DDIT (IT) 3(2), MUMBAI V. THE BANK OF NOVA SCOTIA, MUMBAI

ITA 6588/MUM/2014

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8317 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 31-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Audit objection; Tangible material; Bad and doubtful debts; Provision of bad debts; Reassessment proceedings
• Section: 115JB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 6588 / MUM/ 20 1 4 ( / ASSESSMENT YEAR: 2005 - 06 ) ASS/DY. DIRECTOR OF INCOME TAX, (IT) - 3(2) 132, 1 ST FLOOR, SCINIDA HOUSE, BALLARD PIER, N.M ROAD, MUMBAI - 400038 . / VS. THE BANK OF NOVA SCOTIA MITTAL TOWERS, B WING, NARIMAN POINT, MUMBAI - 400021. ./ ./ PAN/GIR NO. : AAACB 1536 H ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 05 . 0 7 .201 8 / DATE OF PRONOUNCEMENT : 03. 10 . 2018 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 30 . 0 6 .20 1 4 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 10 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE AY. 2005 - 06 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIR CUMSTANCES, THE CIT(A) ERRED IN ANNULLING THE ORDER U/S. 147 OF THE IT. ACT, WITHOUT APPRECIATING THE FACT THAT THE ASSESSES DID NOT DECLARE THE REVENUE BY: S HRI SUMAN KUMAR (DR) ASSESSEE BY : SHRI NISHANT THAKKAR & MS. JASMIN AMALSADVALA ITA. NO. 6588 /M/20 1 4 A.Y. 2005 - 06 2 CORRECT PROFIT WITHIN THE PROVISIONS OF 115JB OF THE IT. ACT, AS THE MATERIALS BROUGHT ON RECORD WERE NOT ENOUGH AND THEREBY WRONGLY RELIED ON THE APEX COURT'S DECISION IN KELVINATOR INDIA LD (2002) 250 ITR 1 (SC). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE ID CIT(APPEALS) ERRED IN ANNULLING THE ORDER U/S. 147 OF THE I.T .ACT, WITHOUT APPRECIATING THE FACT (HAT THE ASSESSEE DID NOT FOLLOW THE PROVISIONS OF 115JB(MAT) OF THE I. T. ACT BY NOT ADDING BACK THE PROVISIONS OF BAD DEBT OF RS,2 ,06,56,501/ - CREATED IN THE PREVIOUS YEAR AND AT THE SAME LIME CLAIMED DEDUCTION OF PROVISION OF BAD DEBT OF RS.24024483 / - WRITTEN BACK AND CREDITED TO P& L ACCOUNT STATING THAT THE SAME WAS NOT ALLOWED IN CURLIER YEARS. 3. THE APPELLANT PRAYS THAT TH E ORDER OF THE ID. CIT(APPEALS) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY,' 3 . THE BRIEF FACTS OF THE CASE A RE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON31.10.2005 DECLARING TOTAL LOSS OF RS.9,44,90,280/ - FOR THE A.Y. 2005 - 06. THEREAFTER, THE ASSESSMENT U/S 1 43(3) OF THE ACT WAS COMPLETED ON 30.12.2008 ASSESSING TOTAL LOSS TO THE TUNE OF RS.2,18,61,190/ - . S UBSEQUENTLY, IT WAS NOTICED THAT THE ASSESSEE DID NOT FOLLOW THE PROVISION OF SECTION 115JB OF THE ACT WHILE CALCULATING THE NET PR OFIT. THE ASSESSEE DID NOT ADD BACK THE PROVISION OF BAD DEBTS OF RS.2,06,56,501/ - CREATED IN THE PREVIOUS YEAR AND AT THE SA ME TIME, THE ASSESSEE CLAIMED DEDUCTION OF THE PROVISIONS OF BAD DEBTS OF RS.2,40,24,453/ - WRITTEN BACK AND CREDITED TO THE P&L ACCOUNT STATING THAT THE SAME WAS NOT ALLOWED IN THE EARLIER YEARS. THE CASE WAS REOPENED U/S 147 OF THE ACT. NOTICE U/S 148 DAT ED 29.03.2012 WAS ISSUED AND SERVED UPON THE ASSESSEE. THEREAFTER, THE ASSESSMENT WAS ITA. NO. 6588 /M/20 1 4 A.Y. 2005 - 06 3 COMPLETED ASSESSING THE INCOME TO THE TUNE OF RS.1,54,94,667/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO SET ASIDE THE PROCEEDING IN VIEW OF PROVISION U/S 147 OF THE ACT, THEREFORE, REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. I SSUE NOS . 1 & 2: - 4. ISSUE NOS. 1 & 2 ARE INTER - CONNECTED, THEREFORE, ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION. IN BRIEF, THE REVENUE HAS CHALLENGED THE SET ASIDE OF PROCEEDING OF THE AO IN VIEW OF PROVISION U/S 147 OF THE ACT BY THE CIT(A) IN WHICH THE DECLARATION OF THE CORRECT PROFIT WITHIN THE PROVISION OF SECTION 115JB OF THE ACT WAS IN QUESTION. THE APPELLANT BANK OF NOVA SCOTIA IS BANKING COMPANY INCORPORATE D IN CANADA WHICH HAD OBTAINED THE LICENCE OF RESERVE BANK OF INDIA TO CARRIED OUT BANKING IN INDIA . BANK OF NOVA SCOTIA IS OPERATING ITS BUSINESS IN INDIA FROM THE LAST 20 YEARS THROUGH VARIOUS BRANCHES S ITUATED AT MUMBAI, DELHI, BANGALORE, COIMBATORE AN D HYDERABAD. THE APPELLANTS MAJOR BUSINESS ACTIVITY IS IN INDIA IN RELATION TO CORPORATE LOANS, TRADE FINANCE, RETAIL BANKING, BILL DISCOUNTING ETC. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD .: - 6. I HAVE CONSIDERED THE A.O ORDER AS WELL AS THE APPELLANT AR'S SUBMISSIONS. 1 HAVE ALSO TAKEN NOTE TO THE APPELLANT'S SUBMISSION AS WELL AS THE JUDICIAL PRONOUNCEMENTS FURNISHED BY THE APPELLANT IN SUPPORT OF ITS CONTENTION. HAVING TAKEN NOTE TO THE SAME AND ALSO AFTER TAKING NOTE TO THE SPECIFIC OBSERVATION MADE ITA. NO. 6588 /M/20 1 4 A.Y. 2005 - 06 4 BY THE A.O THAT HE INITIATED THE REASSESSMENT PROCEEDINGS BASED ON VERIFICATION OF THE RECORD OF THE APPELLANT. THIS CLEARLY EVIDENCED THAT THE INFORMATION ON WHICH THE A.O INITIATED RE - ASSESSMENT WAS ALRE ADY ON THE A.O POSSESSION AS IT THE EVIDENT FROM THE AO OBSERVATION MADE IN PARA 5.1 OF THE ASSESSMENT ORDER EXTRACTED AS ABOVE. FURTHER TO THAT, 1 FIND THAT THE REASSESSMENT PROCEEDINGS WAS INITIATED BY THE A.O BEYOND FOUR YEARS WHEREAS, THE APPELLANT IN A VERY C TERM STATED IN ITS SUBMISSION IN PARA 3.5 THAT THE RETURN OF INCOME COMPUTATION OF INCOME CLEARLY BROUGHT OUT THE WORKING OF U/S.115JB OF THE ACT. THUS, TAKING NOTE OF ALL THESE FACTS AVAILABLE ON RECORD AND ALSO TO THIS FACT THAT THE REASSESSMENT PROCEEDINGS WAS INITIATED SUBSEQUENT TO AUDIT OBSERVATION, I AM OF THE CONSIDERED VIEW THAT THE A.O ACTION OF INITIATION OF RE - ASSESSMENT PROCEEDINGS WAS AB INITIO, WRONG AND INCORRECT. THEREFORE, TAKING NOTE OF THE APEX COURT'S JUDGEMENT IN THE CASE OF K ELVINATOR INDIA LIMITED - REPORTED (2002) 256 ITR L - (SC) ALSO THE DECISION OF THE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF IC1CI HOME FINANCE COMPANY LTD. VS. ACIT IN WRIT PETITION NO,43G OF 2G12 T . 1 CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT THE A.G WAS NOT JUSTIFIED IN HIS ACTION WHILE REOPENING OF THE ASSESSMENT. ACCORDINGLY, THE REASSESSMENT ORDER PASSED BY THE A.O IS ANNULLED. 5 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE AO HAS REOPENED THE CASE OF THE ASSESSEE AFTER THE EXPIRY OF THE 4 YEARS SPECIFICALLY IN THE CIRCUMSTANCES W HEN THE ASSESSEE WAS NOT AT FAULT FOR THE WORKING OF THE COM PUTATION U/S 115JB OF THE ACT. T HE FACTS ARE NOT DISTINGUISHABLE AT THIS STAGE ALSO. THE AO REOPENED THE MATTER IN VIEW OF THE PROVISIO N U/S 147/148 OF THE ACT TO VERIFY THE CLAIM OF ASSESSEE . THE INFORMATION WAS ALREADY WITH THE AO. NO NEW TANGIBLE MATERIAL WAS WITH THE AO FOR REOPENING THE CASE. THE CASE WAS REOPENED ON THE BASIS OF AUDIT OBJECTION. THE CIT( A) HAS SET ITA. NO. 6588 /M/20 1 4 A.Y. 2005 - 06 5 ASIDE THE ORDER P ASSED BY THE AO U / S 147/148 OF THE ACT BY RELYING UPON THE DECISION OF KELVINATOR INDIA LTD. (2002) 250 ITR 1 (SC) AND IN THE CASE OF ICICI HOME FINANCE COMPANY LTD. VS. ACIT IN WRIT PETITION NO. 430 OF 2012 BOMBAY HIGH COURT. TAKING INTO ACCOUNT, ALL THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS PASSED THE ORDER JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, BOTH THE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVE NUE. I SSUE NOS. 3 & 4: - 6 . ISSUE NOS. 3 & 4 ARE FORMAL IN NATURE WHICH NOWHERE REQUIRED ANY ADJUDICATION. 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HERE BY ORDERED TO BE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 03.10 . 2018 . SD/ - SD/ - ( R. C. SHARMA ) (AMARJIT SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 03.10 . 2018 . V IJAY ITA. NO. 6588 /M/20 1 4 A.Y. 2005 - 06 6 / 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// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI