The Karur Vysya Bank Ltd., Karur V. CIT, Trichy

ITA 825/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5029 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 31-05-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 27-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: N QUADIR HOSEYN
• Keywords: Period of limitation; Bad and doubtful debts; Reassessment proceedings
• Section: 143(3); 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B ENCH D C HENNAI BEFORE SHRI HARI OM MARATHA, J.M. AND SHRI N.S. SAINI , AM .. I.T.A. NO. 82 5 /MDS/2 0 09 M/S KARUR VYSYA BANK LIMITED ERODE ROAD KARUR PAN : AA CT 3373 J VS. THE COMMISSIONE R OF INCOME - TAX - I TRICHY (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N. QUADIR HOSEYN DEPARTMENT BY : SHRI ANIRUDH RAI O R D E R PER N.S . SAINI, A.M : - TH IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE C IT , T IRU CHIRAPALLI DATED 30 . 03 .20 0 9 . 2. THE ASSESSEE HAS TAKEN 13 GROUNDS OF APPEAL. IN GROUND S NOS. 1 TO 6 OF THE APPEAL THE GRIEVANCE OF THE ASSESSEE IS THAT THE ORDER OF THE LD. PAGE 2 OF 9 I.T.A. NO. 82 5/MDS/20 09 CIT PASSED ON 30.3.2009 IS BARRED BY LIMITATION AND HENCE THE ORDER IS TO BE ANNULLED. 3. GROUND NOS. 7 TO 13 OF THE APPEAL ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT ON MERITS OF THE CASE WHEREIN GRIEVANCE PROJECTED BY THE ASSESSEE IS THAT THE LD. CIT FAILED TO APPRECIATE THAT THE ASSESSING OFFICER, WHILE PASSING ORDER U/S 143(3) OF THE INCOME - TAX ACT, 1961 [IN S HORT, THE ACT] CONSIDERED THE FACTUAL ASPECTS OF ALL THE ISSUES, DECISIONS OF THE HON'BLE SUPREME COURT AND VARIOUS HIGH COURTS AND HENCE THE ORDER OF THE ASSESSING OFFICER IS NEITHER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WARRANTING ACTI ON U/S 263 OF THE ACT. 4. FIRST WE TAKE UP THE ISSUE WHETHER THE ORDER OF THE LD. CIT IS BARRED LIMITATION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE , THE LD. CIT PASSED AN ORDER U/S 263 ON 30.3.2009 TO REVISE THE ASSESSMENT COMPLETED IN THE CASE OF THE ASSESSEE IN RESPECT OF VARIOUS ISSUES. IN THE INSTANT CASE, IT IS OBSERVED THAT THE ASSESSMENT WAS PAGE 3 OF 9 I.T.A. NO. 82 5/MDS/20 09 ORIGINALLY COMPLETED U/S 143(3) OF THE ACT ON 29.3. 2004. THEREAFTER, THE ASSESSING OFFICER INITIATED PROCEEDINGS U/S 148 OF THE ACT FOR THE REASON THAT INTEREST ACCRUED ON SECURITIES TO THE EXTENT OF RS. 2,70,96,093/ - HAS ESCAPED ASSESSMENT. PURSUANT TO THE ABOVE, ASSESSING OFFICER COMPLETED REASSESSMEN T PROCEEDINGS VIDE ORDER DATED 29.12.2006 WHEREIN HE INCLUDED THE SAID RS. 2,70,96,093/ - APART FROM THE ORIGINALLY ASSESSED INCOME. 6. THE CONTENTION OF THE LD. A.R. OF THE ASSESSEE BEFORE US IS THAT VARIOUS ISSUES WHICH HAVE BEEN REVISED BY THE LD. CIT U/S 263 AL L ARISE OUT OF THE ORIGINAL ASSESSMENT ORDER DATED 29.3.2004 AND THEY WERE BARRED BY LIMITATION ON 30.3.2009. HE ALSO POINTED OUT THAT IN THE REASSESSMENT ORDER DATED 29.12.2006 THE ONLY ISSUE OF INTEREST ON SECURITIES WHICH WERE DUE BUT NOT REC EIVED AMOUNTING TO RS. 2,70,96,093/ - WAS ADJUDICATED UPON BY THE ASSESSING OFFICER AND THE LD. CIT HAS NOT FOUND ANY ERROR IN RESPECT OF THAT ISSUE, THEREFORE, THE INSTANT ORDER PASSED U/S 263 OF THE ACT IS BARRED BY LIMITATION AND IS BAD IN LAW. 7. ON TH E OTHER HAND, THE LD. D.R. SUBMITTED THAT THE ASSESSMENT WAS FINALLY CONCLUDED BY THE ASSESSING OFFICER VIDE ORDER DATED 29.12.2006 PAGE 4 OF 9 I.T.A. NO. 82 5/MDS/20 09 PASSED U/S 147 OF THE ACT AND, THEREFORE, LD. CIT WAS JUSTIFIED IN PASSING REVISION ORDER U/S 263 ON 30.3.2009. ACCORDING TO LD. D.R., THE ORIGINAL ORDER DATED 29.3.2004 PASSED BY THE ASSESSING OFFICER HAS MERGED IN THE REASSESSMENT ORDER DATED 29.12.2006 PASSED BY THE ASSESSING OFFICER. ACCORDING TO LD. D.R., ONCE THE REOPENING OF AN ASSESSMENT IS MADE, ALL THE ISSUES ARE OPEN BEFORE THE ASSESSING OFFICER AND THEREFORE, REASSESSMENT ORDER IS AN ASSESSMENT IN RESPECT OF ENTIRE ISSUES. THE LD. D.R. FURTHER CONTENDED THAT IN THE REASSESSMENT ORDER THE ASSESSING OFFICER ALLOWED DEDUCTION IN RESPECT OF PROVISIONS FOR DOUBTFUL DEBTS AT RS. 11,24,91,794/ - IN PLACE OF DEDUCTION ALLOWED AT RS. 11,11,36,989/ - IN THE ORIGINAL ASSESSMENT ORDER DATED 29.3.2004, THEREFORE, THE ORDER OF THE LD. CIT REVISING THIS ISSUE WAS WITHIN LIMITATION. 8. WE FIND THAT THE PROVISIONS OF SECTION 263 ( 2) OF THE ACT READ S AS UNDER: NO ORDER SHALL BE MADE UNDER SUB - SECTION (1) AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED . PAGE 5 OF 9 I.T.A. NO. 82 5/MDS/20 09 9. THUS, IN OUR CONSIDERED OPINION, THE ORDER WHICH HAS BEEN SOUGHT TO BE REVISED U/S 263 OF THE ACT IS BARRED BY LIMITATION AFTER EXPIRY OF TWO YEARS PERIOD FROM THE END OF THE F.Y. IN WHICH THE RELEVANT ORDER WAS PASSED. THE CONTENTION OF THE LD. D.R. IS THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) MERGES WITH THE ORDER PASSED BY THE ASSESSING OFFICER U/S 147 AND THE ENTIRE ASSESSMENT IS OPEN TO THE ASSESSING OFFICER ONCE REASSESSMENT PROCEEDINGS ARE INITIATED. IN OUR CONSIDERED VIEW, THE ABOVE CONTENTION OF THE LD. D.R. IS NOT CORRECT. HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS REPORTED IN 198 ITR 297 [SC] HAS HELD AS UNDER: IN PROCEEDINGS U/S 147 OF THE ACT, THE ITO MAY BRING TO CHARGE ITEMS OF INCOME WHICH HAD ESCAPED ASSESSMENT OTHER THAN OR IN ADDITION TO THE ITEM OR ITEMS WHICH LED TO THE ISSUANCE OF A NOTICE U/S 148 AND WHERE RE ASSESSMENT IS MADE U/S 147 IN RESPECT OF INCOME WHICH HAD ESC APED TAX, THE ITO S JURISDICTION IS CONFINED ONLY TO SUCH INCOME WHICH H A S ESCAPED TAX OR HAS BEEN UNDER ASSESSED AND DOES NOT EXTEN D TO REVISING, REOPENING OR RECONSIDERING THE WHOLE ASSESSMENT OR PERMITTING THE ASSESSEE TO REAGITATE QUESTIONS WHICH HAD B EEN DECIDED IN TH E ORIGINAL ASSESSMENT PROCEEDINGS. PAGE 6 OF 9 I.T.A. NO. 82 5/MDS/20 09 10. THUS IT IS SETTLED POSITION OF LAW THAT JURISDICTION OF THE ASSESSING OFFICER U/S 147 OF THE ACT IS LIMITED TO THE ESCAPED INCOME AND NOT OTHER ISSUES WHICH ARE BEYO ND HIS JURISDICTION. FURTHER, IT IS ALSO SETTLED POSITION OF LAW THAT THE ORDER OF THE LOWER AUTHORITIES MERGES WITH THE ORDER OF THE HIGHER AUTHORITY, AND THAT TOO, ONLY TO THE EXTENT OF ISSUES WHICH WERE CONSIDERED BY THE HIGHER AUTHORITIES. THE ORDER OF THE STATUTORY AUTHORITY DOES NOT MERGE WITH SUBSEQUENT ORDER PASSED BY THE VERY SAME AUTHORITY BECAUSE THE STATUTORY AUTHORITY IS NOT EMPOWERED TO REVISE ITS OWN ORDER OR ORDER OF HIS PREDECES SOR. IN THAT CASE, ORDER WHICH REMAINS IN FORCE IS THE ORIGINAL ORDER READ WITH OR SUBSEQUENT ORDER. IN OUR CONSIDERED OPINION, THE ISSUE OF ESCAPED INCOME THAT IS RS. 2,70,96,093/ - , SUBJECT MATTER OF PROCEEDINGS U/S 148 ONLY ARISES OUT OF THE REAS SESSME NT ORDER DATED 29.12.2006 IN THE INSTANT CASE AND THE OTHER ISSUES HAVE ATTAINED FINALITY VIDE ORDER DATED 29.3.2004 PASSED U/S 143(3) OF THE ACT AND DO NOT ARISE OUT OF THE ORDER DATED 29.12.2006. THUS, IF THERE WAS AN ERROR IN THE ORIGINAL ORDER WHICH WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE , THEN TIME LIMIT FOR REVISING U/S 263 WILL BE COUNTED FROM THE DATE OF ORIGINAL ASSESSMENT ORDER. ONLY WHEN THERE WAS SOME ERROR WHICH WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE WHICH WAS CONSIDERED IN RE ASSESSMENT PROCEEDINGS CAN BE REVISED U/S 263 BY PAGE 7 OF 9 I.T.A. NO. 82 5/MDS/20 09 COUNTING THE PERIOD OF LIMITATION FROM THE DATE OF REASSESSMENT ORDER. OUR ABOVE VIEW FINDS SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA S E OF CIT VS. ALAGEND R AN FINANCE LTD [2007] 293 IT R 1[SC], DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF ASHOKA BUILDCON LTD VS. ACIT [2010] 325 ITR 574 [BOM] AND DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT VS. SHRIRAM ENGINEERING CONSTRUCTION CO. LTD [2011] 330 ITR 568 [MAD]. 11. THE CONTENT ION OF THE LD. D.R. THAT THE ISSUE OF ALLOWANCE OF PROVISION FOR BAD DEBTS U/S 36(1)(VIIA) WAS CONSIDERED AND DECIDED IN REASSESSMENT ORDER DATED 29.12.2006 A S BECAUSE THE FIGURE OF DEDUCTION WAS CHANGED FROM RS. 11,11,36,989/ - TO RS. 11,24,91,794/ - IS ALSO NOT ACCEPTABLE BECAUSE WE FIND THAT THE SAID ISSUE WAS NOT A SUBJECT MATER OF SECTION 147 PROCEEDINGS AND THE ASSESSING OFFICER NEVER TOOK A FRESH DECISION IN RESPECT OF THE SAME IN REASSESSMENT ORDER. IN THE REASSESSMENT ORDER, ONLY BECAUSE OF I NCREASE IN TOTAL INCOME, THE ASSESSING OFFICER REVISED THE FIGURE IN ACCORDANCE WITH HIS DECISION TAKEN IN THE ORIGINAL ORDER DATED 29.3.2004. IN THE ORIGINAL ORDER DATED 29.3.2004, THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U /S 36(1)(VIIA) OF THE ACT SUBJECT TO MAXIMUM OF 5% OF TOTAL PAGE 8 OF 9 I.T.A. NO. 82 5/MDS/20 09 INCOME. AS IN THE REASSESSMENT ORDER AFTER INCLUDING ESCAPED INCOME OF RS. 2,70,96,093/ - IN THE TOTAL INCOME OF THE ASSESSEE, THE INCOME OF THE ASSESSEE CONSEQUENTLY INCREASED AND THEREFORE, THE ASSESSING OFFICER MODIFIED THE FIGURE OF DEDUCTION ALLOWABLE U/S 36(1)(VIIA) FROM RS. 11,11,36,984/ - TO RS. 11,24,91,794/ - IN ACCORDANCE WITH HIS DECISION TAKEN IN THE ORIGINAL ASSESSMENT ORDER. NO MATERIAL W A S BROUGHT ON RECORD BY THE LD. D.R. TO SHOW T HAT A NEW ERROR WAS FOUND BY THE LD. CIT IN THE REASSESSMENT ORDER DATED 29.12.2006 WHICH WAS NOT THERE IN THE ORIGINAL ORDER OF ASSESSMENT DATED 29.3.2004. AS IT IS FOUND THAT ALL THE ISSUES IN RESPECT OF WHICH IMPUGNED ORDER U/S 263 WAS PASSED BY THE CI T ON 30.3.2009 WERE RELATING TO THE ORIGINAL ORDER OF ASSESSMENT DATED 29.3.2004, IN OUR CONSIDERED OPINION, THE ORDER DATED 30.3.2009 PASSED U/S 263 IS BARRED BY LIMITATION IN VIEW OF PROVISIONS OF SUB - SECTION (2) OF SECTION 263 OF THE ACT AND CONSEQUENTL Y BAD IN LAW. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) PASSED U/S 263 OF THE ACT ON 30.3.2009 AND ALLOW THE APPEAL OF THE ASSESSEE. 12 . IN THE RESULT, THE APPEAL FILED B Y THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 3 RD JUNE 2011. PAGE 9 OF 9 I.T.A. NO. 82 5/MDS/20 09 SD/ - SD/ - ((HARI OM MARATHA ) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 3 RD JUNE , 201 1 . VL COPY TO: ASSESSEE / AO / CIT (A) / CIT / D.R. / GUARD FILE