Sampada Sahakari Bank Ltd, Pune V. Dy CIT, Pune

ITA 961/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72388 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Revision of order; Depreciation; Revised return
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.961/PN/2012 A.Y. 2007-08 SAMPADA SAHAKARI BANK LTD., DIC BUILDING, NEAR KASBA GANPATI TEMPLE, 717, BUDHWAR PETH, PUNE - 411002 PAN : AAAJS0094E APPELLANT VS. DY. CIT, CIRCLE 1(2), PUNE RESPONDENT APPELLANT BY : SHRI NIKHIL PATHAK RESPONDENT BY : SHRI A.K . MODI DATE OF HEARING: 25.11.2013 DATE OF ORDER : 29.11.2013 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX-I, (SHORT CIT-I) PUNE, D ATED 29.03.2012 FOR A.Y. 2007-08 ON THE FOLLOWING GROUND S. 1. THE ORDER U/S 263 IS BAD IN LAW AS THE ASST. ORDER WHICH IS REVISED WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE REVENUE. 2. THE LEARNED CIT ERRED IN DIRECTING THE A.O. TO EXAM INE THE ISSUE OF DEPRECIATION ON SECURITIES HELD TO MAT URITY AND AVAILABLE FOR SALE WITHOUT APPRECIATING THAT TH E LEARNED A.O. HAD DULY VERIFIED THIS ISSUE AT THE TI ME OF PASSING THE ASST. ORDER AND HENCE, THERE WAS NO REA SON TO REVISE THE ORDER U/S 263. 3. THE LEARNED CIT ERRED IN HOLDING THAT THE DEVALUATI ON LOSS OF HTM AND AFS SECURITIES WAS NOT ALLOWABLE AS A 2 DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSE E BANK WITHOUT APPRECIATING THAT THE SAID LOSS WAS ALLOWABLE AND THERE WAS NO REASON TO DISALLOW THE S AME. 4. THE LEARNED CIT FAILED TO APPRECIATE THAT THE HTM & AFS SECURITIES CONSTITUTED STOCK IN TRADE OF THE ASSESS EE BANK AND THEREFORE, ANY DEVALUATION LOSS IN RESPECT OF SUCH SECURITIES WAS ALLOWABLE AS A DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 2. ASSESSING OFFICER HAS FINALIZED THE ORDER U/S. 1 43(3) ON 24.12.2009 DETERMINING LOSS AT RS.6,07,38,161/-. A CCORDING TO CIT, THE ASSESSING OFFICER ALLOWED EXCESS DEVALUATI ON OF SECURITIES AMOUNTING TO RS.6,04,46,331/-. IN THE P ROFIT & LOSS ACCOUNT, THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.3 4,20,108/- AS DEVALUATION OF INVESTMENT IN AFS CATEGORY AND RS .10,56,975/- AS PREMIUM AMORTIZED. IN THE REVISED COMPUTATION O F INCOME, THE ASSESSEE HAS CLAIMED DEVALUATION ON THE SECURIT IES OF HTM AND AFS OF RS.6,49,23,414/-. AS SUCH, THE ASSESSEE BANK HAD TAKEN THE BENEFIT OF DEVALUATION OF AFS SECURITIES IN THEIR BOOKS OF ACCOUNTS AS WELL AS WHILE COMPUTING TAXABLE INCO ME. THE DEVALUATION OF AFS SECURITIES COULD NOT BE ALLOWED WHILE COMPUTING THE TAXABLE INCOME AND ALSO THE DEVALUATI ON OF HTM SECURITIES WAS NOT AN ALLOWABLE EXPENDITURE UNDER T HE INCOME TAX PROVISIONS AS OBSERVED BY CIT. ACCORDING TO HIM, S INCE THE ASSESSING OFFICER FAILED TO ENQUIRE INTO THE DEVALU ATION OF INVESTMENT IN AFS & HTM SECURITIES, THE ORDER PASSED BY THE ASSESSING OFFICER FOR A.Y. 2007-08 BECAME ERRONEOUS AND HENCE PREJUDICIAL TO THE INTERESTS OF REVENUE. ACCORDING LY, THE ASSESSEE WAS ASKED VIDE NOTICE DATED 20.03.2012 TO EXPLAIN A S TO WHY A REVISION ORDER U/S. 263 OF THE ACT SHOULD NOT BE PA SSED REVISING THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 143( 3) OF THE INCOME-TAX ACT, 1961 DATED 24.12.2009. 3 2.1 IN RESPONSE TO NOTICE, THE ASSESSEE FILED WRI TTEN SUBMISSION DATED 28.03.2012, INTER ALIA STATED THAT THEY HAVE NOT TAKEN ANY DOUBLE BENEFIT OF DEVALUATION OF AFS SECU RITIES, HOWEVER, SINCE THEY HAVE FOLLOWED DIFFERENT PRINCIP LE OF VALUATION. THE SECURITIES AMOUNTS DEBITED TO PROFIT & LOSS ACC OUNT AS PER RBI CIRCULAR HAVE BEEN DULY ADDED BACK WHILE COMPUT ING THE INCOME. THE ASSESSEE DOES NOT AGREED THAT THE ASSES SING OFFICER HAS ALLOWED EXCESS DEVALUATION OF SECURITIES AMOUNT ING TO RS.6,04,46,331/-. THE ASSESSING OFFICER HAD VERIFIE D ALL THE FACTS & FIGURES REGARDING THE VALUATION OF SECURITIES BY APPLYING THE PRINCIPLE OF COST OR MARKET VALUE, WHICHEVER IS LES S. THE ASSESSEE FURTHER SUBMITTED THAT IN CASE ORDER IS PREJUDICIAL TO REVENUE, BUT NOT ERRONEOUS, IT COULD NOT BE REVISED UNDER THE PR OVISIONS OF SECTION 263. THE VIEW THAT SECURITIES HELD BY THE BANK ARE IN THE NATURE OF STOCK IN TRADE WAS CONFIRMED BY VARIOUS J UDICIAL PRONOUNCEMENTS SAME WAS SUBMITTED WHEN THE REQUISIT E INFORMATION HAD BEEN FURNISHED. THE ASSESSING OFFI CER HAD COMPLETED THE ASSESSMENT AFTER CONSIDERING ALL THE FACTS. IN THIS BACKGROUND, IT COULD NOT BE SAID THAT THE ASSESSING OFFICER HAS NOT MADE PROPER ENQUIRIES, SO, ORDER OF REVISION U/ S. 263 OF I.T ACT IS NOT JUSTIFIED. HOWEVER, CIT HAVING CONSIDER ED THE SAME, HAS SET ASIDE THE ORDER PASSED BY ASSESSING OFFICER U/S. 143(3), DATED 24.12.2009 FOR A.Y. 2007-08 AND SETTING ASIDE THE ISSUE TO ASSESSING OFFICER TO EXAMINE THE ISSUE OF DEPRECIAT ION ON SECURITIES HELD TO MATURITY AND AVAILABLE FOR SALE AND TO BRING TO TAX. 3. THE SAME HAS BEEN OPPOSED BEFORE US AND VARIOUS CONTENTIONS IN THIS REGARD WAS PUT FORWARD ON BEHAL F OF ASSESSEE. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUPPORTED THE ORDER OF CIT. 4 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE ORDER PASSED U/S. 263 FOR A.Y. 2007-08 IS THE SUBJECT MATTER BEFORE US. THE BRIEFLY STATED F ACTS ARE THAT THE ASSESSEE IS A COOPERATIVE BANK. THE ASSESSEE HAS FI LED ORIGINAL RETURN OF INCOME DECLARING TOTAL LOSS OF RS.2,91,83 0/-. THEREAFTER, THE ASSESSEE FILED THE REVISED RETURN, WHEREIN, THE TOTAL LOSS DECLARED WAS OF RS.6,07,38,161/-. THE C ONCERNED ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT ORDE R ACCEPTING THE LOSS DECLARED BY THE ASSESSEE IN THE REVISED RE TURN. THEREAFTER, THE CONCERNED CIT HAS PASSED THE ORDER U/S.263, INTER ALIA, HE HAS HELD THAT THE DEVOLUTION OF LOSS OF RS. 6,04,46,331/- PERTAINING TO HTM AND AFS SECURITIES WAS NOT ALLOWABLE. ACCORDINGLY, THE CIT IN HIS ORDER HELD THAT THE DEVOLUTION LOSS PERTAINING TO HTM AND AFS SECURITIE S SHOULD HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER WHILE COMPUTING THE INCOME OF THE ASSESSEE. THE CIT HAS HELD THAT THE HTM SECURITIES WERE HELD TILL MATURITY AND AS PER RBI G UIDELINES ARE TO BE CLASSIFIED AS INVESTMENT IN BOOKS AND THEREFORE, THE SAME COULD NOT BE VALUED AT COST OR MARKET PRICE WHICHEV ER IS LESS. THE CIT HAS STATED THAT THE DEVOLUTION OF AFS AND H TM SECURITIES IS NOT ALLOWABLE EXPENDITURE. HE FURTHER STATED TH AT THE ASSESSING OFFICER HAS FAILED TO MAKE ENQUIRIES DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. ACCORDINGLY, THE ASSESS MENT ORDER WAS HELD PREJUDICIAL TO THE INTERESTS OF REVENUE. THE CIT REFERRED TO THE CBDT INSTRUCTION NO.17/208, DATED 26.11.2008 , WHEREIN, INTER ALIA MENTIONED THAT THE SECURITIES HELD UNDER HTM CATEGORY NEED NOT TO BE MARKED TO MARKET AND CAN BE CARRIED AT COST. THUS, THE CIT HELD THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS SO AS TO BE PREJUDI CIAL TO THE INTERESTS OF REVENUE, SO SAME WAS SET ASIDE. 4.1 THE STAND OF THE ASSESSEE HAS BEEN THAT IN THE RETURN, THE ASSESSEE HAS VALUED HTM AND AFS SECURITIES AT COST OR MARKET 5 PRICE WHICHEVER IS LESS. A COPY OF THE REVISED RET URN FILED BY THE ASSESSEE HAS BEEN ENCLOSED AT PAGE NO.49 OF THE PAP ER BOOK FILED ON BEHALF OF ASSESSEE. THE LEARNED AUTHORIZED REPR ESENTATIVE HAS DRAWN OUR ATTENTION TO THE ENCLOSED LETTER, INT ER ALIA, CLARIFIED THAT ALL SECURITIES WERE VALUED AT COST OR MARKET V ALUE WHICHEVER IS LESS. THE SAID CHART GIVING DETAILS OF HTM AND AFS SECURITIES VALUED AT COST OR MARKET VALUE WHICHEVER IS LESS AS ENCLOSED ON PAGES 53 TO 55 OF PAPER BOOK. THE STAND OF THE ASS ESSEE HAS BEEN THAT ALL SECURITIES OF BANK WERE STOCK IN TRAD E, THEREFORE, THE SAME SHOULD HAVE BEEN VALUED AT COST OR MARKET VALU E WHICHEVER IS LESS. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS CLARIFIED THE RELEVANT ISSUE TO THE CONCERNED ASSES SING OFFICER. A COPY OF THE SUBMISSIONS MADE TO THE CONCERNED ASSES SING OFFICER HAS BEEN PLACED AT PAGE NO.57 TO 59 OF THE PAPER BO OK FILED BY ASSESSEE. EVEN THOUGH IN THE BOOKS HTM SECURITIES VALUED AT COST FOR INCOME TAX PURPOSE, ALL SECURITIES INCLUDI NG HTM AND AFS SECURITIES WERE VALUED AT COST OR MARKET PRICE WHICHEVER IS LESS. IN THIS BACKGROUND, THE STAND OF THE ASSESSE E HAS BEEN THAT ALL RELEVANT DETAILS WERE SUBMITTED BEFORE THE ASSE SSING OFFICER IN RESPECT OF DEVOLUTION LOSS CLAIMED BY THE ASSESSEE AND THE CONCERNED ASSESSING OFFICER HAS APPLIED HIS MIND AT THE RELEVANT POINT OF TIME. 4.2 IN THE ASSESSMENT ORDER IN PARA 4 & 5, THE CONC ERNED ASSESSING OFFICER HAS DISCUSSED THE ISSUE OF DEVOLU TION LOSS CLAIMED BY THE ASSESSEE, INTER ALIA MENTIONED THAT THE ASSESSEE HAD CLAIMED DEVOLUTION LOSS AND IT WAS EXPLAINED ON BEHALF OF ASSESSEE THAT THIS LOSS WAS CLAIMED ON THE PRINCIPL E OF ALL SECURITIES HELD BY BANK WERE STOCK IN TRADE. HAVIN G ACCEPTED THE CONTENTION ON BEHALF OF ASSESSEE, THE ASSESSING OFF ICER ALLOWED THE LOSS. IN VIEW OF THE ABOVE, THE CIT WAS NOT JU STIFIED IN OBSERVING THAT THE ASSESSING OFFICER HAS NOT APPLIE D HIS MIND. MOREOVER, ALL RELEVANT DETAILS WERE SUBMITTED BY TH E ASSESSEE IN 6 THE COURSE OF ASSESSMENT PROCEEDINGS AND THE CONCER NED ASSESSING OFFICER ALSO APPLIED HIS MIND WHICH IS EV IDENT FROM THE ASSESSMENT ORDER PASSED BY HIM. SINCE THE ASSESSIN G OFFICER HAS VERIFIED THIS ISSUE AND HAS APPLIED HIS MIND, IT IS NOT JUSTIFIED TO HOLD THAT HIS ORDER WAS PREJUDICIAL TO THE INTEREST S OF REVENUE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BANK O F BARODA (2003) 262 ITR 334 (BOM) HAS HELD THAT ALL SECURITI ES HELD BY BANK WERE STOCK IN TRADE. THIS SUPPORTS THE STAND OF THE ASSESSEE. HENCE, THE ORDER PASSED U/S.263 COULD NO T BE SAID TO BE INVALID. WE ALSO FIND THAT ITAT PUNE BENCH IN T HE CASE OF LATUR URBAN COOPERATIVE BANK IN ITA NO.778/PN/2011 HAS HELD THAT ALL SECURITIES HELD BY THE BANK WERE STOCK IN TRADE. IN THE SAID CASE, THE ASSESSEE HAD SOLD HTM SECURITIES AND LOSS INCURRED WAS CLAIMED AS BUSINESS LOSS, ITAT HELD TH AT LOSS CLAIMED WAS ALLOWABLE SINCE THE HTM SECURITIES WERE ALSO STOCK IN TRADE OF BANK. HONBLE KARNATAKA HIGH COURT IN THE CASE OF KARNATAKA BANK LTD. (2013) 356 ITR 549 (KAR) INTER ALIA, HELD THAT ALL SECURITIES HELD BY THE BANK INCLUDING HTM SECURITIES WERE STOCK IN TRADE AND COULD BE VALUED AT COST OR MARKET PRICE WHICHEVER IS LESS. 4.3 AS REGARD THE CBDT CIRCULAR NO.17/208 RELIED BY THE CIT, THE STAND OF THE ASSESSEE HAS BEEN THAT THE SAID CI RCULAR WAS NOT BINDING ON THE COURTS AS HELD IN THE KARNATAKA BANK (SUPRA), WHERE, WITH REGARD TO THE SAID CIRCULAR, IT WAS HEL D THAT IN THE CASE OF BANK, ALL SECURITIES COULD BE CONSIDERED AS A STOCK IN TRADE AND THEREFORE, THE ASSESSEE HAD VALUED HTM SE CURITIES AT COST OR MARKET PRICE WHICHEVER IS LESS. ACCORDINGL Y, THE CLAIM MADE BY THE ASSESSEE WAS NOT UNTENABLE AND THE ORDE R PASSED BY THE CONCERNED CIT U/S.263 OF ACT WAS NOT JUSTIFIED. MOREOVER, ESPECIALLY WHEN IN PARA 4.2 OF HIS ORDER, HE HIMSEL F HAS ACCEPTED THAT AFS SECURITIES WERE TO BE VALUED AT COST OR MA RKET PRICE WHICHEVER IS LESS, BUT STILL HE HAS DIRECTED THE AS SESSING OFFICER 7 TO DISALLOW IN RESPECT OF AFS SECURITIES. IN VIEW OF ABOVE LEGAL DISCUSSION, THE ORDER PASSED BY CIT IS NOT JUSTIFIE D. WITHOUT PREJUDICE TO THE ABOVE, WE FIND THAT IN CASE TWO VI EWS ARE POSSIBLE ON THE ISSUE, INVOKING OF PROVISIONS OF SECTION 263 OF ACT IS NOT JUSTIFIED. ACCORDINGLY, THE ORDER OF CIT IS CANCEL LED. 5. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOW ED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 29 TH OF NOVEMBER, 2013. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 29 TH NOVEMBER 2013 GCVSR COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT-I, PUNE 4) THE DR, B BENCH, I.T.A.T., PUNE. 5) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE