Vijaya Bank, Bangalore V. CIT, Bangalore

ITA 563/BANG/2011

• Counselvise Citation: 56321114 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SADANANDA SONBARSA CITI
• Keywords: Revision of order; Opportunity of being heard; Earning of tax free income; Period of limitation; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE C BENCH, BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V.VASUDEVAN, JUDICIAL MEMBER I.T.A.NO.563(B)/2011 (ASSESSMENT YEAR : 2006-07) M/S VIJAYA BANK, THE COMMISSI ONER OF INCOME-TAX, H.O. CENTRAL ACCOUNTS DEPT. VS.LARGE TAX PAYERS UN IT 41/2, MG ROAD, (LTU), BANGALORE BANGALORE-560 001 PAN NO.AAACV4791J APPELLANT RESPONDENT ASSESSEE BY : SHRI S. ANANTHAN, CA REVENUE BY : SHRI SADANANDA SONBARSA, CIT-I DATE OF HEARING : 19-06-2012 DATE OF PRONOUNCEMENT : 29-06-2012 O R D E R PER SHRI N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 17.3.2011 OF CIT, LARGE TAX PAYERS UNIT (LTU), BANGALORE, PAS SED U/S.263 OF THE INCOME TAX ACT, 1961 (THE ACT), RELATING TO AY 06 -07. 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE IMPU GNED ORDER U/S.263 OF THE ACT WAS PASSED ARE AS FOLLOWS: 2.1 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BAN KING. THE ASSESSEE FILED RETURN OF INCOME FOR AY 06-07 DECLAR ING NIL INCOME UNDER THE ITA NO.563(B)/2011 2 REGULAR/NORMAL PROVISIONS OF THE ACT. THE ASSESSEE HOWEVER WAS LIABLE TO TAX U/S.115JB OF THE ACT ON BOOK PROFITS. THE AO P ASSED AN ORDER U/S.143(3) OF THE ACT ON 31.1.2008 DETERMINING TOTA L INCOME UNDER THE REGULAR/NORMAL PROVISIONS OF THE ACT AT RS.589,84,1 6,890/- AND BOOK PROFITS U/S.115JB OF THE ACT AT RS.185,03,00,106/- AND 7.5% TAX PAYABLE ON BOOK PROFIT AT RS.13,87,72,507/-. SINCE THE TOT AL INCOME COMPUTED UNDER THE REGULAR/NORMAL PROVISIONS OF THE ACT WAS MORE THAN 7.5% OF THE BOOK PROFITS U/S.115JB OF THE ACT, THE SAME WAS ADO PTED FOR COMPUTING TAX LIABILITY. IN THIS APPEAL WE ARE CONCERNED ONLY WI TH THE COMPUTATION OF BOOK PROFITS DONE BY THE AO IN THE ORDER OF ASSESSM ENT DATED 31.1.2008. THE AO COMPUTED BOOK PROFITS IN THE AFORESAID ORDER OF ASSESSMENT AS FOLLOWS: NET PROFIT AS PER PROFIT AND LOSS A/C. RS.126,87,71,000 ADD: PROVISION FOR IT RS.17,00,00,000 PROVISION FOR DEFERRED TAX RS.32,23,26,7 76 PROVISION FOR CONTINGENCIES RS.36,66,90, 504 EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME RS. 1,74,18,095 PROVISION FOR SUNDRY ASSETS RS. 5,14,55, 640 PROVISION FOR FBT RS. 20,00,000 RS.2 19,86,62,015 LESS: DIVIDEND EXEMPT U/S.10(34) RS. 31,76,35,82 8 INTEREST EXEMPT U/S.10(15) RS. 3,07, 26,081 RS.34,83,61,909 --- ----------------- BOOK PROFIT RS.185,03,00,106 ITA NO.563(B)/2011 3 7.5% OF BOOK PROFIT = RS. 1 3,87,72,507 THE DISPUTES WHICH AROSE FOR CONSIDERATION IN THE A SSESSMENT REGARDING COMPUTATION OF BOOK PROFITS U/S.115JB OF THE ACT AN D WHICH WERE CONTESTED BY THE ASSESSEE BEFORE CIT(A) WAS: A) THE PROFIT AS PER PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE COMPANIES ACT, 1956 WAS RS.126,87,71,000/- . THE ASSESSEE SUBMITTED THAT IT WAS GOVERNED BY THE BANK ING COMPANIES (ACQUISITION & TRANSFER OF UNDERTAKING) A CT, 1970 AND THEREFORE IT HAD TO PREPARE ITS PROFIT AND LOSS ACC OUNT IN ACCORDANCE WITH THE SAID ACT. THE PROFIT AS PER TH E PROFIT AND LOSS ACCOUNT SO PREPARED WAS RS.47,20,90,300. THE ASSES SEE SUBMITTED THAT THE PROFIT AS PER PROFIT AND LOSS AC COUNT SHOULD BE ADOPTED AT THIS FIGURE AND NOT AS PER THE PROFIT AN D LOSS ACCOUNT PREPARED UNDER THE COMPANIES ACT, 1956. THIS CLAIM OF THE ASSESSEE WAS REJECTED BY THE AO AND CIT(A). B) THE SECOND DISPUTE WAS REGARDING ADDING OF EXPENDI TURE INCURRED FOR EARNING EXEMPT INCOME OF RS. 1,74,18 ,095 AND PROVISION FOR FBT OF RS.20,00,000 TO THE PROFIT AS PER PROFIT AND LOSS ACCOUNT TO ARRIVE AT BOOK PROFITS. THIS CLAIM OF THE ASSESSEE FOR EXCLUDING THE AFORESAID SUMS WHILE COMPUTING BO OK PROFITS WAS ACCEPTED BY THE CIT(A). 3. THE CIT(A) PASSED THE ORDER ON 13.1.2010. THE A O GAVE EFFECT TO THE AFORESAID ORDER OF THE CIT(A) BY PASSING ORDER DATED 18.3.2010. 3.1 THE CIT, IN EXERCISE OF HIS POWERS OF REVISION U/S.263 OF THE ACT, WAS OF THE VIEW THAT THE AFORESAID ORDER OF THE AO DATED 18.3.2010 GIVING TO THE ORDER OF THE CIT(A) DATED 13.1.2010 WAS ERRONEO US AND PREJUDICIAL TO ITA NO.563(B)/2011 4 THE INTEREST OF THE REVENUE. THE CIT ISSUED A SHOW CAUSE NOTICE DATED 7.2.2011 PROPOSING TO REVISING THE AFORESAID ORDER OF THE AO DATED 18.3.2010. THE REASONS FOR ISSUE OF THE SHOW CAUSE NOTICE WERE GIVEN IN ANNEXURE TO THE SAID NOTICE, WHICH READS AS FOLLOWS : IN YOUR CASE, RETURN OF INCOME FOR THE AY 2006-0 7 HAS BEEN FILED ON 23.11.2006 DECLARING AN INCOME OF NIL. THE SCRUTIN Y ASSESSMENT U/S.143(3) WAS COMPLETED ON 31.01.2008 DETERMINING TOTAL INCOME OF RS.589,84,16,890/- WHICH WAS LATER RECTIFIED VIDE O RDER DATED 5.3.2010 ALLOWING BROUGHT FORWARD LOSSES AND RE-DET ERMINING THE INCOME AT RS.397,29,88,412/-. CONSEQUENT TO PASSIN G OF CIT(A)S ORDER DELETING ALL THE ADDITIONS MADE, ORDER GIVING EFFECT WAS PASSED DATED 18.3.2010 DETERMINING THE INCOME UNDER SPECIA L PROVISIONS OF SEC.115JB. ON VERIFICATION IT IS OBSERVED THAT MIS TAKES HAVE OCCURRED IN COMPUTING INCOME U/S.115JB WHICH NEEDS TO BE COR RECTED. IT IS ALSO NOTICED FROM THE ASSESSMENT RECORDS THAT WHILE COMP UTING THE TAX LIABILITY U/S.115JB, THE ITEMS UNDER THE HEAD, PROV ISION FOR NPA, PROIVISION FOR STANDARD ADVANCES AND BAD INVESTMENT S WRITTEN OFF, HAVE NOT BEEN TAKEN INTO CONSIDERATION. THE SAME N EEDS TO BE CORRECTED BY REVISION OF ORDER. 3.2 AS CAN BE SEEN FROM THE ABOVE SEQUENCE OF EVENT S, THE ORDER THAT WAS SOUGHT TO BE REVISED WAS THE ORDER DT.18.3.2010 OF THE AO GIVING EFFECT TO THE ORDER OF THE CIT(A) DATED 13.1.2010. THE SC OPE OF SUCH PROCEEDINGS CAN ONLY BE RESTRICTED TO THE ISSUE/MATTERS THAT WA S CONSIDERED AND DECIDED BY THE CIT(A). IT CAN BE SEEN FROM THE SHO W CAUSE NOTICE U/S.263 OF THE ACT THAT THE ISSUES WITH REGARD TO ADDING PR OVISION FOR NPA, PROVISION FOR STANDARD ADVANCES AND BAD INVESTMENTS WRITTEN O FF WHILE COMPUTING BOOK PROFITS U/S.115JB OF THE ACT WERE NEITHER THE SUBJECT MATTER OF AOS ORDER U/S.143(3) NOR THE SUBJECT MATTER OF THE APPE AL BEFORE THE CIT(A) OR CONSIDERED IN THE ORDER OF THE CIT(A). IF THAT BE SO, THE QUESTION WOULD BE AS TO WHETHER THE CIT CAN CONSIDER THE SAME IN EXER CISE OF HIS POWERS OF REVISION U/S.263 OF THE ACT. THE PROVISIONS OF SEC.263 OF THE ACT READ AS FOLLOW S: ITA NO.563(B)/2011 5 263. REVISION OF ORDERS PREJUDICIAL TO REVENUE.--( 1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUS ING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORD ER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSM ENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION.--FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION,-- (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1ST D AY OF JUNE, 1988, BY THE ASSESSING OFFICER SHALL INCLUDE-- (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT CO MMISSIONER *OR DEPUTY COMMISSIONER OR THE INCOME-TAX OFFICER ON TH E BASIS OFF THE DIRECTIONS ISSUED BY THE *JOINT COMMISSIONER UNDER SECTION 144A ; (II) AN ORDER MADY BY THE *JOINT COMMISSIONER IN EX RCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO HIM UNDER THE ORDERS O R DIRECTIONS ISSUED BY THE BOARD OR BY THE CHEIF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORISED BY THE BOARD IN THIS BEHALF UNDER SECTION 120 ; (B) 'RECORD' SHALL INCLUDE AND SHALL BE DEEMED ALWA YS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UND ER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISS IONER ; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF AN Y APPEAL, FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988 THE PO WERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND AN D SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS H AD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AF TER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHI CH THE ORDER SOUGHT TO BE REVISED WAS PASSED. ITA NO.563(B)/2011 6 (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF , OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL **NATIONAL TAX TRIBUNAL, THE HIG H COURT OR THE SUPREME COURT. EXPLANATION.--IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB-SECTION (2), THE TIME TAKEN IN GIVING AN OPP ORTUNITY TO THE ASSESSEE TO BE RE-HEARD UNDER THE PROVISO TO SECTIO N 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTI ON IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUD ED. 4. THE ORDER SOUGHT TO BE REVISED IS THE ORDER DT.1 8.3.2010 GIVING EFFECT TO THE ORDER OF THE CIT(A) DT. 13.1.2010. AS ALREADY STATED THE SCOPE OF SUCH PROCEEDINGS IS RESTRICTED TO THE ISSUE/MATT ERS THAT WAS CONSIDERED AND DECIDED BY THE CIT(A). ISSUES WITH REGARD TO A DDING PROVISION FOR NPA, PROVISION FOR STANDARD ADVANCES AND BAD INVESTMENTS WRITTEN OFF WHILE COMPUTING BOOK PROFITS U/S.115JB OF THE ACT WERE NE ITHER THE SUBJECT MATTER OF AOS ORDER U/S.143(3) NOR THE SUBJECT MAT TER OF THE APPEAL BEFORE THE CIT(A) OR CONSIDERED IN THE ORDER OF THE CIT(A) . IN SUCH A SITUATION WHERE THE AO IS PRECLUDED FROM CONSIDERING THE ABOV E ISSUES, THE CIT IN EXERCISE OF HIS POWERS U/S.263 OF THE ACT CANNOT CO MPEL THE AO TO CONSIDER THE ABOVE ASPECTS. HE CANNOT TERM THE ORDER OF THE AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR FAIL URE TO CONSIDER THE ABOVE ISSUES. THE ORDER OF THE AO DT.18.3.2010 CANNOT TH EREFORE, SAID TO BE ERRONEOUS FOR NOT CONSIDERING THE ABOVE ISSUES. O N THIS SHORT GROUND THE ORDER U/S.263 OF THE ACT IN SO FAR AS IT RELATES TO THE ISSUES WITH REGARD TO ADDING PROVISION FOR NPA, PROVISION FOR STANDARD A DVANCES AND BAD INVESTMENTS WRITTEN OFF WHILE COMPUTING BOOK PROFIT S U/S.115JB OF THE ACT , IS LIABLE TO QUASHED AND IS HEREBY QUASHED. ITA NO.563(B)/2011 7 5. ARGUMENTS WERE ADVANCED BEFORE US TO SAY THAT TH E ORDER U/S.263 IS VIRTUALLY A REVISION OF THE ORIGINAL ORDER OF AS SESSMENT U/S.143(3) OF THE ACT DT.31.1.2008 AND THE ORDER U/S.263 WOULD BE HIT BY THE LIMITATION OF TIME LAID DOWN IN SEC.263 OF THE ACT. ARGUMENTS WE RE ALSO ADVANCED ON MERITS OF THE ADDITION MADE BY THE CIT IN THE ORDER U/S.263 OF THE ACT. WE DO NOT WISH TO GO INTO THOSE ASPECTS AS THE PLEA OF THE ASSESSEE REGARDING SCOPE OF THE PROCEEDINGS BEFORE THE AO HAS BEEN ACC EPTED BY US AND THE ORDER U/S.263 OF THE ACT QUASHED ON THAT GROUND. 6. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 29 TH JUNE, 2012. SD/- SD/- (N. BARATHVAJA SANKAR) (N.V.VASUDEVAN) VICE PRESIDENT JUDICIAL MEMBER PLACE: BANGALORE DATED: 29-06-2012 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER ASST. REGISTRAR