SYNDICATE BANK V. THE DEPUTY COMMISSIONER OF INCOME TAX

WP/46976/2014

AI Insights

Syndicate Bank filed writ petitions against the Deputy Commissioner of Income Tax and others, challenging the reassessment notices issued under Section 147/148 of the Income Tax Act. The bank argued that the reassessment was based on a mere change of opinion and lacked new material, thus was impermissible. The court referenced the CBDT Circular No.18/2015 and a similar case involving Corporation Bank, where it was held that income from investments made by banks is part of the business of banking and should not be reassessed under different heads without substantial new evidence. The court found in favor of the bank, quashing the reassessment notices.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 697926 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 17-07-2017
• Assessment Year: misc
• Other Referred Cases: Corporation Bank Vs. The Assistant Commissioner of Income-tax, Circle 2(1), Mangalore
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: E R INDRAKUMAR
• Assessee Lawyers: P KUMAR
• Keywords: Income Tax; Jurisdiction; Limitation; Reassessment; CBDT Circular No.18/2015
• Section: 147; 148

Judgement Text

" 1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 17TH DAY OF JULY, 2017 BEFORE THE HON’BLE Dr. JUSTICE VINEET KOTHARI WRIT PETITION No.46976/2014 (T-IT) C/W WRIT PETITION No.46977/2014 (T-IT) BETWEEN SYNDICATE BANK, HEAD OFFICE, ESHWAR NAGAR, MANIPAL-576 104, REP. BY ITS ASSISTANT GENERAL MANAGER MR. R. RAMALINGAM … PETITIONER (COMMON IN BOTH PETITIONS) (BY SRI.. P. KUMAR, SENIOR COUNSEL FOR SRI. T. SURYANARAYANA, ADV.) AND 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, AAYKAR BHAVAN, UDUPI-MALPE ROAD, UDUPI-576 103 2. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1, UDUPI, C R BUILDING, Date of Order 17.07.2017 W.P.No.46976/2014 c/w W.P.No.46977/2014 Syndicate Bank Vs. The Deputy Commissioner of Income Tax & Others 2/8 N G ROAD, ATTAVARA, MANGALORE-575 001 3. THE COMMISSIONER OF INCOME TAX C R BUILDING, N G ROAD, ATTAVARA, MANGALORE–575 001 … RESPONDENTS (COMMON IN BOTH PETITIONS) (BY SRI.E. R. INDRAKUMAR, SENIOR COUNSEL FOR SRI. E. I. SANMATHI, ADV. ) THESE WRIT PETITIONS ARE FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT TO DECLARE THAT THE IMPUGNED PROCEEDINGS INITIATED BY THE R-1 UNDER SECTION 147 READ WITH SECTION 148 OF THE ACT ARE BARRED BY LIMITATION AND OPPOSED TO THE SAID PROVISIONS AND THEREFORE WITHOUT JURISDICTION. THESE PETITIONS COMING ON FOR HEARING THIS DAY, THE COURT MADE THE FOLLOWING: ORDER Mr. K. P. Kumar, Senior Counsel for Mr. T. Suryanarayana, Adv. for Petitioner Mr. E. R.Indrakumar, Senior Counsel for Mr. E. I. Sanmathi, Adv. for Respondents 1. Both the learned counsels at the Bar submit that the issue in these petitions is now covered by the decision of the co-ordinate Bench of this Court in the case of Date of Order 17.07.2017 W.P.No.46976/2014 c/w W.P.No.46977/2014 Syndicate Bank Vs. The Deputy Commissioner of Income Tax & Others 3/8 Corporation Bank Vs. The Assistant Commissioner of Income-tax, Circle 2(1), Mangalore, in W.P. No.30820/2015 a/w W.P. No.27355/2015 (T-IT) rendered on 11.01.2016, wherein the Co-ordinate Bench of this Court relying upon the CBDT Circular No.18/2015 issued on 02.11.2015, had quashed the impugned reassessment notices under Section 147/148 of the Income tax Act,1961 and the order passed by the Co- ordinate Bench is quoted below for ready reference, in which the Circular Ni.18/2015 itself is quoted in extenso:- “ORDER Heard the learned Senior Advocate Shri K P Kumar appearing for the petitioner and the learned Standing Counsel for the revenue Shri K V Aravind. 2. These petitions are disposed of by this common order. The petitioners’ regular assessments were concluded by assessment orders dated 08.02.2012 and 21.03.2011 for the years 2010-11 and 2009-10 respectively. Date of Order 17.07.2017 W.P.No.46976/2014 c/w W.P.No.46977/2014 Syndicate Bank Vs. The Deputy Commissioner of Income Tax & Others 4/8 Subsequently, the first respondent is said to have issued notices under Section 148 proposing to reassess the petitioners for the assessment years concerned on the ground that certain income was found to be escaped income. The reasons assigned were not indicated as the basis for reopening of the assessment. It was learnt that the income occurring from investments made by the petitioners banks other than what were not made by the Statutory Liquidity Ratio (‘SLR’ for brevity) was held not related to the business of banking, and that, the said income ought to have been taxed under the head ‘income from other sources’ as against business income. Therefore, the first respondent sought to disallow an interest expense of a large sum of money. The above reassessment proceedings having been initiated on a mere change of opinion, according to the learned Senior Advocate, was not permissible under Section 147 of the Act. All the details regarding investment portfolio of the petitioner for the year in Date of Order 17.07.2017 W.P.No.46976/2014 c/w W.P.No.46977/2014 Syndicate Bank Vs. The Deputy Commissioner of Income Tax & Others 5/8 question, including the annual report of the petitioner for the year ended 31.03.2010, necessary for one to have to come to any conclusion as regards non – SLR securities had been furnished to the first respondent at the time of the original assessment. This had been examined in detail and having applied his mind to the said question, had formed an opinion that no disallowance was necessary on that account. There was no new material that has come to the knowledge of the first respondent after the original assessment. Therefore the changed opinion having been under review of assessment was wholly impermissible. It is in this background that the petitions are filed. 3. However, even during pendency of these petitions the Ministry of finance, Government of India, Directorate of Income Tax had issued a circular bearing No.18/2015 which reads as follows: “ It has been brought to the notice of the Board that in the case of Banks, field Date of Order 17.07.2017 W.P.No.46976/2014 c/w W.P.No.46977/2014 Syndicate Bank Vs. The Deputy Commissioner of Income Tax & Others 6/8 officers are taking a view that, “expenses relatable to investment in non-SLR securities need to be disallowed u/s 57(i) of the Act as interest on non-SLR securities is income from other sources.” 2. Clause (id) of sub-section (1) of Section 56 of the Act provides that income by way of interest on securities shall be chargeable to income-tax under the head “Income from Other Sources”, if, the income is not chargeable to income-tax under the head “Profits and Gains of Business and Profession”. 3. The matter has been examined in light of the judicial decisions on this issue. In the case of CIT vs. Nawanshahar Central Cooperative Bank Ltd., (2007) 160TAXMAN 48(SC), the Apex Court held that the investments made by a banking concern are part of the business of banking. Therefore, the income arising from such investments is attributable to the business of banking falling under the head Date of Order 17.07.2017 W.P.No.46976/2014 c/w W.P.No.46977/2014 Syndicate Bank Vs. The Deputy Commissioner of Income Tax & Others 7/8 “Profits and Gains of Business and Profession”. 3.2 Even though the abovementioned decision was in the context of co-operative societies/Banks claiming deduction under Section 80P(2)(a)(i) of the Act, the principle is equally applicable to all banks/commercial banks, to which Banking Regulation Act, 1949 applies. 4. In the light of the Supreme Court’s decision in the matter, the issue is well settled. Accordingly, the Board has decided that no appeals may henceforth be filed on this ground by the officers of the Department and appeals already filed, if any, on this ground before Courts/Tribunals may be withdrawn/not pressed upon. This may be brought to the notice of all concerned.” 4. In view of the above, the learned Senior Advocate would submit that the petitions would have to be summarily allowed Date of Order 17.07.2017 W.P.No.46976/2014 c/w W.P.No.46977/2014 Syndicate Bank Vs. The Deputy Commissioner of Income Tax & Others 8/8 and the notices issued by the respondent No.1 would have to be quashed. 5. The learned Standing counsel would have no comment on this aspect of the matter as the circular is plain in its language. Accordingly, the petitions are allowed in terms of the above said circular and the impugned notices are quashed. Sd/- (Dr. VINEET KOTHARI) JUDGE” 2. Accordingly, both these petitions are allowed and the impugned notices under Section 147/148 of the Income Tax Act issued for Assessment Years 2007-2008 and 2008- 2009 (Annexure-B dated 28.03.2014 and Annexure-F dated 02.09.2014), are quashed. No Costs. Sd/- JUDGE KGR "