Ratnagiri District Central Co-op. Bank Ltd., Ratnagiri V. Deputy Commissioner of Income-tax, Ratnagiri

ITA 271/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8547 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 02-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THIS CONSOLIDATED
• Assessee Lawyers: PERTAINING TO ASSESSMENT YEARS
• Keywords: Bad and doubtful debts; Reason to believe
• Section: 43B; 143(3); 147; 148; 6; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NOS.271 TO 275/PUN/17 / ASSESSMENT YEARS : 2004-05, 2006-07, 2007-08, 20 08-09 & TO 2010-11 RATNAGIRI DIST. CENTRAL CO-OP. BANK LTD., SAHAKAR BHAVAN, JAWAHAR PATH, DIST. RATNAGIRI PAN : AAAAR7920B VS. DCIT, RATNAGIRI CIRCLE, RATNAGIRI/ ACIT, RATNAGIRI CIRCLE, RATNAGIRI (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS BUNCH OF FIVE APPEALS BY THE ASSESSEE, PERTAINING TO THE ASSESSMENT YEARS 2004-05, 2006-07, 2007-08, 2008-09 AND 2010- 11, INVOLVE SOME COMMON ISSUES. WE ARE, THEREFORE, PRO CEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE O F CONVENIENCE. APPELLANT BY NONE RESPONDENT BY SHRI PANKAJ GARG DATE OF HEARING 02-01-2019 DATE OF PRONOUNCEMENT 03-01-2019 ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 2 2. THESE APPEALS CAME UP FOR HEARING BEFORE THE TRIBUNA L ON 19-12-2018. THE ASSESSEE MOVED AN APPLICATION SEEKING ADJOURNMENT. THE REQUEST OF THE ASSESSEE WAS ACCEPTED A ND THE CASE WAS ADJOURNED FOR TODAY WITH CLEAR DIRECTION THAT NO FU RTHER ADJOURNMENT WILL BE GIVEN TO THE ASSESSEE. NEITHER ANYONE H AS APPEARED ON BEHALF OF THE ASSESSEE TODAY, NOR ANY APP LICATION FOR ADJOURNMENT HAS BEEN MOVED. UNDER THESE CIRCUMSTANCES, WE ARE PROCEEDING TO DISPOSE OF THE APPEALS EX PARTE QUA THE ASSESSEE. A.Y. 2004-05 : 3. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE INITIATION OF RE-ASSESSMENT PROCEEDINGS. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) OF THE IN COME- TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT) ON 28-12 -2006, WHEREIN THE LOSS RETURNED BY THE ASSESSEE AT RS.10.53 CRO RE WAS ACCEPTED. NOTICE U/S.148 DATED 28-03-2011 WAS ISSUED GIVIN G THE FOLLOWING REASONS, AS REPRODUCED FROM THE ASSESSMENT ORD ER : 'THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED IN THIS CASE ON 28/12/2006 WHEREIN THE LOSS RETURNED BY THE ASSESSEE AT RS.10,53,92,979/- IS ACCEPTED. THE ASSESSEE IS A CO-OPERATIVE BANK. IT IS NOTICED THA T, THE ASSESSEE HAS MADE PROVISION OF RS.5,22,09,000/- ON ACCOUNT OF N.P.A., RS.13,23,80,669/- ON ACCOUNT OF OVERDUE INTEREST, AND ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 3 RS.24,95,800/- ON ACCOUNT OF LOSS ON GOUT. SECURITIES IN IT S PROFIT AND LOSS ACCOUNT. THESE PROVISIONS ARE NOT ALLOWABLE AS PER I NCOME TAX ACT, 1961. HOWEVER, NO DISALLOWANCE IS MADE IN THE REGUL AR ASSESSMENT ON THESE ACCOUNTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2 005-2006, 2006-2007 AND 2007-2008 THE ASSESSEE BANK TAKEN A STA ND THAT THESE PROVISIONS ARE MANDATORY FOR THE BANK AS PER GU IDELINES BY THE RBI AND NABARD. THE GUIDELINES REGARDING THE PROVISIO NING FOR DEBTS AND NON PERFORMING ASSETS HAVE BEEN MADE AS ME ASURE OF PRUDENCE. BY PROVISIONING IN SUCH MANNER, THE BANK IS C USHIONED FROM UNNECESSARY SHOCK IF CERTAIN DEBTS TURN BAD. TH E GUIDELINES IN THIS REGARD WHICH HAD BEEN MADE BY THE RBI RE BINDI NG OR MANDATORY ON THE BANKS WHICH ARE SUPERVISED BY THE R BI. THE PROVISIONS OF THE INCOME TAX ACT SUPERCEDE ALL OTHER L AWS IN INCOME TAX PROCEEDINGS. A GUIDELINE FRAMED BY RBI HAS TO BE APPLIED ONLY TO THE EXTENT PERMITTED BY THE ACT. THE ACT PROVIDES FOR A LLOWANCE OF DEDUCTION ON ACCOUNT OF BAD DEBTS. BEFORE ALLOWING THE DEDUCTION, THE ASSESSEE HAS TO PROVE THAT DEBTS HAVE ACTUALLY TURNE D BAD. THE BANK HAS TO MAKE PROVISION FOR DOUBTFUL ASSETS, NO N PERFORMING ASSETS AND LOSS ASSETS. THESE THREE CATEGORIES ARE SE PARATED BY THE PERIOD FOR WHICH PARTICULAR LOAN HAS BEEN SERVICED. IF THE INSTALMENT ON A LOAN HAS NOT BEEN RECEIVED FOR A SPECIFIED NUMBE R OF QUARTERS, IT IS CONSIDERED AS-NON PERFORMING ASSET. IF THE LOAN HAS NOT BEEN SERVICED FOR A LONGER PERIOD IT IS CATEGORIZED AS LOSS ASSET AND SO ON. THE CATEGORY OF LOSS ASSET IS THE ONLY CATEGORY WHIC H FALLS INTO THE DEFINITION OF BAD DEBTS' AND DESCRIBED IN SECTION 36 (I)(VII) OF THE ACT. THE OTHER CATEGORIES FOR WHICH PROVISIONING IS DONE I .E..DOUBTFUL ASSETS AND NON PERFORMING ASSETS HAVE NOT YET GONE B AD. HOWEVER, SINCE THERE IS A POSSIBILITY THAT THE DEBT CAN GO BAD , THE GUIDELINES ALLOW THE BANK TO APPROPRIATE PART OF ITS PROFIT BY MAKI NG A PROVISION AGAINST SUCH ASSETS WHICH WILL BE UTILIZED IN CASE T HE DEBT TURNS BAD. THE PROVISIONING HOWEVER IS NOT OF 100% OF THE DEBTS BUT FRACTION OF THE DEBTS. THIS IS EVIDENCE THAT THE DEBT IS NOT YET A BAD DEBT. THE PROVISION MADE OUT OF PRUDENCE FOR ASSETS OTHER THAN LOSS ASSETS OR ASSETS WHICH ARE DUE TO BE WRITTEN OFF THEREFORE CAN NOT BE ALLOWED. THE DEDUCTION UNDER INCOME TAX ACT IS ALLOWABLE ONLY O N ACCOUNT OF BAD DEBTS WRITTEN OFF IN THE BOOKS. THE PROVISIONS OF SECTION 36(1)(VIIA) WERE ALSO NOT APPLIC ABLE TO THE ASSESSEE DURING A.Y. 2004-2005 WHEREIN IT COULD CLAIM TH E BAD DEBTS ON PERCENTAGE BASIS BEING A CO-OPERATIVE BANK. AS REGARDS PROVISION FOR LOSS ON GOVT. SECURITIES, IT I S TO BE REALIZED AT THE TIME OF ITS MATURITY OR ACTUAL SALE, THUS, IT CA NNOT BE SAID TO BE AN INVESTMENT OF PERMANENT NATURE. THE PROFIT OR LOSS C AN BE ARRIVED ONLY AT THE TIME OF MATURITY OR SALE OF THE SECURITY. AS SUCH, THE DEBIT OF LOSS IN THE MIDDLE, WITHOUT ACTUAL SALE OR MATURITY, WITH OUT ANY TRANSFER, CANNOT BE ALLOWED. BEING PERMANENT INVESTMENTS , THE SECURITIES HAVE TO BE STILTED AT THE PURCHASE PRICE, UNLIKE TRADING ASSETS OR STOCK FOR WHICH THE BANK CAN ADOPT THE ME THOD OF ACCOUNTING BASED ON COST OR MARKET VALUE. BEING A PERM ANENT INVESTMENT, AND NOT A TRADING ASSET, THE PROVISION MA DE FOR LOSS IN VALUE OF SECURITIES BY MARKING SECURITIES TO THE MARK ET PRICE AS ON THE LAST DAY OF THE FINANCIAL YEAR IS NOT AN ALLOWABLE DEDU CTION. THE ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 4 GUIDELINES FRAMED BY THE RBI AND NABARD MAY BE BIND ING ON THE BANKS BUT DO NOT HAVE SAME EFFECT AS FAR AS APPLICAT ION OF THE INCOME TAX LAW IS CONCERNED. THE ASSESSEE HAS NOT SUBMITTED ANY PROOF DURING THE C OURSE OF ASSESSMENT PROCEEDINGS TO SHOW THAT THE DEBTS MENTION ED ABOVE ARE ACTUALLY CONSIDERED AS BAD AND FULLY WRITTEN. OFF IN THE BOOKS. IT HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NEC ESSARY FOR ITS ASSESSMENT. HENCE, THE PROVISO TO SECTION 147 IS NOT A PPLICABLE IN THIS CASE. THE, CASE IS ALSO COVERED' UNDER EXPLANATIO N 1 OF THE PROVISO TO SECTION 147. THE ASSESSEE HAS CLAIMED LOSS O F RS.10,53,92,979/- DUE TO THE ABOVE PROVISIONS WHICH ARE N OT AT ALL ALLOWABLE TO THE ,ASSESSEE. SAID LOSS IS FURTHER CLAIMED SET OFF AGAINST INCOME OF A.Y.S 2005-2006, 2006-2007 AND 2007-2008. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT THE INCOME 'OF RS.18,85,97,249/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT . NOTICE UNDER SECTION 148 OF THE ACT ISSUED TO THE ASSESSEE AFTER APPROVAL FROM THE HON'BLE CIT-II, KOLHAPUR 'VIDE HER LETTER NO.KOP/ CIT-II /148/RDCCL/2004-05/2010-11/2733, DATED 25/03/2011.' 5. THE ASSESSEE OBJECTED TO THE INITIATION OF RE-ASSESSMENT PROCEEDINGS, WHICH OBJECTION WAS DISPOSED OFF BY THE AO V IDE HIS ORDER DATED 23-12-2011. IN THE ASSESSMENT COMPLETED O N 27.12.2011 U/S.143(3) R.W.S. 147, THE AO MADE ADDITIONS OF RS.13.23 CRORE ON ACCOUNT OF WRONG PROVISION FOR OVE RDUE INTEREST AND RS.2.17 CRORE ON ACCOUNT OF WRONG DEDUCTIO N CLAIMED U/S.36(1)(VIIA). WITH THE ABOVE ADDITIONS, THE AO W ORKED OUT GROSS TOTAL INCOME AT RS.7.17 CRORE. AFTER ALLOWING DEDU CTION U/S.80P FOR THE EQUAL SUM, TOTAL INCOME WAS COMPUTED AT NIL. T HE ASSESSEE REMAINED UNSUCCESSFUL BEFORE THE LD. CIT(A) IN RESPECT OF ITS CHALLENGE TO THE INITIATION OF RE-ASSESSMENT PROCEEDINGS. TH E LD. CIT(A) DELETED THE ADDITION OF RS.13.23 CRORE ON ACCOUNT OF WRONG PROVISION FOR OVERDUE INTEREST. THE OTHER ADDITION WAS ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 5 SUSTAINED APART FROM MAKING CERTAIN ENHANCEMENTS. THE ASS ESSEE IS AGGRIEVED BY THE INITIATION OF RE-ASSESSMENT PROCEEDINGS BE FORE THE TRIBUNAL. 6. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE RELEVA NT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ORIGINAL ASSESSM ENT IN THIS CASE WAS COMPLETED U/S.143(3) OF THE ACT. THE REAS ONS RECORDED BY THE AO FOR INITIATION OF RE-ASSESSMENT PROCEEDIN GS, AS EXTRACTED ABOVE, ARE THREE-FOLD VIZ., (1) WRONG PROVISIO N FOR OVERDUE INTEREST RS.13.23 CRORE; (2) WRONG PROVISION ON ACCOUNT OF NPA RS.5.22 CRORE; AND (3) LOSS ON GOVERNMENT SECURITIE S CLAIMED IN PROFIT AND LOSS ACCOUNT RS.24.95 LAKHS. IN TH E FINAL ASSESSMENT COMPLETED BY THE AO U/S 147 READ WITH SECTION 14 3(3), HE MADE AN ADDITION OF RS.13.23 CRORE IN RESPECT OF REA SONS RECORDED FOR INITIATION OF RE-ASSESSMENT PROCEEDINGS. HE GOT SATISFIED IN RESPECT OF OTHER TWO ITEMS AND DID NOT MAKE ANY ADDITION ON SUCH COUNTS. THE ASSESSEE RAISED A CLAIM FO R DEDUCTION U/S.36(1)(VIIA) OF THE ACT IN THE COMPUTATION OF TOTAL INCOME FILED WITH THE RETURN IN RESPONSE TO NOTICE U/S.148, WHICH CLAIM WAS JETTISONED. THE LD. CIT(A) DELETED THE ADDITION OF RS.13.23 CRORE, BEING, THE ONLY ADDITION SURVIVING FROM THE REASONS RECORD ED BY THE AO. ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 6 7. SECTION 147 OF THE ACT PROVIDES THAT: IF THE ASSESSIN G OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, S UBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION. A BARE P ERUSAL OF THE ABOVE PROVISION MANIFESTS THAT THE AO IS FULLY EMPOWERED TO BRING TO TAX ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMEN T AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS U/S 147, APART FROM THE INCOME ESCAPING ASSES SMENT ON WHICH THE AO FORMED REASON TO BELIEVE ABOUT THE ESCAPEM ENT OF INCOME AND ISSUED NOTICE U/S 148. THE USE OF WORDS AND BETWEEN THE INCOME ESCAPING ASSESSMENT FORMING REASONS TO BELIEVE F OR ISSUING NOTICE U/S 148 AND OTHER INCOME CHARGEABLE TO TAX WHIC H ESCAPED ASSESSMENT AND COMES TO THE NOTICE OF THE AO IN THE COURSE OF THE PROCEEDING, AMPLY SHOWS THAT THE EXISTENCE OF THE FORMER IS A PRE-CONDITION FOR TAXING THE LATTER. TO PUT IT SIMP LY, IF THE GROUNDS SET OUT IN THE RE-ASSESSMENT NOTICE ARE NON-EXIS TENT, I.E., EITHER NO ADDITION IS MADE ON SUCH GROUNDS OR THE ADD ITION SO MADE DOES NOT FINALLY PASS THE SCRUTINY BY THE APPELLATE FORU MS, ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 7 THEN, OBVIOUSLY, NO FURTHER ADDITION CAN BE MADE FOR INCOME WHICH COMES TO HIS NOTICE DURING THE COURSE OF PROCEEDINGS U/S 1 47. WITHOUT THERE BEING SUCH A DETERRENT, THE AO COULD HAVE GOT UNHINDERED POWERS TO INITIATE RE-ASSESSMENT AT THE DROP OF A HAT WITHOUT ANY LEGALLY SUSTAINABLE REASONS AND THEN MADE OTHER ADDITIONS RESULTING IN MULTIPLICITY OF PROCEEDINGS, WHICH THE LEGISLATURE HAS SOUGHT TO CURB. ANY LAWFUL JURISDICTION TO MAKE ADDITION ON ACCOUNT OF OTHER INCOMES COMING TO THE NOTICE OF TH E AO DURING THE COURSE OF PROCEEDINGS U/S 147 CAN BE ACQU IRED ONLY ON THE FOUNDATION OF A VALIDLY ACQUIRED JURISDICTION ON LEGALLY SUSTAINABLE ITEMS OF INCOME ESCAPING ASSESSMENT FORMING REAS ONS FOR ISSUING NOTICE U/S 148. IN OTHER WORDS, IF THE AO FAILS TO ACQUIRE A VALID JURISDICTION TO MAKE RE-ASSESSMENT ON THE BASIS OF HIS REASONS, THEN, HE IS ALSO DEBARRED FOR MAKING ADDITIONS FOR OTHER INCOMES CHARGEABLE TO TAX WHICH ESCAPED ASSESSMENT AND C OME TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS U/S 14 7. THE HONBLE BOMBAY HIGH COURT IN CIT VS. JET AIRWAYS (I) LTD. (2011) 331 ITR 236 (BOM) HAS HELD TO THIS EXTENT. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE DELHI HIGH COURT IN CIT VS. CHIEL COMMUNICATIONS INDIA PVT. LTD. (2013) 354 ITR 549 (DEL). ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 8 8. WHEN WE TEST THE FACTS OF THE INSTANT CASE ON THE TOU CHSTONE OF THE PRINCIPLE AS DISCUSSED HEREINABOVE, IT TURNS OUT THAT ALL THE THREE REASONS TAKEN NOTE OF BY THE AO BEFORE ISSUING NOTICE U/S 148 ARE NON-EXISTENT INASMUCH AS THE AO HIMSELF MADE ADDITION O N ONLY ONE OF SUCH REASONS, WHICH ALSO GOT DELETED IN THE FIR ST APPEAL. NO CROSS APPEAL HAVING BEEN FILED BY THE REVENUE HAS BEE N BROUGHT TO OUR NOTICE. THUS, THERE IS NO QUESTION OF MAKIN G ANY OTHER ADDITION TO THE INCOME. WE, THEREFORE, HOLD THAT THE IN ITIATION OF REASSESSMENT WAS BAD IN LAW. SUCH INITIATION AS WELL AS THE FURTHER PROCEEDINGS ARE, THEREFORE, SET ASIDE. 9. NOTWITHSTANDING THE ABOVE, IT IS NOTICED THAT THE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S.143(3) ON 28-12 -2006. NOTICE U/S.148 WAS ISSUED ON 28-03-2011. FIRST PROVISO TO S ECTION 147 PROVIDES THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT AS SESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPON SE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SEC TION 148 OR ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 9 TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR. A BARE PERUSAL OF THE PROVISO INDICATES THAT IN THE CASE OF THE EARLIER COMPLETION OF ASSESSMENT U/S.143(3), NO ACTION CAN BE TAKEN U/S.147 AFTE R THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEA R, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY R EASON OF FAILURE ON THE PART OF THE ASSESSEE INTER ALIA TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR RE-ASSESSMENT . THE ASSESSMENT YEAR INVOLVED IS A.Y. 2004-05. THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR EXPIRE S ON 31- 03-2009. NOTICE U/S.148 WAS ISSUED ON 28-03-2011, WHIC H IS OBVIOUSLY BEYOND THE STIPULATED PERIOD OF FOUR YEARS FROM TH E END OF THE RELEVANT ASSESSMENT YEAR. THUS IT IS APPARENT THAT THE PROVISO IS TRIGGERED IN THE INSTANT CASE. GOING BY THE MANDATE OF THE PROVISO, IT IS SINE QUA NON THAT IN ORDER TO INITIATE REASSESSMENT IN RESPECT OF THE ORIGINALLY COMPLETED ASSESSMENT U/S 143(3) AND AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR, THERE MUST BE A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR RE-ASSESSMENT . IF THERE IS NO SUCH FAILURE, NO REASSESSMENT CAN BE DONE. ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 10 10. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND A LL THE THREE REASONS, WHICH FORMED THE BEDROCK OF THE REASSES SMENT, ARE IN RESPECT OF DISCLOSURES MADE BY THE ASSESSEE IN WHICH D EDUCTIONS WERE CLAIMED AND GRANTED IN THE COURSE OF THE ORIGINAL ASSE SSMENT PROCEEDINGS. IT IS NOT EVEN THE CASE OF THE AO THAT THE AS SESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN RESPECT OF THE THREE DEDUCTIONS, VIZ., PROVISION ON ACCOUNT OF NPA; PROVISIO N ON ACCOUNT OF OVERDUE INTEREST; AND DEDUCTION ON ACCOUNT OF LO SS ON GOVERNMENT SECURITIES CLAIMED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. THESE THREE ITEMS CANNOT BE BROUGHT WITHIN THE AMBIT OF FAILURE ON THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. ONCE THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FA CTS NECESSARY FOR HIS ASSESSMENT, THERE CAN BE NO REASSESS MENT AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSES SMENT YEAR. ON THIS SCORE ALSO, THE INITIATION OF RE-ASSESSMENT PROCEEDINGS CANNOT BE VALIDATED. 11. WE, THEREFORE, HOLD THAT THE RE-ASSESSMENT WAS NOT PROPERLY INITIATED. AS SUCH, ALL THE PROCEEDINGS FLOWING FROM SUCH ILLEG AL INITIATION OF RE-ASSESSMENT PROCEEDINGS ARE LIABLE TO BE AND AR E HEREBY SET-ASIDE. THUS, THERE IS NO NEED TO DISCUSS THE OTHER ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 11 ADDITIONS MADE BY THE AO/CIT(A) ON MERITS. EQUALLY, THE FRES H CLAIM MADE BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO THE NOTICE U/S 148 IS ALSO HELD TO BE NOT TENABLE AS THE VERY INITIA TION OF REASSESSMENT IS NOT LEGALLY VALID. 12. IN THE RESULT, THIS APPEAL IS ALLOWED PRO TANTO . A.Y. 2006-07 : 13. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST UPHOLDING THE ADDITION OF RS.4,74,230/-. 14. RELEVANT FACTS OF THE ADDITION ARE THAT THE ASSESSEE CRED ITED ENTRY FEES OF RS.280/- AND NOMINAL MEMBERSHIP FEE OF RS.4,73,950/- TO THE RESERVE FUNDS WITHOUT ROUTING IT THROUGH THE PROFIT AND LOSS ACCOUNT. THE AO TREATED THESE AMOUNTS AS CHARGEABLE TO TAX. THE LD. CIT(A) CONFIRMED THE ADDITION BY OBSERVING THAT SUCH AMOUNTS WAS RECEIVED BY THE ASSESSEE FROM THE PERSONS WHO BECAME MEMBERS OF THE SOCIETY. 15. IN THE ABSENCE OF ANY MATERIAL COMING FROM THE S IDE OF THE ASSESSEE SUPPORTING THE CLAIM FOR TREATING SUCH AMOUNTS AS NOT CHARGEABLE TO TAX, WE UPHOLD THE IMPUGNED ORDER TO THIS EXTE NT. ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 12 16. IN THE RESULT, THIS APPEAL IS DISMISSED. A.Y. 2007-08 : 17. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.1,97,08,972/- ON ACCOUNT OF PROVISION OF OVERDUE INTEREST. 18. THE ASSESSEE MADE PROVISION FOR OVERDUE INTEREST AT RS.1.97 CRORE, WHICH WAS DISALLOWED BY THE AO. 19. WE FIND THAT THOUGH THERE IS A REFERENCE TO DISALLO WANCE OF PROVISION FOR OVERDUE INTEREST OF RS.1.97 CRORE ON PAGES 3 AND 5 OF THE IMPUGNED ORDER BUT THERE IS NO ELABORATE DISCUSSION ON THE MERITS OF SUCH GROUND. UNDER THESE CIRCUMSTANCES, WE SE T-ASIDE THE IMPUGNED ORDER TO THIS EXTENT AND REMIT THE MATTER TO THE F ILE OF LD. CIT(A) FOR PASSING A SPEAKING ORDER ON THIS ISSUE. 20. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. A.Y. 2008-09 : 21. GROUND NO.1 IS AGAINST THE CONFIRMATION OF ADDITION OF RS.1,71,616/- MADE U/S. 43B OF THE ACT. ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 13 22. THE FACTS OF THE GROUND ARE THAT THE AO MADE DISALLO WANCE FOR THE SUM ON THE GROUND THAT THE SAID AMOUNT WAS PAID AF TER DUE DATE OF FILING OF RETURN OF INCOME. THE ASSESSEE CONTENDE D BEFORE THE LD. CIT(A) THAT THE SAID AMOUNT REPRESENTED OPENING BALAN CE. THE LD. CIT(A) GOT CONVINCED WITH THE ASSESSEES SUBMISS IONS AND ORDERED TO DELETE THE ADDITION VIDE PARA NO. 5.1 ON PAGE 4 OF THE IMPUGNED ORDER. 23. IN VIEW OF THE FACT THAT THE ADDITION HAS BEEN DELETE D BY THE LD. CIT(A), THE ASSESSEE HAS ERRONEOUSLY PRESUMED THAT TH IS DISALLOWANCE WAS CONFIRMED IN THE FIRST APPEAL. THIS GROUND IS DISMISSED AS HAVING BECOME INFRUCTUOUS. 24. THE ONLY OTHER GROUND IS AGAINST THE CONFIRMATION OF AD DITION OF RS.12,03,619/-. 25. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE C LAIMED DEDUCTION ON ACCOUNT OF INTEREST REBATE ON LOANS OF BANK U/S .52C AMOUNTING TO RS.48,50,619/-. ON VERIFICATION OF THE DETAILS, IT WAS OBSERVED BY THE AO THAT TOTAL INTEREST REBATE AMOUNTING TO RS.36.47 LAKHS WAS ACTUALLY GIVEN. HE, THEREFORE, DISALLOW ED THE DIFFERENTIAL AMOUNT OF RS.12,03,619/- (RS.48,50,619 MINUS RS.36,47,000/-). THE LD. CIT(A) GOT CONVINCED WITH THE A SSESSEES ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 14 SUBMISSIONS AND DELETED THE DISALLOWANCE OF RS.12,03,619 V IDE PARA NO.5.2 OF THE IMPUGNED ORDER. 26. IN VIEW OF THE FACT THAT THE DISALLOWANCE OF RS.12,0 3,619/- HAS BEEN DELETED IN THE FIRST APPEAL, THE ASSESSEE CAN HAVE NO GRUDGE AGAINST SUCH DELETION OF DISALLOWANCE. THUS, THIS GR OUND IS DISMISSED AS INFRUCTUOUS. 27. IN THE RESULT, THE APPEAL IS DISMISSED AS HAVING BECOME INFRUCTUOUS. A.Y. 2010-11 : 28. THE ASSESSEE HAS RAISED FOLLOWING TWO EFFECTIVE GROUN DS IN ITS APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN LAW AND ON IN MERIT IN IGNORING THE R ETURN FILED UNDER SECTION 147 OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW AND ON IN MERIT IN NOT ADOPTING T HE INCOME AS PER THE RETURN FILED UNDER SECTION 147 IN RESPONSE TO NOT ICE ISSUED U/S.148 OF THE ACT. 29. BRIEFLY STATED, THE FACTS OF THE CASE ARE, THAT THE ASSES SEE FILED RETURN DECLARING TOTAL INCOME OF RS.6,59,94,758/- WHICH WAS ACCEPTED U/S.143(1) OF THE ACT AND A REFUND OF RS.55.38 LAKHS WAS GRANTED TO THE ASSESSEE. LATER ON, THE AO OBSERVED THAT TH E ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 15 ASSESSEE CLAIMED EXCESSIVE DEDUCTION U/S.36(1)(VIIA) WITHOUT ADDING BACK THE PROVISION ALREADY DEBITED TO THE PROFIT AND LOS S ACCOUNT. NOTICE U/S.148 WAS ISSUED, IN RESPONSE TO WHICH TH E ASSESSEE FILED RETURN DECLARING TOTAL INCOME OF RS.5,55,78, 080/- BEFORE SET OFF OF THE BROUGHT FORWARD LOSSES. THE AO COMPLETED THE ASSESSMENT AT THE ORIGINALLY RETURNED INCOME OF RS.6.59 CRORE, THEREBY IGNORING THE LOWER INCOME OFFERED IN RESPONSE TO N OTICE U/S.148 OF THE ACT. THE LD. CIT(A) CONFIRMED THE DECISION OF THE AO. 30. HAVING HEARD THE LD. DR AND GONE THROUGH THE RELEVAN T MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSEE FURNISHE D A RETURN IN RESPONSE TO NOTICE U/S.148 AT TOTAL INCOME OF RS.5.5 5 CRORE AS AGAINST THE ORIGINALLY FILED RETURN WITH AN INCOME OF RS.6.59 CRORE. THE DECISION TAKEN BY THE AUTHORITIES BELOW IN NOT ACC EPTING THE LOWER INCOME IN THE RE-ASSESSMENT IS IN ACCORDANCE WITH TH E JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS PVT. LTD. (1992) 198 ITR 297 (SC) . IT GOES WITHOUT SAYING THAT THE RE-ASSESSMENT IS CARRIED OUT FOR THE BE NEFIT OF THE REVENUE AND NOT THE ASSESSEE. IN SUCH RE-ASSES SMENT PROCEEDINGS, THE ASSESSEE CANNOT RAISE FRESH INDEPENDENT CLAIMS ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 16 HAVING THE EFFECT OF REDUCING THE INCOME ALREADY DECLARED . WE, THEREFORE, UPHOLD THE IMPUGNED ORDER. 31. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD JANUARY, 2019. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VI CE PRESIDENT PUNE; DATED : 03 RD JANUARY, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-2, KOLHAPUR 4. 5. THE PR.CIT -2, KOLHAPUR , , / DR B, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SEC RETARY , / ITAT, PUNE ITA NOS.271 TO 275/PUN/2017 RATNAGIRI DIST. CENTRAL CO.OP BANK LTD., 17 DATE 1. DRAFT DICTATED ON 02-01-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 03-01-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. **