ACIT, Kumbakonam v. M/s. City Union Bank Limited, Kumbakonam

ITA 1115/CHNY/2011 | 1998-1999
Pronouncement Date: 22-11-2011 | Result: Allowed

Appeal Details

RSA Number 111521714 RSA 2011
Assessee PAN AAACC1287E
Bench Chennai
Appeal Number ITA 1115/CHNY/2011
Duration Of Justice 5 month(s) 5 day(s)
Appellant ACIT, Kumbakonam
Respondent M/s. City Union Bank Limited, Kumbakonam
Appeal Type Income Tax Appeal
Pronouncement Date 22-11-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 22-11-2011
Date Of Final Hearing 22-11-2011
Next Hearing Date 22-11-2011
Assessment Year 1998-1999
Appeal Filed On 16-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NOS. 1079 TO 1088/MDS/2011 (ASSESSMENT YEARS : 1988-89 1990-91 TO 1993-94 1995-96 TO 1998-99 & 2000-01) M/S CITY UNION BANK LTD. CENTRAL OFFICE 149 TSR BIG STREET KUMBAKONAM. PAN : AAACC1287E (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE I KUMBAKONAM. (RESPONDENT) I.T.A. NOS. 1107 TO 1116/MDS/2011 (ASSESSMENT YEARS : 1988-89 1990-91 TO 1993-94 1995-96 TO 1998-99 2000-01) THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE I KUMBAKONAM. (APPELLANT) V. M/S CITY UNION BANK LTD. CENTRAL OFFICE 149 TSR BIG STREET KUMBAKONAM. (RESPONDENT) ASSESSEE BY : SHRI G. SITHARAMAN REVENUE BY : SHRI K.E.B. RANGARAJAN JUNIOR STANDING COUNSEL DATE OF HEARING : 22.11.2011 DATE OF PRONOUNCEMENT : 22.11.2011 I.T.A. NOS. 1079 TO 1088/MDS/11 I.T.A. NOS. 1107 TO 1116/MDS/11 2 O R D E R PER BENCH : THESE ARE CROSS APPEALS OF THE ASSESSEE AND REVEN UE RESPECTIVELY FOR ASSESSMENT YEARS 1988-89 1990-91 1991-92 1992- 93 1993-94 1995-96 1996-97 1997-98 1998-99 AND 2000-01. 2. ASSESSEE IN ITS APPEALS HAS CHALLENGED THE REOPE NING UNDER 148 OF INCOME-TAX ACT 1961 (IN SHORT THE ACT) FO R RESPECTIVE ASSESSMENT YEARS. 3. AS AGAINST ABOVE REVENUE IN ITS APPEALS HAS RAI SED DIFFERENT ISSUES ON MERITS. FOR ASSESSMENT YEARS 1988-89 19 92-93 1997-98 1998-99 AND 2000-01 REVENUE HAS RAISED THE ISSUE O F INTEREST ACCRUED ON SECURITIES WHICH WAS ADDED BY THE A.O. AND DELETED BY THE CIT(APPEALS). IT HAS RAISED ANOTHER ISSUE OF B ROKEN PERIOD INTEREST ON SECURITIES PURCHASED FOR ASSESSMENT YEA RS 1988-89 1990-91 1992-93 AND 1993-94. AS PER THE REVENUE THE SECURITIES PURCHASED BY THE ASSESSEE FOR MAINTAINING SLR REQUI REMENTS PRESCRIBED UNDER BANKING REGULATION ACT FORMED PAR T OF PERMANENT ASSETS AND HAD TO BE CONSIDERED AT COST ONLY. IN S O FAR AS OTHER I.T.A. NOS. 1079 TO 1088/MDS/11 I.T.A. NOS. 1107 TO 1116/MDS/11 3 SECURITIES WHICH FORMED PART OF STOCK-IN-TRADE AS PER THE REVENUE INTEREST UPTO THE DATE OF PURCHASE IF ALLOWED THE N IT SHOULD GO TO INCREASE THE CLOSING STOCK VALUATION ALSO. THIRD ISSUE RAISED BY THE REVENUE IS ALLOWANCE ON LOSS OF SALE ON SECURITIES FOR ASSESSMENT YEARS 1988-89 1990-91 1991-92 AND 1993-94. AS PE R THE REVENUE SUCH LOSS ON SALE OF SECURITIES CLASSIFIED UNDER TH E PERMANENT CATEGORY COULD ONLY BE CONSIDERED AS CAPITAL LOSS. FOURTH ISSUE RAISED BY THE REVENUE IS ALLOWANCE ON BAD DEBTS WRI TTEN OFF UNDER SECTION 36(1)(VII) OF THE ACT WHICH APPEARS IN ITS APPEALS FOR ASSESSMENT YEARS 1988-89 1990-91 AND 1992-93. SIM ILAR ISSUE ON ALLOWANCE UNDER SECTION 36(1)(VIIA) OF THE ACT WITH REGARD TO DEBTS OF RURAL BRANCHES APPEARS IN ITS APPEALS FOR ASSESSMEN T YEARS 1991-92 1992-93 1995-96 1996-97 AND 1997-98. FIFTH ISSUE RAISED BY THE REVENUE WHICH IS DISALLOWANCE OF EXPENSES RELATING TO TAX FREE INCOME MADE UNDER SECTION 14A BY THE A.O. AND DELET ED BY THE CIT(APPEALS) APPEARS IN ITS APPEALS FOR ASSESSMENT YEARS 1991-92 AND 1992-93. SIXTH ISSUE RAISED BY THE REVENUE IS REGARDING DEPRECIATION VALUE OF THE INVESTMENTS WITHOUT CONSI DERING THE DIFFERENTIATION BETWEEN INVESTMENTS HELD UNDER FIXE D CATEGORY AND I.T.A. NOS. 1079 TO 1088/MDS/11 I.T.A. NOS. 1107 TO 1116/MDS/11 4 STOCK-IN-TRADE APPEARS IN ITS APPEALS FOR ASSESSMEN T YEARS 1992-93 AND 1997-98. SEVENTH ISSUE RAISED BY THE REVENUE I S DEDUCTION ALLOWED BY THE CIT(APPEALS) UNDER SECTION 80M OF TH E ACT ON GROSS DIVIDENDS WHICH APPEARS IN APPEALS FOR ASSESSMENT Y EARS 1988-89 1990-91 1991-92 1992-93 AND 1993-94. IN ADDITION TO THESE CERTAIN INDEPENDENT ISSUES HAVE ALSO BEEN RAISED IN THE APP EALS OF THE REVENUE FOR VARIOUS YEARS LIKE ALLOWANCE GIVEN ON C OST OF COMPUTER FOR ASSESSMENT YEAR 1988-89 DEPRECIATION CLAIMED O N FLATS ALLOWED FOR ASSESSMENT YEAR 1992-93 ALLOWANCE GIVEN FOR AR CHITECT FEE DELETION OF ADDITION OF EXCESS CASH ON AUCTION OF J EWELLERY SUBSIDY ADDITION WHICH WAS NOT DISTRIBUTED TO THE CUSTOMERS ALL IN APPEAL OF ASSESSMENT YEAR 1988-89. IN ITS APPEAL FOR 1990-91 REVENUE ALSO ASSAILS THE DELETION OF ADDITION FOR SHARE TRANSFER FEE WITHOUT DIFFERENTIATING BETWEEN INVESTMENTS HELD UNDER STOC K-IN-TRADE AND INVESTMENTS HELD UNDER PERMANENT CATEGORY. FOR ASS ESSMENT YEAR 1992-93 REVENUE HAS ALSO CHALLENGED DEDUCTION ALLO WED ON INTEREST PAID TO BORROWERS AGAINST SECURITIES HELD UNDER BUY BACK ARRANGEMENT WHICH DISALLOWANCE WAS NOT MADE BY THE ASSESSING OFFICER AS PER THE REVENUE. AGAIN FOR ASSESSMENT YEAR 1992-93 I.T.A. NOS. 1079 TO 1088/MDS/11 I.T.A. NOS. 1107 TO 1116/MDS/11 5 REVENUE HAS ALSO CHALLENGED ALLOWANCE OF PROVISION FOR SALARY ARREARS. FOR ASSESSMENT YEAR 1993-94 REVENUE HAS ALSO CHALLENGED DISALLOWANCE OF FEES PAYABLE WHICH WERE DELETED BY THE CIT(APPEALS). FOR ASSESSMENT YEAR 2000-01 REVENUE HAS ALSO CHALLENGED DELETION OF ADDITION MADE UNDER SECTION 41(1) OF THE ACT ON RECOUPMENT OF LOSSES EARLIER ALLOWED UNDER SECTI ON 36(1)(VIIA) OF THE ACT AND ALSO DELETION OF ADDITION ON CESSATION OF LIABILITIES ON STALE DRAFTS AND BRANCH SUSPENSE BALANCES. 4. WHEN THE MATTER CAME BEFORE US LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT DESPITE SERIOUS CHALLENGE TAKEN BY T HE ASSESSEE ON REOPENING FOR ALL THE ASSESSMENT YEARS LD. CIT(AP PEALS) HAD NOT ADJUDICATED THIS ISSUE. ON THE DEPARTMENTS APPEAL S LEARNED A.R. SUBMITTED THAT EVERY ISSUE RAISED BY THE DEPARTMENT WAS COVERED BY AN EARLIER DECISION OF THIS TRIBUNAL OR THAT OF HIG HER JUDICIAL FORUMS. 5. PER CONTRA LEARNED D.R. SUBMITTED THAT ALLOWANC E RELATING TO BROKEN PERIOD INTEREST AND LOSS ON SALE OF SECURITI ES THOUGH CONSIDERED BY THIS TRIBUNAL EARLIER IN SUCH EARLIE R CASES THERE WAS NO ATTEMPT FOR DIFFERENTIATION BETWEEN INVESTMENTS HELD AS PART OF I.T.A. NOS. 1079 TO 1088/MDS/11 I.T.A. NOS. 1107 TO 1116/MDS/11 6 SLR REQUIREMENTS AND INVESTMENTS HELD AS PART OF ST OCK-IN-TRADE. THIS ISSUE WAS NEVER DECIDED BY ANY EARLIER BENCH O F THIS TRIBUNAL AND THEREFORE REQUIRED A FRESH LOOK AS PER LEARNE D D.R. RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT V. KARUR VYSYA BANK (273 ITR 510). 6. WE HAVE HEARD THE COUNSEL. ASSESSEE HAD CHALLEN GED THE REOPENING FOR ALL THE ASSESSMENT YEARS INVOLVED BE FORE LD. CIT(APPEALS). SUCH REOPENING WAS DONE DESPITE COMP LETION OF THE ORIGINAL ASSESSMENTS UNDER SECTION 143(3) OF THE AC T. THE REOPENING DONE FOR ASSESSMENT YEARS 1988-89 1990-91 1991-92 1992-93 1995-96 1996-97 AND 2000-01 WERE AFTER LAPSE OF FO UR YEARS FROM THE END OF THE RESPECTIVE ASSESSMENT YEARS. THE RE OPENING FOR ASSESSMENT YEARS 1993-94 1997-98 AND 1998-99 WERE DONE WITHIN A PERIOD OF FOUR YEARS. THE CIT(APPEALS) HAD AFTER NOTING DOWN THE CHALLENGE MADE BY THE ASSESSEE AND VARIOUS CASES RE LIED ON BY IT IN THIS REGARD REFRAINED FROM PASSING ANY DECISION BY SIMPLY MAKING A NOTE AS UNDER:- I.T.A. NOS. 1079 TO 1088/MDS/11 I.T.A. NOS. 1107 TO 1116/MDS/11 7 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND THE MATERIALS ON RECORD BUT I AM INCLINED TO P ASS THE ORDER CONSIDERING THE MERITS OF THE CASE AND TH E POINTS ARE AS DISCUSSED BELOW. IN OUR OPINION ASSESSEE HAVING MADE A SERIOUS CHAL LENGE ON REOPENING CIT(APPEALS) WAS REQUIRED UNDER LAW TO G IVE A DECISION IN THIS REGARD. LD. CIT(APPEALS) DESPITE NOTING THE A RGUMENTS OF THE ASSESSEE HAD NOT GIVEN ANY DECISION. HENCE IN OU R OPINION THE MATTER RELATING TO CHALLENGE ON REOPENING HAS TO GO BACK TO LD. CIT(APPEALS) FOR HIS DECISION AS PER LAW. 7. IN SO FAR AS MERITS OF THE VARIOUS ISSUES WHICH HAVE BEEN CHALLENGED BY THE REVENUE IN ITS APPEALS ARE CONCER NED WE FIND THAT MUCH WATER HAS FLOWN AFTER THE DECISION OF THE CIT( APPEALS) IN MANY OF SUCH ISSUES. IN OUR OPINION IT WILL BE APPROPR IATE FOR THE LD. CIT(APPEALS) TO TAKE A FRESH LOOK ON EACH OF SUCH I SSUES BASED ON PRECEDENTS LAID DOWN BY THIS TRIBUNAL THROUGH ITS V ARIOUS DECISIONS AS ALSO DECISIONS OF HIGHER AUTHORITIES WHICH ARE BROU GHT TO HIS NOTICE BY THE ASSESSEE AS WELL AS ASSESSING OFFICER. THE ASS ESSING OFFICER SHALL BE FREE TO BRING TO THE NOTICE OF THE CIT(APP EALS) DECISIONS RELATING TO BROKEN PERIOD INTEREST INCLUDING THAT OF HON'BLE I.T.A. NOS. 1079 TO 1088/MDS/11 I.T.A. NOS. 1107 TO 1116/MDS/11 8 JURISDICTIONAL HIGH COURT IN THE CASE OF KARUR VYSY A BANK LTD. (SUPRA). THE CIT(APPEALS) SHALL CONSIDER DE NOVO FRESH EACH OF SUCH DECISIONS AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES. 8. IN THE RESULT THE MATTERS ARE REMITTED BACK TO THE CIT(APPEALS) FOR CONSIDERATION AFRESH. CROSS APPEALS OF THE REV ENUE AS WELL AS ASSESSEE STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 22 ND NOVEMBER 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 22 ND NOVEMBER 2011. KRI. COPY TO: (1) ASSESSEE (2) ASSESSING OFFICER (3) CIT(A) TIRUCHIRAPALLI (4) CIT-II TIRUCHIRAPALLI (5) D.R. (6) GUARD FILE