The ITO, Ward-1, Godhra V. M/s. Lunawada Peoples Co.Op. Bank Ltd., Panchmahal

ITA 3037/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9904 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 19-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Revised return
• Section: 143(3); 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.3037/AHD/2013 / ASSTT. YEAR: 2010-2011 ITO, WARD - 1 GODHRA. VS M/S.LUNAWADA PEOPLE CO - OP. BANK LTD. NR. HATANA KUVA AT-LUNAWADA (PMS) PAN : AAJT 0334 L ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SMT.SONIA KUMAR, DR ASSESSEE BY : NONE / DATE OF HEARING : 27/10/2016 / DATE OF PRONOUNCEMENT: 25/11/2016 $%/ O R D E R THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINS T ORDER OF THE LD.CIT(A)-VI, BARODA DATED 27.9.2013 PASSED FOR ASS TT.YEAR 2010-11. 2. SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LD .CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.39,09,208/- WHICH W AS ADDED BY THE AO ON ACCOUNT OF ACCRUAL OF INTEREST INCOME IN TO THE TOT AL INCOME OF THE ASSESSEE. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A C OOPERATIVE BANK HAVING REGISTERED OFFICE AT LUNAWADA, DISTRICT PANCH MAHAL S. IT HAS FILED ITS RETURN OF INCOME ON 22.9.2010 DECLARING TOTAL INCOME AT NIL. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UND ER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY O F THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE WAS REQUIRED TO MAINTAI N SLR AND CRR ACCORDING ITA NO.3037/AHD/2013 2 TO SECTIONS 18 AND 24 OF THE BANKING REGULATION ACT , 1949. THE ASSESSEE IN ORDER TO MAINTAIN SLR HAS TO MAKE DEPOSITS WITH PAN CH MAHALS COOPERATIVE BANK LTD. THIS BANK WAS PLACED UNDER DIRECTIONS OF THE RESERVE BANK OF INDIA UNDER SECTION 31A AND IT WAS CONDUCTING BUSIN ESS ACCORDINGLY. SINCE LAST FIVE YEARS, SUCH BANK IS NOT REFUNDED DEPOSITE D MONEY AND ISSUED ONLY INTEREST ADVICE FOR THE DEPOSITS LYING WITH THEM. IN OTHER WORDS, NO ACTUAL INTEREST INCOME WAS EARNED BY THE ASSESSEE. THE RE STRICTIONS WERE IMPOSED UPON THE PDC BANK BY RBI IN MAY, 2003 WHICH WAS LIF TED BY THE RBI IN THE MONTH OF NOVEMBER-DECEMBER, 2011, AND IN THIS WAY, VARIOUS BANKS HAVING DEPOSITED MONEY WITH PDC BANK WERE ABLE TO RECEIVE INTEREST AND DEPOSITS IN THE MONTH OF JANUARY, 2012. ALMOST AFTER LAPSE OF E IGHT-AND-HALF YEARS, SINCE THE ASSESSEE HAS RECEIVED ADVICE OF AN AMOUNT OF RS .39,03,208/-, IT HAS ANNEXED A NOTE AND CONTENDED THAT THIS AMOUNT BE EX CLUDED FROM THE TAXABLE INCOME OF THE ASSESSEE. THIS WAS NOT ACCRUED TO TH E ASSESSEE. THE LD.AO DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE AND HE M ADE ADDITION OF RS.39,03,208/- IN THE TOTAL INCOME OF THE ASSESSEE. 4. DISSATISFIED WITH THE ADDITION, THE ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) HAS OBSERVED T HAT AN IDENTICAL ADDITION WAS MADE BY THE AO IN THE IMMEDIATELY PRECEDING YEA R, AND FOLLOWING THE ORDER OF HIS PREDECESSOR, THE LD.CIT(A) DELETED THE ADDITION. FINDING RECORDED BY THE CIT(A) READS AS UNDER: 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE THE SU BMISSIONS OF THE APPELLANT AND THE MATERIAL AVAILABLE ON RECORD. I FIND THAT THIS CASE IS SQUARELY COVERED BY THE ORDER OF MY PREDECESSOR IN THE CASE OF THE DAHOD URBAN COOPERATIVE BANK LT., IN APPEAL NO.CAB/ VI-361/10/11 FOR A.Y.07-08. IN THIS CASE, ON A SIMILAR ISSUE, T HE CIT(A)-VI, BARODA HAS HELD AS UNDER: ITA NO.3037/AHD/2013 3 ' 4.3 I HAVE CAREFULLY CONSIDERED THE FINDINGS GIVEN IN THE ASSESSMENT ORDER BY THE ASSESSING OFFICER, CLARIFICATORY NOTE PLACED IN THE COMPUTATION OF INCOME, SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND ALSO IN THE COURSE OF APPELLATE PROCEEDINGS BY THE APPELLANT. IN ORDER TO DECIDE THIS ISSUE IT IS NECESSARY TO EXAMI NE POSITION OF LAW IN THIS REGARD SINCE SUBSTANTIVE AMENDMENTS WERE MADE IN THE INCOME-TAX ACT, 1961 W.E.F. 1,4.1989 AS FAR AS ASSESSMENT OR I NCOME UNDER THE PROVISIONS OF THE ACT IS CONCERNED. I FIND THAT AT THE TIME OF MAKING SUBSTANTIVE AMENDMENTS BY THE DIRECT TAX LAWS (AMEN DMENT) ACT, 1987 W.E.F 1.4.1989, THE CBDT HAD ISSUED CIRCULAR N O. 549 DATED 31.10.1989 CLARIFYING THAT ASSESSING OFFICER CANNOT ASSESS INCOME BELOW THE RETURNED INCOME. THE SAID CIRCULAR WAS IN CONSONANCE WITH THE PROVISIONS OF SECTION 143 PREVAILING AT THE REL EVANT TIME AS ASSESSING OFFICER HAD NO POWER TO GRANT REFUND TO T HE ASSESSES IF INCOME GOES BELOW THE RETURNED INCOME AT THE TIME O F MAKING ASSESSMENT. THE SAID CIRCULAR CAME TO BE CHALLENGED BEFORE THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT G AS CO. LTD. VS. CIT 245 ITR 84 AND AFTER GOING THROUGH THE PROVISIO NS OF THE ACT, HON'BLE HIGH COURT HELD SAID CIRCULAR TO BE ULTRA V IRUS AND CONTRARY TO THE PROVISIONS OF THE ACT AND THAT THE CBDT HAD NO POWER TO ISSUE SUCH CIRCULAR. IN THE SAID CASE, ASSESSING OFFICER THOUG H COMPUTED INCOME BELOW THE RETURNED INCOME IN THE ASSESSMENT BUT REF USED TO GRANT REFUND TO THE ASSESSEE WHICH WAS PAID AT THE TIME O F FILING OF RETURN OF INCOME AND BECAUSE REFUNDABLE AS A CONSEQUENCE OF F INDING OF THE ASSESSING OFFICER THAT INCOME IF COMPUTED IN ACCORD ANCE WITH THE PROVISIONS OF THE ACT WOULD BE LESS THAN THE RETURN ED INCOME. I HAVE BEEN INFORMED BY THE LEARNED AUTHORIZED REPRESENTAT IVES THAT NO SLP HAS BEEN PREFERRED BY THE DEPARTMENT AGAINST THIS D ECISION OF HON'BLE HIGH COURT BEFORE THE HON'BLE SUPREME COURT. THUS, TWO ISSUES HAVE ATTAINED FINALLY I.E. THE ASSESSING OFFICER CAN MAK E ASSESSMENT BELOW THE RETURNED INCOME WHEN INCOME IS COMPUTED IN ACCO RDANCE WITH THE PROVISIONS OF THE ACT AND CAN GRANT REFUND TO THE A SSESSES IF INCOME GOES BELOW THE RETURNED INCOME. HOWEVER, HON'BLE SU PREME COURT IN THE CASE OF GOETZE INDIA LTD. VS. CIT 284 ITR 323 ( SC) HELD THAT THE ASSESSING OFFICER HAS NO POWER TO ENTERTAIN ANY FRE SH CLAIM UNLESS IT IS MADE THROUGH A REVISED RETURN. I FIND THAT THE SAID DECISION PERTAINS TO A.Y. 1995-96. AT THE RELEVANT TIME LANGUAGE APPEARI NG IN SECTION 143(3) WAS '....DETERMINE THE SUM PAYABLE BY HIM'. THUS, IN THE ASSESSMENT YEAR BEFORE THE HON'BLE SUPREME COURT TH E ASSESSING OFFICER WAS NOT EMPOWERED TO ASSESS INCOME BELOW TH E RETURNED INCOME BY ENTERTAINING FRESH CLAIM WHICH WAS NOT SU PPORTED BY REVISED ITA NO.3037/AHD/2013 4 RETURN BECAUSE IN SUCH A SCENARIO IF INCOME IS ASSE SSED BELOW THE RETURNED INCOME THE ASSESSEE WOULD HAVE ASKED FOR R EFUND OF TAXES ALREADY PAID FOR WHICH NO AUTHORITY WAS GRANTED TO HIM BY THE STATUTE. HOWEVER, SAID LANGUAGE CAME TO BE SUBSTITUTED BY TH E FINANCE (NO. 2) ACT, 1998 W.E.F. 1ST OCT. 1998 WITH THE WORDS '...D ETERMINE THE SUM PAYABLE BY HIM OR REFUND OF ANY AMOUNT DUE TO HIM.' IN VIEW OF SUBSTANTIVE CHANGES MADE IN THE STATUTE ITSELF, I F IND THAT THE ASSESSING OFFICER WHILE ASSESSING INCOME IN ACCORDANCE WITH T HE PROVISIONS OF THE ACT IS EMPOWERED TO GRANT REFUND ON THE BASIS OF AS SESSED INCOME TO THE ASSESSEE. I, THEREFORE, HOLD THAT THE DECISION OF H ON'BLE SUPREME COURT IN THE CASE OF GOETZ INDIA (SUPRA) IS DISTINGUISHAB LE ON FACTS AND IS NOT APPLICABLE IN THE YEAR UNDER CONSIDERATION. I ALSO FIND THAT IN FOLLOWING CASES HON'BLE TRIBUNALS HAVE HELD THAT HON'BLE SUPR EME COURT DECISION IS NOT BINDING ON THE APPELLATE AUTHORITIE S AND RELIEF COULD BE GRANTED TO THE ASSESSEE IF PROVISIONS OF LAW SO PER MIT. (A) SNC LALVIN ACRES INC. VS. ACIT15SOT1 (DELHI ) (B) CHICAGO PNEUMATIC INDIA LTD./S. DCIT15 SOT 2 52 (MUMBAI) AND (C) LABH CONSTRUCTION & INDUSTRIES LTD. VS. ACI T IN ITA NO. 2486 2488/AHD/2003 (AHMEDABAD BANCH A) IN DECIDING THESE CASES HON'BLE TRIBUNAL RELIEF UPO N CBDT CIRCULAR NO. 14 (XL-35)DATED 11.04.1955. THE SAID CIRCULAR S TATES AS TO WHAT SHOULD BE THE ATTITUDE OF THE DEPARTMENT WHILE GRAN TING REFUND AND RELIEF'S TO THE ASSESSEE. THE CIRCULAR READS AS UND ER 'CIRCULAR NO. 14 (XL-35) MISCELLANEOUS - REFUND AND RELIEFS DUE TO ASSESSEES - DEPARTMENTAL ATTITUDE TOWARDS. 11.04.1955 ASSESSMENT- SECTIONS 143 THE BOARD HAS ISSUED INSTRUCTIONS FROM TIME TO TIME IN REGARD TO THE ATTITUDE WHICH THE OFFICERS OF THE DEPARTMENT SHOUL D ADOPT IN DEALING WITH ASSESSES IN MATTERS AFFECTING THEIR INTEREST A ND CONVENIENCE. IT APPEARS THAT THESE INSTRUCTIONS ARE NOT BEING UNIFO RMLY FOLLOWED. 2. COMPLAINTS ARE STILL BEING RECEIVED THAT WH ILE ITO'S ARE PROMPT IN MAKING ASSESSMENTS LIKELY TO RESULT INTO DEMANDS AN D IN EFFECTING THEIR RECOVERY, THEY ARE LETHARGIC AND INDIFFERENT IN GRA NTING REFUNDS AND GIVING RELIEFS DUE TO ASSESSEES UNDER THE ACT. DILA TORINESS OR ITA NO.3037/AHD/2013 5 INDIFFERENCE IN DEALING WITH REFUND CLAIMS (EITHER UNDER S. 48 OR DUE TO APPELLATE, REVISIONAL ETC. ORDERS) MUST BE COMPLETE LY AVOIDED SO THAT THE PUBLIC MAY FEEL THAT THE GOVERNMENT ARE ACTUALL Y PROMPT AND CAREFUL IN THE MATTER OF COLLECTING TAXES AND GRANT ING REFUNDS AND GIVING RELIEFS. 3. OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTA GE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DU TIES TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEF AND IN THIS REGARD THE OFFICERS SHO ULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WHERE PROCEEDINGS OR OTHER PA RTICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH THEREFORE, THE RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEFS RESTS WITH ASSESSEES ON WHOM IT IS IMPO SED BY LAW, OFFICERS SHOULD: (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER: (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS T O THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED F OR CLAIMING REFUNDS AND RELIEF. 4. PUBLIC RELATIONS OFFICERS HAVE BEEN APPOIN TED AT IMPORTANT CENTERS, BUT BY THE VERY NATURE OF THEIR DUTIES, TH EIR FIELD OF ACTIVITY IS BOUND TO BE LIMITED. THE FOLLOWING EXAMPLES (WHICH ARE BY NO MEANS EXHAU STIVE) INDICATE THE ATTITUDE WHICH OFFICERS SHOULD ADOPT- (A) SEC. 17(1): WHILE DEALING WITH THE ASSESSMENT O F A NONRESIDENT ASSESSEE THE OFFICER SHOULD BRING TO HIS NOTICE THA T HE MAY EXERCISE THE OPTION TO PAY TAX ON HIS INDIAN INCOME WITH REFEREN CE TO HIS TOTAL WORLD INCOME, IF IT IS TO HIS ADVANTAGE. (B) SEC. 18(3), (3A), (3B) AND (3D): THE OFFICER SH OULD IN EVERY APPROPRIATE CASE BRING TO THE ASSESSEE'S NOTICE THE POSSIBILITY OF OBTAINING A CERTIFICATE AUTHORIZING DEDUCTION OF IN COME-TAX AT A RATE ITA NO.3037/AHD/2013 6 LESS THAN THE MAXIMUM OR DEDUCTION OF SUPER TAX AT A RATE LOWER THAN THE FLAT RATE, AS THE CASE MAY BE. (C) SEC. 25(3) AND 25(4): THE MANDATORY RELIEF ABOU T EXEMPTION FROM TAX MUST BE GRANTED WHETHER CLAIMED OR NOT; THE OTH ER RELIEF ABOUT SUBSTITUTION, IF NOT TIME BARRED, MUST BE BROUGHT T O THE NOTICE OF A TAXPAYER, (D) SEC. 26A: THE BENEFIT TO BE OBTAINED BY REGI STRATION SHOULD BE EXPLAINED IN APPROPRIATE CASES. WHERE AN APPLICATION FOR REGISTRATION PRESENTED BY A FIRM IS FOUND DEFECTIVE , THE OFFICER SHOULD ? POINT OUT THE DEFECT TO IT AND GIVE IT AN OPPORTUNI TY TO PRESENT A ' PROPER APPLICATION. (D) SEC. 33A: CASES IN WHICH THE ITO OR THE ASSTT,. COMMISSIONER THINKS THAT AN ASSESSMENT SHOULD BE REVISED MUST BE BROUGHT TO THE NOTICE OF THE CIT. (E) SEC. 35: MISTAKES SHOULD BE RECTIFIED AS SOON A S THEY ARE DISCOVERED WITHOUT WAITING FOR AN ASSESSEE TO POINT THEM OUT. (F) SEC. 60(2): CASES WHERE RELIEF CAN PROPERLY BE GIVE UNDER THIS SUB- SECTION SHOULD BE REPORTED TO THE BOARD. 5. WHILE OFFICERS SHOULD, WHEN REQUESTED, FREELY AD VISE ASSESSEES THE WAY IN WHICH ENTRIES SHOULD BE MADE IN VARIOUS FORM S, THEY SHOULD NOT THEMSELVES MAKE ANY IN THEM ON THEIR BEHALF. WHERE SUCH ADVICE IS GIVEN, IT SHOULD BE CLEARLY EXPLAINED TO THEM THAT THEY ARE RESPONSIBLE FOR THE ENTRIES MADE IN ANY FORM AND THAT THEY CANN OT BE ALLOWED TO PLEAD THAT THEY WERE MADE UNDER OFFICIAL INSTRUCTIO NS. THIS EQUALLY APPLIES TO THE PUBLIC RELATION OFFICERS. THE INTENTION OF THIS CIRCULAR IS NOT THAT TAX DUE SHOULD NOT BE CHARGED OR THAT ANY FAVOUR SHOULD BE SHOWN TO ANYBODY IN TH E MATTER OF ASSESSMENT, OR THAT WHERE INVESTIGATIONS ARE CALLED FOR, THEY SHOULD NOT BE MADE. WHATEVER THE LEGITIMATE TAX IT MUST BE ASS ESSED AND MUST BE COLLECTED. THE PURPOSE OF THIS CIRCULAR IS MERELY T O EMPHASIZE THAT WE SHOULD NOT TAKE ADVANTAGE OF AN ASSESSEE'S IGNORANC E TO COLLECT MORE TAX OUT OF HIM THAN IS LEGITIMATELY DUE FROM HIM.' I ALSO FIND THAT HON'BLE GUJARAT HIGH COURT IN THE CASE OF CHOKSI METAL REFINERY VS. CIT 107 ITR 63 (GUJ) RELYING UPON THE ABOVE MENTIONED CIRCULAR HELD THAT IT IS INCUMBENT ON ITO'S TO FOLL OW THE AFORESAID CIRCULAR AND TO DRAW THE ATTENTION OF THE ASSESSEE CONCERNED TO ALL THE RELIEFS AND REFUNDS TO WHICH THE ASSESSEE CONCERNED TO ALL THE RELIEFS AND REFUNDS TO WHICH THE ASSESSEE SEEMS TO BE ENTIT LED ON THE FACTS OF ITA NO.3037/AHD/2013 7 THE CASE EVEN THOUGH THE ASSESSEE MIGHT HAVE OMITTE D TO CLAIM REFUND OR RELIEF IN THE RETURN. I FIND THAT MERELY BECAUSE INCOME HAS BEEN RECORDED IN THE BOOKS THOUGH NOT ACCRUED TO THE ASS ESSEE, IT CANNOT BE BROUGHT TO TAX AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF GODHRA ELECTRIC CO. LTD. VS. CIT 225 ITR 746 (SC) RATIO OF WHICH IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE IF INSTRUCTIONS OF RBI AS RELIEF UPON AND REFERRED TO IN THE SUBMISSION ARE TAKEN COGNIZA NCE. I FIND THAT RBI PROVISIONS HAVE OVER RIDDING EFFECT OVER PROVISIONS OF INCOME-TAX ACT AS HELD IN THE CASE OF BARKHA INVESTMENT AND TRADIN G CO. VS. CIT 281 ITR 316 (GUJ.) I ALSO FIND THAT THE APPELLANT HAD MADE A CLAIM IN THE RETURN OF INCOME BY DISCLOSING RELEVANT FACTS BY WAY OF NOTES AS IT HAD NO LEGAL ASSISTANCE AT THE TIME OF FILLING OF RETURN AS TO H OW REQUIRED ADJUSTMENTS COULD BE MADE IN THE RETURN OF INCOME O NCE THE INCOME IS ACCOUNTED IN THE BOOKS. I FIND THAT ISSUE IS OTHERW ISE DIRECTLY COVERED IN FAVOUR OF THE APPELLANT BY THE DECISION OF HON'BLE