DCIT (IT) 1(2)(1), MUMBAI V. BANK OF BAHRAIN & KUWAIT B.S.C, MUMBAI

ITA 4844/MUM/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2299 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 28-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; Set aside
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4844/MUM/2015 ASSESSMENT YEAR: 2009 - 10 & ITA NO. 4845/MUM/2015 ASSESSMENT YEAR: 2010 - 11 & ITA NO. 2120/MUM/2017 ASSESSMENT YEAR: 2011 - 12 DCIT (IT) - 1 (2)(1), ROOM NO. 118, 1 ST FLOOR, SCINDIA HOUSE, N.M. ROAD, BALLARD ESTATE, MUMBAI - 400038. VS. M/S BANK OF BAHRAIN & KUWAIT B.S.C., JOLLY MAKER CHAMBERS II, GR. FLOOR, 225 NARIMAN POINT, MUMBAI. PAN NO. AAACB2140F APPELLANT RESPONDENT REVENUE BY : MR. SUHAS KULKARNI, DR ASSESSEE BY : MR. KETANVED , AR DATE OF HEARING : 21/08/2019 DATE OF PRONOUNCEMENT: 28/08/2019 ORDER PER N.K. PRADHAN, AM THE CAPTIONED APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 55 , MUMBAI [IN SHORT CIT(A) ] AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143 (3) R.W.S 144C(3) OF THE INCOME TAX ACT 1961 (THE ACT). A S COMMON ISSUES M/S BANK OF BAHRAIN & KUWAIT ITA NOS. 4844, 4845/MUM/2015 & 2120/MUM/2017 2 ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF THROUGH A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE 1 ST GROUND OF APPEAL FOR AY 2009 - 10, THE 2 ND GROUND OF APPEAL FOR AY S 2010 - 11 AND 2011 - 12 ADDRESS A COMMON ISSUE. FOR BREVI TY, THE 1 ST GROUND OF APPEAL FOR AY 2009 - 10 IS MENTIONED BELOW: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO MAKE NECESSARY VERIFICATION FROM THE ASSESSEES CASE RECORDS IN RESPECT OF SET OFF OF PROVISIONS OF NONPERFORMING ASSETS WRITTEN BACK WHICH IS DEFACTO SETTING ASIDE OF THE MATTER NOT PERMISSIBLE U/S 251(1)(A) OF THE I.T. ACT INSPITE OF THE FACT THAT LD. CIT(A) FOUND NO JURISDICTION IN THE CLAIM RAISED BY THE ASSESSEE. 3. BRIE FLY STATED, THE FACTS ARE THAT THE ASSESSING OFFICER (AO) MADE AN ADDITION OF RS.23,44,26,771/ - AS PROVISION FOR NON - PERFORMING ASSETS WRITTEN BACK, WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSES SEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE ABOVE AMOUNT BEING PROVISION FOR NON - PERFORMING ASSETS WRITTEN BACK OUGHT TO HAVE BEEN REDUCED WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. THE LD. CIT(A) VIDE ORDER DATED 27.04.2015 HELD AS UNDER : 7 . I FIND TH AT THE APPELLANT'S THIS CLAIM HAS BEEN DEALT WITH BY THE A.O IN PARA 8 OF THE ASSESSMENT ORDER WHEREIN THE AO TOOK NOTE OF THE SAID CLAIM AS DETAILED IN PARA 8. HOWEVER, SUBSEQUENTLY, THE A.O. MADE DETAILED NOTE OF THE APPELLANT'S SUCH CLAIM AND ITS ALLOWABILITY AS DETAILED IN PARA 8.1 TO PARA 24 OF THE ASSESSMENT ORDER. THE AO DISCUSSED IN DETAIL THE RELEVANT PROVISIONS OF THE ACT AND THE APPELLANT'S CLAIM MADE IN EARLIER YEARS WHICH WERE DEALT WITH BY THE RESPECTIVE AO IN THOSE ASSESSMENT YEARS AS DEALT BY THE A.O. IN THE M/S BANK OF BAHRAIN & KUWAIT ITA NOS. 4844, 4845/MUM/2015 & 2120/MUM/2017 3 ABOVE REFERRED PARAS OF THE ASSESSMENT ORDER. AFTER THE DETAILED REASONS ASSIGNED THEREIN, THE A.O. REJECTED THE CLAIM OF THE APPELLANT. HOWEVER, I DO NOT FIND ANY SUCH DISCUSSION IN THE COMPUTATION OF INCOME OF THE APPELLANT I N RELATION TO THE DEDUCTION OF AN AMOUNT OF RS.23,44,26,771/ - AS PROVISION OF ASSET WRITTEN BACK FROM THE BOOK PROFIT. IN THIS BACKGROUND OF THE FACT, I FIND THAT THERE IS NO JUSTIFICATION IN THE APPELLANT'S CLAIM RAISED THROUGH THIS GROUND OF APPEAL. 7.1 HOWEVER, TAKING NOTE OF THE APPELLANT'S CLAIM AND IN THE INTEREST OF NATURAL JUSTICE, I DIRECT THE A.O. TO VERIFY THE APPELLANT'S CLAIM FROM THE CASE RECORDS FOR DIFFERENT ASSESSMENT YEARS TO WHICH THE TOTAL SUM OF RS.23,44,26,771/ - PERTAINS TO AS DETAILED IN THE APPELLANT'S SUBMISSION. IN VIEW OF THE SAME, I CONSIDER IT PROPER AND APPROPRIATE TO DIRECT THE AO TO MAKE NECESSARY VERIFICATION FROM THE APPELLANT'S CASE RECORDS OF THOSE RESPECTIVE ASSESSMENT YEARS IN WHICH SUCH PROVISIONS WERE ACTUALLY ADDED BA CK TO THE INCOME OF THE APPELLANT IN THOSE RESPECTIVE YEARS AS SUBMITTED BY THE APPELLANT IN ITS SUBMISSION. AFTER TAKING NOTE OF THE SAME AND ALSO AFTER TAKING NOTE TO THE PROVISIONS OF I.T. ACT FOR GIVING SET OFF OF SUCH PROVISIONS OF NON - PERFORMING ASSE TS WRITTEN BACK, IF THE AO FINDS THAT THE APPELLANTS CLAIM IS IN ACCORDANCE WITH THE PROVISIONS OF LAW AS WELL AS JUSTIFIED UNDER THE ACCOUNTING PRINCIPLE AS SPECIFIED FOR SUCH ACCOUNTING, THE AO MAY ALLOW THE CLAIM OF THE APPELLANT IF IT IS AN ALLOWABLE DEDUCTION UNDER THE RESPECTIVE PROVISIONS OF INCOME - TAX ACT. WITH THIS OBSERVATION, THE APPELLANT'S THIS GROUND OF APPEAL IS ADJUDICATED. 4. BEFORE US, THE LD. DR SUBMITS THAT SUCH SETTING ASIDE OF THE MATTER IS NOT PERMISSIBLE U/S 251(1)(A) OF THE ACT AND THE LD. CIT(A) MAY BE DIRECTED TO DECIDE THE ISSUE ON MERITS. THE LD. COUNSEL FOR THE ASSESSEE AGREES THAT FULLY SETTING ASIDE OF THE MATTER IS NOT PERMISSIBLE U/S 251(1)(A) O F THE ACT. M/S BANK OF BAHRAIN & KUWAIT ITA NOS. 4844, 4845/MUM/2015 & 2120/MUM/2017 4 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE POWER OF THE FIRST APPELLATE AUTHORITY TO SET ASIDE THE ASSESSMENT ORDER U/S 251(1)(A) HAS BEEN WITHDRAWN W.E.F. 01.06.2001. IT IS PERTINENT T O MENTION HERE THAT DUE TO THE OMISSION (W.E.F. 01.06.2001) BY THE FINANCE ACT, 2001 (14 OF 2001) OF CERTAIN WORDS, VIZ - - OR HE MAY SET ASIDE THE ASSESSMENT AND REFER THE CASE BACK TO THE ASSESSING OFFICER FOR MAKING A FRESH ASSESSMENT IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE COMMISSIONER (APPEALS) AND AFTER MAKING SUCH FURTHER INQUIRY AS MAY BE NECESSARY, AND THE ASSESSING OFFICER SHALL THEREUPON PROCEED TO MAKE SUCH FRESH ASSESSMENT AND DETERMINE, WHERE NECESSARY, THE AMOUNT OF TAX PAYABLE ON THE BASIS OF SUCH FRESH ASSESSMENT FROM SECTION 251(1)(A), THE POWER OF THE FIRST APPELLATE AUTHORITY TO SET ASIDE THE ASSESSMENT ORDER HAS BEEN WITHDRAWN (W.E.F. 1 - 6 - 2001). IN THE INSTANT CASE, THE LD. CIT(A) HAS SET ASIDE THE ABOVE MATTER TO THE FILE OF TH E AO WHICH IS NOT PERMISSIBLE U/S 251(1)(A) OF THE ACT. THEREFORE, WE RESTORE THE MATTER BACK TO THE FILE OF THE LD. CIT(A) TO DECIDE THE MATTER AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS THE 1 ST GROUND OF APPEAL FOR AY 2009 - 10, THE 2 ND GROUND OF APPEAL FOR AY S 2010 - 11 AND 2011 - 12 ARE ALLOWED FOR STATISTICAL PURPOSES. 6. THE 1 ST GROUND OF APPEAL FOR AY S 2010 - 11 AND 2011 - 12 ALSO ADDRESS A COMMON ISSUE. FOR BREVITY WE PRODUCE BELOW THE 1 ST GROUND OF APPEAL FOR AY 2010 - 11 : M/S BANK OF BAHRAIN & KUWAIT ITA NOS. 4844, 4845/MUM/2015 & 2120/MUM/2017 5 WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN RELYING ON THE ORDER OF THE ITAT, IN THE CASE OF THE ASSESSES FOR THE A.Y 2002 - 03 AND THEREBY ALLOWING RELIEF, WHEN ON THE ISSUE OF ADDITION OF RS.1,25,58,475/ - BEING TH E ADJUSTMENT MADE BY THE TPO, THE FACTS OF THE INSTANT CASE ARE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE CASE OF THE ASSESSEE FOR THE A.Y 2002 - 03 IN AS MUCH AS THE TPO , AFTER DULY FOLLOWING THE DIRECTIONS OF THE ITAT IN THE A.Y 2002 - 03 AND DUE VERIF ICATIONS HAS MADE THE ADJUSTMENTS FOR THE REASON OF NON - FURNISHING OF REQUISITE INFORMATION BY THE ASSESSEE? 7. THE ISSUE RELATES TO THE TOTAL ADJUSTMENT OF RS.1,25,58,475/ - MADE BY THE TRANSFER PRICING OFFICER (TPO) VIDE ORDER DATED 30.01.2014 FRAMED U/S 92CA(3) OF THE ACT , WHICH IS ADOPTED BY THE AO . THE LD. CIT(A) FOLLOWED THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2002 - 03 AND DIRECTED THE AO TO FOLLOW THE ORDER OF THE TRIBUNAL (PARAS 16 TO 18) AND THUS ALLOWED THE APPEAL FILED BY THE ASSESSEE. 8. BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO WHEREAS THE LD. COUNSEL FOR THE ASSESSEE RELIES ON THE ORDER OF THE CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND FROM THE ORDER DATED 27.04.2015 PASSED BY THE LD. CIT(A) THAT HE HAS CLEARLY DIRECTED THE AO TO FOLLOW THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR AY 2002 - 03 IN ITA NO. 6731 & 6605/MUM/2006. SPECIFIC MENTION HAS BEEN MADE BY HIM TO PARAS 16 TO 18 OF THE ABOVE ORDER OF THE TRIBUNAL. IT IS THE RESPONSIBILITY OF THE AO TO FOLLOW THE ABOVE DIRECTION OF THE LD. CIT(A). DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE SAID M/S BANK OF BAHRAIN & KUWAIT ITA NOS. 4844, 4845/MUM/2015 & 2120/MUM/2017 6 DIRECTION OF THE CIT(A) HAS NOT BEEN FOL LOWED IN ITS ENTIRETY BY THE AO. HAVING CONSIDERED THE ABOVE SUBMISSIONS AND FACTS OF THE CASE , WE DIRECT THE AO TO CARRY OUT IN ITS ENTIRETY THE DIRECTION OF THE LD. CIT(A) BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2002 - 03. THUS 1 ST GROUND OF APPEAL FOR AY S 2010 - 11 AND 2011 - 12 IS DISMISSED. 10. FINAL LY WHAT REMAINS IS THE 3 RD GROUND OF APPEAL FOR AY 2010 - 11 WHICH IS AS UNDER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO VERIFY THE ALLOWABILITY OF EXEMPTION U/S 10(34) OF THE I.T.ACT WHILE ARRIVING AT BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB WHICH IS DE FACTO SETTING ASIDE OF THE MATTER AND NOT PERMISSIBLE WITHIN THE MEANING OF SECTION 251(1)(A) OF T HE I.T. ACT? 11. BEFORE US, THE LD. DR SUBMITS THAT THE ABOVE MATTER MAY BE RESTORED TO THE LD. CIT(A) SO THAT THE INTEREST OF THE REVENUE IS PROTECTED. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT AS THE AO HAS GIVEN APPEAL EFFECT TO THE ORDER OF THE L D. CIT(A), THERE IS NO NECESSITY OF FURTHER RESTORING THE MATTER. 12. HAVING HEARD THE RIVAL CONTENTIONS AND EXAMINED THE MATERIALS ON RECORD, WE FIND THAT THE AO HAS GIVEN EFFECT TO THE ORDER OF THE LD. CIT(A) AND THEREFORE, THERE IS NO MERIT IN THE ABOV E GROUND OF APPEAL FILED BY THE R EVENUE. ACCORDINGLY, THE 3 RD GROUND OF APPEAL FOR AY 2010 - 11 IS DISMISSED. M/S BANK OF BAHRAIN & KUWAIT ITA NOS. 4844, 4845/MUM/2015 & 2120/MUM/2017 7 13. TO SUM UP, THE APPEAL FOR AY 2009 - 10 IS ALLOWED FOR STATISTICAL PURPOSES; FOR AY S 2010 - 11 AND 2011 - 12 ARE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 28/08/2019. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 28/08/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI