Ita/514/2007 Of The Commissioner Of Income Tax v. M/S Canara Bank

IN THB HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 14[‘T]DAY OF FEBRUARY 2014 PRESENT THE HON'BLE MR.JUSTICE DILIP B.BHOSALE AN D THE HON'BLE MR.JUSTICE B.MANOHAR ITA NO.514/2007 BBRHIWEE 1. The Commissioner of Income-Tax, C.R. Building,|Queens Road,Bangalore. ”.. The Assistant Commissioner of Income-lTa Circle-11(2), C.R Building, Queens Road,Bangalore....Appellants (By Sri.K.V.Aravind, Advocate) AN): M/s.Canara Bank,Balance Sheet & Central Accounts Section,Head Office,113, J.C.Road,Bangalore — 560 O02..... Responde (By Sri.K.S.Ramabadran, Advocate)| This ITA filed u/S.260-A of I.T.Act, 1961 arisingout of Order dated 31-01-2007 passed in ITA No.73/Bang/2005 tor the Assessment Year 1999-00,praying that this Hon'ble Court may be pleased to: 1.formulate the substantial questions of law|stated therein,stated therein, ll.allow the appeal and set aside the order|passed by the ITAT, Bangalore in ITA No.73/Bang/20095 dated 31-01-2007 confirmingthe order of the Appellate Commissioner &confirm the order passed by the Asst.Commissioner of Income Tax, Central Circle-11(2), Bangalore, in the interest of justice)and equity.passed by the ITAT, Bangalore in ITA No.73/Bang/20095 dated 31-01-2007 confirmingthe order of the Appellate Commissioner &confirm the order passed by the Asst.Commissioner of Income Tax, Central Circle-11(2), Bangalore, in the interest of justice)and equity. This appeal coming on for hearing this day, theCourtdelivered the following: ORAL JUDGMENT (DILIP B. BHOSALE) This Income Tax Appeal is preferred by Revenueagainst the common order dated 31-1-2007 passed byIncome Tax Appellate Tribunal, Bangalore Bench ‘B’ (for short ‘the Tribunal) in ITA No.73/2005 and ITANo.94/2005 pertaining to the assessment year 1999- 2000. In the present case, we are concerned only withthe order in ITA No.73/2005. The Tribunal partlyallowed the appeal filed by the Revenue. The appealbefore the Tribunal was directed against the order dated03-11-2004 passed by Commissioner of Income Tax(Appeals) (for short 'the Appellate Authority’) whereby|the Appellate Authority set aside the order dated 30-07-2004 passed by the Assessing Officer under Section143(3) read with Section 263 of the Income Tax Act,1961 (for short ‘the Act’). 2 |We have heard the learned counsel for the partiesfor some time and with their assistance, gone throughthe orders passed by the Tribunal and the authoritiesbelow. 3.|When the appeal was admitted vide order dated 19-11-2007, substantial questions of law were notformulated by this Court. The substantial questions of law formulated in the memorandum of appeal read thus: 1.Whether the Tribunal was correct insdismissing the appeal of the revenue for|want ofpermission from the COD and not|recordingFTfindingforsubsequentrestoration of appeal on receipt of COD ’sapproval on the issue of restricting the|disallowance of expenditure under Section|14A to 2% of the dividend income through|such permission was allowed by the COD|in the assessee’s own case in this issue|for the assessment year 2004-05?dismissing the appeal of the revenue for|want ofpermission from the COD and not|recordingFTfindingforsubsequentrestoration of appeal on receipt of COD ’sapproval on the issue of restricting the|disallowance of expenditure under Section|14A to 2% of the dividend income through|such permission was allowed by the COD|in the assessee’s own case in this issue|for the assessment year 2004-05? 2.Whether the Tribunaql was correct i1upholding the order of the CIT(A) deleting|the|additionmade|OTLaccountof|disallowance of claim of ‘* bad anddoubtful debts ‘ having regard to the|provisions of explanation to clause (vit)|read with clause (via) of Section of 36(1) |of the Act?|upholding the order of the CIT(A) deleting|the|additionmade|OTLaccountof|disallowance of claim of ‘* bad anddoubtful debts ‘ having regard to the|provisions of explanation to clause (vit)|read with clause (via) of Section of 36(1) |of the Act?| 2.Whether the Tribunaql was correct i1upholding the order of the CIT(A) deleting|the|additionmade|OTLaccountof|disallowance of claim of ‘* bad anddoubtful debts ‘ having regard to the|provisions of explanation to clause (vit)|read with clause (via) of Section of 36(1) |of the Act?|upholding the order of the CIT(A) deleting|the|additionmade|OTLaccountof|disallowance of claim of ‘* bad anddoubtful debts ‘ having regard to the|provisions of explanation to clause (vit)|read with clause (via) of Section of 36(1) |of the Act?| 3.Whether the Tribunaql was correct i1upholding the order of the CIT(A) deleting|the addition on account of accrued|interest for the broken period when|similar claim for expenditure towards|interest payable on Fixed Deposits stands|claimed and allowed while computing|income of the assessee?upholding the order of the CIT(A) deleting|the addition on account of accrued|interest for the broken period when|similar claim for expenditure towards|interest payable on Fixed Deposits stands|claimed and allowed while computing|income of the assessee? 4.Whether the Tribunal was correct insdismissing the appeal of the revenue for|dismissing the appeal of the revenue for| want ofpermission from the COD and notrecording(Cfindingforsubsequentrestoration of appeal on receipt of COD’s|approval on the issue of adjustments to|book profits for the purpose of tax under|Section 115JA?| 4It appears, for the assessment year 1999-2000,the respondent-assessee i.e. Canara Bank filed return ofincome on 30-12-1999. After processing the returnunder section 143(1)(a) of the Act, the case was selectedfor scrutiny and an order under Section 143(3) was.passed on 28-03-2002. Consequently, an order undersection 263 was passed by the Commissioner of IncomeTax, Bangalore dated 10-10-2002. As per this order,the assessment under Section 143(3) was set aside andthe Assessing Officer was directed to re-do theassessment.OT)certainpoints.indicatedtherein.Accordingly, notice under Section 142(1) was issued tothe assessee calling for specific details on the issuesthat find place in the order dated 10-10-2002 passed bythe Commissioner of Income Tax, Bangalore under section 263 of the Act. It is in this backdrop, thematter once again travelled before the Assessing Officer,First Appellate Authority and then the Tribunal. TheRevenue having lost before the First Appellate Authorityand the Tribunal is before this Court in appeal undersection 260A of the Act raising the aforementionedsubstantial questions of law. 5.|Insofar as the first substantial question of law isconcerned, there does not appear to be any dispute thatduring the pendency of the appeal before the Tribunal,the Committee on Disputes (for short “COD”) refusedpermission to file an appeal before the Tribunal andhence, this question has rendered infructuous. AS amatter of fact, even before the decision of the Committeewas communicated to the Tribunal, the Tribunal had)dismissed the appeal. Mr.K.V.Aravind, learned counselappearing for the Revenue, therefore, could not and did not press the first substantial question of law anyfurther and hence it is not answered. 6. The second substantial question of law pertains todisallowance of claim of bad debts. Our attention was|invited by Mr.Aravind, learned counsel for the Revenueto the order dated 10[th]October 2OO3!passed by the.Commissioner of Income Tax, Bangalore under Section263 of the Act, wherein the following issue was framed:| The allowability of bad debts written offunder clause (vit) of Section 36(1) which arethe provision made under clause (vila) of|section S6(1). The assessing officer has|disallowed the entire bad debts of Rs.467.10crores as per the discussion in the body ofthe assessment order applying the provisions|of 36(2)(v) T |The issue was however not answered by the.Commissioner and he simply recorded that “the issue is treated as dropped after considering the assessee’ssubmissions.” There does not appear to be any dispute that the question of disallowance of bad debts was The allowability of bad debts written offunder clause (vit) of Section 36(1) which arethe provision made under clause (vila) of|section S6(1). The assessing officer has|disallowed the entire bad debts of Rs.467.10crores as per the discussion in the body ofthe assessment order applying the provisions|of 36(2)(v) T |The issue was however not answered by the.Commissioner and he simply recorded that “the issue is treated as dropped after considering the assessee’ssubmissions.” There does not appear to be any dispute that the question of disallowance of bad debts was already concluded vide order dated 28-03-2002 passedby the Assessing Officer under Section 143(3) of the Act. ©Though the order of the Assessing Officer dated 28-03-2002 was challenged in an appeal by the assesseebearing|appeal No.590/R/11/CIT(A)-1/02-03, theappeal was dismissed as infructuous. According tolearned counsel appearing for the assessee, the saidorder was passed by the Appellate Authority in view oftheorder.dated10-10-2003|passedby the Commissioner in the revision under Section 263 of the|Act. It is was not pointed out to the Appellate Authoritywhich was dealing with the appeal against the orderdated 28-3-2002 that issue No.5, as aforementioned,was not answered and it was simply dropped aiterconsidering the assessee’s submissions. Despite this,after the order of the Assessing Officer in pursuance ofthe order dated 10-10-2003 was passed under Section263 of the Act. The assessee filed an appeal before theRirst|AppellateAuthorityraisingtheissueoT| disallowanceotf baddebtsandthat|issueWaSconsidered by the First Appellate Authority on meritsand decided against the Revenue. Against that order,the Revenue filed an appeal before the Tribunal and theTribunal also confirmed the order passed by theAppellate Authority. In view of this, Mr.K.V.Aravind,learned counsel for the Revenue submitted that it was|not open to the assessee to raise an issue ofdisallowance of bad debts before the First AppellateAuthority arising from the order of assessment passedaiter the order dated 10-10-2003 passed by theCommissioner in revision under Section 263 oft the Act. In other words, he submitted that the order dated |28-03-2002 had attained finality, and therefore, it wasnot open to the Appellate Authority to consider the issueof disallowance of bad debts and allow the appeal. Thisposition, though has not been disputed by the learnedcounsel appearing for the respondent-assessee, hesubmitted that he has no objection for remand of the matter to the First Appellate Authority to consider theissue of disallowance of bad debts afresh including thecontentions urged by Mr.K.V.Aravind, learned counselfor the Revenue betore us and as recorded in this order. —We are saying so in view of the fact that when theRevenue filed an appeal against the order of the FirstAppellate Authority before the Tribunal, they had raisedthe issue as raised before us in the present appeal andbefore the Tribunal they challenged the order of theFirst Appellate Authority in respect of the disallowanceof bad debts on merits. It is in this backdrop this.substantial question of law needs to be remanded to theFirst Appellate Authority to consider it afresh. Orderaccordingly.| 8.|We keep all contentions of the parties open to beraised before the first Appellate Authority on thisquestion. 8.|We keep all contentions of the parties open to beraised before the first Appellate Authority on thisquestion. OQ Insofar as the third substantial question of law isconcerned, there does not appear to be any dispute thatthis was raised in the present appeal awaitingpermission of the COD to file an appeal before thisCourt. During the pendency of the appeal, Mr.Aravind,learned counsel appearing for the Revenue, informs theCourt that the COD refused permission to file an appealvide order dated 4-3-2008. In view thereof, the appealraising this substantial question is not maintainableand in our opinion, the question need not be answered. —At this stage, Mr.Aravind, learned Counsel for theRevenue submits that in view ot the order of the!Supreme Court in|ELECTRONICS CORPORATIONINDIA LIMITED v/s UNION OF INDIA AND OTHERS|(2011) 332 ITR 58), permission of the COD in fact wasnot required. Despite this, he could not and did notconvince us to take the matter further in view of the|Office Memorandum dated 4-2-2013 issued by theGovernment of India, Cabinet Secretariat, Rashtrapathi Bhavan, New Delhi bearing No.A-12034/01/2011-Ad.I. —Paragraphs 2 and 3 of the said memorandum read thus: 2. Instances have come to notice wherein|(OfewPSUs/Departmentshave|approached Tribunals/ Courts to re-openthe cases in which permission to litigate|was denied by CoD. In a few cases,|Public Sector Undertaking/ Departmentshave filed petitions in the High Courts. In|an isolated case, a Special Leave Petition|(SLP) has also been filed in the Hon;ble|oupremeCourtby|anorganizationagainst the High Court decision seeking|clarification of the Order dated 17.2.2011 of the Hon’ble Supreme Court, although|the High Court had declined to re-open|the case. 3. Since the matter has been agitated|before the Hon’ble Supreme Court in one|case and decision on the same 1S|pending, following interim direction areissued,with.theapprovalof|the|competent authority, for strict compliance. 10. £I[nVIEWoT|thecontenfs|oT|theOfficialMemorandum, in our opinion this issue standsconcluded. Order accordingly. 11.)Insofar as the last substantial question of law isconcerned, it appears that the Tribunal dismissed theappeal of the Revenue on the assumption thatpermission was refused by the COD and therefore, theTribunal did not record any finding on merits of thecase and the Tribunal dismissed the appeal withoutreserving liberty to the Revenue to file a fresh appealalter obtaining permission of the COD. He submitsthat, as a matter of fact, the permission was not refusedby the COD as recorded by the Tribunal in its order, butthe subject was simply deferred as per the Proceedingsdated 01-08-2006. In the year 2008, vide Proceedings.dated 04-03-2008, the COD had granted permission tothe Revenue to raise the said issue before this Court in the present appeal. It is an admitted position thatsubsequently, the COD granted permission to file anappeal before this Court against the order of theTribunal on the same issue and therefore, we are of the)opinion that this issue can also be remanded to the Tribunal for deciding it afresh on merits. Orderaccordingly.| With these observations, the appeal is disposed of. No costs. od/-JUDGESd/-|JUDGE. mpk/-