THE ZORASTRIAN CO-OPERATIVE BANK LTD, MUMBAI V. CIT 1, MUMBAI

ITA 3028/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0482 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 01-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 20-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: K K VED
• Keywords: Revision of order; Question of law
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G , MUMBAI BEFORE S HRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 3028 /MUM/20 1 5 ASSESSMENT YEAR: 2010 - 11 M/S ZORASTRIAN CO - OPERATIVE BANK LTD., DR. ANNIE BESANT ROAD, WORLI, MUMBAI - 400030 P AN: AAAAZ0071B VS. THE COMMISSIONER OF INCOME TAX - 1, 387, AAYAKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI - 400020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. VED (A R) RESPONDENT BY : MS. ANUPAMA SINGLA (D R) DATE OF HEARING: 01/03 /201 7 DATE OF PRONOUNCEMENT: 31 / 0 5 /201 7 O R D E R PER RAM LAL NEGI, JM T HE ASSESSEE HAS PREFERRED THE PRESENT APPEAL AGAINST THE ORDER DATED 24/03/2015 PASSED BY THE COMMISSIONER OF INCOME TAX ( CIT ) - 1 , MUMBAI , FOR THE ASSESSMENT YEAR 2010 - 11 U/S 263 OF THE INCOME TAX ACT, 1961 HEREINAFTER REFERRED TO AS THE ACT , WHEREBY THE LD . CIT HAS SET ASIDE THE ASSESSMENT ORDER WITH THE DIRECTION TO THE AO TO FRAME THE ASSESSMENT ORDER AFRESH TAKING INTO A CCOUNT THE OBSERVATIONS MADE IN THE SAID ORDER. 2. BRIEF FACTS LEADING TO THE PRESENT APPEAL ARE THAT THE ASSESSEE A CO - OPERATIVE BANK ENGAGED IN THE BUSINESS OF BANKING , FILED ITS RETURN OF INCOME FOR THE A.Y. 2010 - 11 DECLARING THE TOTAL INCOME OF RS. 4, 65,17,921/ - . THE 2 ITA NO. 3028/MUM/2015 ASSESSMENT YEAR: 2010 - 11 ASSESSMENT WAS COMPLETED U/S 143 (3 ) OF THE ACT ACCEPTING THE RETURNED INCOME. 3. LATER ON T HE LD. CIT NOTICED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 4,68,65,000/ - ON ACCOUNT OF LOSS ON SHIFTING OF SECURITIES FROM THE CATEGORY AV AILABLE FOR S ALE TO THE CATEGORY HELD TO M ATURITY . THE LD. CIT ACCORDINGLY ISSUED SHOW CAUSE NOTICE U/S 263 OF THE ACT OBSERVING THAT THE LOSS HAS ARISEN TO THE ASSESSEE FROM RE - CATEGORIZATION OF SECURITIES IS NOTIONAL LOSS NOT ARISING FROM ANY ACTUAL T RANSACTION OF PURCHASE AND SALE , THEREFORE NOT ALLOWABLE. IN RESPONSE TO THE SAID NOTICE THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FILED WRITTEN SUBMISSIONS CONTENDING THAT THE ISSUE OF SHIFTING OF SECURITIES WAS EXPLAINED TO AO DURING THE ASSESSMENT PROCEEDINGS. THEREFORE, THE REVISION OF ORDER IS NOT PERMISSIBLE. IT WAS FURTHER CONTENDED THAT THE RE - CATEGORIZATION OF THE INVESTMENT WAS DONE IN ACCORDANCE WITH THE GUIDELINES OF THE RESERVE BANK OF INDIA, THEREFORE, THE LOSS IS ALLOWABLE. HOWEVER, THE LD. CIT REJECTING THE CONTENTION OF THE ASSESSEE PASSED THE IMPUGNED ORDER AND ISSUED DIRECTIONS TO THE AO TO FRAME THE ASSESSMENT ORDER AFRESH TAKING INTO ACCOUNT THE OBSERVATIONS MADE IN THE SAID ORDER. 4. AGGRIEVED BY THE ORDER OF LD. CIT , THE ASSESSE E PREFERRED THIS APPEAL BEFORE US ON THE FOLLOWING EFFECTIVE GROUNDS: - 1:0 RE: VALIDITY OF ORDER U/S. 263: 1:1 THE COMMISSIONER OF INCOME - TAX HAS ERRED IN HOLDING THAT THE ORDER DATED 12 NOVEMBER 2012 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE I NCOME - TAX ACT, 1961 WAS PASSED WITHOUT APPLICATION OF MIND AND WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND IN SETTING ASIDE THE SAME. 1:2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILIN G ON THE SUBJECT THE ORDER PASSED BY 3 ITA NO. 3028/MUM/2015 ASSESSMENT YEAR: 2010 - 11 THE ASSESSING OFFICER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HENCE THE SETTING ASIDE OF THE SAME BY THE COMMISSIONER OF INCOME - TAX U/S 263 OF THE INCOME - TAX ACT, 1961 IS ERRONEOUS AND B AD IN LAW. 1:3 THE APPELLANT SUBMITS THAT THE IMPUGNED ORDER PASSED U/S 263 OF THE INCOME TAX ACT, 1961 BY THE COMMISSIONER OF INCOME - TAX BE STRUCK DOWN. WITHOUT PREJUDICE TO THE AFORESAID: 2:0 RE: TREATING THE LOSS OF RS. 4,68,65,000/ - AS A NOTIONA L LOSS. 2:1 THE COMMISSIONER OF INCOME - TAX HAS ERRED IN HOLDING THAT THE LOSS OF RS. 4,68,65,00 0 / - DEBITED BY THE APPELLANT TO ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR IS A NOTIONAL LOSS WHICH CANNOT BE ALLOWED AND IN DIRECTING THE ASSESSING OFFICER TO RE DO THE ASSESSMENT AFRESH. 2:2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT THE LOSS OF RS. 4,68,65,500/ - DEBITED TO ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR IS ALLOWABLE WHILE COMPUTI NG ITS TOTAL INCOME AND THE STAND TAKEN BY THE COMMISSIONER OF INCOME - TAX IN THIS REGARD IS INCORRECT, MISCONCEIVED, ERRONEOUS AND NOT IN ACCORDANCE WITH LAW. 5. THE LD. COUNSEL AT THE OUTSET SUBMITTED THAT THE ASSESSEES CASE IS COVERED BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT PASSED IN CIT VS. HDFC BANK LTD., 368 ITR 377 (BOM) AND THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE HONBLE COURT IN FAVOUR OF THE ASSESSEE. HENCE, THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE IMPUGNED ORDER PASSED BY THE LD. CIT SUBMITTED THAT SINCE THE ASSESSEE HAD WRONGLY DEBITED THE AMOUNT OF RS. 4,68,65,000/ - THE LD. CIT HAS RIGHTLY HELD THAT THE LOSS IS NOTIONAL AND THE SAME IS NOT ALLOWABLE. 4 ITA NO. 3028/MUM/2015 ASSESSMENT YEAR: 2010 - 11 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE MATERIAL PLACED ON RECORD. WE NOTICE THAT IN CIT VS. HDFC BANK (SUPRA), THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE CLAIM OF THE ASSESSEE FOR THE LOSS ON TRANSFER OF SECURITIES FROM TH E CATEGORY AVAILABLE FOR S ALE TO HELD TO M ATURITY WAS AN ALLOWABLE DEDUCTION. IN THE SAID CASE, THE ASSESSEE BANK BEING A PUBLIC LTD. COMPANY FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. AFTER THE SCRUTINY, THE ASSESSMENT ORDER WAS COMP LETED TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY THE ASSESSEE. SUBSEQUENTLY, IT WAS NOTICED THAT THE ASSESSEE HAD DEBITE D TO THE PROFIT & LOSS ACCOUNT A SUM OF RS. 87.11 LACS AS A LOSS ON ACCOUNT OF TRANSFER OF SECURITIES FROM CATEGORY AVAILABLE FO R S ALE TO HELD TO M ATURITY WHICH WAS ALLOWED BY THE ASSESSING OFFICER. THE LD. CIT SET ASIDE THE ASSESSMENT ORDER INVOKING JURISDICTION U/S 263 OF THE ACT HOLDING THAT THE ALLOWANCE OF SUCH A NOTIONAL LOSS WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F THE REVENUE. THE ASSESSEE CHALLENGED THE SAID ORDER BEFORE THE ITAT, MUMBAI BENCH. THE CO - ORDINATE BENCH OF ITAT SET ASIDE THE REVISIONAL ORDER HOLDING THAT THE CLAIM OF THE ASSESSEE FOR THE LOSS ON TRANSFER OF SECURITIES FROM THE CATEGORY AVAILABLE FOR S ALE TO HELD TO M ATURITY WAS AN ALLOWABLE DEDUCTION. 8. THE DEPARTMENT CHALLENGED THE ORDER PASSED BY THE ITAT BEFORE THE HONBLE HIGH COURT. BEFORE THE HONBLE HIGH COURT, THE DEPARTMENT CONTENDED THAT SINCE SUCH AN ALLOWANCE OF A NOTIONAL LOSS WAS I MPERMISSIBLE UNDER THE PROVI SION NS OF THE ACT, THE LD. CIT WAS FULLY JUSTIFIED IN INVOKING HIS POWERS U/S 263 OF THE ACT, THEREFORE, THE IMPUGNED ORDER PASSED BY THE ITAT REQUIRES INTERFERENCE. 9. THE HONBLE HIGH COURT REJECTED THE CONTENTION OF THE RE VENUE AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION S OF THE 5 ITA NO. 3028/MUM/2015 ASSESSMENT YEAR: 2010 - 11 JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE AFORESAID CASE ARE REPRODUCED BELOW : 6. BEING AGGRIEVED BY THE ORDER PASSED BY THE APPELLANT UNDER SECTION 263 OF THE A CT, THE ASSESSEE BANK FILED AN APPEAL BEFORE THE ITAT, MUMBAI BENCH. AFTER HEARING THE REPRESENTATIVES OF THE ASSESSEE AS WELL AS THE REVENUE, THE ITAT HELD THAT EVEN THOUGH THE ASSESSEE HAD CHALLENGED THE ORDER OF THE APPELLANT PASSED INVOKING THE SAID PO WERS WERE NOT SATISFIED, THE ITAT ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS AND WITHOUT GOING INTO THE JURISDICTIONAL ISSUE. WE FIND THAT THE ITAT, AFTER EXAMINING THE ENTIRE FACTUAL MATRIX OF THE MATTER AND AFTER RELYING UPON ITS OWN JUDGMENTS IN THE C ASE OF STATE BANK OF MYSORE V. DY. CIT [2009] 33 SOT 7 (BANG) AND ACIT V. VIJAYA BANK [IT APPEAL NO. 253/BANG/2007 DATED 24 TH JANUARY 2008] AS WELL AS THE JUDGMENT OF THE KANATAKA HIGH COURT IN THE CASE OF KARNATAKA BANK LTD. (SUPRA), HELD THAT THE CLAIM O F THE ASSESSEE FOR THE LOSS OF RS. 87.11 LAKHS ON THE TRANSFER OF SECURITIES FROM THE CATEGORY AVAILABLE FOR SALE TO HELD TO MATURITY WAS AN ALLOWABLE DEDUCTION, AND THEREFORE SET ASIDE THE ORDER PASSED BY THE APPELLANT UNDER SECTION 263 OF THE ACT .. 7. AFTER PERUSING THE ORDER PASSED BY THE APPELLANT DATED 23 RD MARCH 2009 AND THE IMPUGNED ORDER PASSED BY THE ITAT, WE FIND THAT THE ITAT WAS FULLY JUSTIFIED IN SETTING ASIDE THE ORDER OF THE APPELLANT DATED 23 RD MARCH 2009 AND ALLOWING THE DEDUCTION OF RS. 87.11 LAKHS TO THE ASSESSEE. IN THIS REGARD, THE RELIANCE PLACED BY MR. MISTRY, THE LEARNED SENIOR COUNSEL APPEARING ON BEHALF OF THE RESPONDENT - ASSESSEE ON THE JUDGMENT OF THIS COURT IN THE CASE OF BANK OF BARODA (SUPRA) IS WELL FOUNDED.. 11. WE THEREFORE FIND THAT THE ISSUE RAISED IN THIS APPEAL IS ALSO SQUARELY COVERED BY THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF KARNATAKA BANK LTD. (SUPRA). 12. IN VIEW THEREOF, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE ITAT. THE PRES ENT APPEAL DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW AS PROJECTED BY THE LEARNED COUNSEL APPEARING FOR THE APPELLANT. THE APPEAL IS THEREFORE DISMISSED . 6 ITA NO. 3028/MUM/2015 ASSESSMENT YEAR: 2010 - 11 10. THE ISSUE INVOLVED IN THE PRESENT CASE IS IDENTICAL TO THE CASE DISCUSSED ABOVE AND SINCE, THE HONBLE BOMBAY HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE SAID CA S E , BY CONFIRMING THE FINDINGS OF THE ITAT THAT THE CLAIM OF THE ASSESSEE FOR LOSS ON THE TRANSFER OF SECURITIES FROM THE CATEGORY AVAILABLE FOR SALE TO HELD TO MATURITY IS AN ALLOWABLE DEDUCTION , WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE/APPELLANT. SINCE, THE LOSS IN QUESTION IS ALLOWABLE, THE LD. CIT HAS NO JURISDICTION TO EXERCISE THE POWERS UNDER SECTION 263 OF THE ACT. W E , ACCORDINGLY , SET AS IDE THE IMPUGNED ORDER PASSED BY THE LD. CIT U /S 263 OF THE ACT AS BAD IN LAW AND ALLOW GROUND NO 1.1 TO 1.3 . 11. IN SO FAR AS GROUND NO 2.1& 2.2 ARE CONCERNED, SINCE WE HAVE ALLOWED GROUND NO 1.1 TO 1.3 OF THE ASSESSEES APPEAL WE DO NOT CONSIDER NECESS ARY TO ADJUDICATE THESE GROUNDS WHICH HAVE BEEN RAISED AS ALTERNATIVE GROUNDS . IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR A SSESSMENT YEAR 2010 - 2011 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY , 2017 . S D/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 31 / 0 5 / 2017 ALINDRA, PS 7 ITA NO. 3028/MUM/2015 ASSESSMENT YEAR: 2010 - 11 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE C IT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI