The Nasik Merchants Co-op Bank Limited, Nashik, Nashik V. ITO, Ward-16(2), Hyderabad, Hyderabad

ITA 805/HYD/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4655 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH GAWLI
• Keywords: Revision of order
• Section: 143(3); 148; 263

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI ANIL CHATURVEDI, AM . / ITA NO.805/HYD/2017 / ASSESSMENT YEAR : 2005-06 THE NEELAKANTA CO - OP. URBAN BANK LTD., IN THE CASE OF MERGER WITH THE NASHIK MERCHANTS CO.OP. BANK LTD., A-16, BABUBHAI RATHI CHOWK, SATPUR, NASHIK 422 007. PAN : AABCN4696H. . / APPELLANT V/S THE INCOME TAX OFFICER, WARD 16(2). HYDERABAD. . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE. REVENUE BY : SHRI RAJESH GAWLI. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 4, HYDERABAD DT.20.01.2011 FOR THE ASSESSMENT YEAR 2005-06. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A CO-OPERATIVE BANK, WHO ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2005-06 ON 30.10.2005. THE CASE WAS TAKEN UP FOR SCRUTINY AND THEREAFTER, ASSESSMENT WAS FRA MED U/S / DATE OF HEARING : 15.10.2018 / DATE OF PRONOUNCEMENT: 22.10.2018 2 ITA NO.805/HYD/2017 143(3) OF THE ACT AND THE LOSS WAS ASSESSED AT RS.6,62,326 /-. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED BY ISSUING NOTICE U/S 148 OF THE ACT DT.04.01.2010 AND WHICH WAS SERVED ON THE ASSESSEE. THEREAFTER, THE CASE WAS TAKEN UP FOR SCRUTIN Y AND ASSESSMENT WAS FRAMED U/S 143(3) R.W.S 147 OF THE ACT V IDE ORDER DT.21.12.2010 AND THE TOTAL TAXABLE INCOME WAS DETERMINED AT RS.4,33,598/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.01.02.2017 (IN APP EAL NO.0239/10-11/ITO, WD.16(2)/CIT(A)-4/HYD/16-17) ENHANCED THE INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD .CIT(A), ASSESSEE IS NOW IN APPEAL AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN MAKING THE ENHANCEMENT TO THE IN COME ASSESSED BY THE ASSESSING OFFICER ON ACCOUNT OF NEW SOURCE OF INCOME. IT IS MOST HUMBLY SUBMITTED THAT THE CIT(A ) HAS EXCEEDED THE POWERS CONFERRED UNDER SECTION 250 OF THE INCOM E TAX ACT, 1961, AND THEREFORE ENTIRE ACTION IS BAD IN LAW. WITHOUT PREJUDICE TO THE ABOVE GROUND FOLLOWING GRO UNDS ARE ON MERIT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD.CIT(A) ERRED IN TREATING THE INTEREST INCOME OF RS.11,19,673/- UNDER THE HEAD INCOME FROM OTHER SOURCES BY DISREGA RDING THE FACT THAT INTEREST IS EARNED DURING THE COURSE OF B USINESS ACTIVITY OF THE APPELLANT AND ENTIRE INCOME THEREFORE IS ATT RIBUTABLE TO THE BUSINESS ACTIVITY AND THEREFORE ADDITION DESERVES T O BE DELETED. 3. BEFORE ME, AT THE OUTSET, LD.A.R. SUBMITTED THAT THOUGH ASSESSEE HAS RAISED TWO GROUNDS BUT BOTH THE GROUNDS ARE INTER- CONNECTED. HENCE, BOTH THE GROUNDS ARE CONSIDERED TOGETHER. 4. BEFORE ME, LD.A.R. SUBMITTED THAT THE CASE OF THE ASSES SEE WAS RE-OPENED FOR THE REASON THAT THE AMOUNT OF RS.10,9 5,924/- WAS FOUND DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD 3 ITA NO.805/HYD/2017 PROVISIONS AND WHICH WAS CLAIMED AS DEDUCTION AND WAS ALLOWED IN THE ASSESSMENT ORIGINALLY FRAMED U/S 143(3) OF THE ACT. AO WAS OF THE VIEW THAT THE AFORESAID PROVISION WAS NOT ALLOWA BLE AS DEDUCTION AND ACCORDINGLY, THE CASE WAS RE-OPENED BY IS SUING NOTICE U/S 148 OF THE ACT. THEREAFTER, IN THE ASSESSMEN T FRAMED U/S 143(3) R.W.S. 147 OF THE ACT, THE AMOUNT OF RS.10,95,924/ - WAS DISALLOWED. BEFORE AO, IT WAS SUBMITTED THAT AFTER MAKIN G ADDITION ON ACCOUNT OF DISALLOWANCE OF PROVISION, THE GROS S TOTAL INCOME TURNS OUT TO BE POSITIVE AND THEREFORE THE ASS ESSEE BE ALLOWED DEDUCTION U/S 80P OF THE ACT. IT WAS ALSO SUBMITT ED THAT DEDUCTION WAS NOT CLAIMED IN THE RETURN OF INCOME AS THE INCOME RETURNED BY THE ASSESSEE WAS A LOSS. THE CLAIM OF DEDU CTION U/S 80P OF THE ACT WAS DENIED BY AO. BEFORE LD.CIT(A), A PRAYE R WAS MADE FOR ALLOWING THE DEDUCTION U/S 80P OF THE ACT. LD.A.R. SUBMITTED THAT LD.CIT(A) DIRECTED THE AO TO GRANT DEDUCT ION U/S 80P OF THE ACT TO THE EXTENT OF RS.4,33,598/- BUT HOWE VER LD.CIT(A) NOTED THAT ASSESSEE HAD EARNED INTEREST FROM N ON- MEMBERS WHICH ACCORDING TO HIM SHOULD HAVE BEEN TAXED UNDER INCOME FROM OTHER SOURCES AND ON SUCH INTEREST DEDU CTION U/S 80P OF THE ACT WAS NOT ALLOWABLE. LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND AFTER RELYING ON THE DEC ISION OF HONBLE APEX COURT IN THE CASE OF BANGALORE CLUB VS. CIT REPORTED IN (2013) 350 ITR 509 ENHANCED THE INCOME AN D DIRECTED THE AO TO ADD RS.11,19,673/- UNDER THE HEAD IN COME FROM OTHER SOURCES. AGGRIEVED BY THE ORDER OF ENHANC EMENT, ASSESSEE IS NOW IN APPEAL. 4 ITA NO.805/HYD/2017 5. BEFORE ME, LD.A.R. SUBMITTED THAT LD.CIT(A) IN THE APPELLATE PROCEEDINGS CANNOT INTRODUCE A NEW SOURCE OF IN COME AS HIS POWER OF ENHANCEMENT IS RESTRICTED ONLY TO THE INCOME WHICH WAS THE SUBJECT MATTER OF CONSIDERATION FOR THE PU RPOSES OF ASSESSMENT BY THE AO. LD.A.R. SUBMITTED THAT UNDER THE PROVISIONS OF SEC.251(1)(A) OF THE ACT. LD.CIT(A) HAS POWER TO ENHANCE, REVISE OR CANCEL THE ASSESSMENT BUT HAS NO P OWER TO MAKE ADDITION BY SEARCHING A NEW SOURCE OF INCOME, WHICH W AS NEITHER DISCUSSED IN THE ASSESSMENT ORDER NOR MENTIONED IN THE RETURN FILED BY THE ASSESSEE. HE FURTHER SUBMITTED LD.CIT (A) HAS GONE BEYOND HIS JURISDICTION IN ENHANCING THE ASSESSMENT . HE FURTHER SUBMITTED THAT WHENEVER THE QUESTION OF TAXABILIT Y OF INCOME FROM A NEW SOURCE AND WHICH HAS NOT BEEN CONS IDERED BY THE AO IS CONCERNED, THE JURISDICTION TO DEAL WITH THE SAME CAN BE DEALT WITH U/S 147/148 AND U/S 263 OF THE ACT PROVIDED THAT THE REQUISITE CONDITIONS STIPULATED IN THE RESPECTIVE SECTIONS ARE SATISFIED. IN SUPPORT OF HIS CONTENTION THAT LD.CIT(A) CANNOT INTRODUCE A NEW SOURCE OF INCOME, HE RELIED ON THE DECISIO NS OF CIT VS. SHAPOORJI PALLONJI MISTRY REPORTED IN 44 ITR 891 (SC), CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA REPORTED IN 66 ITR 443 (SC) AND CIT VS. SARDARILAL AND COMPANY REPORTED IN 120 TAXAMANN 295 (DELHI). HE FURTHER SUBMITTED THAT THE P UNE TRIBUNAL IN THE CASE OF M/S VIJAY BUILDERS VS. ITO (ITA NO.863/PUN/2016 ORDER DT.25.02.2015) AND IN THE CASE OF R AM INFRASTRUCTURE LTD. VS. JCIT (ITA NO.746/PUN/2013 ORDER DT.30.12.2016) AFTER RELYING ON THE AFORESAID DECISIONS OF HON BLE APEX COURT AND HONBLE DELHI HIGH COURT HAS HELD THAT LD .CIT(A) 5 ITA NO.805/HYD/2017 HAS NO POWER TO ENHANCE THE INCOME OF THE ASSESSEE BY INTRODUCING A NEW SOURCE OF INCOME. ON THE MERITS OF AD DITION, WITH RESPECT TO THE INTEREST EARNED FROM OTHER MEMBER S, HE SUBMITTED THAT ALL INVESTMENTS WHETHER OUT OF SURPLUS FUN DS OR OTHERWISE MADE BY THE CO-OPERATIVE SOCIETY WHICH FORM PA RT OF THE BUSINESS OF THE BANK IS ATTRIBUTABLE TO THE BUSINESS OF BANKING CARRIED OUT BY IT AND QUALIFIES FOR DEDUCTION U/S 8 0P OF THE ACT AND FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BAROD A PEOPLES CO-OPERATIVE BANK LTD., REPORTED IN (2006) 280 ITR 282. H E ALSO PLACED RELIANCE ON THE DECISIONS OF PUNE TRIBUNAL IN THE CAS E OF RAJMATA URBAN CO-OP BANK LIMITED VS. ITO (ITA NO.479/PUN/2010 ORDER DT.28.10.2010) AND THE CASE OF ACIT VS. THE RAYAT SEVAK CO-OPERATIVE BANK LTD., (ITA NO.1960/PUN/2013 ORDER DT.27.10.2014). HE ALSO PLACED ON RECORD THE COPY OF THE ABOVE DECISIONS. HE THEREFORE SU BMITTED THAT FIRSTLY LD.CIT(A) WAS NOT JUSTIFYING IN ENHANCING THE INCOME AND SECONDLY EVEN ON MERITS, ASSESSEE IS ELIGIBLE FOR DEDUC TION U/S 80P OF THE ACT. 6. LD.D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A) AND SUBMITTED THAT U/S 251(1)(A), LD.CIT(A) HAS POWER OF ENHANCEMENT. HE FURTHER SUBMITTED THAT THERE IS A LINK BETWEEN ENHANCEMENT OF INCOME AND DEDUCTION U/S 80P OF THE ACT. HE FURTHER PLACED RELIANCE ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CITIZEN CO-OPERATIVE SOCIETY LTD., VS. ACIT IN CIVIL APPEAL NO.10245 OF 2017 JUDGMENT DT.08.08.2017 6 ITA NO.805/HYD/2017 7. LD.A.R. IN THE REJOINDER SUBMITTED THAT THE RELIANCE PLAC ED BY THE LD.D.R. ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CITIZEN CO-OPERATIVE SOCIETY LTD., VS. ACIT (SUPRA) IS MIS- PLACED AS THE ISSUE WAS DIFFERENT BEFORE HONBLE APEX COUR T. HE FURTHER SUBMITTED THAT THE RELIANCE PLACED BY THE LD.CIT(A ) IN THE CASE OF BANGALORE CLUB VS CIT (SUPRA) IS ALSO MISPLACED AS IT WAS WITH RESPECT TO MUTUALITY AND THEREFORE A DIFFERENT ISSUE. 8. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO ENHANCEMENT OF INCOME BY LD.CIT(A) AND ON SUC H ENHANCED INCOME, DENIAL OF DEDUCTION U/S 80P OF THE ACT. IT IS AN UNDISPUTED FACT THAT WHILE DECIDING THE APPEAL, LD.CIT(A) HAS ENHANCED THE INCOME OF THE ASSESSEE BY RS.11,19,673/-. I T IS ALSO A FACT THAT THE ISSUE ON WHICH THE LD.CIT(A) HAD ENHA NCED THE INCOME WAS NOT CONSIDERED BY AO AND WAS THEREFORE NOT A SUBJECT MATTER OF APPEAL BEFORE LD.CIT(A). I FIND THAT IDE NTICAL ISSUE ABOUT ENHANCEMENT OF INCOME AROSE BEFORE THE CO-O RDINATE BENCH OF THE TRIBUNAL OF PUNE IN THE CASE OF M/S. VIJAY BU ILDERS VS. ITO (IN ITA NO.863/PUN/2013 DT.25.02.2015). THE CO- ORDINATE BENCH OF THE TRIBUNAL AFTER CONSIDERING THE DECIS ION OF HONBLE APEX COURT IN THE CASE OF CIT VS. SHAPOORJI PALLON JI MISTRY (SUPRA), CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMAR IA (SUPRA) AND CIT VS. SARDARILAL AND COMPANY (SUPRA) HAS DEC IDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : 7 ITA NO.805/HYD/2017 14.1 EVEN OTHERWISE ALSO WE ARE OF THE CONSIDERED OPINION THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN ENHANCING THE IN COME OF THE ASSESSEE BY RS.25 LAKHS. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SHAPOORJI PALLONJI MISTRY (SUPRA) HAS HE LD THAT IT WOULD NOT BE OPEN TO THE AAC TO INTRODUCE INTO ASSESSMENT NEW SOURCES, AS HIS POWER OF ENHANCEMENT IS RESTRICTED ONLY TO I NCOME WHICH WAS SUBJECT MATTER OF CONSIDERATION FOR PURPOSES OF ASSESSMENT. THE HONBLE SUPREME COURT IN THE CASE OF RAI BAHADU R HARDUTROY MOTILAL CHAMARIA (SUPRA) HAS HELD THAT THE POWER OF ENHANCEMENT OF AAC IS RESTRICTED TO SUBJECT MATTER OF ASSESSMEN T OR IN ASSESSMENT ORDER. WE FIND THAT FOLLOWING THE ABOVE DECISIONS THE HONBLE DELHI HIGH COURT IN THE CASE OF SARDARILAL AND COMPANY (SUPRA) HAS HELD THAT WHENEVER QUESTION OF TAXABILI TY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED WHICH HAS NOT BEEN CONSIDERED BY THE AO, JURISDICTION TO DEAL WITH SAM E IN APPROPRIATE CASES MAY BE DEALT WITH U/S.147/148 AND SECTION 263 IF REQUISITE CONDITIONS ARE SATISFIED. IT IS IN CONCEIVABLE THAT IN PRESENCE OF SUCH SPECIFIC PROVISIONS A SIMILAR POWE R IS AVAILABLE TO THE FIRST APPELLATE AUTHORITY. THE HONBLE DELHI HI GH COURT IN THE CASE OF UNION TYRES (SUPRA) HAS ALSO HELD SIMILAR V IEW AND HELD THAT IT IS NOT OPEN TO THE APPELLATE COMMISSIONER T O INTRODUCE IN ASSESSMENT A NEW SOURCE OF INCOME AND ASSESSMENT HA S TO BE CONFINED TO THOSE ITEMS OF INCOME WHICH WAS SUBJECT MATTER OF ORIGINAL ASSESSMENT. THE RELEVANT OBSERVATIONS OF H ONBLE DELHI HIGH COURT AT PARA NOS. 11 TO 13 OF THE ORDER READS AS UNDER : XXXXX XXXX 14.2 IN VIEW OF THE ABOVE DECISIONS WE HOLD THAT TH E LD.CIT(A) HAS NO POWER TO ENHANCE THE INCOME OF THE ASSESSEE BY I NTRODUCING ITA NO.863/PN/2013 M/S. VIJAY BUILDERS 16 A NEW SOU RCE OF INCOME WHICH HAD NOT BEEN CONSIDERED BY THE AO. ADD ITION, IF ANY, ON THAT ACCOUNT CAN BE MADE BY TAKING RECOURSE INTO PROVISIONS OF SECTION 147/148 AND SECTION 263. WE ACCORDINGLY HOL D THAT BOTH FACTUALLY AS WELL AS LEGALLY THE LD.CIT(A) IS NOT J USTIFIED IN ENHANCING THE INCOME OF THE ASSESSEE BY RS.25 LAKHS . WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) ON TH IS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 9. BEFORE ME, REVENUE HAS NOT PLACED ANY CONTRARY BINDIN G DECISION IN ITS SUPPORT NOR HAS POINTED OUT ANY DISTINGUISH ING FEATURE IN THE FACTS OF THE PRESENT CASE AND TO THE CAS E OF M/S. VIJAY BUILDERS VS. ITO (SUPRA). I FURTHER FIND THAT THE DEC ISIONS RELIED UPON BY THE LD.D.R. ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE PRESENT CASE. I THEREFORE, FOLLOWING THE DECISION OF CO- 8 ITA NO.805/HYD/2017 ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. VIJAY BUILDERS VS. ITO (SUPRA) AND FOLLOWING THE SAME REASONING HOLD THAT LD.CIT(A) WAS NOT JUSTIFIED IN ENHANCING THE INCOME OF THE ASSESSEE AND ACCORDINGLY SET ASIDE THE ORDER OF LD.CIT(A ) ON THIS ISSUE. SINCE THE ENHANCEMENT ITSELF HAS BEEN SET ASIDE, I FIND THE ISSUE OF DEDUCTION U/S 80P OF THE ACT ON THE ENHANCEMEN T OF INCOME TO BE ACADEMIC. I ACCORDINGLY SET ASIDE THE ORD ER OF LD.CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. THUS, THE GROUND OF THE ASSESSEE IS ALLOWED. 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED ON 22 ND DAY OF OCTOBER, 2018. SD/- ( ANIL CHATURVEDI ) ' / ACCOUNTANT MEMBER PUNE; DATED : 22 ND OCTOBER, 2018. YAMINI #$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. THE CIT(A)-4, HYDERABAD. THE PR.CIT-4, HYDERABAD. '#$ %%&',) &', *+ / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.