Charotar Nagrik Sahakari Bank Ltd. vs Deputy Commissioner of Income Tax

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Mukesh R. Shah, J.—Rule. Shri K.M. Parikh, learned advocate waives service of notice of rule on behalf of the respondent in both the petitions. In the facts and in the circumstances of the case and with the consent of the learned advocates appearing on behalf of the respective parties, the present petitions are taken up for final hearing today.

As common question of law and facts arise in both these petitions, they are disposed of by this common judgment and order.

In both these petitions the common petitioner-assessee-Charotar Nagrik Sahakari Bank Ltd. (in liquidation) had initially challenged the reassessment proceedings for the assessment years 2006-07 and 2007-08. However, during pendency of the special civil applications, the Assessing Officer passed the reassessment orders and by way of amendment the petitioner has also challenged the respective orders for the assessment years under consideration.

3.1. The petitioner is a co-operative bank in liquidation. For the assessment year 2006-07, the petitioner filed its return of income on dated December 30, 2006, showing the total income as "nil". The order under section 143(3) of the Income-tax Act (hereinafter referred to as "the Act") was passed on December 2, 2008, on a total income declared at "nil" after set off of brought forward unabsorbed business loss of the assessment year 2005-06 to the extent of Rs. 1,33,63,272.

3.2. The assessee also filed its return of income showing the total income at "nil" for the assessment year 2007-08 on October 31, 2007. The order under section 143(3) of the Act was passed on December 10, 2009, on the total income at "nil" after set off of brought forwards unabsorbed business loss of the assessment year 2005-06 to the extent of Rs. 1,22,76,099.

3.3. At the end of the relevant assessment years, the Assessing Officer initiated the reassessment proceedings for the assessment years 2006-07 and 2007-08 by issuing notices. The petitioner was supplied the reasons for issuing such notices, which so far as for the assessment year 2006-07 is concerned reads as under:

"In this case, the assessee has filed its return of income showing a total income at Rs. nil on December 30, 2006. Order under section 143(3) of the Income-tax Act, 1961, was passed on December 2, 2008, on a total income at Rs. nil after set off of brought forward business loss of the assessment year 2005-06 to the extent of Rs. 1,33,63,272. It was noticed that the assessee''s banking licence was cancelled by the Reserve Bank of India on July 30, 2003. Since then the assessee was in the process of winding up by the official liquidator. Thus, the assessee was not engaged in the banking business or any other business activity after the assessment year 2004-05. Hence, the receipts during the previous year relevant to the assessment year 2006-07 was not on account of engaging in any business or profession. The assessee had not carried on any business during the previous year, as per the provisions of section 28(i) of the Income-tax Act, 1961. Thus, the income of Rs. 1,33,63,272 derived was chargeable to Income-tax under the head ''income from other sources''. Hence, the assessee was not entitled for set off of brought forward losses of the assessment year 2005-06 against the income of the current year chargeable under the head ''income from other sources''.

The fact that the assessee''s banking licence had been cancelled by the Reserve Bank of India on July 30, 2003, and the assessee was in the process of winding up by the official liquidator were in the knowledge of the assessee. The assessee was not engaged in the banking business or any other business activity after the assessment year 2004-05 as such it should not have set off the loss of the assessment year 2005-06 to the extent of Rs. 1,33,63,272.

In these circumstances, I have reason to believe that the income chargeable to tax has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961."

3.4. With respect to the assessment year 2007-08, similar reasons for reopening was furnished except the change in the assessment year and the amount of set off of brought forward business loan and, therefore, to avoid any repetition, the same is not reproduced.

3.5. Thereafter, the petitioner raised objections against the reassessment proceedings by submitting that on the very ground for the assessment year 2005-06 the reassessment proceedings were initiated after a period of four years from the end of the relevant assessment year and by the judgment and Charotar Nagrik Sahakari Bank Ltd. Vs. Deputy Commissioner of Income Tax, the Division Bench of this court quashed and set aside the reassessment proceedings. Despite the above, the Assessing Officer has overruled the objections raised by the petitioner by submitting that there is no res judicata. Being aggrieved and dissatisfied with the aforesaid initiation of the reassessment proceedings for the assessment years 2006-07 and 2007-08 and, thereafter, the reassessment order passed on the basis of the aforesaid notice, the common petitioner has preferred the present special civil applications under article 226 of the Constitution of India.

Shri Patel, learned advocate appearing on behalf of the petitioner, has vehemently submitted that as such on the very ground with respect to the assessment year 2005-06 the reassessment proceedings were sought to be initiated, which were also initiated beyond the period of four years from the end of the relevant assessment year and the Division Bench of this court quashed and set aside the said reassessment proceedings by the judgment and order passed in Special Civil Application No. 1043 of 2013. It is submitted that, therefore, in the present case, the Assessing Officer ought not to have initiated the reassessment proceedings for the assessment years 2006-07 and 2007-08 on the very ground on which the earlier reassessment proceedings came to be set aside and/or ought to have dropped the reassessment proceedings. It is submitted that the Assessing Officer has materially erred in observing that there is no res judicata. He has also tried to make the submissions on the merits.

However, for the reasons stated hereinafter and in view of the decision of the Division Bench of this court in Special Civil Application No. 1043 of 2013 in the case of the very petitioner but with respect to the assessment year 2005-06, this court proposes to allow the present special civil application and quash and set aside the reassessment proceedings, we are not further entering into the merits of the case.

Shri K.M. Parikh, learned advocate appearing on behalf of the assessee, has tried to oppose the present special civil applications. However, is not disputing that with respect to the assessment year 2005-06 on the very ground on which the reassessment proceedings are initiated for the assessment years under consideration, i.e., 2006-07 and 2007-08, for the assessment year 2005-06, the Division Bench of this court has quashed and set aside the reassessment proceedings by the judgment and order dated May 7, 2013, in Special Civil Application No. 1043 of 2013.

Heard the learned advocates appearing on behalf of the respective parties at length. At the outset, it is required to be noted that for the assessment year 2005-06 with respect to the very assessee, the Assessing Officer initiated the reassessment proceedings under section 147 of the Act on the very ground on which the reassessment proceedings are initiated for the assessment years 2006-07 and 2007-08. It is required to be noted that in the present case also initiation of the reassessment proceedings are after a period of four years from the end of the relevant assessment year. It is also not in dispute that by the judgment and order passed in Special Civil Application No. 1043 of 2013 the Division Bench of this court has quashed and set aside the initiation of the reassessment proceedings with respect to the assessment year 2005-06, which were sought to be initiated on the very ground on which the reassessment proceedings are initiated in the present special civil applications, i.e., for the assessment years 2006-07 and 2007-08 by observing that there was no failure on the part of the assessee to disclose truly and fully all material facts. The Division Bench also observed that the banking licence of the petitioner has been cancelled by the Reserve Bank of India, which was disclosed in the original return itself. In view of the above, when the reassessment proceedings for the assessment year 2005-06 with respect to the very assessee, which were sought to be initiated on the very ground on which the reassessment proceedings are initiated for the subsequent assessment years 2006-07 and 2007-08 are set aside by this court and the facts are similar to that of the assessment year 2005-06, the impugned reassessment proceedings for the assessment years 2006-07 and 2007-08 deserve to be quashed and set aside. In view of the above and for the reasons stated hereinabove, both the petitions succeed. The impugned reassessment proceedings for the assessment year 2006-07 and the subsequent reassessment orders passed on the basis of the aforesaid reassessment proceedings are quashed and set aside. Rule is made absolute to the aforesaid extent in both the petitions. In the facts and circumstances of the case, there shall be no order as to costs.