TMI Blog2010 (2) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... ly were processed on 29.1.2003 3.12.2003. Thereafter , the AO reopened the assessments for these two assessment years after recording reasons with the issue of notice dated u/s 148 of the Act. In their written submissions the assessee submitted that the reasons recorded for reopening these assessments were not provided to the assessee and the assessee relied on the judgment of the Hon ble Apex Court in the case of GKN Driveshafts (India) Ltd vs ITO (2003) 259 ITR 19 (SC). Similar contention was raised before the ld. CIT(A), who observed in paragraph 2.4 2.3 of his order for these two assessment years that It is seen from the assessment records that reasons recorded for reopening have been shown to the authorized representative Mr. Aadil Aibda,C.A.. His signatures are there on the copy of reasons recorded . In these circumstances, especially when return was merely processed u./s 143(1) of the Act, the ld. CIT(A) rejected the grounds of the assessee in these two assessment years. The ld. AR appearing before us did not argue on this aspect any further. 3. We have heard the rival contentions and gone through the facts of the case. Admittedly, in this case after processing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not entitled to deduction on above income, under the circumstances, excessive deduction has been claimed U/s 36(1)(viii) of the Act. 3. Considering the above facts, I have the reason to believe that the income of ₹ 2,93,218/- and amount of excess claimed deduction chargeable to tax has escaped assessment for A.Y. 2003-04. Issue notice u/s 148 of the IT Act,1961 for AY 2003-04. 4. As is apparent from the aforesaid reasons, the AO reopened these assessments on the ground that provision for NPA was not admissible while the deduction u/s 36(1)(viii) of the Act was not allowable on income from other sources and thus, the assessee claimed excessive deduction. We find that Hon ble Supreme Court in their decision dated 11.1.2010 the case of M/s Southern Technologies Ltd. versus Joint Commnr. of Income Tax, Coimbatore in civil appeal no.1337 of 2003 held that provision for NPA is not deductible. Thus this issue is now settled. As regard non-supply of reasons by the AO pleaded in the written submission, we find from copy of the reasons placed in paper books that reasons were available with the assessee and in any case, in the light of findings of the ld. CIT(A), no furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. 4.1 Even the jurisdictional High Court in the case of Bharat V Patel vs. Union of india,268 ITR 116, following the decision in the case of Praful Chunilal Patel,236 ITR 832(Guj) held: Thus, in the liberalised and simplified tax collection regime, mere acceptance and acknowledgment of return and issuance of refund cannot be elevated to the status of regular assessment and formation of opinion about the incidence of tax on a particular claim or item mentioned in the return of income. And in the absence of any formation of opinion about the taxability of the non-compete fees, in the facts of the present case, there can be no question of change of opinion. On the other hand, the deeming fiction provided by Explanation 2 to section 147 of the Act imparts an added obligation in the matter of believing escapement of income. According to the aforesaid Explanation (clause (c)) even where an assessment is made, but income chargeable to tax has been under-assessed, it has to be deemed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss had been incurred wholly during the course of business by the assessee. Since the assessee is carrying on the same business as any other bank , the provisions of section 36(1)(viia) are applicable, the assessee company being a non-scheduled bank. Inter alia,the assessee relied on a judgment of the Delhi High Court in the case of CIT vs Eicher Ltd 205 CTR 469 (Del) wherein it is held that the provision for NPA is an ascertained business loss / expenditure. However, it was conceded before the ld. CIT(A) that the decision was rendered in the context of provisions of section 115J / 115JA of the Act. In the light of these submissions, the ld CIT(A) upheld the findings of the AO in the following terms in the AY 2002-03: 3.3 I have considered the submissions made by the appellant and observations of the AO. It is very clear that the assessee does not fall within the provisions of section 36(1)(viia) which applies to the scheduled bank or a non-scheduled bank. As claimed by the assessee it is not covered by the definition of non-scheduled bank as defined in clause (i) of Explanation below clause (viia) of Section 36(1). Hence, the claim is not allowable under these provisions. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Court, we have no alternative but to uphold the findings of the ld. CIT(A). Therefore, ground no.2 in both these appeals of the assessee is dismissed. 9. Next ground no.3 in these two appeals the assessee relates to confirmation of disallowance of claim u/s 36(1)(viii) of the Act. During the course of assessment proceedings, the AO asked the assessee to furnish details and documentary evidence of each of the property purchased / constructed from the advances given by it, along with applications made by the borrowers, seeking advance for this purpose. However, the assessee did not furnish the required details properly. In response to a notice u/s 133(6) of the Act, the following parties confirmed that they did not purchase any residential property with the loan received from the assessee: M/s Laxmi Hari Prints (P) Ltd ₹ 1,20,000/- M/s Ankit Sizers (P) Ltd ₹ 2,80,000/- M/s Hitech Weaves (P) Ltd ₹ 2,80,000/- Accordingly, the AO was of the view that the loans were not used for purchasing and construction of any residential house and therefore, the assessee is not eligible for making claim, as it did not fulfill the conditions stipulated u/s 36(1)(viii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding long term finance for construction or purchase of houses in India for residential purposes. On the back side of the applications of the borrowers produced before the AO, complete details of the house property for which loans had been granted were mentioned. The total numbers of borrowers at the end of the year under appeal were 194 and merely on the basis of reply of three parties, the AO cannot conclude that the loans were not given for housing purposes. Since the assessee company was providing housing finance to the backward class and poor people, who did not maintain accounts, it cannot be said that the funds were not used for purchasing / construction of houses. It was further argued that since the company is formed and registered with NHB for the purpose of carrying business of providing long term finance for construction / purchases of houses for residential purposes, the assessee was eligible for deduction u/s 36(1)(viii) of the Act. However, the ld. CIT(A) did not accept the plea of the assessee ,holding as under: 4.5 I have considered the submissions made by the appellant and observations of the A.O. It is not denied that the appellant company is formed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Since the appellant company has not bothered about any of these conditions, it cannot be said that it has provided the loans / finances for the purposes which are envisaged in Section 36(1)(viii). 4.7 As regards its arguments that as per the provisions of 36(1)(viii) all that is required is that the assessee company should only be formed and registered with the main object of carrying on business of providing long term finance for construction / purchase of residential houses is not acceptable because it cannot be said that the Act only wanted that the company should be formed and registered for the purpose but it need not adhere to those purposes. All that this provision quoted by the appellant means that while the main purpose should be providing finance for construction or purchase of residential houses, it can carry on some other business to some extent also. In view of the above, the disallowance made by the A.O. is confirmed and this ground of appeal is dismissed. 10.1 Similar findings were recorded by the ld. CIT(A) in his order for the AY 2003-04. 11. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(viii), deduction was not admissible. The copies of application for advances by various borrowers placed in paperbook on page 41 to 90 submitted before us and referred to by the ld. AR are in Gujrati . The ld. AR contended that the various borrowers requested for advance for purchase and construction of houses. Apart from copies of these applications, no evidence has been referred to before us suggesting that advances given by the assessee were indeed utilized for purchase or construction of residential houses. If an assessee claimed the benefit of deduction u/s 36(1)(viii) of the Act, the onus squarely rested upon them to satisfy the revenue authorities that they fulfilled the conditions stipulated under the said provision i.e the advances given by it were used only for the purpose of purchase or construction of residential houses. In the case under consideration, the asssessee did not establish their claim nor submitted the relevant evidence before the AO or the ld. CIT(A) that the advances given by it were indeed for purchase or construction of residential houses. Even before us situation is no better. In these circumstances, especially when there is no material before us to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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