOUNT OF RS.2,68,10,000/- WHICH WAS A LOSS ON ACCOUNT OF HTM SECURITIES OUT OF RS.18,82,64,149/- WHICH IS THE TOTAL LOSS CLAIMED BY THE ASSESSEE AND SUCH LOSS TO THE EXTENT OF RS.2,68,10,000/- ON SALE OF HTM SECURITIES HAS BEEN DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THEREFORE, THE LD. AR SUBMITTED THAT WORKING WAS ALREADY THERE BEFORE THE ASSESSING OFFICER AND THUS THE PRAYER OF THE LD. DR FOR REMITTING THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE CALCULATION IS THEREFORE NO LONGER PERTINENT IN THIS CASE. THE LD. AR PLACED STRONG RELIANCE ON THE FINDINGS OF THE LD. CIT(A) AND FURTHER SUBMITTED THAT IN THE ASSESSMENT YEAR 2012-13 IN ASSESSEES OWN CASE THE PUNE BENCH OF THE TRIBUNAL IN ITA NO.814/PUN/2017 4 ITA NO.2628/PUN/2017 HAD THE OCCASION TO DEAL WITH THE GROUNDS WHICH ARE THE SUBJECT MATTER OF CONTENTION BEFORE US AND SINCE BOTH ISSUES BEING INTERCONNECTED THE TRIBUNAL IN ASSESSMENT YEAR 2012-13 HELD AS FOLLOWS :- 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO ALLOWING THE LOSS OF VALUATION ON HTM SECURITIES AND LOSS ON SALE OF HTM SECURITIES. WE FIND THAT LD.CIT(A) AFTER CONSIDERING VARIOUS DECISIONS CITED IN THE ORDER AND THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.21/PN/2014 FOR A.Y. 2005-06 HAS HELD THAT THE CLAIM OF DEPRECIATION ON VALUATION OF HTM SECURITIES AND LOSS ON SALE OF HTM SECURITIES ARE ALLOWABLE IN ASSESSEES HANDS. BEFORE US, REVENUE HAS NOT POINTED OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE PRESENT CASE AND TO THAT OF ASSESSEES OWN CASE IN A.Y. 2005-06 IN ITA NO.21/PN/2014 (SUPRA) NOR HAS PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THE DECISION OF PUNE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2005-06 WHICH HAS BEEN RELIED UPON BY LD.CIT(A) HAS BEEN SET ASIDE / OVERTURNED OR STAYED BY THE HIGHER JUDICIAL FORUM. WE FURTHER FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. BANK OF MAHARASHTRA REPORTED IN (2018) 97 TAXMANN.COM 581 (BOM) HAS HELD THAT THE SECURITIES KEPT BY ASSESSEE ON THE BASIS OF HELD TO MATURITY (HTM) COULD BE VALUED BY USING THE METHOD OF COST OR MARKET PRICE WHICHEVER IS LESS. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS THE GROUNDS OF REVENUE ARE DISMISSED. 7. SIMILARLY, FOR ASSESSMENT YEAR 2011-12 AGAIN IN ASSESSEES OWN CASE VIDE ITA NO.1761/PUN/2017 FOR BOTH THE ISSUES, THE TRIBUNAL OBSERVED AS FOLLOWS :- 7. WE HEARD BOTH THE SIDES. WE PERUSED THE CONTENTS OF PARA 4.2.1 TO 5.2 OF THE ORDER OF THE CIT(A) AND FIND IT RELEVANT TO EXTRACT SAME. THE SAME ARE EXTRACTED HEREUNDER :- 4.2.1 RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE PUNE BENCH OF ITAT IN THE APPELLANTS OWN CASE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM ARISING ON ACCOUNT OF DEPRECIATION ON VALUATION OF HTM SECURITIES. HOWEVER, IN THE LIGHT OF DIRECTION GIVEN BY THE HON'BLE BENCH THE ASSESSING OFFICER IS DIRECTED TO CONSIDER REWORKING THE INCOME IN LINE WITH OBSERVATION OF THE TRIBUNAL IN THE CASE OF ACIT VS. BANK OF MAHARASHTRA IN ITA NOS. 1505, 1618/PN/2008 AS HAS BEEN DIRECTED IN THE APPELLANT'S OWN CASE IN A.Y. 2007-08 & 2009-10 IN ITA NO. 522 & 523/PN/2013. NEEDLESS TO MENTION THAT REASONABLE OPPORTUNITY SHALL BE GRANTED TO THE APPELLANT. THE GROUNDS OF APPEAL RAISED BY THE APPELLANT ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 5. IN GROUND NO. 2, THE APPELLANT IS AGGRIEVED AGAINST THE ADDITION OF RS. 73,55,848/- ON ACCOUNT OF PROFIT ON SALE OF SECURITIES. THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDING NOTICED THAT THE ASSESSEE HAD CREDITED AN AMOUNT OF RS. 1,88,60,112/- ON ACCOUNT OF PROFIT ON SALE OF SECURITIES. HOWEVER, IN THE COMPUTATION OF INCOME THE ASSESSEE DEDUCTED THE SAME AND ADDED BACK AN AMOUNT OF RS. 1,15,04,264/- WHICH WAS CALCULATED ON COST OR MARKET PRICE WHICHEVER IS LOWER. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSION FILED ON BEHALF OF THE APPELLANT HELD AS UNDER IN THE ASSESSMENT ORDER: .. 5 ITA NO.2628/PUN/2017 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND I AM IN CONCURRENCE WITH THE ARGUMENTS TAKEN ON BEHALF OF THE APPELLANT. THE BANK VALUE ITS SECURITIES IN THE BOOKS OF ACCOUNT AS PER THE GUIDELINES ISSUED BY THE RBI. ACCORDINGLY THE PROFIT/LOSS ON SALE OF SECURITIES IS CALCULATED IN THE BOOKS BY COMPARING THE BOOK VALUE OF EACH SECURITY AND ITS SELLING PRICE. THE SAID PROFIT/LOSS IS DEBITED OR CREDITED AS THE CASE MAY BE TO THE P & L ACCOUNT. HOWEVER FOR THE PURPOSE OF INCOME TAX, ALL THE SECURITIES ARE TREATED AS STOCK-IN-TRADE. SINCE WHILE DEALING WITH GROUND NO.1 RELATING TO HTM CATEGORY OF GOVT. SECURITIES, IT HAS BEEN HELD THAT THE APPELLANT BANK CAN VALUE THE SAME AT COST/MARKET PRICE WHICHEVER IS LESS THEREFORE I HOLD THAT PROFIT OR LOSS ON SALE OF SECURITY FOR THE PURPOSE OF INCOME TAX SHOULD ALSO BE ALLOWED AND PROFIT/LOSS IN RESPECT OF THE SAME SECURITY SHOULD BE DEDUCTED/ADDED WHILE COMPUTING THE INCOME. WITH THESE OBSERVATIONS, THE GROUND NO.2 IS TREATED AS ALLOWED. 8. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE AT THE LEVEL OF THE TRIBUNAL AS AFFIRMED BY THE HONBLE HIGH COURT (SUPRA), WE ARE OF THE OPINION THAT THE DECISION OF THE CIT(A) IS FAIR AND REASONABLE ON THIS ISSUE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 9. REGARDING THE GROUND NO.2 RAISED BY THE REVENUE RELATES TO THE RELIEF OF RS.73,55,848/-, LD. COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THE SAID ISSUE NOW STANDS COVERED BY THE SAID JUDGEMENT OF THE HONBLE HIGH COURT IN ASSESSEES OWN CASE (SUPRA) AND, THEREFORE, FOR THE COMPUTATION OF CORRECT FIGURES, THE MATTER MAY BE REMANDED TO THE FILE OF THE ASSESSING OFFICER. IN FACT, SIMILAR DIRECTION WAS GIVEN BY THE CIT(A) WHICH IS EVIDENT FROM THE CONTENTS OF PARA 5 OF THE ORDER OF THE CIT(A). CONSIDERING THE SAME, WE ARE OF THE VIEW THAT THE DECISION GIVEN BY THE CIT(A) IN THE SAID PARA 5 IS IN TUNE WITH THE SAID JUDGMENT OF THE HONBLE HIGH COURT IN ASSESSEES OWN CASE (SUPRA) FOR COMPUTATION OF THE CORRECT FIGURES. THUS, ON THIS ISSUE ALSO, THE ORDER OF THE CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 8. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS, ANALYZED THE FACTS AND CIRCUMSTANCES OF THIS CASE AND CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED ON RECORD BEFORE US. THE FACTS ON RECORD DEMONSTRATE THAT THE ENTIRE CALCULATION/WORKING OF HTM SECURITIES WAS PLACED BEFORE THE ASSESSING OFFICER AND ACCORDINGLY THE ASSESSING OFFICER HAS TAKEN A DECISION WHICH WAS REVERSED BY THE LD. CIT(A) AS PER REASONS RECORDED IN HIS ORDER PLACING RELIANCE ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA). SINCE THE CALCULATIONS WERE PRODUCED BEFORE THE ASSESSMENT ITSELF, THERE IS NO NEED FOR RESTORING THE MATTER TO THE FILE OF THE ASSESSING OFFICER AGAIN FOR VERIFYING THE SAME CALCULATION AND WORKING WHICH HAS BEEN ALREADY DEALT WITH BY THE REVENUE. FURTHER, LD. CIT(A) HAS PLACED RELIANCE ON 6 ITA NO.2628/PUN/2017 THE DECISIONS OF PUNE BENCH OF THE TRIBUNAL AND ALSO THE DECISIONS PLACED ON RECORD BY THE LD. AR FOR ASSESSMENT YEARS 2011-12 AND 2012-13 (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) WAS CORRECT IN DELETING THE SAID ADDITIONS MADE BY THE ASSESSING OFFICER. THE LD. DR COULD NOT PLACE BEFORE US ANY DECISION OF THE HONBLE HIGH COURT FAVOURING THE CASE OF THE REVENUE AND THEREFORE, THE LD. CIT(A) WAS ABSOLUTELY CORRECT IN RELYING ON THE DECISIONS OF THE PUNE BENCH OF THE TRIBUNAL (SUPRA) PLACED ON RECORD, SINCE THERE IS NO DECISION ON THE ISSUES FAVOURING THE REVENUE BY ANY HIGHER FORUM. IN THE PRESENT FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DAY OF AUGUST, 2020. SD/- SD/- (ANIL CHATURVEDI) (PARTHA SARATHI CHAUDHURY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 17 TH AUGUST, 2020 SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-4, PUNE. 4. THE PR. CIT-3, PUNE. 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.