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TMI Blog2020 (7) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Brief facts are, the assessee is a Co-operative Society engaged in banking business. For the assessment year under consideration, the assessee filed its return of income on 31st October 2005, declaring total income at nil after claiming deduction under section 80P(2) of the Act. The assessment in case of the assessee was completed under section 143(3) of the Act vide order dated 22nd June 2007, accepting the income returned by the assessee. Subsequently, the Assessing Officer alleging escapement of income re-opened the assessment under section 147 of the Act by issuing notice under section 148 of the Act which was served on the assessee on 29th March 2012. During the re-assessment proceedings, the Assessing Officer noticed that the assessee had claimed amortization of premium on Government security held in three categories - (i) Held To Majority, (ii) Held For Trading (HFT) and (iii) Available For Sale (AFS). On a query made, the assessee submitted that the Government securities were held in different categories, as above, in accordance with guidelines prescribed in Reserve Bank of India's master circular dated 17th July 2004. It was claimed by the assessee that HTM securities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the assessee's income, the same will result only in increasing assessee's income from business. Therefore, the assessee would be entitled to avail deduction under section 80P(2)(a)(i) of the Act in respect of such enhanced income. Accordingly, learned Commissioner (Appeals) directed the Assessing Officer to allow deduction under section 80P(2)(a)(i) of the Act on the enhanced income of the assessee due to disallowance. 6. We have considered rival submissions and perused the material on record. At the outset, we will address the issue relating to the validity of assessment under section 147 of the Act. Undisputedly, for the assessment year under dispute, the assessee had filed its return of income within the prescribed time provided under section 139(1) of the Act. It is also a fact on record that the return of income filed by the assessee was selected for scrutiny and in the course of assessment proceedings, the Assessing Officer called for various information and details regarding the income earned, expenditure incurred as well as deduction claimed under section 80P(2) and other provisions of the Act. After examining all the details and making necessary enquiry, the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considering all the aspects relating to the issue, the Assessing Officer had allowed assessee's claim. Therefore, it is established beyond doubt that the re-opening of assessment is not on the basis of any tangible material but on a mere change of information. Further, though the Assessing Officer has re-opened the assessment after expiry of four years there is no allegation either in the assessment order or anywhere else stating that the escapement of income was due to failure on the part of the assessee to disclose all material facts relating to his income truly and correctly. Accordingly, the condition enshrined in section 147 of the Act is not fulfilled. For the aforesaid reasons, we agree with learned Commissioner (Appeals) that the re-opening of assessment under section 147 of the Act in the present case is invalid. 7. Having held so, now we will proceed to decide the issue on merits. As discussed earlier, the Assessing Officer has disallowed the amortization of premium paid on Government securities on the ground that it relates to STM category, hence, capital in nature. However, we find that the aforesaid issue relating to claim of amortization was subject matter of dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the view that proportionate expenditure attributable towards earning of such income has to be disallowed under section 14A of the Act, the Assessing Officer proceeded to compute the disallowance on a proportionate basis which worked out to Rs. 66,74,594. The assessee contested the aforesaid disallowance before learned Commissioner (Appeals). 12. After considering the submissions of the assessee, the learned Commissioner (Appeals) deleted the addition. 13. Drawing our attention to the observations of the Assessing Officer, the learned Departmental Representative submitted, since the assessee has earned exempt income during the year, expenditure attributable to earning of such income has to be disallowed under section 14A of the Act. Further, he submitted, let such disallowance be made by adopting the methodology prescribed under rule 8D. 14. Per contra, the learned Authorised Representative submitted, the disallowance computed by the Assessing Officer is purely on ad-hoc basis. He submitted, for earning the dividend income, the assessee has not incurred any expenditure. He further submitted, no interest expenditure was incurred by the assessee as the investments were made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reason only the appeal order could not be pronounced within the period of 90 days. Being faced with a similar situation the Tribunal in case of DCIT V/s JSW Limited, ITA Nos.6264 & 6103/Mum/2018, dated 14th May 2020, after interpreting rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963 as well as various decisions of the Hon'ble Supreme Court as well as the Hon'ble Jurisdictional High Court held that due to the extraordinary situation prevailing due to the pandemic, the lockdown period has to be excluded for the purpose of limitation in respect of pronouncement of order as per rule 34(5). The relevant observation of the Bench in this regard is reproduced hereunder for better clarity:- "7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows: (5) The pronouncement may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light revert to the prevailing situation in the country. On 24th March, 2020, Hon‟ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon‟ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon‟ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon‟ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed "while calculating the time for disposal of matters made timebound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly". The extraordinary steps taken suo motu by Hon‟ble jurisdictional High Court and Hon‟ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words "ordinarily", in the light of the above analysis of the legal position, the period during which lockout w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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