Commissioner Of Income Tax-Ltu v. Idbi Bank Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. INCOME TAX APPEAL NO. 1679 OF 2017 Commissioner of Income Tax-LTU ..Appellant Versus IDBI Bank Ltd ..Respondent ................... Mr. Tejveer Singh for the AppellantMr. Tejveer Singh for the Appellant Mr. S.R. Mody a/w Ms. Aasifa Khan for the RespondentMr. S.R. Mody a/w Ms. Aasifa Khan for the Respondent ................... CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. DATE : JANUARY 23, 2020. P.C.: 1.Heard Mr. Tejveer Singh, learned standing counsel,revenue for the appellant and Mr. S.R. Mody, learned counselfor the respondent - assessee. 2.This appeal has been preferred under Section 260A ofthe Income Tax Act, 1961 ("the Act" for short) against theorder dated 30.3.2016 passed by the Income Tax AppellateTribunal, Mumbai Bench "I", Mumbai ("Tribunal" for short) inIncomeTaxAppealNos.2365/Mum/2013and2194/Mum/2013 for the assessment year 2005-06. 3.Income Tax Appeal No. 2365/Mum/2013 was filed bythe revenue whereas the other appeal was filed by theassessee arising out of the same assessment order passedby the Assessing OfÏcer on reopening of assessment. 4.The appeal has been preferred projecting the followingquestions as substantial questions of law:-questions as substantial questions of law:- (a) Whether on the facts and in the circumstances of the case andin law, the Tribunal was right in holding the re-assessmentproceedings as bad in law despite the fact that reopening wasdone in the face of specific information received by theAssessing Officer from his counterpart at Surat; which was notavailable to him at the time of framing the originalassessment?in law, the Tribunal was right in holding the re-assessmentproceedings as bad in law despite the fact that reopening wasdone in the face of specific information received by theAssessing Officer from his counterpart at Surat; which was notavailable to him at the time of framing the originalassessment? (b) The order of Tribunal holding reassessment proceedings asinvalid be quashed and the Tribunal may be directed to decidethe other issues on merit.invalid be quashed and the Tribunal may be directed to decidethe other issues on merit. 5.For the assessment year under consideration, assessee filed return of income declaring 'Nil' income. In theassessment order passed under Section 143(3) of the Act,total income of Rs. 1796,96,08,020.00 was assessed as theincome of the assessee. 6.Subsequently, notice under Section 148 of the Act wasissued by the Assessing OfÏcer to the assessee seeking toreopen the assessment of the assessee for the assessmentyear under consideration primarily on three grounds. Thefirst ground was that an amount of Rs. 105,06,70,665.00 hadto be added back to the book profit of the assessee underSection 115JB of the Act which amount was not disclosed bythe assessee in the original return of income and thus,escaped assessment. The second ground was that assesseehad paid Rs. 23,94,249.00 as MICR charges to MICR Centremanaged by State Bank of India at Surat but has notdeducted TDS on such charges under Section 194J of the Act.Therefore, Assessing OfÏcer was of the view that there wasfailure on the part of the assessee in not adding back theaforesaid amount to the total income of the assessee underSection 40(a)(ia) of the Act. The third ground was thatassessee had paid Rs. 58,94,437.00 to one Ratnakar Shetty,proprietor of M/s. Ratna Caterers but the assessee had failedto deduct TDS on such payment. Therefore, AssessingOfÏcer stated that he had reasons to believe that there wasfailure on the part of the assessee in not adding back the said amount to the total income under Section 40(a)(ia) ofthe Act. Therefore, Assessing OfÏcer expressed the viewthat income had escaped assessment due to failure on thepart of the assessee which therefore, necessitated reopeningof assessment. said amount to the total income under Section 40(a)(ia) ofthe Act. Therefore, Assessing OfÏcer expressed the viewthat income had escaped assessment due to failure on thepart of the assessee which therefore, necessitated reopeningof assessment. 7.The assessee submitted his response to the noticeissued and furnished explanation. However, AssessingOfÏcer did not accept the explanation furnished by theassessee and added the aforesaid amounts to the totalincome of the assessee vide his assessment order dated15.9.2011 passed under Section 143(3) read with Section147 of the Act. 8.Assessee preferred appeal before the Commissioner ofIncome Tax (Appeals)-24, Mumbai. By the appellate orderdated 12.12.2012, Commissioner of Income Tax (Appeals)set aside addition of Rs. 23,94,249.00 as well as Rs.58,94,437.00 which amounts were added to the total incomeof the assessee by the Assessing OfÏcer on the ground offailure to deduct TDS on such payments but upheld the addition of Rs. 105,06,70,665.00 9.Against the aforesaid order of Commissioner of IncomeTax (Appeals) dated 12.12.2012, revenue preferred IncomeTax Appeal No. 2365/Mum/2013 whereas assessee preferredIncome Tax Appeal No. 2194/Mum/2013 before the Tribunal.Tribunal took up the appeal filed by assessee first and bythe impugned order dated 30.3.2016 held that the noticeissued for reopening of assessment itself was not sustainableand therefore, reopening of assessment was declared asinvalid. Consequently, appeal filed by the revenue wasrendered redundant. 10. Aggrieved, revenue is in appeal before us. 11. Submissions made by learned counsel for the partieshave been considered. 12. At the outset, we may advert to the three additionsmade by the Assessing OfÏcer in the assessment order onreopening of assessment. 13. In so far addition under Section 115JB of the Act isconcerned, the finding of the Assessing OfÏcer is as under:- "5.1The submission of the assessee has been considered but notacceptable. As per provisions of Sec. 115JB, amount of expenditurerelatable to any exempt income if debited to profit and loss accountshall be added back. It is seen that as per CIT(A) order dated31.3.2009, the expenses disallowable u/S. 14A have been computedat Rs. 106,26,80,655/- hence the amount of Rs. 105,06,70,665/- hasto be added back to book profits u/s 115JB (Rs. 1,20,09,990/- havingbeen added back already in book profits returned by the assessee).In view of this, amount of Rs. 105,06,70,665/- is added back tobook profits u/S. 115JB of the IT Act, 1961." 14. As already discussed above, Commissioner of IncomeTax (Appeals) had upheld the aforesaid addition made by theAssessing OfÏcer. 15. In the course of hearing, learned counsel for therespondent has placed before us a copy of order dated10.2.2015 passed by this Court in Income Tax Appeal No.337 of 2013, Commissioner of Income Tax-8 Vs. M/s.Bengal Finance & Investments Pvt Ltd, wherein a similarquestion arose for consideration. In the said decision, it wasnoted that Tribunal's decision in the case of M/s. EssarTeleholdings Ltd Vs. DCIT[1], that an amount disallowed 1ITA No. 3850/Mum/2010 under Section 14A of the Act cannot be added to arrive atthe book profit for purpose of Section 115JB of the Act, wasnot interfered by this Court when the appeal filed by therevenue i.e Income Tax Appeal No. 438 of 2012 wasdismissed on 7.8.2014. Following the aforesaid decision, thisCourt held that a substantial question of law did not arise. 1ITA No. 3850/Mum/2010 under Section 14A of the Act cannot be added to arrive atthe book profit for purpose of Section 115JB of the Act, wasnot interfered by this Court when the appeal filed by therevenue i.e Income Tax Appeal No. 438 of 2012 wasdismissed on 7.8.2014. Following the aforesaid decision, thisCourt held that a substantial question of law did not arise. 16. Reverting back to the second addition made by theAssessing OfÏcer regarding MICR charges of Rs.23,94,249.00, the assessee in its reply stated that therewere decisions of the Tribunal in various places that insimilar transaction, there was no obligation to deduct tax atsource. Therefore, the basic issue of whether tax isdeductible at source on MICR charges is debatable. Thissubmission of the assessee was simple brushed aside by theAssessing OfÏcer as not accepted. After referring to theprovisions of Section 40(a)(ia) of the Act, Assessing OfÏcerheld that assessee failed to deduct TDS on MICR charges andtherefore, the aforesaid amount was added back to theincome of the assessee under Section 40(a)(ia) of the Act. 17. At this stage, we may also revert back to the thirdaddition made by the Assessing OfÏcer under the sameprovision i.e under Section 40(a)(ia) of the Act. As alreadyreferred to herein above, an amount of Rs. 58,94,437.00 wasadded back to the income of the assessee on the ground thatassessee failed to produce proof of deducting TDS on theaforesaid payment made to Ratnakar Shetty, proprietor ofM/s. Ratna Caterers. 18. Assessee in its reply had clearly stated that assesseehad deducted tax at source and paid into governmentaccount, details of which were provided in the reply.Assessee also stated that the detailed information wasgathered from the record of the bank and submitted copiesof internal vouchers showing deduction of tax at source onsuch payment. Assessing OfÏcer declined to accept thesubmission of the assessee by contending that merefurnishing copies of internal vouchers showing deduction oftax at source on some payments did not discharge the onusof the assessee. 19. These two additions had already been deleted by theCommissioner of Income Tax (Appeals). In further appeal bythe respondent, Tribunal held that the reasons given by theAssessing OfÏcer were not sufÏcient to frame notice forreopening a concluded assessment beyond the period of fouryears and declared such notice as invalid. Tribunal held asunder:- "11.The 2nd Proviso of section 147 specially referred in respect ofthose cases including financial interest which are located outside inIndia, chargeable to tax and escaped assessment for any AY.However, the 1st Proviso attached with section clearly cast a dutymandate on the AO to find out if the particular word disclosed fullyand truly necessary for his assessment for that AY, the reasonsrecorded by the AO “the words absolutely missing in para-4 & 5 ofthe reasons recorded that as to which fact or material was notdisclosed by the assessee in its return of income”. 12.Admittedly, there is no details given by AO as to which the factor material was not disclosed by the assessee which lead to escapeassessment. Merely referring a bald assertion that “I have reason tobelieve that it is a failure of assessee part or not to add back theamount of Rs. 58,94,437/- to the total income u/s. 40(a)(ia) of theAct” is not sufficient to frame notice for re-opening concludedassessment beyond the four years. Thus the notice (impugned noticeu/s. 48 is bad in law) and does not qualify a sustainable notice underthe scrutiny of law, hence, the legal ground raised by the assessee isallowed and the re-opening of assessment is declared as invalid." 20. We are in agreement with the view expressed by theTribunal as above. Since the very foundation of re-assessment was struck down, the revenue's appeal assailingthe two deletions was rendered redundant. 20. We are in agreement with the view expressed by theTribunal as above. Since the very foundation of re-assessment was struck down, the revenue's appeal assailingthe two deletions was rendered redundant. 21. Nonetheless, since the revenue is in appeal before us,we may examine the same even at this stage. In so far thesecond deletion is concerned, it is evident that the basicissue as to whether tax is deductible at source on MICRcharges itself is debatable. Assessee had referred to severaldecisions of the Tribunal including a coordinate bench atMumbai wherein it was held that there is no obligation todeduct tax at source in such a transaction. When that is theposition, we fail to understand as to how the AssessingOfÏcer could invoke jurisdiction under Sections 147/148 ofthe Act. Therefore, the first appellate authority was justifiedin deleting such addition. Regarding the third deletion, it isquite evident that assessee had disclosed details of TDSmade from the payments to the caterer. Such informationwas furnished from the record of the bank where paymentswere made and in support of the payments, internal vouchers were furnished. If the Assessing OfÏcer had anyfurther doubt in this regard, he could have very well verifiedthe record of the bank by issuing notice to the bank inquestion. Thus, the addition made by the Assessing OfÏcerwas rightly deleted by the first appellate authority. 22. Therefore, Assessing OfÏcer was not justifying in takingthe view that assessee had failed to disclose fully and trulyall material facts for the purpose of assessment of his incomefor the assessment year under consideration and theTribunal is correct in taking the view that Assessing OfÏcercould not have issued notice to reopen the concludedassessment in the facts and circumstances of the case. 23. Therefore, on a thorough consideration of the matter,we do not find any error or infirmity in the view taken by theTribunal. No substantial question of law arises in the appeal. 24. Appeal is accordingly dismissed but there shall be noorder as to costs. [ MILIND N. JADHAV, J. ] [ UJJAL BHUYAN, J. ]