M/s. Indore Paraspar Sahakari Bank Ltd., Indore V. ACIT-I(I), Indore

ITA 441/Ind/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2616 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 08-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S AMBEDKAR
• Assessee Lawyers: S S DESH
• Keywords: Reopening of assessment; Depreciation; Business expenditure; Question of law; Reason to believe; Reassessment proceedings; Set aside
• Section: 143(3); 142(1); 148; 139

Judgement Text

INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.441/IND/2019 & ITA NO.503/IND/2018 ASSESSMENT YEARS: 2010-11 & 2012-13 REVENUE BY SHRI R.S. AMBEDKAR, SR.DR ASSESSEE BY SHRI S.S. DESHPANDE,CA DATE OF HE ARING 0 6 . 6 .201 9 DATE OF PRONOUNCEMENT 18 .6.2019 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED TWO APPEALS ARE FILE D AT THE INSTANCE OF THE ASSESSEE. APPEALS NO. 441/IND/2019 & NO.503/IND/2018 FOR ASSESSMENT YEARS 2010-11 & 2012 -13 ARE DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-1 ( IN SHORT CIT(A)), INDORE DATED 18.02.2019 AND 20.03.2018 RESPECTIVEL Y WHICH ARE M/S INDORE PARASPAR SAHAKARI BANK LTD, 3/1, SOUTH TUKOGANJ, INDORE VS. ACIT - 1(1), INDORE ( APPELLANT ) (RESPONDENT ) PAN NO.AA A C17152E INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 2 ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME T AX ACT 1961 (IN SHORT THE ACT) DATED 13.12.2017 AND 30.03.2015 F RAMED BY ACIT- 1(1), INDORE. 2. AS THE ISSUES RAISED IN THESE APPEALS ARE MOSTL Y COMMON, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. WE WILL FIRST TAKE UP THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09 FOR WHICH FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED. ITA NO. 441/IND/2019 ASSESSMENT YEAR 2010-11 1. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE RE-OPENIN G OF ASSESSMENT WHEN ALL NECESSARY FACTS WERE DISCLOSED IN THE RETU RN AND DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE REOPENIN G U/S 147/148 IS BAD IN LAW AND HENCE THE ASSESSMENT BE QUASHED. 2. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.16,36,000/- BEING THE AMOUNT OF DEPRECIATION CLAIMED AS PER THE RBI GUIDELINES. 3. THE LD. CIT(A) ERRED IN NOT FOLLOWING THE JUDGMENTS CITED BEFORE HIM FOR ALLOWANCE OF DEPRECIATION. THE CLAIM OF DEPRECIATI ON ON INVESTMENT OF FLUID ASSET MAY PLEASE BE ALLOWED. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO-OP. SOCIETY ENGAGED IN THE BUSINESS OF BANKING AND PROVIDING CR EDIT FACILITIES. THE ACTIVITIES OF THE SOCIETY ARE GOVERNED BY THE D IRECTIVES OF THE INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 3 RBI. THE RETURN OF INCOME WAS FILED ON 15.10.10 DEC LARING THE INCOME OF RS. 45,66,540/-. THE ACCOUNTS ARE AUDITED AND THE TAX AUDIT REPORT IS FILED. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE LD AO SPECIFICALLY RAISED A QUERY VIDE LETTER DATED 2 2/10/2012 REGARDING THE ALLOWABILITY OF DEPRECIATION ON INVESTMENTS AND VIDE LETTER DATED FILED 11.12.2012, THE ASSESSEE GAVE THE REPLY AND ALSO DREW ATTENTION TO THE RBI CIRCULAR. THE ORIGINAL ASSESSMENT WAS COMPLETED ON 28/12/2012 DETERMINING THE TOTAL INCOME OF RS. 45,66,540/-. 5. SUBSEQUENTLY NOTICE U/S 148 OF THE ACT WAS ISSUED O N 25.11.2016 ON THE GROUND THAT THE INCOME HAS ESCAPE D THE ASSESSMENT. THIS NOTICE WAS ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR 2010-11. THE A SSESSEE RAISED OBJECTION AND FILED THE RETURN UNDER PROTEST. HOWE VER THE LD. A.O REOPENED THE ASSESSMENT ON THE REASON TO BELIEVE TH AT THE INCOME AMOUNTING TO RS. 16,36,000/- HAS ESCAPED ASSESSMENT. WHILE FRAMING THE ASSESSMENT, THE ID. AO HAS MADE THE ADD ITION OF RS.16,36,000/- ON ACCOUNT OF DEPRECIATION IN THE VALUE OF INVESTMENT. WHILE MAKING THE ADDITION, THE LD AO ME RELY GIVE A REASON THAT THE CLOSING STOCK IS VALUED AT COST OR MARKET WHICHEVER INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 4 IS LESS AND THE ASSESSEE HAS NOT FILED SECURITY WIS E DETAILS OF VALUATION OF INVESTMENTS. IT WAS CLAIMED BEFORE THE ID. AO THAT THE SAID CLAIM IS ALLOWABLE AS PER THE PROVISIONS OF TH E LAW AND THE GUIDELINES OF THE RBI. SUBMISSIONS MADE BY THE ASSE SSEE WERE CONSIDERED BY THE LD. A.O BUT WERE NOT FOUND TENABL E AND IN THE REASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 147 OF T HE ACT DEPRECIATION OF INVESTMENT OF RS.16,36,000/- WAS DI SALLOWED AND ADDED BACK TO THE INCOME AT RS.45,66,540/- ASSESSED U/S 143(3) OF THE ACT VIDE ORDER DATED 28.12.2012. INCOME ACCORD INGLY ASSESSED AT RS.62,02,540/-. AGGRIEVED ASSESSEE PREFERRED AP PEAL BEFORE LD. CIT(A) CHALLENGING THE REOPENING OF ASSESSMENT AS W ELL AS CHALLENGING THE DISALLOWANCE OF DEPRECIATION BUT FA ILED TO GET ANY RELIEF. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL. WE WILL FIRST TAKE UP GROUND NO.1 OF ASSESSEES APPEAL FOR ASSESS MENT YEAR 2010-11 CHALLENGING THE REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT. 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSMENT HAS BEEN REOPENED BEYOND FOUR YEARS ON THE GROUND T HAT THE CLAIM INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 5 OF DEPRECIATION ON SECURITIES IS NOT ALLOWABLE. DUR ING THE COURSE OF THE ASSESSMENT PROCEEDINGS IN FIRST ROUND A SPECIFI C QUERY WAS RAISED ABOUT THE ALLOWABILITY OF THE DEDUCTION AND A COMPLETE EXPLANATIONS WAS GIVEN ALONG WITH THE CIRCULARS OF THE RESERVE BANK OF INDIA. THE ACCOUNTING STANDARDS WERE ALSO PROVIDED. AFTER CONSIDERING ALL THE SUBMISSIONS THE CLAIM WAS ALLOW ED BY THE LD AO. NOW THE REOPENING OF THE ASSESSMENT IS A MERE C HANGE OF OPINION AND AS SUCH IT IS SUBMITTED THAT THE ACTION OF REOPENING IS BAD IN LAW AND WITHOUT JURISDICTION: IN THIS CONNEC TION, ATTENTION IS DRAWN TO THE FOLLOWING CASES. DISTRICT COOPERATIVE BANK LTD V/S DCIT (ALL) CIT VERSUS FUJISTU OPTEL LTD (359 ITR 67) MADHYA PR ADESH HIGH COURT CIT V/S. TRIMURTI BUILDERS (M.P.) (246 CTR 308) CIT VS. KELVINATOR OF INDIA LTD. (256 ITR (DEL) CIT V/S ORIENT CRAFT LTD (354 ITR 536) (DEL) DIT VS. ROLLS ROYEE INDUSTRIAL POWER INDIA LTD (201 7) 82 TAXMANN.COM 166 (DELHI HIGH COURT) RANBAXY LABORATORIES LTD VERSUS DEPUTY COMMISSIONER OF INCOME TAX AND OTR 351 ITR 23 DELHI HIGH COURT . RUBAMIN LTD. VIS. LOVE KUMAR (253 ITR 432) (GUJ.) ASHWAMEGH CO-OPERATIVE HOUSING SOCIETY VIS. DCIT (3 53 INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 6 ITR 413) (GUJ.) METAL ALLOYS CORPORATION V/S. ACIT (350 ITR 245) (G UJ.) MRS. PARVEEN P. BHARUCHA VIS. CIT (348 ITR PAGE 325) (MUMBAI) NDT SYSTEMS VIS. ITO (255 CTR PAGE 113) (BORN.) VISHWANATH ENGINEERS VIS. ACIT (354 ITR PAGE 211) (GUJ.) MARUTI SUZUKI VIS. DCIT (356 ITR PAGE 209) 8. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED AND SUPPORTED THE ORDERS OF LOWER AUTHORITIE S. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE JUD GMENT REFERRED BY LD. COUNSEL FOR THE ASSESSEE. IN GROUND NO.1 T HE ASSESSEE HAS CHALLENGED THE REOPENING OF THE ASSESSMENT PROCEEDI NGS U/S 147 OF THE ACT AS BAD IN LAW. WE FIND THAT THE NOTICES U/ S 148 OF THE ACT WAS ISSUED ON 25.11.2016 WHICH IS BEYOND FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR 2010-11. THE PROVISO TO SECT ION 147 OF THE ACT PROVIDES THAT WHERE THE ASSESSMENT U/S 143(3) O R U/S 147 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTI ON SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 7 TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A R ETURN U/S 139 OR IN RESPONSE TO A NOTICE ISSUED U/S 142(1) OR SECTIO N 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. EXAMINING THE FACTS OF THE CASE IN THE LIGHT OF PROVISION OF SECTION 147 OF TH E ACT, WE FIND THAT THE RETURN U/S 139 OF THE ACT WAS FILED, NOTICE U/ S 142(1) OF THE ACT WAS DULY SERVED, ASSESSMENT U/S 143(3) OF THE A CT HAS BEEN FRAMED AND PROPER RESPONSES GIVEN TO NOTICE U/S 148 OF THE ACT. TWO THINGS WHICH NEEDS TO BE PROVED BY REVENUE OFFI CER ARE THAT (I) WHETHER ANY INCOME CHARGEABLE TO TAX HAVE ESCAPED T HE ASSESSMENT BY FAILURE ON THE PART OF THE ASSESSEE (II) WHETHER ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY OF MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT. 10. WE FIND THAT IN THE NOTICE ISSUED U/S 148 OF TH E ACT THE LD. A.O HAS MENTIONED THAT THE ASSESSEE HAS WRONGLY CLA IMED DEPRECIATION OF INVESTMENT. THIS CLAIM OF THE ASSE SSEE WAS MADE IN THE REGULAR BOOKS OF ACCOUNTS AND THE CLAIM WAS ALS O APPEARING IN THE AUDITED BALANCE SHEET. DURING THE COURSE OF AS SESSMENT INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 8 PROCEEDINGS U/S 143(3) OF THE ACT ON 5.11.2012 A LE TTER WAS SUBMITTED ALONG WITH NECESSARY EVIDENCES TO THE LD. DCIT, CIRCLE 1(1), INDORE IN COMPLIANCE TO THE NOTICES ISSUED/S 142(1) OF THE ACT AGAINST SPECIFIC QUERY RAISED BY THE LD. A.O DURING THE COURSE OF ASSESSMENT PROCEEDINGS. PARA 8 OF THE SAID LETTER R EADS AS FOLLOWS:- 8. REGARDING THE ADMISSIBILITY OF DEPRECIATION ON INVESTMENT, IT IS SUBMITTED THAT THE DIMINUTION IN THE VALUE OF INVES TMENTS OF RS.16,36,000/- HAS BEEN DEBITED TO THE P&L A/C. TH E SAME REPRESENTS THE DIMINUTION IN THE VALUE OF INVESTMENTS IN GOVT. SECURITIES. THE SECURITIES WHICH ARE NOT KEPT BY THE BANK AS HTM (H ELD TILL MATURITY) ARE VALUED EVERY MONTH AND THE SAME ARE MARKED TO MARKE T AS PER THE RBI CIRCULAR. ANY DIMINUTION IN THE VALUE OF THE SECUR ITIES AS ON THE VALUATION DATE ARE DEBITED TO P&L A/C. AS DEPRECIATION ON INV ESTMENTS. THE SAME IS DONE ON THE BASIS OF CIRCULAR OF THE TBI NAMED AS CLASSIFICATION AND VALUATION OF INVESTMENTS. THE SAME IS A BUSINESS EXPENDITURE AND INCURRED DURING THE COURSE OF ITS BANKING BUSINESS AND HENCE IS AN ALLOWABLE EXPENDITURE. THE SAME HAS BEEN MADE FOR LAST MANY YEARS AND HAS BEEN ACCEPTED BY THE DEPARTMENT FOR THE PRECEDI NG YEARS . 11. LD. A.O AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE ACCEPTED THE CLAIM OF DIMINUTION IN THE VALUE OF IN VESTMENT AT RS.16,36,000/- AND ACCEPTED THE RETURNED INCOME OF THE ASSESSEE VIDE ORDER U/S 143(3) OF THE ACT DATED 28.12.12. TH ERE REMAINS NO DOUBT THAT PROPER DISCLOSURE OF THE CLAIM OF DEPREC IATION IN THE FORM INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 9 OF DIMINUTION OF VALUE OF SECURITIES WAS MADE BY TH E ASSESSEE IN THE REGULAR RETURN OF INCOME, SPECIFIC QUERY WAS RAISED BY THE LD. A.O FOR THE ALLEGED CLAIM AND DETAILED REPLY WAS FILED ALONG WITH NECESSARY EVIDENCES IN THE FORM OF CIRCULAR ISSUED BY RBI AND THE ACCOUNTING STANDARDS APPLICABLE FOR DISCLOSURE OF S UCH TYPE OF INVESTMENTS. 12. WE ARE THEREFORE OF THE VIEW THAT THE PROVISO O F SECTION 147 OF THE ACT AS REFERRED ABOVE IS NOT APPLICABLE ON THE ASSESSEE AND THE REOPENING OF THE ASSESSMENT BY ISSUANCE OF NOTICE U /S 148 OF THE ACT IS BAD IN LAW AND THE ASSESSMENT MADE U/S 147 R.W.S. 143(3) OF THE ACT DATED 13.12.2017 DESERVES TO BE QUASHED. I N THE RESULT GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 13. SINCE WE HAVE QUASHED THE ASSESSMENT PROCEEDING S U/S 147 R.W.S. 143(3) OF THE ACT DATED 13.12.2017, THE DIS ALLOWANCE MADE BY THE A.O OF RS.16,36,000/-TOWARDS THE AMOUNT OF D EPRECIATION CLAIMED ON THE SECURITIES AS PER RBI GUIDELINES STA NDS DELETED. GROUND NO.2 OF THE ASSESSEE THEREFORE BECOMES INFRU CTUOUS AND CONSEQUENTIAL TO GROUND NO.1. INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 10 14. GROUND NO.3 IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 15. IN THE RESULT APPEAL FOR THE ASSESSEE FOR ASSES SMENT YEAR 2010-11 VIDE ITA NO.441/IND/2019, STANDS ALLOWED. 16. NOW WE TAKE UP ASSESSEES APPEAL NO.ITA 503/IND /2018 FOR ASSESSMENT YEAR 2012-13 RAISING FOLLOWING GROUNDS O F APPEAL; 1. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWA NCE OF DEPRECIATION ON INVESTMENT OF SECURITIES. 2. THE REMARK MADE BY THE LD. A.O AND THE LD. CIT(A) T HAT BASIS OF VALUATION HAVE NOT BEEN FURNISHED IS CONTRARY TO TH E FACTS. THE REASON FOR DISALLOWING GIVEN THAT THE BALANCE SHEET REFLEC TS THE PROVISION FOR INVESTMENT FLUCTUATION RESERVE AND AS SUCH THE LOSS SHOULD BE SET-OFF AGAINST THE PROVISION ALREADY MADE IS BAD IN LAW AN D HENCE THE DISALLOWANCE MADE DESERVES TO BE DELETED. 3. THE DEPRECIATION ON SECURITIES CLAIMED BY THE ASSES SEE MAY PLEASE BE DIRECTED TO BE ALLOWED. 4. THE ASSESSEE PRAYS TO ALTER, AMEND, ADD OR DELETE A NY OF THE GROUNDS OF APPEAL. 17. BRIEF FACTS RELATING TO ISSUE RAISED BY THE ASS ESSEE ARE THAT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 WA S FILED ON 30.09.2012 WHICH WAS FURTHER REVISED ON 21.11.2012 DECLARING TOTAL LOSS AT (-) RS.73,31,502/- . NECESSARY NOTICES U/ S 143(2) AND 142(1) WERE DULY SERVED UPON THE ASSESSEE. BOOKS O F ACCOUNTS AND AUDITED FINANCIAL STATEMENTS WERE PLACED ON RECORD. LD. A.O ON OBSERVING THAT THE ASSESSEE HAS CLAIMED DEPRECIATIO N ON INVESTMENT INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 11 OF RS.57,95,185/- DIRECTED THE ASSESSEE TO JUSTIFY THE CLAIM. ASSESSEE MADE NECESSARY REPLY GIVING REFERENCE TO T HE RESERVE BANK OF INDIA GUIDELINES WHICH ARE STATUTORILY REQUIRED TO BE ADHERED BY THE ASSESSEE BEING ENGAGED IN THE BUSINESS OF BANKI NG AND PROVIDING CREDIT FACILITIES. HOWEVER LD. A.O DID N OT ALLOW THIS CLAIM OF RS.57,95,185/- OBSERVING THAT THE SECURITY WISE VALUATION OF INVESTMENTS WERE NOT FURNISHED AND NO BASIS OF VAL UING SECURITIES HAVE BEEN FURNISHED IN ORDER TO ARRIVE AT A FIGURE OF DEPRECIATION ON ACCOUNT OF DIMINUTION IN THE VALUE OF INVESTMENTS. LD. A.O ALSO OBSERVED THAT THE ASSESSEE HAS TREATED THE INVESTME NTS AS CLOSING STOCK BY VALUING THEM AT COST OR MARKET PRICE, WHIC HEVER IS LESS BASIS. LD. A.O THEREFORE AFTER DISALLOWING RS.57,95 ,185/- TOWARDS DEPRECIATION OF DIMINUTION IN THE VALUE OF INVESTME NTS, ASSESSED LOSS OF (-) RS.15,36,320/-. 18. ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) BUT FAILED TO SUCCEED AS LD. CIT(A) CONFIRMED THE DISALLOWANCE OB SERVING AS FOLLOWS; GROUND L NOS. L & 2 : THROUGH THESE GROUNDS OF APPEAL. THE APPELLANT HAS CHALLENGED THE ADDITION RS.57,95,185/- ON ACCOUNT OF DEPRECIATION ON THE INVESTMENT OF FL UID ASSETS. THE FLUCTUATION IN THE VALUE OF INVESTMENT IS NOT ACCEPTABLE INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 12 BECAUSE THE APPELLANT HAS SHOWN ITS SECURITIES UNDER THE HEAD INVESTMENT IN T HE ASSETS SIDE OF THE BALANCE SHEET. NO BASIS OR VALUING. THE SECURITIES HAVE BEEN FURNISHED IN ORDER TO ARRIVE AT A FIGURE OR DEPRECI ATION ON ACCOUNT OR DIMINUTION IN THE VALUE OF INVESTMENTS. THE BALANCE SHEET OF THE APPELLANT REFLECTS PROVISION F OR INVESTMCNT FLUCTUATION RESERVE TO THE TUNE OF RS.62,19,218/- AS ON 31.3.11 AND ALSO ON 31.3.12 WHICH IS HIGHER THAN THE AMOUNT CLAIMED UNDER DEPRECIATION ON INVESTMENT. THE APPELLANT HAD ALREADY CREATED PROVI SION AND RESERVE IN EARLIER YEARS FOR THIS AMOUNT. AND MUST HAVE CLAIMED THIS AMOUNT AS EXPENDITURE IN RESPECTIVE YEARS. THUS. EVEN IF ANY DIMINUTION IN THE VALUE O F INVESTMENTS IS NOTICED BY QUANTIFYING THE VALUE OF EACH SECURITY, THE LOSS, I F ANY SO CALCULATED SHOULD BE FIRST SET-OFF AGAINST THE PROVISION ALREADY MADE FOR THIS PURPOSE. THEREFORE. THE ADDITION MADE BY AO AMOUNTING TO RS.57,95,185/- IS C ONFIRME D. THEREFORE, THE APPEAL ON THESE GROUNDS IS DISMISSED. 19. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 20. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT OF RS.57,95,185/- REPRESENTS THE DIMINUTION IN THE VALUE OF INVESTMENTS IN GOVT. SECURITIES. CERTAIN SECURITIES ARE REQUIRED TO BE KEPT BY THE BANK AS FLUID SECURITIES AND ARE AVA ILABLE FOR SALE AND ARE VALUED ON PERIODICAL BASIS. AS PER THE RBI GUIDELINES, THE SAME ARE REQUIRED TO BE 'MARKED TO MARKET' ON THE S PECIFIED DATES. ANY DIMINUTION IN THE VALUE OF THE SECURITIES ON TH E VALUATION DATE ARE DEBITED TO P&L A/C AS DEPRECIATION ON INVESTMENTS. THE INVESTMENTS THUS HELD BY THE BANK ARE NOTHING .BUT IN THE NATURE OF CURRENT ASSETS WHICH ARE REGULARLY TRADED AND VALUE D AT THE END OF INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 13 THE . MONTH AND AS SUCH ANY DIMINUTION IN THE VALUE IS BO OKED AS AN EXPENDITURE. THE SAME IS DONE ON THE BASIS OF CIRCU LAR OF THE REI NAMED AS CLASSIFICATION AND VALUATION OF INVESTME NTS', AND THE CIRCULAR OF THE BOARD DATED 26.11.2008 VIDE INSTRUCTION NO. 17/2008 AND THE ACCOUNTING STANDARDS. THE BANKS ARE TRADIN G IN THESE SECURITIES AND THESE SECURITIES ARE VALUED AT COST OR MARKET VALUE, WHICHEVER IS LOWER. THUS, WHEN THE MARKET PR ICES ARE LESSER, THE SECURITIES ARE VALUED AT THE PREVAILING RATES A ND THE DIFFERENCE OF COST AND MARKET VALUE IS CHARGED AS DEPRECIATION AS PER THE RBI GUIDELINES. THE ID. AO' HAS MADE THE ADDITIONS MERE LY ON THE GROUND THAT THESE ARE INVESTMENTS AND THE DETAILS A RE NOT FILED. BUT COMPLETE DETAILS WERE FILED BEFORE LD. AO EXPLAININ G THE NATURE OF THE DEPRECIATION, ITS WORKING AND PROPER EXPLANATIO N WAS GIVEN. HOWEVER, NO EFFORTS WERE MADE BY HIM TO UNDERSTAND THE FACTS AND NO COGNIZANCE HAS BEEN TAKEN BY HIM FOR ANY OF THE ASSESSEE'S SUBMISSIONS. THE ADDITIONS MADE ARE TOTALLY BASELES S AND DESERVES TO BE DELETED. IN THIS CONNECTION, WE WOULD LIKE TO DRAW YOUR HONOUR'S KIND ATTENTION TO THE DECISIONS OF VARIOUS HIGH COURTS DIRECTLY ON THIS POINT WHO HAVE SPECIFICALLY HELD I T THAT THE DIFFERENCE IN VALUE OF INVESTMENTS SHOULD BE TREATE D AS DEPRECIATION INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 14 AND IS ALLOWABLE AS A DEDUCTION:- CIT V/S. NENDUGADA BANK 182 CTR P.403 (KAR} BANK OF BARODA V/S. CIT 262 ITR P.334 (KER.) CIT V/S. KARUR VYASYA BANK 273 ITR P.51 0 (MAD.)3 21. HE FURTHER SUBMITTED THAT THE ASSESSEES CASE I S SQUARELY COVERED IN ITS FAVOUR BY THE RECENT DECISION OF HON BLE TRIBUNAL IN THE CASE OF JHABUA DHAR KSHETRIYA GRAMIN BANK, JHAB UA ITA NO.106 TO 114/IND/2017 ORDER DATED 06.09.2018 DECID ING THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE PLACING REL IANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S RAJKOT DIST. CO-OP BANK LTD TAX APPEAL NO.56/2013 D ATED 10.02.2014. 22. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE THOU GH SUPPORTED THE ORDERS OF LOWER AUTHORITIES BUT FAILED TO CONTR OVERT THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSE E. 23. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE SOLE ISSUE RAISED IN THIS A PPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2012-12 RELATES TO THE DISALLOWANCE OF INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 15 DEPRECIATION IN THE VALUATION OF INVESTMENT OF SECU RITIES AT RS.57,95,185/-. WE OBSERVE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF BANKING AND PROVIDING CREDIT FACILITIES . AS PER THE GUIDELINES OF RBI THE ASSESSEE IS REQUIRED TO INVES T IN SECURITIES TO BE KEPT AS FLUID SECURITIES AND ARE AVAILABLE FOR S ALE AND ARE TO VALUED EVERY MONTH ON PERIODICAL BASIS. AS PER THE RBI GUIDELINES, CIRCULAR NAMED CLASSIFICATION IN VALUATION OF INVE STMENTS DATED 26.11.2008 VIDE INSTRUCTION NO.17/2008, SUCH SECURI TY ARE REQUIRED TO BE MARKED TO MARKET ON THE SPECIFIED DATES. A NY DIMINUTION/INCREASE IN THE VALUE OF THE SECURITIES ON THE VALUATION DATE ARE TO BE DEBITED/CREDITED TO PROFIT & LOSS AC COUNT AS DEPRECIATION ON INVESTMENT OR INCREMENT IN INVESTME NT AS THE CASE MAY BE. THUS THE INVESTMENT HELD BY THE BANK ARE N OTHING BUT IN THE NATURE OF CURRENT ASSETS WHICH ARE REGULARLY VA LUED AT THE END OF THE MONTH AND DIMINUTION/INCREASE IN THEIR VALUA TION IS BOOKED AS EXPENDITURE/INCOME. THE ASSESSEE HAS MADE SIMIL AR CLAIM OF DIMINUTION IN THE VALUE OF SECURITIES/INVESTMENTS O F RS.57,95,185/- AND BOTH THE LOWER AUTHORITIES HAVE NOT ALLOWED THI S CLAIM. INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 16 24. WE FIND THAT SIMILAR ISSUE CAME UP BEFORE VARIO US JUDICIAL FORUMS AND WE TOO HAVE ADJUDICATED SIMILAR ISSUE IN THE CASE OF JHABUA DHAR KSHETRIYA GRAMIN BANK, JHABUA (SUPRA) W HEREIN WE HAVE ALLOWED THE CLAIM OF DEPRECIATION OF DIMINUTIO N OF INVESTMENT OBSERVING AS FOLLOWS; 26. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE COMMON ISSUE RELATES TO DISALLOWANCE OF AM ORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES. FROM PERUSAL OF THE AUDITED BALANCE SHEET IT IS REVEALED THAT THE ASSESSEE BEING A REGIONAL R URAL CO. OPERATIVE BANK ENGAGED IN THE BUSINESS OF BANKING IS REQUIRED TO D EPOSIT CERTAIN AMOUNT IN GOVERNMENT SECURITIES AS PER THE GUIDELINES OF R ESERVE BANK OF INDIA AND TO HOLD SUCH SECURITIES TILL THE MATURITY SO AS TO MAINTAIN THE STATUTORY LIQUIDITY RATIO (SLR). IN SOME CASES VAL UE OF ACQUISITION OF SUCH SECURITIES IS HIGHER THAN THE FACE VALUE AND SUCH P REMIUM SO PAID IS AMORTIZED AS LOSS DURING THE ENTIRE PERIOD OF SECUR ITY. ASSESSEE MADE SIMILAR CLAIM BUT BOTH THE LOWER AUTHORITIES DID NO T ALLOWED. 27. WE FIND THAT THE ASSESSEE HAS REFERRED TO VARIO US JUDGMENTS PLACED IN THE PAPER BOOK NO.2 DATED 26.4.2018. SIMILAR FACTS CAME UP FOR ADJUDICATION BEFORE HONBLE GUJARAT HIGH COURT IN T HE CASE OF CIT V/S RAJKOT DIST. CO-OP BANK LTD TAX APPEAL NO.56/2013 D ATED 10/02/2014 AND FOLLOWING QUESTION WAS RAISED FOR CONSIDERATION BEFORE THE HONBLE COURT; (I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE APPELLATE TRIBUNAL IS JUSTIFIED IN HOLDING THAT THE A.O AND CIT(A) HAVE ERRED IN DISALLOWING THE AMORTIZATION OF SECUR ITY PREMIUM OF RS.40,30,000/- ? (II) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE APPELLATE TRIBUNAL IS JUSTIFIED IN NOT CONSIDER ING THAT THE INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 17 SECURITIES HELD UNDER HELD TO MATURITY (HTM) CATEG ORY AS PER RBI GUIDELINES ARE NOT MEANT TO EARN PROFIT BUT ARE REQ UIRED TO BE KEPT AS THEY ARE TILL MATURITY? 28. FURTHER THE FACTS IN THIS CASE ARE MENTIONED B ELOW: 2.1 THE RESPONDENT-ASSESSEE IS A COOPERATIVE BANK. AS PER THE RESERVE BANK OF INDIA GUIDELINES, IT IS REQUIRED TO DEPOSIT CERTAIN AMOUNTS IN GOVERNMENT SECURITIES AND TO HOLD THE SA ME TILL MATURITY IN ORDER TO MAINTAIN STATUTORY LIQUIDITY RATIO (SLR ). IN CERTAIN CASES, THE ACQUISITION OF SUCH SECURITIES IS AT A VALUE HI GHER THAN THE FACE VALUE OF THE SECURITY ITSELF. THE RESPONDENT-ASSES SEE CLAIMED SUCH PREMIUM SO PAID IN ACQUIRING THE SECURITIES AS A LO SS AMORTIZED OVER THE ENTIRE PERIOD OF SECURITY 29. HONBLE COURT DECIDED IN FAVOUR OF THE ASSESSE E FINDING MERIT IN THE FOLLOWING SUBMISSIONS MADE BY THE LD. COUNSEL FOR T HE ASSESSEE PLACING RELIANCE ON THE CBDT CIRCULAR DATED 26.11.2008. 6. ON THE OTHER HAND, THE LEARNED COUNSEL SHRI TU SHAR HEMANI FOR THE RESPONDENT PLACED HEAVY RELIANCE ON THE SAID CB DT CIRCULAR DATED NOVEMBER 26, 2008 AND CONTENDED THAT THE BENE FIT OF AMORTIZATION HAD TO BE GRANTED. THE ASSESSEE AS A COOPERATIVE BANK WAS BOUND BY THE RBI DIRECTIVES. AS PER SUCH DIREC TIVES, THE ASSESSEE HAD TO INVEST CERTAIN AMOUNTS IN GOVERNMEN T SECURITIES AND TO HOLD THE SAME TILL MATURITY. IN THE PROCESS OF ACQUISITION, IF THERE WAS ANY PREMIUM PAID ON THE FACE VALUE OF THE SECURITY, THE LOSS HAD TO BE AMORTIZED. PARAGRAPH (VII) OF THE C BDT CIRCULAR NO.17 OF 2008 DATED NOVEMBER 26, 2008 WOULD APPLY. SUCH INSTRUCTION READS AS UNDER: (VII) AS PER RBI GUIDELINES DATED 16 TH OCTOBER, 2000, THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HEAD TO MATURITY (HTM), HELD FOR TR ADING (HTF) AND AVAILABLE FOR SALE (AFS). INVESTMENTS CLASSIFIED U NDER HTM CATEGORY INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 18 NEED NOT BE MARKED TO MARKET AND ARE CARRIED AT ACQ UISITION COST UNLESS THESE ARE MORE THAN THE FACE VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINI NG TO MATURITY. IN THE CASE OF HFT AND AFT SECURITIES FORMING STOCK -IN-TRADE OF THE BANK, THE DEPRECIATION/APPRECIATION IS TO BE AGGREG ATED SCRIP-WISE AND ONLY NET DEPRECIATION, IF ANY, IS REQUIRED TO B E PROVIDED FOR IN THE ACCOUNTS. THE LATEST GUIDELINES OF THE RBI MAY BE REFERRED TO FOR ALLOWING ANY SUCH CLAIMS. 7. THE INSTRUCTIONS CLEARLY PROVIDE FOR AMORTIZATIO N OF PREMIUM PAID ON ACQUISITION OF SECURITIES WHEN THE SAME ARE ACQU IRED AT THE RATE HIGHER THAN THE FACE VALUE. SUCH AMORTIZATION WOUL D HAVE TO BE FOR THE REMAINING PERIOD OF MATURITY. THIS PRECISELY T HE TRIBUNAL HAD DIRECTED IN THE IMPUGNED ORDER. THOUGH CONTENDED, NO CONTRARY INSTRUCTIONS OF CBDT ARE BROUGHT TO OUR NOTICE. TH E INSTRUCTION IN QUESTION HAVING BEEN ISSUED UNDER SECTION 119(2) OF THE INCOME-TAX ACT, 1961, WOULD BIND THE REVENUE. NO QUESTION OF LAW, THEREFORE, ARISES. 8. RESULTANTLY, THE TAX APPEAL IS DISMISSED. NOT ICE IS DISCHARGED WITH NO ORDER AS TO COSTS. 30. WE HAVE EXAMINED THE FACTS OF THE INSTANT APPE AL AND FIND THAT THEY ARE SIMILAR TO THE FACTS ADJUDICATED BY THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT V/S RAJKOT DIST. CO-OP BANK LTD (SU PRA). THEREFORE RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE HIGH COURT OF GUJARAT, WE ARE OF THE CONSIDERED OPINION THAT BOTH THE LOWER A UTHORITIES ERRED IN CONFIRMING THE ADDITION AND THE ASSESSEE HAS RIGHTL Y CLAIMED THE AMORTIZATION OF LOSS IN THE VALUE OF GOVERNMENT SEC URITIES AND THE SAME IS LIABLE TO BE TREATED AS BUSINESS EXPENDITURE. IN T HE RESULT THIS COMMON ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE RELEVANT GROUNDS RAISED IN ASSESSMENT YEAR 2008-09 TO ASSESSMENT YEAR 2012- 13 IN I.T.A. NO. 107, 109, 111, 112, & 133/IND/2017 STANDS ALLOWED. INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 19 25. WE THEREFORE RESPECTFULLY FOLLOWING THE ABOVE D ECISION OF THE TRIBUNAL AS WELL AS JUDGMENTS AND DECISIONS RELIED THEREIN FIND THAT THE ISSUE RAISED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND BOTH THE LOWER AUTHORITIES ERRED IN DI SALLOWING THE DIMINUTION IN VALUE OF INVESTMENT IN SECURITIES. W E ACCORDINGLY SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND ALLOW THE APPEAL OF THE ASSESSEE AND DIRECT THE REVENUE AUTHORITIES TO ALLO W DEPRECIATION OF DIMINUTION IN THE VALUATION OF INVESTMENT CLAIMED B Y THE ASSESSEE AT RS.,57,95,185/-. 26. IN THE RESULT APPEAL OF THE ASSESSEE FOR ASSESS MENT YEAR 2012- 13 STANDS ALLOWED. 27. IN THE RESULT BOTH THE APPEALS OF THE ASSESSE E FOR ASSESSMENT YEAR 2010-11 AND 2012-13 VIDE ITA NO.441/IND/2019 & ITA NO.503/IND/2018 ARE ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18.06.20 19 SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 18 JUNE, 2019 /DEV INDORE PARASPAR SAHAKARI BANK LTD ITA NO.441/IND/2019 & ITA NO.503/IND/2018 20 COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER ASSTT.REGISTRAR, I.T.A.T., INDORE