9911796707
TMI Blog2014 (2) TMI 1123X X X X Extracts X X X X X X X X Extracts X X X X ..... es as stock-in-trade? 2. The assessee herein is a Nationalised Bank engaged in the business of banking as defined under the Banking Regulations Act. The assessee filed its return originally on 31.12.1990, the assessement under Section 143(3) of the Income Tax Act was completed on 26.03.1993, applying the provisions of Section 115-J of the Income Tax Act. In the course of assessment proceedings for the subsequent year, it was noticed that the assessee had made payments through M/s.Chandrakala & Co., under various demand drafts payable to the Public Sector Undertakings (PSUs); the payments being by way of additional interest on deposits during the previous years relevant to the assessment years 1990-91, 1991-92, 1992-93 & 1993-94; these claims were as per adjustments of interest at higher rate payable to the PSUs from what was prescribed under the guidelines of Reserve Bank of India. Originally, the payment made through M/s.Chandrakala & Co., under various demand drafts to the PSUs, were accepted for deduction. However, in the assessments made for the assessment years 1992 to 1994, these payments were held as illegal and contrary to the RBI guidelines. Consequently, they were added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the interest received for the broken period was assessed under Section 28 of the Income Tax Act. Thus, the claim of the assessee was accepted by the Department for all the assessment years (1991-92 to 1993-94) and the decision in the case of CIT vs.,M/s.Vijaya Bank reported in 187 ITR 541, was not applicable to the assessee's case. The Assessing Officer however rejected the assessee's contention and confirmed the proposal as contained in the notice issued under Section 148 of the Income Tax Act. 6. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals) and reiterated the grounds. The Commissioner of Income Tax (Appeals), however, rejected the objections on the jurisdiction of the Officer to reopen the assessment and thus upheld the reopening of the assessment. However on the broken period interest, the Commissioner of Income Tax (Appeals) followed the order passed for the assessment year 1991-92 and directed the Assessing Officer to disallow the broken period interest, in respect of permanent securities, held as investment and allowed the broken period interest, in respect of current securities held as stock-in-trade. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, the reassessment proceedings was valid. It pointed out that the assessee had artificially bifurcated the purchase consideration and claimed a part as Revenue expenditure and this was not disclosed in the Audit report nor by the Director's report, consequently, there was non-furnishing of full and true particulars. Thus, the issue was held against the assessee. Such view was taken in respect of those assessments, which were original assessments, which related to the subsequent period. 11. The Income Tax Appellate Tribunal further pointed out that the investment portfolio of the Bank would normally consists of both approved securities predominantly Government securities, others, (shares, debentures and bonds). The investment securities should be bifurcated into permanent and current investments and permanent investments are those which banks are to hold till maturity, and current investments are those which the assessee could deal on day to-day basis. As per RBI guidelines, bank should not keep more than 70% of the investments in permanent category from the accounting year 1992-93. Since the Assessing Officer had not made any enquiry as to how the Bank had bifurcated permane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of extra interest through M/s.Chandrakala & Co to various PSUs as entitled for deduction. It was found that the amount paid to the PSUs were properly accounted for disclosing therein before the Income Tax Authorities. This Court also referred to the judgment of the CBI Court relating to the prosecution taken on the Managing Director and other bank officials as regards the payment of additional interest. Referring to the circular issued by the RBI, we held that such payment was not opposed to the RBI circular, consequently the decision given on 30.10.2012, in T.C.(A).No.455 of 2008, would cover this issue in favour of the assessee. 14. As far as the payment of broken period interest is concerned, Learned counsel appearing for the assessee pointed out that the decision in CIT vs. M/s.Vijaya Bank reported in 187 ITR 541, which was rendered on 19th September, 1990, was very much available to the Assessing Officer, when he passed the assessment order under Section 143(3) on 26.03.1993. Thus, according to the assessee, the decision being well within the knowledge of the Assessing Officer, the question of reopening the assessement did not arise. 15. Leaving that aside for the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptual difference between power to review and power to reassess and the Apex Court observed as follows:- 6....The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n materials available at the hands of the Revenue. Thus, the issue raised comes directly under the decision of the Apex Court reported in 320 ITR 561, referred to above and we have no hesitation in accepting the assessee's contention that on a mere change of opinion, the assessment for the assessment year 1990-91 was sought to be revised under Section 147 of the Income Tax Act, a course which has been denounced upon by the Apex Court; consequently, we hold that the proceedings initiated suffer from want of jurisdiction. 20. We may further point out that the Supreme Court in the case of ESS ESS Kay Engineering Co. P. Ltd. vs. Commissioner of Income Tax, reported in 2001 ITR 818, held that reopening of assessment for an earlier assessment year based on the findings of fact made on the basis of fresh materials in the course of assessment of the next year was well within the scope of Section 147 of the Income Tax Act. Considering the fact that, in the case on hand, no fresh materials were stated to have been considered for the subsequent assessment years, we agree with the assessee's contention that there is total lack of jurisdiction under Section 147 of the Income Tax Act to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee's case is concerned, the securities thus subscribed are part of its business and this was for the purpose of maintaining statutory liquidity ratio and thus the fact that they were classified as permanent and current investments for the purposes of complying with the Banking Regulations would not make nevertheless the investment a permanent one to deny the assessee, claim for deduction. 24. Learned counsel appearing for the assessee pointed out that the interest received in respect of these securities for the broken period were assessed under Section 28 of the Income Tax Act and taking note of this alone, this Court had already decided the issue in favour of the assessee in T.C.(A).No.455 of 2008, dated 30.10.2012. She pointed out that in denying the assessee's claim for deduction, no fresh materials were placed by the Revenue to embark on Section 147 proceedings. She also placed before this Court the circular issued by the RBI, dated 04.08.1998, which referred to some of the banks capitalizing the broken period interest included in the cost price on the ground that such accrued interest paid to the seller at the time of purchase was not recognised as a revenue expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meters of Section 147 of the Income Tax Act. In the light of the aforesaid view, we set aside the order of the Income Tax Appellate Tribunal and there were no materials which would clothe the Assessing Officer, the right jurisdiction to reopen the assessment. 27. This leaves us with only one question, namely, the levy of additional tax. Learned counsel appearing for the assessee pointed out that the Income Tax Appellate Tribunal rejected the claim of the assessee on the correctness of the levy of the additional tax on the ground that the claim did not arise out of the assessment year. She pointed out that the additional tax levy was demanded in the assessment order, hence, the appeal was maintainable. 28. We find that the question of additional tax levy was considered under Section 143(1A) of the Income Tax Act originally in the 143(1)(a) proceedings against which the assessee is stated to have filed an appeal also before the Income Tax Appellate Tribunal. In the background of this, the Assessee raised an issue before the Commissioner of Income Tax (Appeals) that the additional tax levy originally was on the basis of computation under Section 115J of the Income Tax Act and the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
