Ita/194/2009 Of M/S.catholic Syrian Bank Ltd v. The Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM MONDAY, THE 3RD AUGUST 2009 / 12TH SRAVANA 1931 ITA.No. 194 of 2009() --------------------- ITA.188/COCH/2003 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT: -------------------- M/S.CATHOLIC SYRIAN BANK LTD, REPRESENTED BY ITS CHAIRMAN SRI.N.R.ACHAN, AGED 61,SON OF SRI.LATE PADMANABHA MENON, ST.MARY'S COLLEGE ROAD, POST BOX NO.502,THRISSUR - 680 020. BY ADV. SRI.K.VINOD CHANDRAN SRI. SARANGAN RESPONDENT(S): --------------- THE COMMISSIONER OF INCOME TAX, CIRCLE 1 (1), TRICHUR. ADV. SRI. JOSE JOSEPH, S.C. FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 03/08/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & C.K.ABDUL REHIM, JJ. ------------------------------- I.T.A. No. 194 of 2009 --------------------------------- Dated this the 3[rd] day of August, 2009 J U D G M E N T ---------------------- Ramachandran Nair,J. This is an appeal filed by the assessee Bank against theorder of the Tribunal confirming the order issued by the CITunder Section 263 of the Income Tax Act directing the AssessingOfficer to make proportionate disallowance in respect ofexpenditure incurred on items of income which do not form partof total income under Section 14A of the Income Tax Act. Wehave heard senior counsel Sri.Sarangan appearing for theappellant. 2.The appellant is a Bank, the assessment of which wascompleted by Assessing Officer for the year 1997-98 withoutmaking pro-rata disallowance in respect of expenditure incurredon items of income which do not form part of total income asprovided under Section 14A of the Act. Assessee filed appealagainst the assessment on some other issues and the CIT(Appeals) allowed the appeal in part and remanded the case forrevision of assessment by Assessing Officer. In between, the CIT noticed that the Assessing Officer has not taken into accountSection 14A while completing the original assessment andtherefore by order issued under Section 263 he directed pro-ratadisallowance in terms of Section 14A. Against this order issuedunder Section 263 the assessee filed appeal before the Tribunalwhich dismissed the appeal. Appellant has come before us inthis appeal mainly contending that under CBDT Circular No.11dated 23.11.2000 concluded assessment could not be re-openedfor purpose of disallowance under Section 14A of the Income TaxAct. The senior counsel appearing for the appellant contendedthat the assessment has become final as it was completed on23.11.2000 whereas Section 14A was introduced by Finance Act2001 though with retrospective effect from 1.4.1992. On factswe notice from Tribunal's order that assessment in this case wasnot concluded for the reason that it was directed to be modifiedin appeal filed by the assessee itself by orders of the firstappellate authority namely CIT (Appeals). In fact theCommissioner has issued a suo moto order under Section 263directing pro-rata disallowance of expenditure incurred inrespect of items of income which do not form part of the totalincome of the assessee when the assessment was pending beforethe officer for finalisation based on the orders of the first appellate authority on other issues. So much so Tribunal tookthe view that assessment has not been concluded as on the dateCommissioner passed order under Section 263 and so much socircular does not bar proceedings for disallowance under Section14A. We are of the view that the Tribunal rightly held that anassessment pending finalisation after remand by first appellateauthority in appeal filed by the assessee cannot be said to be aconcluded assessment. Besides this, we notice that Section263(2) of the Income Tax Act authorises Commissioner toscrunitise every assessment and to order revision of assessmentto the extent such orders are prejudicial to the interest of theRevenue within two years from the end of the financial year inwhich assessment was made. In this case the commissionerissued orders within the time prescribed under Section 263(2) ofthe Act. An assessment which could be modified by a higherauthority cannot be said to have become final or concluded untilexpiry of the statutory time provided for such orders because itis always subject to revision by higher authority within the timestipulated under the statute. So much so we feel the circularprohibits against modification of assessment for the purpose ofpro-rata disallowance under Section 14A only when time limit formodification of assessment by original authority or revisional authority is over. In other words circular applies only to caseswhere assessment otherwise cannot be modified by any authorityunder the provisions of the Act. There is no dispute thatamendment is retrospective and on merits appellant has no casethat commissioner's order is against any statutory provision. It istherefore open to the assessee to furnish details so thatdisallowance is limited to the actual pro-rata expenditureallowed in original assessment which is attributable to the itemsof income which do not form part of total income. We thereforedismiss the appeal filed by the appellant. C.N.RAMACHANDRAN NAIR, JUDGE. C.K.ABDUL REHIM, JUDGE. okb