The Kolar & chickballapur District Co-Op Bank Ltd., V. A.C.I.T., Bangalore

ITA 351/BANG/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8718 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 14-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Assessee Lawyers: NAYAZ PASHA
• Keywords: Bonafide belief; Reasonable cause; Condonation of delay
• Section: 143(3); 72(1); 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO. 351/BANG/2014 ASSESSMENT YEAR : 2006-07 THE KOLAR & CHICKBALLAPUR DISTRICT CO-OP. BANK LTD., POST BOX NO.11, D.C.C. BANK, KOLAR 563 101. PAN: AACFT 4514E VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 10(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : MR. NAYAZ PASHA, C.A. RESPONDENT BY : MR. P. DHIVAHAR, JT. CIT(DR) DATE OF HEARING : 20.02.2015 DATE OF PRONOUNCEMENT : 27.02.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 7.10.2013 OF THE CIT(APPEALS)-V, BANGALORE RELATING TO ASSESSMEN T YEAR 2006-07. 2. THERE IS A DELAY OF ABOUT 60 DAYS IN FILING THE APPEAL BY THE ASSESSEE. THE REASONS FOR DELAY HAVE BEEN EXPLAINE D BY THE ASSESSEE IN ITA NO.351/BANG/2014 PAGE 2 OF 10 THE APPLICATION FOR CONDONATION OF DELAY. IT HAS B EEN STATED THEREIN THAT THE IMPUGNED ORDER OF THE CIT(A) WAS RECEIVED BY THE AS SESSEE ON 14.11.2013 AND IN NORMAL COURSE APPEAL OUGHT TO HAVE BEEN FILE D BEFORE THE TRIBUNAL ON OR BEFORE 13.1.2014. HOWEVER, THE APPEAL WAS FI LED ONLY ON 14.3.2014 RESULTING IN A DELAY OF 62 DAYS IN FILING THE APPEA L. IT HAS BEEN FURTHER STATED THAT THE ASSESSEE IS MANAGED AND OPERATED BY DEPARTMENT OF CO- OPERATIVE SOCIETIES, GOVERNMENT OF KARNATAKA, SINCE 2004. FURTHER TO THE DIRECTIVES OF GOVT., ELECTION WAS TO BE CONDUCTED T O ELECT GOVERNING BODY OF THE BANK IN NOV. 2014. THERE WERE CONTROVERSIES IN THE ELECTION RESULTS AND CASES WERE FILED IN THE HIGH COURT OF KARNATAKA BY VARIOUS FACTIONS CHALLENGING THE ELECTION. THE CEO OF THE ASSESSEE IS THE DEPUTY REGISTRAR OF CO-OPERATIVE SOCIETIES AND IS A DEPUTED GOVERNME NT OFFICER ON BEHALF OF GOVT. OF KARNATAKA. HE HAD TO APPEAR BEFORE THE HI GH COURT ON ALMOST EVERY ALTERNATE DAY AND COULD NOT INVOLVE IN THE AF FAIRS OF BANKING ACTIVITIES INCLUDING INCOME TAX MATTERS. THE ELECTION RESULTS WERE DECLARED ON 3.3.2014. THEREAFTER, THE ASSESSEE FILED AN APPEAL ON 14.3.2014. HENCE THE DELAY IN FILING APPEAL BEFORE THE TRIBUNAL. 3. THE CONTENTS OF THE APPLICATION FOR CONDONATION OF DELAY HAVE BEEN VERIFIED BY MR. VENKATESHAPPA M., THE CEO OF THE AS SESSEE. CONSIDERING THE REASONS GIVEN THE APPLICATION FOR CONDONATION O F DELAY, WE ARE SATISFIED THAT THE DELAY WAS OCCASIONED DUE TO A REASONABLE A ND SUFFICIENT CAUSE. CONSEQUENTLY, DELAY IN FILING THE APPEAL IS CONDONE D. ITA NO.351/BANG/2014 PAGE 3 OF 10 4. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS WITH REGARD TO BENEFIT OF CARRY FORWARD OF SET OFF OF LO SS FOR A.Y. 2004-05. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE AFORESAID I SSUE ARISES FOR CONSIDERATION ARE AS FOLLOWS. 5. THE ASSESSEE IS A CO-OPERATIVE BANK ASSESSED IN THE STATUS OF AOP AND CARRIES ON BANKING BUSINESS. FOR THE A.Y. 2005 -06, THE ASSESSEE FILED A RETURN OF INCOME ON 31.10.2006 DECLARING TOTAL IN COME OF NIL. THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT ON 17.12.2006. THEREAFTER, ORDER U/S. 143(3) OF THE ACT WAS PASSED ON 28.11.2008, ACCEPTI NG NIL INCOME RETURNED BY THE ASSESSEE. THE COMPUTATION OF TOTAL INCOME MADE BY THE AO WAS AS FOLLOWS:- TOTAL INCOME FOR THE YEAR RS.16,22,41,706 LESS: INCOME SET OFF AGAINST BROUGHT FORWARD LOSSES FOR THE PREVIOUS YEAR RS.16,22,41,706 --------------------- TAX THEREON NIL 6. THE AO, THEREAFTER, ISSUED NOTICE U/S. 154 OF TH E ACT DATED 5.1.2010. ACCORDING TO THE SHOW CAUSE NOTICE U/S. 154, THE AO WAS OF THE VIEW THAT CARRY FORWARD LOSS RELATING TO A.Y. 2003-04 & 2004- 05 OUGHT NOT TO HAVE BEEN ALLOWED AS THE ASSESSEE HAD FILED THE RETURN O F INCOME FOR THOSE YEARS BEYOND THE TIME CONTEMPLATED U/S. 139(1) OF T HE ACT. U/S. 139(3) OF THE ACT, ANY PERSON WHO HAS SUSTAINED A LOSS IN THE PREVIOUS YEAR UNDER ITA NO.351/BANG/2014 PAGE 4 OF 10 THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSIO N' AND CLAIMS FOR THE LOSS OR ANY PART THEREOF TO BE CARRIED FORWARD U/S. 72(1 ) & (3) OR 74A(3), THEN HE HAS TO FILE A RETURN OF LOSS IN THE PRESCRIBED FORM WITHIN THE TIME ALLOWED U/S. 139(1) OF THE ACT. IN THE EVENT OF FAILURE TO FILE THE RETURN AS AFORESAID, ASSESSEE CANNOT SEEK TO CLAIM CARRY FORWARD OF LOSS FOR SET OFF IN THE SUBSEQUENT ASSESSMENT YEARS, AS LAID DOWN IN SECTIO N 80 OF THE ACT. 7. THE LOSS INCURRED BY THE ASSESSEE WHICH IS AVAI LABLE FOR CARRY FORWARD IN THE VARIOUS ASSESSMENT YEARS ARE AS FOLL OWS:- SL. NO. ASSESSMENT YEAR LOSS 1. 2002-03 NIL 2. 2003-04 RS.3,09,29,802 3. 2004-05 RS.5,23,18,280 4. 2005-06 RS.10,19,12,615 TOTAL 18,51,60,697 8. THE RETURN OF LOSS FOR THE A.Y. 2004-05 WAS FILE D BY THE ASSESSEE ON 2.11.2004. THE DUE DATE FOR FILING THE RETURN OF I NCOME U/S. 139(1) OF THE ACT WAS 31.10.2004. ACCORDING TO THE AO, SINCE THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 1.11.2004 / 2.11.2004, IT IS NOT A RETURN FILED WITHIN THE DUE DATE AS PRESCRIBED U/S. 139(1) OF THE ACT. THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO CARRY FORWARD OF LOSS FOR A.Y. 2004-05. IN THE ORDER PASSED U/S. 143(3) OF THE ACT, THE LOSS OF RS.5,23, 18,280 WHICH WAS THE LOSS FOR A.Y. 2004-05 WAS ALLOWED TO BE SET OFF, W HICH WAS AN ERROR APPARENT ON THE FACE OF RECORD. THE AO ACCORDINGLY PROPOSED TO REVISE THE ITA NO.351/BANG/2014 PAGE 5 OF 10 TOTAL INCOME OF THE ASSESSEE BY WITHDRAWING SET OFF OF LOSS TO THE EXTENT OF RS.5,23,18,280. 9. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE D UE DATE FOR FILING RETURN OF INCOME IN TERMS OF SECTION 139(1) OF THE ACT FOR A.Y. 2004-05 WAS 31.10.2004 WHICH HAPPENED TO BE A SUNDAY. THE DUE DATE THEREFORE AUTOMATICALLY BECOMES 1.11.2004. THE ASSESSEE POIN TED OUT THAT IN THE STATE OF KARNATAKA, 1ST NOVEMBER OF EVERY CALENDAR YEAR IS A PUBLIC HOLIDAY ON ACCOUNT OF KARNATAKA RAJYOTSAVA DAY. ALL STATE GOVT. OFFICE, BANKS ARE CLOSED ON THIS DAY. ASSESSEE BEING A CO-OPERATIVE BANK WAS ALSO CLOSED ON 1.11.2004 BEING A PUBLIC HOLIDAY. ASSESSEE WAS UNDER BONAFIDE BELIEF THAT INCOME TAX DEPARTMENT IS CLOSED ON 1ST NOVEMBE R. THE ASSESSEE SUBMITTED THAT TIME LAID DOWN IN SECTION 139(1) IS NOT MANDATORY, BUT DIRECTORY IN NATURE. THE AO, HOWEVER, DID NOT ACCE PT THE CLAIM OF ASSESSEE AND HE PASSED AN ORDER U/S. 154 OF THE ACT WITHDRAW ING SET OFF OF LOSS FOR A.Y. 2004-05, WHICH RESULTED IN A TAXABLE TOTAL INC OME OF RS.2,93,99,289. 10. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CO NFIRMED THE ORDER OF AO. 11. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS. PROVISIO NS OF SECTION 72(1) OF THE ACT READ THUS:- ITA NO.351/BANG/2014 PAGE 6 OF 10 72. (1) WHERE FOR ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTATION UNDER THE HEAD PROFITS AND GAINS OF BU SINESS OR PROFESSION IS A LOSS TO THE ASSESSEE, NOT BEING A LOSS SUSTAINED IN A SPECULATION BUSINESS, AND SUCH LOSS CANNOT BE OR IS NOT WHOLLY SET OFF AGAINST INCOME UNDER ANY HEAD OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 71, SO MUCH OF THE L OSS AS HAS NOT BEEN SO SET OFF OR, WHERE HE HAS NO INCOME UNDER AN Y OTHER HEAD, THE WHOLE LOSS SHALL, SUBJECT TO THE OTHER PROVISIO NS OF THIS CHAPTER, BE CARRIED FORWARD TO THE FOLLOWING ASSESS MENT YEAR, AND ( I ) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAINS , IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESS ABLE FOR THAT ASSESSMENT YEAR ; ( II ) IF THE LOSS CANNOT BE WHOLLY SO SET OFF, THE AMOU NT OF LOSS NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWIN G ASSESSMENT YEAR AND SO ON : PROVIDED THAT WHERE THE WHOLE OR ANY PART OF SUCH LOSS IS SUSTAINED IN ANY SUCH BUSINESS AS IS REFERRED TO IN SECTION 33B WHICH IS DISCONTINUED IN THE CIRCUMSTANCES SPECIFIE D IN THAT SECTION, AND, THEREAFTER, AT ANY TIME BEFORE THE EX PIRY OF THE PERIOD OF THREE YEARS REFERRED TO IN THAT SECTION, SUCH BUSINESS IS RE-ESTABLISHED, RECONSTRUCTED OR REVIVED BY THE ASS ESSEE, SO MUCH OF THE LOSS AS IS ATTRIBUTABLE TO SUCH BUSINESS SHA LL BE CARRIED FORWARD TO THE ASSESSMENT YEAR RELEVANT TO THE PREV IOUS YEAR IN WHICH THE BUSINESS IS SO RE-ESTABLISHED, RECONSTRUC TED OR REVIVED, AND ( A ) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAINS , IF ANY, OF THAT BUSINESS OR ANY OTHER BUSINESS CARRIED ON BY HIM AN D ASSESSABLE FOR THAT ASSESSMENT YEAR; AND ( B ) IF THE LOSS CANNOT BE WHOLLY SO SET OFF, THE AMOU NT OF LOSS NOT SO SET OFF SHALL, IN CASE THE BUSINESS SO RE-ESTABL ISHED, RECONSTRUCTED OR REVIVED CONTINUES TO BE CARRIED ON BY THE ASSESSEE, BE CARRIED FORWARD TO THE FOLLOWING ASSES SMENT YEAR AND SO ON FOR SEVEN ASSESSMENT YEARS IMMEDIATELY SUCCEE DING. ITA NO.351/BANG/2014 PAGE 7 OF 10 13. IT IS SEEN FROM THE RECORDS THAT LD. COUNSEL FO R THE ASSESSEE HAS FILED BEFORE US A COPY OF RETURN OF INCOME FILED BY THE A SSESSEE FOR A.Y. 2004- 05. THE COMPUTATION OF TOTAL INCOME AND DETERMINAT ION OF TOTAL LOSS BY THE ASSESSEE IS ANNEXED TO THIS ORDER AS ANNEXURE-I. THE RETURN SO FILED BY THE ASSESSEE IS ACCEPTED BY THE AO AND INTIMATIO N U/S. 143(1) WAS ISSUED WHICH IS ANNEXED TO THIS ORDER AS ANNEXURE-II. 14. SECTION 80 OF THE ACT PROVIDES AS FOLLOWS:- 80. NOTWITHSTANDING ANYTHING CONTAINED IN THIS CHAPTER , NO LOSS WHICH HAS NOT BEEN DETERMINED IN PURSUANCE OF A RET URN FILED IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (3) O F SECTION 139, SHALL BE CARRIED FORWARD AND SET OFF UNDER SUB-SECT ION (1) OF SECTION 72 OR SUB-SECTION (2) OF SECTION 73 OR SUB- SECTION (1) OR SUB-SECTION (3) OF SECTION 74 OR SUB-SECTION (3) OF SECTION 74A. 15. A READING OF THE PROVISIONS OF SECTION 72(1) OF THE ACT WOULD SHOW THAT WHERE A LOSS UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' CANNOT BE SET OFF AGAINST INCOME UNDER ANY HEAD OF INCOME U/S. 71 OF THE ACT, SO MUCH OF THE LOSS CAN BE CARRIED F ORWARD AND SET OFF AGAINST THE 'PROFITS AND GAINS OF BUSINESS OR PROFE SSION' OF THE FOLLOWING ASSESSMENT YEAR AND IF THE LOSS IS NOT SET OFF IN T HE FOLLOWING ASSESSMENT YEAR, CAN BE CARRIED FORWARD TO THE NEXT ASSESSMENT YEAR AND SO ON. SECTION 80 STARTS WITH A NON-OBSTANTE CLAUSE AND IT OVERRIDES ALL OTHER PROVISIONS CONTAINED IN CHAPTER VI OF THE ACT, WHIC H DEAL WITH AGGREGATION OF INCOME AND SETOFF OF CARRY FORWARD LOSS. A REA DING OF THE PROVISIONS OF SECTION 80 WOULD SHOW THAT FOR A LOSS TO BE CAPABLE OF SET OFF IN A ITA NO.351/BANG/2014 PAGE 8 OF 10 SUBSEQUENT ASSESSMENT YEAR, THE RETURN FOR THAT YEA R OUGHT TO HAVE BEEN FILED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 139(3) OF THE ACT I.E., ON OR BEFORE THE DUE DATE FOR FILING RETURN OF INCOME. IN FACT, THE SAID CONDITION IS ALSO NECESSARY FOR CARRY FORWARD OF LOSS FOR SET OFF IN FUTURE YEARS. ADMITTEDLY, IN THE CASE OF ASSESSEE, THE RETURN OF INCOME WAS NOT FILED WITHIN THE DUE DATE AND THEREFORE THE LOSS FOR A.Y. 2004-05 HAS NOT BEEN DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SUB -SECTION (3) OF 139 FOR A.Y. 2004-05. SUCH A LOSS CANNOT BE THEREFORE SET OFF AGAINST THE PROFITS OF A.Y. 2006-07. IN TERMS OF SECTION 119(2)(B) OF THE ACT, THE CBDT ALONE HAS THE POWER TO CONDONE THE LAPSE ON THE PART OF ASSES SEE IN NOT FILING THE RETURN OF INCOME FOR THE A.Y. 2004-05 WITHIN THE ST ATUTORY TIME PERMITTED U/S. 139(3) OF THE ACT. IN THIS CASE, THE TIME FOR MAKING SUCH APPLICATION TO CBDT HAD EXPIRED BY THE TIME THE AO ISSUED SHOW CAU SE NOTICE U/S. 154 TO THE ASSESSEE FOR THE A.Y. 2006-07. THUS, THE ASSES SEE WAS TAKEN BY SURPRISE AND COULD NOT EXERCISE THE REMEDIES IN LAW , EVEN THOUGH IT HAD VERY GENUINE AND REASONABLE CAUSE FOR NOT FILING RE TURN OF INCOME FOR A.Y. 2004-05 ON OR BEFORE THE DUE DATE U/S. 139(1) OF TH E ACT. IT IS NOT POSSIBLE TO ALLOW RELIEF TO THE ASSESSEE BASED ON EQUITABLE CONSIDERATIONS, SINCE EQUITY AND TAX LAWS ARE STRANGERS TO EACH OTHER. 16. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIAN CE ON THE DECISION OF ITAT HYDERABAD BENCH IN THE CASE OF ITO V. S. VENKATAIAH, ITA NO.984/HYD/2011 FOR THE A.Y. 2008-09, ORDER DATED 3 1.5.2012 . THE AFORESAID DECISION WAS RENDERED IN THE CONTEXT OF S ECTION 80AC OF THE ACT, ITA NO.351/BANG/2014 PAGE 9 OF 10 WHICH PROVIDES THAT DEDUCTION UNDER CHAPTER VIA WIL L NOT BE ALLOWED TO THE ASSESSEE, WHO HAS NOT FILED RETURN OF INCOME FOR TH E RELEVANT ASSESSMENT YEAR ON OR BEFORE THE DUE DATE SPECIFIED U/S. 139(1 ) OF THE ACT. WE HAVE PERUSED THE SAID DECISION AND WE FIND THAT THE SAID DECISION IS NOT RENDERED IN THE CONTEXT OF SECTION 80 OF THE ACT. IN VIEW O F THE SPECIFIC PROVISIONS OF SECTION 80 OF THE ACT, WE ARE OF THE VIEW THAT CLAI M OF THE ASSESSEE CANNOT BE ENTERTAINED. WE ARE OF THE VIEW THAT THE REVENU E AUTHORITIES WERE JUSTIFIED IN DENYING THE CLAIM OF SET OFF OF LOSS F OR A.Y. 2004-05 IN THE ASSESSMENT OF INCOME FOR A.Y. 2006-07. WE ACCORDIN GLY DISMISS THE APPEAL BY THE ASSESSEE. 17. IN THE RESULT THE APPEAL BY THE ASSESSEE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF FEBRUARY, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 27 TH FEBRUARY, 2015. /D S/ ITA NO.351/BANG/2014 PAGE 10 OF 10 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.