Itxa/532/2016 Of Pr. Commissioner Of Income Tax-2 v. State Bank Of Saurashtra

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 532 OF 2016 The Pr. Commissioner of Income Tax-2 .. Appellant v/s. State Bank of Saurashtra ..Respondent Mr. Suresh Kumar for the appellant Mr. A.K. Jasani for the respondent CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. P.C. DATED : 24[th] NOVEMBER, 2018. 1.This Appeal under Section 260-A of the Income Tax Act, 1961(the Act) challenges the order dated 25[th] March, 2015 passed by theIncome Tax Appellate Tribunal (the Tribunal). This appeal relates toAssessment Year 2001-02. 2.The Revenue has urged only the following reframed question oflaw for our consideration :- (i)Whether on the facts and circumstances of the case and inlaw, the Tribunal was correct in quashing the reopeningproceedings, holding that there was no failure on the part of theassessee in making true and full disclosure of material factsnecessary for assessment? 3.The undisputed facts are that for the Assessment Year 2001-02,the return of income was filed by the respondent. An scrutinyassessment under Section 143(3) of the Act was passed on 22[nd] March,2004 determining the income @ Rs.80.99 crores. 4.Thereafter, on 5[th] February, 2018, the appellant Revenue soughtto reopen the assessment for Assessment Year 2001-02 on the following reasons :- “The assessee follows mercantile system of account andaccordingly in its accounts, at the end of the year, takes credit forinterest accrued but not due on its investment in securities.However, in the return of income such interest is not offered totax and only the interest which has become due and receivableduring the year is offered to tax. From the A.Ys. 2003-04onwards, such interest, “Accrued but not due at the end of theyear” was taxed by the Assessing Officer. Such additions havebeen confirmed and upheld by the CIT(A) in assessee bank's firstappeal subject to the direction that the credit for similar amountof interest accrued but not due at the beginning of the year whichwas offered to tax should be allowed. 2.The appellate order of the CIT(A) on this aspect hasbecome final as the assessee bank has not been grantedpermission by the COD to pursue further litigation on thedecision. Accordingly, the amount liable to be taxed at theassessee bank's income for A.Y. 2001-02 on this ground is workedout as under :- 3. Interest accrued but not due on investment is worked outas under:- Interest accrued but not due as at end of Rs.82,63,97,428/-assessment yearLess : Interest Accrued but not due as at Rs.66,20,14,992/-beginning of assessment YearNet Difference Rs.16,43,82,436/- 4. Amount of accrued interest during the yearRs.16,43,82,436/- which is to be added back and is taken as theincome of the year and the same is required to be taxedaccordingly. As a result of which income chargeable to tax hasescaped assessment. 5.In view of the above, I have to reason to believe thatincome chargeable to tax has escaped assessment and the case isfit for issue of notice under Section 148 of the I.T. Act.” 5.The impugned order of the Tribunal concludes that there wastrue and full disclosure of all material facts necessary for assessmentduring the scrutiny assessment proceedings. The issue with regard tointerest due and payable and interest due and accrued was disclosedduring the assessment proceedings. The impugned order further recordsthat even though the notice was beyond the period of 4 years from theend of the relevant assessment year in respect of the assessmentcompleted under Section 143(3) of the Act, the reasons do not evenallege any failure on the part of the assessee to disclose truly and fullyall material facts necessary for the assessment. In the above view, theimpugned order of the Tribunal allowed the respondent's appeal. 5.The impugned order of the Tribunal concludes that there wastrue and full disclosure of all material facts necessary for assessmentduring the scrutiny assessment proceedings. The issue with regard tointerest due and payable and interest due and accrued was disclosedduring the assessment proceedings. The impugned order further recordsthat even though the notice was beyond the period of 4 years from theend of the relevant assessment year in respect of the assessmentcompleted under Section 143(3) of the Act, the reasons do not evenallege any failure on the part of the assessee to disclose truly and fullyall material facts necessary for the assessment. In the above view, theimpugned order of the Tribunal allowed the respondent's appeal. 6.We note that admittedly the reopening notice has been issuedbeyond a period of four years from the end of the relevant assessmentyear i.e. 2001-02 in respect of regular assessment completed underSection 143(3) of the Act. The jurisdictional requirement to issue areopening notice under the proviso to Section 147 of the Act, is a failureon the part of the assessee to truly and fully disclose all material factsnecessary for assessment during the scrutiny proceedings. In fact, thereasons in support of the reopening notice even do not allege anyfailure to disclose truly and fully all material facts necessary for assessment. Therefore, the jurisdictional requirement is not satisfied.Moreover, we find that the Tribunal has on facts found that there was afull and true disclosure on the part of the assessee during the regularassessment proceedings. This finding of fact has not been shown to beincorrect or perverse in any manner. 7.In the above view, the view taken by the Tribunal calls for nointerference. Accordingly, the question as proposed does not give riseto any substantial question of law. Thus, not entertained. 8.The appeal is dismissed. No order as to costs. (M.S. SANKLECHA, J.) (AKIL KURESHI, J.)