STATE BANK OF SAURASHTRA( NOW MERGED WITH STAT BANK OF INDIA), MUMBAI V. ADDL CIT RG 1, MUMBAI

ITA 7115/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9150 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-09-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 20-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Keywords: Depreciation; Reassessment proceedings
• Section: 143(3); 142(1); 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI D. KARUNAKAR RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 7115/MUM/2011 ASSESSMENT YEAR: 2001-02 STATE BANK OF SAURASHTRA C/O. STATE BANK OF INDIA FINANCIAL REPORTING, COMPLIANCE & TAXATION DEPT. 3 RD FLOOR, CORPORATE CENTRE, MADAN CAMA ROAD, NARIMAN POINT, MUMBAI 400 021 PAN:-AACCS 9880 R VS. DY. CIT CIR - 2(2) MUMBAI (APPELLANT) (RESPONDENT) ASSES SEE BY : SHRI C. NARESH REVENUE BY : SHRI KISHAN VYAS DATE OF HEARING : 1 0 .03.2015 DATE OF ORDER : 25.03.2015 O R D E R PER AMIT SHUKLA, JM: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESS EE AGAINST ORDER DATED 28.07.2011, PASSED BY LD.CIT-5 MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) R.W.S. 147 FOR THE A.Y . 2001-02. IN VARIOUS GROUNDS OF APPEAL, THE ASSESSEE HAS MAINLY CHALLENGED THE IMPUGNED ORDER ON FOLLOWING POINTS:- ITA NO. 7115/MUM/2011 ASSESSMENT YEAR: 2001-02 2 I). VALIDITY OF REOPENING U/S 147, ON THE GROUND T HAT THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEARS AND THEREFORE, SUCH A REOPENING IS BAD IN LAW IN VIEW OF THE PROVISO TO SECTION 147. II) DISALLOWANCE U/S 14A. III) DISALLOWANCE OF DEPRECIATION ON COMPUTER SOFT WARE. 2. THE BRIEF FACTS QUA THE LEGAL ISSUE RAISED VIDE GROUND 1 TO 4 ARE THAT, ASSESSEE IS A PUBLIC UNDERTAKING ENGAGED IN T HE BUSINESS OF BANKING AND ALLIED ACTIVITIES. THE ASSESSEE BANK WA S LATER ON MERGED WITH THE STATE BANK OF INDIA ON 13.08.2008. THE RET URN OF INCOME FOR THE A.Y. 2001-02 WAS FILED ON 28.02.2002 AT NIL A FTER CLAIMING SET OFF OF CARRIED FORWARD LOSSES TO THE EXTENT OF RS.59,61 ,23,649/-THE SAID RETURN WAS DULY PROCESSED U/S 143(1) ON 09.09.2002. THEREAFTER THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSES SMENT ORDER WAS PASSED U/S 143(3) VIDE ORDER DATED 22.03.2004 AT AN INCOME OF RS.80,99,67,030/-. AGAINST THE SAID ORDER, THE ASSE SSEE HAD PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A), WHICH WAS DECID ED VIDE ORDER DATED 20.10.2004. AFTER GIVING EFFECT TO THE SAID APPELLA TE ORDER, THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.27,34,39,370/-. L ATER ON, THE ASSESSEES CASE WAS REOPENED U/S 147 BY ISSUANCE OF NOTICE DATED 05.02.2008 U/S 148, AFTER RECORDING THE FOLLOWING REASONS:- THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNT AND ACCORDINGLY IN ITS ACCOUNTS, AT THE END OF THE YEAR , TAKES CREDIT FOR INTEREST ACCRUED BUT NOT DUE ON ITS INVESTMENT IN S ECURITIES. HOWEVER, IN THE RETURN OF INCOME SUCH INTEREST IS N OT OFFERED TO TAX AND ONLY THE INTEREST WHICH HAS BECOME DUE AND RECEIVABLE DURING THE YEAR IS OFFERED TO TAX. FROM THE A.YS. 2 003-04 ONWARDS, SUCH INTEREST 'ACCRUED BUT NOT DUE AT THE END OF THE YEAR' WAS TAXED BY THE ASSESSING OFFICER. SUCH ADD ITIONS HAVE BEEN CONFIRMED AND UPHELD BY THE CIT(A) IN ASSESSEE BANKS FIRST ITA NO. 7115/MUM/2011 ASSESSMENT YEAR: 2001-02 3 APPEAL SUBJECT TO THE DIRECTION THAT THE CREDIT FOR SIMILAR AMOUNT OF INTEREST ACCRUED BUT NOT DUE AT THE BEGINNING OF THE YEAR WHICH WAS OFFERED TO TAX SHOULD BE ALLOWED. 2. THE APPELLATE ORDER OF THE CIT(A) ON THIS ASPECT HAS BECOME FINAL AS THE ASSESSEE BANK HAS NOT BEEN GRANTED PER MISSION BY THE COD TO PURSUE FURTHER LITIGATION ON THE DECISIO N. ACCORDINGLY, THE AMOUNT LIABLE TO BE TAXED AT THE ASSESSEE BANK S INCOME FOR A.Y. 2001-02 ON THIS GROUND IS WORKED OUT AS UNDER: - 3. INTEREST ACCRUED BUT NOT DUE ON INVESTMENT IS WO RKED OUT AS UNDER:- 4. AMOUNT OF ACCRUED INTEREST DURING THE YEAR RS.16 ,43,82,436/- WHICH IS TO BE ADDED BACK AND IS TAKEN AS THE INCOM E OF THE YEAR AND THE SAME IS REQUIRED TO BE TAXED ACCORDINGLY. A S A RESULT OF WHICH INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSME NT. 5. IN VIEW OF THE ABOVE, I HAVE TO REASON TO BELIEV E THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THE CA SE IS FIT FOR ISSUE OF NOTICE U/S 148 OF THE I.T. ACT. IN PURSUANCE THEREOF, THE ASSESSING OFFICER COMPLE TED THE ASSESSMENT U/S 143(3) R.W.S. 147 VIDE ORDER DATED 29.12.2008 A T AN INCOME OF RS.120,96,49,798/- AND AFTER SETTING OFF OF BROUGHT FORWARD LOSSES, INCOME WAS FINALLY ASSESSED AT NIL INCOME. 3. IN THE FIRST APPEAL BEFORE THE LD. CIT(A), SO FA R AS THE ISSUE OF VALIDITY OF REOPENING U/S 147, IS CONCERNED THE LD. CIT(A) D ISMISSED THE ASSESSEES CONTENTION THAT REOPENING IS BAD IN LAW IN VIEW OF PROVISO TO SECTION 147 ON THE GROUND THAT AP HAD SUFFICIENT RE ASONS TO REOPEN THE CASE. HIS FINDING IN THIS REGARD ARE GIVEN IN PARA 5 OF THE IMPUGNED ORDER. INTEREST ACCRUED BUT NOT DUE AS AT END OF ASSESSMENT YEAR RS.826397428/- LESS: INTEREST ACCRUED BUT NOT DUE AS AT BEGINNING OF ASSESSMENT YEAR RS.662014992/- NET DIFFERENCE RS.164382436/- ITA NO. 7115/MUM/2011 ASSESSMENT YEAR: 2001-02 4 4. BEFORE US, LEARNED COUNSEL SUBMITTED THAT IN THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN OF INCOME, THE A SSESSEE HAS DULY DISCLOSED THE DETAILS OF INTEREST OF SECURITIES CHA RGEABLE TO TAX AND ALSO THE DETAILS OF INTEREST ACCRUED BUT NOT DUE AT THE END OF THE YEAR. ALL THESE DETAILS WERE AVAILABLE IN THE AUDITED STATEME NT OF ACCOUNT. IN THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS DULY SCRUTINIZED ALL THE BOOK OF ACCOUNT AND THE AU DIT REPORT AND HAS PASSED DETAILED ORDER MAKING VARIOUS DISALLOWANCES. NOW, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, THE CASE HAS BEEN SOUGHT TO BE REOPENED, WITHOUT THEIR BEING ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT PROCEEDINGS. FROM THE PERUSAL OF THE REASONS RECORDED, IT CAN BE SEEN THAT, MERELY BEC AUSE IN THE A.Y. 2003-04, THE INTEREST ACCRUED BUT NOT DUE HAS BEEN TAXED BY THE AO AND CONFIRMED BY THE LD. CIT(A), THEREFORE, THE COMPLET ED ASSESSMENT HAS BEEN REOPENED FOR THE A.Y. 2001-02. IN THE REASONS RECORDED NO FAILURE HAS BEEN ASCRIBED ON THE PART OF THE CASE. THUS REO PENING OF THE ASSESSEE IS BAD-IN-LAW. IN SUPPORT OF HIS CONTENTIO N, HE STRONGLY RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN C ASE OF TALATI AND PANTHAKLY ASSOCIATE P. LTD. VS. DCIT REPORTED IN (2 014) 362 ITR 362 (BOM) . 5. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON T HE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT FRESH MATERIAL HAS CO ME ON RECORD IN THE FORM OF ASSESSMENT ORDER AND LD. CIT(A) ORDER FOR T HE SUBSEQUENT ASSESSMENT YEARS. THIS WAS SUFFICIENT MATERIAL TO A CQUIRE THE JURISDICTION TO REOPEN THE CASE U/S 147. IN SUPPORT OF HIS CONTE NTION, HE RELIED UPON ITA NO. 7115/MUM/2011 ASSESSMENT YEAR: 2001-02 5 THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF DR. AMINS PATHOLOGY LABORATORY VS. JCIT REPORTED IN (2001) 25 2 ITR PAGE 673 . 6. WE HAVE HEARD RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD QUA THE LEGAL ISSUE RAISED ON RE OPENING OF CASE U/S 147. IT IS AN UNDISPUTED FACT THAT ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) AN D THE REOPENING OF SUCH AN ASSESSMENT HAS BEEN DONE AFTER THE EXPIRY O F FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN SUCH A CASE, TIME LIMIT FOR REOPENING HAS TO BE EXAMINED IN LIGHT OF THE PROVIS O TO SECTION 147, WHICH CLEARLY LAYS DOWN ON EMBARGO TO REOPEN THE CA SE WHERE THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) THE PROVIS O CLEARLY PROVIDES THAT NO ACTION SHALL BE TAKEN U/S 147 FOR REOPENING THE ASSESSMENT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEARS. SUCH A LIMITATION IS SUBJECT TO TWO CONDITIONS, FIR STLY, ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO FURNISH THE RETURN U/S 139 OR S. 142(1) OR S. 148 AND SECONDLY, FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT. IN THIS CASE, THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO FURNISH THE RETURN U/S 139. SO FAR AS SECOND CONDITION IS CONCERNED, IT IS EVIDENT FROM THE RECORD THAT THE ASSESSEE HAS DULY DISCLOSED ALL THE DETAILS OF INTEREST DUE AND RECEIVABLE AND INTEREST DUE AND ACCRUED DURING THE YEAR NOT ONLY IN THE BOOKS BUT ALSO IN THE STATEMENT OF AUDITED ACCO UNTS. IN THE STATEMENT OF INTEREST ON THE SECURITIES FOR THE PER IOD OF 01.04.2000 TO 31.03.2001 AS APPEARING IN THE AUDITED ACCOUNTS THE DETAILS OF INTEREST WERE DISCLOSED IN THE FOLLOWING MANNER:- ITA NO. 7115/MUM/2011 ASSESSMENT YEAR: 2001-02 6 STATEMENT OF INTEREST ON SECURITIES FROM 1.04.2000 TO 31.03.2001 PARTICULARS INTEREST ON GOVT. SECURITIES RS. INTEREST ON OTHER TRUSTEE SECURITIES & DEBENTURES RS. SUMMARY OF CLAIM FOR TAX DEDUCTION AT SOURCE AMOUNT TOTAL INTEREST INCOME ON SECURITIES 2,38,91,40,185 25,36,10,802 ON GOVERNMENT SECURITIES ON OTHER SECURITIES 1,43,09,438 11,36,86,944 INTEREST ACCRUED UPTO 31.03.2000 BUT NOT DUE DEBITED ON 01.04.2000 RECEIVED ST. NO. 9F ATTACHED TO OUR RETURN OF INCOME FOR AY 2000-01 59,78,82,999 6,41,31,993 ADD: ON SHARES ADD: ON UNITS OF SBI MAGNIUM ADD: ON SUCCESS FEE 82,500 SUB TOTAL 2,98,70,23,184 31,77,42,795 12,80,78,882 LESS: INTE REST ACCRUED UPTO 31.03.2001 BUT NOT DUE (ST NO. 9F) 73,83,38,715 8,80,58,710 2,24,86,84,469 22,96,84,085 (GRAND TOTAL : RS.2,47,83,68,554/-) AFTER THIS DISCLOSURE, THE ASSESSEES CASE HAVE BEE N COMPLETED UNDER SCRUTINY PROCEEDING AND ORDER HAS BEEN PASSED BY TH E ASSESSING OFFICER U/S 143(3). SUCH AN ASSESSMENT IS BEING SOUGHT TO B E REOPENED WITHOUT THEIR BEING ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FOLLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT. EVEN IN THE REASON RECORDED, THE ASSESSING OFFICER HAS NOT ASCRIBED A NY FAILURE ON THE PART OF THE ASSESSEE AS TO WHAT IS THE FAILURE ON THE P ART OF THE ASSESSEE IN MAKING THE FULL DISCLOSURE. IF THE ASSESSEE HAS MAD E FULL DISCLOSURE AS ITA NO. 7115/MUM/2011 ASSESSMENT YEAR: 2001-02 7 CONTEMPLATED UNDER THE LAW THEN, IT IS UPON THE ASS ESSING OFFICER TO DRAW CORRECT INFERENCE OF LAW FROM THE PRIMARY FACT S. ONCE THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL THE MATERIAL FACTS THEN, STATUTE PROVIDES THAT NO ACTION CAN BE TAKEN FOR RE OPENING THE CASE BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS, WHERE ORDER HAS BEEN COMPLETED U/S 143(3). T HUS, ON THESE FACTS THE REOPENING OF THE CASE U/S 147 VIDE NOTICE DATED 05.02.2008 IS BAD- IN-LAW AND CONSEQUENTLY THE ENTIRE PROCEEDINGS INIT IATED VIDE NOTICE U/S 148 IS VOID AB INITIO. ACCORDINGLY, THE ASSESSMENT ORDER IS QUASHED AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7. IN VIEW OF THE AFORESAID FINDING THE OTHER GROUN DS ON MERITS HAVE BECOME PURELY ACADEMIC. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF MARCH, 2015. SD/- SD/- (D.KARUNAKAR RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 25.03.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.