STATE BANK OF INDIA, V. DCIT CEN CIR 2(2),

MA 170/MUM/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 2147 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 04-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 09-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Keywords: Bad and doubtful debts
• Section: 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDI CIAL MEMBER . / M.A . NO. 170 / MUM./20 1 3 ( . / ITA NO. 3145/ MUM./ 20 09 ) ( / ASSESSMENT YEAR : 20 06 0 7 ) STATE BANK OF INDIA FINANCIAL REPORTING, COMPLIANCE & TAXATION DEPARTMENT, 14 TH FLOOR CORPORATE CENTRE, MADAM CAMA ROAD MUMBAI 400 021 .. / APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 2(2), MUMBAI .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AAACS8577K / AS SESSEE BY : MR. GIRISH DAVE / REVENUE BY : MR. ASHOK SURI / DATE OF HEARING 0 4 .0 4 .2014 / DATE OF ORDER 04.06.2014 / ORDER , / PER AMIT SHUKLA , J.M. B Y WAY OF THIS MISCELLANEOUS APPLICATION, THE ASSESSEE SEEKS RECALL OF THE IMPUGNED ORDER DATED 6 TH JUNE 2012 , PASSED BY THE TRIBUNAL, MUMBAI BENCH, IN ASSESSEE S APPEAL BEING ITA NO. 3145 / MUM./20 09 , FOR ASSESSMENT YEAR S 20 0 6 07 , ON THE LIMITED ISSUE. STATE BANK OF INDIA 2 2 . TH IS LIMITED ISSUE RAISED IN THE PRESENT APPLICATION IS WITH RESPECT TO THE DECISION OF THE TRIBUNAL O N GROUND NO.10, 11, 12 AND 13, WHICH WAS ON ACCOUNT OF WITHDRAWAL OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF ` 405,17,20,944 , IN RELATION TO THE PROVISIONS OF STANDARD ASSETS. THE ASSESSEE HAS CONTENDED THAT IN PARA 3 OF THE IMPUGNED ORDER, THE TRIBUNAL HAS OBSERVED THAT THE FACTS AND CIRCUMSTANCES OF THIS ISSUE ARE MUTATIS MUTANDIS SIMILAR TO THOSE FOR THE PRECEDING YEAR I.E., ASSESSMENT YEAR 2005 06, WHEREIN THE TRIBUNAL HAS UPHELD THE ORDER OF THE LEARNED COMMISSIONER UNDER SECTION 263. SUCH FINDING OF THE TRIBUNAL IS NOT CORRECT AS IN THE EARLIER ASSESSMENT YEAR 2005 06, THE LEARNED COMMISSIONER HAS NOT DECIDED THIS ISSUE ON MERITS AND HAS ONLY DIRECTED THE ASSESSING OFFICER TO PASS THE FRESH ASSESSMENT AFTER GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE . W HEREAS IN THIS YEAR, THE LEARNED COMMISSIONER HAS DECIDED THIS ISSUE ON MERITS, THEREFORE, THE SAME CANNOT BE SAID TO BE COVERED BY THE FINDINGS GIVEN THER EIN AND WILL NOT APPLY MUTATIS MUTANDIS IN THIS YEAR ALSO. 3 . BEFORE US, THE LEARNED COUNSEL, MR. GIRISH DAVE, ON BEHALF OF THE ASSESSEE, SUBMITTED THAT IN THE EARLIER ORDER PASSED BY THE LEARNED COMMISSIONER UNDER SECTION 263, FOR THE ASSESSMENT YEAR 2005 0 6, THE LEARNED COMMISSIONER HAD SET ASIDE THE ASSESSMENT UNDER SECTION 263 ON ALL THE POINT RAISED BY HIM FOR RE DOING THE ASSESSMENT AS PER THE LAW WITHOUT GOING INTO THE MERITS OF THE ISSUE. THIS ORDER OF THE STATE BANK OF INDIA 3 LEARNED COMMISSIONER WAS CONFIRMED BY THE TRI BUNAL, VIDE ORDER DATED 30 TH MARCY 2012 IN ITA NO.4288/MUM./2010, ON THE GROUND THAT NO ENQUIRY OR QUERY WAS RAISED BY THE ASSESSING OFFICER ON THE ISSUES RAISED BY THE LEARNED COMMISSIONER IN HIS ORDER UNDER SECTION 263 AND, THEREFORE, THE ASSESSMENT ORDE R WAS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. THE TRIBUNAL HAS ALSO NOT GONE INTO THE MERITS OF THE ISSUE, WHEREAS, IN THE IMPUGNED ASSESSMENT YEAR, THE LEARNED COMMISSIONER IN HIS ORDER PASSED UNDER SECTION 263, HAS GIVEN A CAT EGORICAL FINDING ON THE ISSUE OF WITHDRAWAL OF DEDUCTION UNDER SECTION 36(1)(VIIA) AND HAS HELD THAT THE PROVISIONS OF DOUBTFUL DEBT WHICH INCLUDED THE SUM OF ` 405,17,20,944 WITH REGARD TO STANDARD ASSETS HAS TO BE EXCLUDED. THUS, THE TRIBUNAL, WHILE FOLL OWING THE EARLIER YEAR ORDER FOR DISMISSING THIS ISSUE IS NOT CORRECT AND IT IS A MISTAKE APPARENT FROM RECORD WHICH NEEDS TO BE RECTIFIED. HE SUBMITTED THAT THE EFFECT OF THE SAID ORDER OF THE TRIBUNAL WILL RESULT IN STRAIGHT AWAY DEDUCTION OF SUM OF ` 40 5,17,20,944, WHICH IS OTHERWISE ADMISSIBLE TO THE ASSESSEE UNDER SECTION 36(1)(VIIA). THUS, HE SUBMITTED THAT ON THIS SCORE, THE ORDER OF THE TRIBUNAL SHOULD BE RECALLED AND SHOULD BE DECIDED ON MERITS. 4 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT ONCE THE TRIBUNAL HAS GIVEN A CATEGORICAL FINDING THAT THIS ISSUE IS SIMILAR TO THE ISSUE INVOLVED IN THE ASSESSMENT YEAR 2005 06 AND NOT ONLY THIS , IT HAS ALSO BEEN RECORDED THAT IT HAS BEEN STATE BANK OF INDIA 4 CONCEDED BY THE LEARNED COUNSEL THAT THE F ACTS AND THE ISSUE INVOLVED IN THIS YEAR ARE THE SAME, THEN , IT CANNOT BE HELD THAT THERE IS A MISTAKE APPARENT FROM RECORD. THUS, HE STRONGLY OBJECTED TO RECALLING OR MODIFYING THE TRIBUNAL ORDER. 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATER IAL AVAILABLE ON RECORD. THE ASSESSEE HAD PREFERRED APPEAL BEFORE THE TRIBUNAL , CHALLENGING THE ORDER PASSED BY THE LEARNED COMMISSIONER UNDER SECTION 263, WHEREIN THE LEARNED COMMISSIONER HAS DIRECTED THE ASSESSING OFFICER TO MODIFY THE ASSESSMENT ORDER O N THE GROUNDS, WHICH WE RE AS UNDER: I. DEDUCTION OF ` 230.45 CRORES GRANTED UNDER SECTION 36(1)(II) MAY BE WITHDRAWN AS THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION NAS IT IS NOT A FINANCIAL CORPORATION WITHIN THE MEANING OF SECTION 36(1)(VIII) OF THE I T ACT, 1961. II. IT MAY BE SPECIFICALLY STATED IN THE ORDER THAT IN CASE IT IS FOUND IN APPELLATE PROCEEDINGS THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION NU/S 36(1)(VIII) THE DEDUCTION NTO BE MADE ON THE BASIS OF THE ASSESSMENT AS IT STANDS TO DAY IS ONLY ` 117.03 CRORES. III. SINCE THE PROVISION FOR BAD AND DOUBTFUL DEBTS INCLUDES A SUM OF ` 405,17,20,944, MADE WITH REFERENCE TO STANDARD ASSETS, WHICH HAS BEEN HELD TO BE NOT IN THE NATURE OF PROVISION FOR BAD AND DOUBTFUL DEBTS WITHIN THE MEANING OF SE CTION 36(1)(VIIA), ONLY THE PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY THE ASSESSEE, EXCLUDING THE ABOVE SUM, MAY BE CONSIDERED FOR DETERMINING THE DEDUCTION ADMISSIBLE UNDER SECTION 36(1)(VIIA) OF THE ACT. 6 . THE LEARNED COUNSEL, AT THE TIME OF HEARING , BROUGHT TO THE NOTICE OF THE BENCH THAT SIMILAR ISSUE AS RAISED IN POINT NO.(III), WAS ALSO INVOLVED IN THE ASSESSMENT YEAR 2005 06 , WHEREIN THE LEARNED STATE BANK OF INDIA 5 COMMISSIONER HAS EXERCISED HIS REVISIONARY JURISDICTION UNDER SECTION 263 ON THE FOLLOWING ISSUES: 1) WHILE COMPUTING THE TOTAL INCOME THE ASSESSING OFFICER REJECTED CLAIM OF BANK TO REDUCE AN AMOUNT OF ` 2,985.34 CRORES WHICH WAS CREDITED IN PROFIT & LOSS ACCOUNT ON ACCOUNT O F APPRECIATION OF SECURITIES HELD AS AFS (AVAILABLE FOR SALE) AND HFT (HELD FOR TRADING) CATEGORIES FROM TOTAL INCOME. HOWEVER, WHILE ARRIVING AT THE TOTAL INCOME THE ASSESSING OFFICER ALLOWED THE DEDUCTION OF ` 1,244.90 CRORES WHICH WAS TAXED DURING A.Y. 2001 02 TO 2004 05 OVER LOOKING THE FACT THAT HE ASSESSEE BANK HAS NOT ACCE PTED THE ADDITION MADE IN THE ABOVE ASSESSMENT YEARS. 2) IN PARA 2 OF NOTES TO THE STATEMENT OF INCOME, THE BANK HAS MENTIONED THAT THE BANK AS PER RESERVE BANK OF INDIA GUIDELINES FOR NON RECOGNITION OF INTEREST ON ADVANCES CLASSIFIED AS NON PERFORMING ASSETS (NPA) DID NOT RECOGNIZE SUCH INTEREST ON BAD AND DOUBTFUL DEBTS. THE ASSESSING OFFICER FAILED TO CONDUCT ANY ENQUIRY AS TO WHETHER THE BANK HAS FULFILLED THE CONDITIONS LAID DOWN UNDER RULE 6EA OF THE INCOME TAX RULES FOR NOT RECOGNIZING THE INTERE ST ON NPA. 3) WHILE WORKING OUT DEDUCTION U/S 36(1)(VIIA) INCLUDING THE PRUDENTIAL PROVISION ON STANDARD ASSETS OF ` 115 CRORES WAS ALSO INCLUDED. THE ASSESSING OFFICER DID NOT EXAMINE THE ISSUE IN DETAIL AS THE PROVISION IS NOT FOR BAD AND DOUBTFUL DEBT BUT FOR THE STANDARD ASSETS WHICH CANNOT BE INCLUDED FOR ALLOWING DEDUCTION U/S 36(1)(VIIA) OF THE INCOME TAX ACT, 1961. 8 . ON TH ESE ISSUE S INCLUDING POINT NO.(III), T HE LEARNED COMMISSIONER HAD THEN SET ASIDE THE ASSESSMENT FOR FRAMING IT AFRESH , WHICH HAS BEEN CONFIRMED BY THE TRIBUNAL ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND AND NO ENQUIRY WAS CONDUCTED AND, T HEREFORE, THE ASSESSMENT ORDER WA S ERRONEOUS. 9 . NOW, BEFORE US, IN THE MISCELLANEOUS APPLICATION IT HAS BEEN CONTENDED BY T HE LEARNED COUNSEL THAT THE FACTS AND CIRCUMSTANCES IN WHICH THE EARLIER ORDER WAS RENDERED WAS NO LONGER APPLICABLE FOR THE STATE BANK OF INDIA 6 REASON THAT IN THIS YEAR, THE LEARNED COMMISSIONER HAS PASSED THE ORDER AFTER DISCUSSING ON MERITS AND, THEREFORE, THE EARLIER TRIB UNAL ORDER WILL NOT APPLY IN THIS YEAR. SUCH CONTENTION OF THE LEARNED COUNSEL, FIRST OF ALL, IS NOT WELL FOUNDED F ROM OUR RECORDS, AS THERE IS A SPECIFIC NOTING IN BOTH THE FILE S, WHEREIN IT HAS BEEN CLEARLY NOTED THAT THE LEARNED COUNSEL HAS ACCEPTED THA T THE THIRD ISSUE RELATING TO THE PROVIS I ONS OF DOUBTFUL DEBTS FOR THE PURPOSE OF ALLOWANCE OF DEDUCTION UNDER SECTION 36(1)(VIIA), IS SQUARELY COVERED BY THE EARLIER ORDER OF THE TRIBUNAL WHICH IS AGAINST THE ASSESSEE. THIS FACT HAS ALSO BEEN NOTED IN OUR LOG BOOK WHEREIN , WE HAVE NOTED THAT THIS ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2005 06. THUS, AT THIS STAGE, IT IS VERY DIFFICULT TO ACCEPT THE CONTENTION OF THE LEARNED COUNSEL THAT AT THE TIME OF HEARING, HE HAS NOT ADMI TTED THIS FACT AND ON THE CONTRARY, HAS ARGUED THE ISSUE ON MERITS HIGHLIGHTING THE DISTINGUISHING FEATURES FROM THE EARLIER YEAR WITH THE ORDER OF THE IMPUGNED ASSESSMENT YEAR. THE LEARNED COUNSELS ARGUMENTS ON OTHER ISSUES HAVE BEEN VERY WELL NOTED AND DECISION HAS BEEN GIVEN ON MERITS. TH ERE IS NOTHING IN THE RECORD THAT ON THIS ISSUE, THE TRIBUNAL HAS OVERLOOKED THE ASSESSEES SUBMISSION. 10 . IT IS EXPECTED FROM THE PARTIES THAT AT THE TIME OF HEARING, CORRECT FACTS AND CONTENTIONS SHOULD BE RAISED BASED ON THE MATERIAL PLACED ON RECORD. IT IS ON THE BASIS OF THE ARGUMENTS OF THE PARTIES ON THE POINTS RAISED BY THEM, THE ISSUE S INVOLVED IN AN APP EAL IS ADJUDICATED BY THE STATE BANK OF INDIA 7 BENCH. IF THERE WAS ANY SUCH DISTINGUISHING FEATURES, AS HIGHLIGHTED AT THIS STAGE, T HE SAME OUGHT TO HAVE BEEN POINTED OUT BEFORE THE BENCH AND SHOULD HAVE BEEN ARGUED BY THE PARTIES. IT IS VERY DIFFICULT NOW TO APPRECIATE SUCH A LATE REACTION THAT TOO AFTER EXPIRY OF MORE THAN TWO YEARS OF THE PASSING OF THE ORDER. 11 . HOWEVER, IN THE INTE REST OF JUSTICE, WE HAVE TO SEE WHETHER THERE IS ANY MISTAKE APPARENT FROM RECORD WITHIN THE AMBIT OF SECTION 254(2) WHICH HAS CR E PT IN THE ORDER. AS STATED ABOVE, THE ISSUE OF ALLOWANCE OF DEDUCTION UNDER SECTION 36(1)(VIIIA) WITH REGARD TO THE PROVISIONS ON STANDARD ASSETS WAS SUBJECT MATTER OF REVISION BY THE LEARNED COMMISSIONER UNDER SECTION 263 NOT ONLY IN THIS YEAR BUT ALSO IN THE EARLIER YEAR I.E., 2005 06. FROM THE PERUSAL OF BOTH THE ORDERS OF THE LEARNED COMMISSIONER, IT IS SEEN THAT THE MAJOR DI FFERENCE IN THIS YEAR IS THAT , THE LEARNED COMMISSIONER HAS PASSED THE ORDER AFTER DISCUSSING THE SAME ON MERITS AND HAS DIRECTED THE ASSESSING OFFICER TO WITHDRAW THE DEDUCTION UNDER SECTION 36(1)(VIIA) WHEREAS, IN THE EARLIER YEAR, THE LEARNED COMMISSION ER HAS SIMPLY ASKED THE ASSESSING OFFICER TO RE DO THE ASSESSMENT ON MERITS AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, ON THIS MATERIAL DIFFERENCE ITSELF, THE EARLIER ORDER OF THE LEARNED COMMISSIONER AS WELL AS THE TRIBUNAL CANNOT BE HELD TO BE MUTATIS MUTANDIS APPLICABLE IN THIS YEAR. ACCORDINGLY, WE RECALL OUR ORDER DATED 6 TH JUNE 2012, FOR THE LIMITED PURPOSE OF DECIDING THE ISSUE RAISED IN THE MISCELLANEOUS APPLICATION STATE BANK OF INDIA 8 FOR HEARING IT AFRESH ON MERITS WHICH RELATES TO WITHDRAWAL OF DEDU CTION UNDER SECTION 36(1)(VIIA) IN RELATION TO THE PROVISIONS OF STANDARD ASSETS. THE REGISTRY IS DIRECTED TO FIX THE APPEAL IN DUE COURSE AND ISSUE NOTICES TO THE PARTIES ACCORDINGLY. 12 . 12. IN T HE RESULT, ASSESSEES MISC ELLANEOUS APPLICATION IS PARTLY ALLOWED . 4 TH JUNE 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE 2014 SD/ - . D. KARUNAKARA RAO ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 4 TH JUNE 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRI VATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI