Ahmednagar Merchants Co-Operative Bank Ltd, Ahmednagar V. Assistant Commissioner of Income-tax, Ahmednagar Circle, Ahmednagar

ITA 406/PUN/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7262 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-09-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 27-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SHEKHAR NANIWADEKAR
• Keywords: Rule 8D
• Section: 143(3); 244A; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI INTURI RAMA RAO, AM AND SHRI S. S. VISWANETHRA RAVI, JM . / ITA NO.406/PUN/2018 / ASSESSMENT YEAR : 2013-14 AHMEDNAGAR MERCHANTS CO-OPERATIVE BANK LTD., MARKET YARD, AHMEDNAGAR- 414001. PAN : AAAAT3334M ....... / APPELLANT / V/S. ACIT, AHMEDNAGAR CIRCLE, AHMEDNAGAR. / RESPONDENT ASSESSEE BY : SHRI SHEKHAR NANIWADEKAR REVENUE BY : SHRI DEEPAK GARG / DATE OF HEARING : 06.09.2021 / DATE OF PRONOUNCEMENT : 06.09.2021 / ORDER PER INTURI RAMA RAO, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- 2, PUNE (CIT(A) FOR SHORT) DATED 13.10.2017 FOR THE ASSESSMENT YEAR 2013-14. 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1) THAT ON THE FACTS & IN THE CIRCUMSTANCES & IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) II PUNE HAS ERRED ALLOWING PARTIAL RELIEF OF RS.1,94,38,180/- AS AGAINST DISALLOWANCE OF RS.2,06,49,222/- MADE BY ASSISTANT COMMISSIONER OF INCOME TAX AHMEDNAGAR BY INVOKING PROVISIONS OF SECTION 14A OF IT ACT. THAT THE DISALLOWANCE RETAINED BY CIT(A) II OF RS.12,11,042/- IS UNWARRANTED & HENCE THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S 14A OF I.T. ACT BE DELETED. 2) THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) II PUNE HAS ERRED ON THE FACTS & IN THE CIRCUMSTANCES IN CONFIRMING ADDITION MADE BY ASSISTANT COMMISSIONER OF INCOME TAX AHMEDNAGAR OF INTEREST U/S 244A OF I.T. ACT RS.3,38,468/-. THAT ADDITION MADE BY A.O. WAS UNWARRANTED & HENCE THE SAME BE DELETED. 2 ITA NO.406/PUN/2018 3) THAT YOUR APPELLANT PRAYS THAT HE MAY BE ALLOWED TO ADD, TO ALTER TO DELETE OR TO AMEND ANY OF THE ABOVE GROUNDS OF APPEAL. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE APPELLANT IS A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 WAS FILED ON 02.10.2013 DISCLOSING TOTAL INCOME OF RS.8,76,56,290/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR (THE ASSESSING OFFICER) VIDE ORDER DATED 30.03.2016 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) AT TOTAL INCOME OF RS.11,23,91,398/-. WHILE DOING SO, THE ASSESSING OFFICER MADE THE FOLLOWING DISALLOWANCES :- I. II. III. IV DISALLOWANCE OF BROKEN PERIOD INTEREST 36,00,977 INTEREST U/S 244A 3,38,468 DISALLOWANCE U/S 14A 2,06,49,222 DISALLOWANCE OF AMOUNT DIRECTLY CREDITED TO RESERVE FUND 1,46,441 4. BEING AGGRIEVED BY THE ABOVE ADDITIONS, AN APPEAL WAS FILED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER HAD GRANTED RELIEF IN RESPECT OF ADDITION ON ACCOUNT OF BROKEN PERIOD INTEREST, CONFIRMED THE ADDITION ON ACCOUNT OF INTEREST ON INCOME TAX REFUND RECEIVED U/S 244A OF THE ACT. AS REGARDS THE ADDITION U/S 14A OF THE ACT, THE LD. CIT(A) DELETED THE ADDITION UNDER CLAUSE (II) OF SUB-RULE (2) OF RULE 8D OF THE INCOME TAX RULES, 1962 (THE RULES). HOWEVER, IN RESPECT OF ADDITION U/S 14A, CONFIRMED THE ADDITION U/S 14A OF THE ACT IN RESPECT OF INDIRECT EXPENSES UNDER CLAUSE (III) OF SUB-RULE (2) OF RULE 8D OF THE RULES. 5. BEING AGGRIEVED BY THE ABOVE DECISION OF THE LD. CIT(A), THE APPELLANT COOPERATIVE SOCIETY IS IN APPEAL BEFORE US. 6. GROUND OF APPEAL NO.1 CHALLENGES THE DIRECTIONS OF THE LD. CIT(A) CONFIRMING THE ADDITION IN RESPECT OF INDIRECT EXPENSES UNDER CLAUSE (III) OF SUB-RULE (2) OF RULE 8D OF THE RULES. IT IS SUBMITTED THAT WHILE COMPUTING THE 3 ITA NO.406/PUN/2018 DISALLOWANCE UNDER CLAUSE (III) OF SUB-RULE (2) OF RULE 8D OF THE RULES, THE ASSESSING OFFICER HAD CONSIDERED ANNUAL AVERAGE OF MONTHLY AVERAGE OF OPENING AND CLOSING BALANCE OF VALUE OF INVESTMENT WHICH YIELDED THE INVESTMENT FOR THE PURPOSE OF COMPUTING ANNUAL AVERAGE VALUE OF INVESTMENT AS ENVISAGED UNDER CLAUSE (III) OF SUB-RULE (2) OF RULE 8D OF THE RULES. IT IS SUBMITTED BEFORE US THAT THE ASSESSING OFFICER HAD ADOPTED THE AMENDED PROVISIONS OF THE RULES WHICH CAME INTO EFFECT FROM 02.06.2016 THOUGH THE ASSESSMENT WAS COMPLETED MUCH PRIOR TO THE AMENDMENT OF THE RULES. IT IS SUBMITTED THAT THE AVERAGE VALUE OF INVESTMENT SHOULD BE COMPUTED WITH REFERENCE TO THE PROVISIONS OF RULES AS EXISTING AT THE RELEVANT POINT OF TIME. 7. ON THE OTHER HAND, LD. SR. DR ALSO AGREED TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO COMPUTE THE AMOUNT OF DISALLOWANCE UNDER CLAUSE (III) OF SUB-RULE (2) OF RULE 8D UNDER THE UNAMENDED PROVISIONS OF THE RULES. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE ARE OF THE CONSIDERED OPINION THAT THE METHODOLOGY OF COMPUTATION OF AVERAGE VALUE OF INVESTMENT IS NOT IN ACCORDANCE WITH THE PROVISIONS OF RULE 8D OF THE RULES PREVALENT DURING THE RELEVANT PERIOD. HENCE, WE REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO COMPUTE THE AMOUNT OF DISALLOWANCE UNDER CLAUSE (II) OF SUB-RULE (2) OF RULE 8D IN ACCORDANCE WITH THE PROVISIONS OF RULES AS APPLICABLE AT THE RELEVANT POINT OF TIME. ACCORDINGLY, THIS GROUND OF APPEAL STANDS PARTLY ALLOWED. 9. GROUND OF APPEAL NO.2 CHALLENGES THE ADDITION ON ACCOUNT OF INTEREST U/S 244A OF THE ACT OF RS.3,38,468/-. THE ASSESSING OFFICER BROUGHT TO TAX ON THE INTEREST RECEIVED U/S 244A OF THE ACT OF RS.3,38,468/- BEING THE INTEREST ON INCOME TAX REFUND FOR THE ASSESSMENT YEAR 2012-13 AS THE SAME WAS NOT OFFERED TO TAX BY THE APPELLANT SOCIETY ON ACCOUNT OF IGNORANCE OF THIS 4 ITA NO.406/PUN/2018 FACT AS THE INTEREST REFUND WAS ADJUSTED AGAINST THE TAX LIABILITY. EVEN ON APPEAL BEFORE THE LD. CIT(A) ALSO CONFIRMED THE LIABILITY. 10. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THE INTEREST ON INCOME TAX REFUND OF RS.3,38,468/- FOR THE ASSESSMENT YEAR 2012-13 WAS RECEIVED BY THE APPELLANT SOCIETY DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE FACT THAT SUCH INTEREST WAS ADJUSTED AGAINST THE OUTSTANDING DEMAND OF THE APPELLANT IS IMMATERIAL AS THE ADJUSTMENT OF REFUND ALSO AMOUNT TO RECEIPT OF THE INTEREST. THEREFORE, WE UPHOLD THE FINDINGS OF THE LOWER AUTHORITIES ON THIS ISSUE. ACCORDINGLY, THIS GROUND OF APPEAL FILED BY THE ASSESSEE IS DISMISSED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 06 TH DAY OF SEPTEMBER, 2021. SD/- SD/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 06 TH SEPTEMBER, 2021. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-2, PUNE. 4. THE PR. CIT-1, PUNE. 5 . , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.