TMI Blog2023 (3) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... e purposes of the business and allowable as deduction under section 36 (1) (iii) of the Act. It was further held that the assessee is a nationalized bank and there is no question of assessee investing in perpetual bonds other than for banking businesses. Accordingly, respectfully following the decision of the coordinate bench, we do not find any reason to sustain the order passed by the principal Commissioner of income tax, Mumbai for A.Y. 2016-17, under section 263 of the Act. Accordingly, we quash the revisionary order. Appeal of assessee allowed. - ITA No. 1024/MUM/2021 ITA No. 1025/MUM/2021 - - - Dated:- 13-2-2023 - SHRI PRASHANT MAHARISHI , AM AND SHRI PAVAN KUMAR GADALE , JM For the Assessee : Shri. S. Ananthan, Adv. For the Revenue : Dr. Mahesh Akhade, CIT Dr. ORDER PER PRASHANT MAHARISHI, AM: 01. These are the two appeals filed by Bank of Baroda (erstwhile Vijaya bank) for A.Y. 2017-18 and A.Y. 2016 17 in ITA no. 1025/Mum/2021 and ITA no. 1025/Mum/2021 against the order passed by the Principal Commissioner Of Income Tax 2, Mumbai (the learned PCIT) under section 263 of the Income-tax Act, 1961 (the Act) on 31st March, 2021 for both the years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is not prejudicial to the interest of the Revenue. Your appellants therefore suit that the order of the Pr. CIT be quashed. 1.3. The learned Pt. CIT failed to appreciate the fact that in respect of all the issues, the learned Assessing Officer has adopted one of the possible views. 1.4. Without prejudice to the above, the learned Pr.CIT erred in remanding the matter for further verification. 2. The learned Pr.CIT erred in holding that the provisions of section 43D r.w.r. 6EA applies to Non Performing Assets (NPA) which are more than 180 days. 2.1. The learned Pr. CIT failed to appreciate the fact that the Rule 6EA applies to all NPAs even if they are less than 180 days. 2.2. The learned Pr CIT failed to appreciate the fact that the interest on NPA are to be offered to tax only on realization. 2.3. Learned Pr. CIT failed to appreciate the fact that once an account is classified as NPA as per RBI norms, then the income on the same is taxable on realization basis only. 3 The learned Pr. CIT erred in holding that the Assessment order is erroneous in respect of offering to income, the guarantee commission. 3.1. The learned Pr CIT failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled on 23.01.2019 declaring nil income after adjustment of brought forward loss of Rs 509,98,17,471/- under normal provisions of the Act. The Assessment u/s 143(3) was completed on 19-02-2019 by making various additions and determining the Total Income at Rs. 2185,34,81,455/- under the normal provisions of the Act and ₹988,47,87,941/- u/s 115JB of the Act. On the basis of the examination of the records, a notice u/s 263 dated 04-02-2020 and 12.03.2020 was issued on the Appellant bank and the same was served on 11.02.2020 and 13.03.2020 respectively. In the said notice, it was alleged that the order of the learned Assessing Officer was erroneous and prejudicial to the interest of the Revenue in respect of the following items: 1. Interest on Non Performing Assets. 2. Deferred payment receipt of guarantee commission. 3. Loss on sale of assets to ARC. 4. Interest on Perpetual Bonds. 5. Provision and Contingency (Provision for NPA) treatment while computing Book Profit. The Appellant bank gave a detailed reply to the said notice. Disregarding the contentions of the Appellant bank, the learned Pr. CIT passed the impugned order holding that the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Pr. CIT erred in holding that the Assessment order is erroneous on the issue of loss on sale of assets to ARC. 4.1. The order of the learned Pr. CIT is based on surmises and conjunctures. 4.2. The learned Pr. CIT failed to appreciate the fact that the Appellant bank did not claim any loss on assets sold to ARC. 4.3. The learned Pr. CIT erred in relying on irrelevant records to remand the issue to the learned Assessing Officer. 5. The learned Pr. CIT erred in holding that the Assessment order is erroneous on the issue of interest on perpetual bonds. 5.1. The learned Pr. CIT failed to appreciate the fact that the interest on perpetual bonds is an allowable expenditure. 5.2. The learned Pr. CIT traversed beyond the Show Cause Notice in remanding the issue to the lamed Assessing Officer. 6. The learned Pr. CIT erred in holding Broken period Interest i.e., Interest paid at the time of purchase of security should be added back to the Total Income and cannot be claimed as deduction. 6.1 The learned Pr. CIT failed to appreciate the fact that Broken Period Interest need not be offered to tax as held by the Hon ble Supreme Court. 6.2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s added however while computing the book profit Under Section 115 JB of the Act same was not made. Assessee has also made provisions for unascertained liability and provision for diminution in value of asset which includes provisions for non-performing asset amounting to ₹1459.38 crores which was not added to the book profit. Accordingly, the assessment order passed by the learned Assessing Officer was found to be erroneous and prejudicial to the interest of revenue mentioned in the show cause notice. 07. Assessee submitted its reply on 17 February 2020, stating that deferred payment receipt of guarantee commission has been shown by the assessee and offered for taxation in the year of receipt itself. It was also submitted that assessee did not sell any assets to asset reconstruction company and therefore, debiting of any loss on account of this type of transaction did not arise. With respect to the interest on non-performing asset the assessee submitted that the learned assessing officer has been provided with all the details and after examining the issue he has taken a view therefore the revision cannot be made. With respect to the interest on perpetual bonds it was submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer suffers from error which are prejudicial to the interest of the revenue and therefore invoking the provisions of explanation 2 to section 263 of the Act, where the learned assessing officer has failed to make adequate enquiries, the order of the learned PCIT is sustainable in law. 011. We have carefully considered the rival contention and perused the order of the learned PCIT. Assessee has also submitted assessment order dated 30th March 2022 passed by the learned Assessing Officer being order giving effect to the order of the learned PCIT passed under section 263 of the Act dated 31st March, 2021. According to that order after consideration of various issues, ld AO made adjustment with respect to the (1) interest on non-performing assets of ₹ 1,070,737,409 and (2) interest paid on perpetual bonds of ₹ 517,083,079 only. Therefore except these two issues, even after order of the learned PCIT, no addition was made. Therefore, except the above two items there is no error which is prejudicial to the interest of the revenue. Even on the issue of interest on non-performing assets the coordinate bench in ITA No. 1685/Mum/2020, in paragraph number 4 (IB) has categorical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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