Commissioner of Income Tax vs Lakshmi Vilas Bank Ltd.

P.P.S. Janarthana Raja, J.—The revenue has filed the above appeals u/s 260A of the Income Tax Act, 1961, by raising the following substantial questions of law:

Tax Case (Appeal) Nos. 1352 & 1356 of 2009 (Assessment years. 1989-90 & 1990-91):

(a) Whether the subsequent decision of the Supreme Court would constitute a material fact for the purposes of reopening the assessment u/s 147 of the Act ?

(b) Whether claiming deduction which the Assessee is not entitled for claiming an excessive deduction would amount to not disclosing fully and truly the material facts ?

(c) Whether in the facts and circumstances of the case, the assessing officer was right in coming to the conclusion that the Assessee has not truly and fully disclosed the material facts necessary for assessment and thereby the assessing officer was right in reopening the assessments for the assessment years 1989-90 and1990-91 ?

Tax Case (Appeal) Nos. 1353 to 1355 of 2009 (Assessment years. 1994-95, 1995-96 and 1996-97 respectively):

When the written off bad debt is less than the provision made for bad and doubtful debts, whether the difference between the written off bad debt and the provision made for bad and doubtful debts is liable as deduction u/s 36(1)(vii) ?

The brief facts which are necessary to decide the appeals are as follows:

Tax Case (Appeal) Nos. 1352 and 1356 of 2009 (Assessment years 1989-90 and 1990-91):

The Respondent-Assessee is a scheduled commercial bank in which the public are substantially Interested. For the assessment year 1989-90, the assessment was completed u/s 143(3) on 31-3-1992. Subsequently, it was found that the Assessee had claimed interest on purchase of securities. The amount of interest so claimed was Rs. 17,13,336. The assessing officer was of the view that income assessable to tax has escaped assessment. Hence, notice u/s 148 was issued. Subsequently, after completion of the assessment, the assessing officer determined the taxable income at Rs. 2,08,60,750. While computing the assessment, the assessing officer disallowed the claim of interest on purchase of securities and added income. In respect of assessment year 1990-91, the assessment was completed u/s 143(3) on 15-3-1393. The assessing officer reopened the assessment u/s 147 of the Act on the ground that income assessable to tax has escaped assessment. Thereafter, the assessing officer completed the reassessment and determined the taxable income at Rs. 2,48,04,550. While computing the reassessment, the assessing officer disallowed the claim of interest on purchase of securities. Aggrieved by the orders of the assessing officer, the Assessee filed appeals questioning the reopening of the assessments as well as the additions made by the assessing officer. The Commissioner (Appeals) allowed the said appeals. Aggrieved over the same, the revenue filed appeals before the Tribunal. The said appeals have been dismissed by the Tribunal. Hence, the revenue filed the above appeals.

Tax Case (Appeal) Nos. 1353 to 1355 of 2009 (Assessment years 1994-95, 1995-96 & 1996-97 espectively):

For the assessment year 1994-95, the assessment was completed on 31-12-1996. Later on, it was reopened u/s 147 of the Act and notice was issued u/s 148 of the Act to the Assessee. The assessing officer determined the total income at Rs. 11,16,40,420. While determining the income, the assessing officer restricted the claim of deduction of the Assessee u/s 36(1)(viia). For the assessment year 1995-96, the Assessee filed return of income on 29-11-1995 admitting an income of Rs. 19,71,87,300 and the return was processed u/s 143(1) on 23-9-1996 on the total income of Rs. 20,35,42,430. Subsequently, it was taken up for scrutiny and the assessment was completed u/s 143(3) on 20-3-1998 determining the total income at Rs. 30,21,66,460. Later on, it was reopened u/s 147 and notice u/s 148 was issued on 8-11-2000 on the ground that income assessable to tax has escaped assessment and the assessing officer determined the taxable income at Rs. 42,54,09,520. After computing the reassessment, the assessing officer restricted the claim of deduction of the Assessee u/s 36(1)(viia) of the Act. For the assessment year 1996-97, the Assessee filed return of income on 29-11-1996. Later on, the assessment was completed on 17-3-1999 u/s 143(3) of the Act, determining the taxable income at Rs. 22,28,52,120. While computing the assessment, the assessing officer also restricted the claim of deduction of the Assessee u/s 36(1)(viia) of the Act. Aggrieved by the orders of the assessing officer, the Assessee filed appeals before the Commisioner(Appeals) and the Commissioner (Appeals) confirmed the orders of the assessing officer. Aggrieved by that, the Assessee filed appeals before the Tribunal and the Tribunal remanded the said appeals to the assessing officer for fresh consideration. Aggrieved by the same, the revenue filed the above appeals.

The learned standing counsel appearing for the revenue; submitted in respect of Tax Case (Appeal) Nos. 1352 and 1356 of 2009 that the Tribunal ought to have appreciated the fact that the reopening was made based on the judgment of the Supreme Court in the case of Vijaya Bank Ltd. Vs. Additional Commissioner of Income Tax, Bangalore, and hence, the Tribunal is wrong in holding that the reopening the assessment is bad in law. He further submitted that the authority below failed to take into consideration the fact that claiming of wrong deduction by filing returns would not amount to true and full disclosure of the material facts. It is further submitted that the decision of the Supreme Court would constitute a material fact for the purposes of reopening the assessment u/s 147 of the Act. Hence, the assessing officer has properly come to the conclusion that the Assessee has not truly and fully disclosed the material facts for assessment. Therefore, the order passed by the Tribunal is not in accordance with law and the same has to be set aside. In respect of Tax Case (Appeal) Nos. 1353 to 1355 of 2009 it is submitted that the Tribunal ought not to have held that the order passed by the assessing officer is wrong, without any basis and justification. He further submitted that the Tribunal failed to take into consideration the fact that if the actual written off bad debt is less than the provision for bad and doubtful debts, no deduction u/s 36(1)(vii) is permissible. Therefore, he submitted that the order passed by the Tribunal is not in accordance with law and the same has to be set aside.

Heard the learned Counsel appearing on either side and perused the materials available on record. In respect of Tax Case Nos. 1352 and 1356 of 2009 are concerned, it is seen that the Commissioner (Appeals) held that the Assessee had disclosed all the material facts to the authority below and filed documents in support of the claim. The Assessee had also filed the relevant materials accompanying the return of income and also fully disclosed the interest on purchase of securities and also claimed interest on revenue expenditure before the assessing officer. The Tribunal after considering the material facts, had given a categorical finding that the Assessee had disclosed complete and full materials in support of the claim which reads as follows:

In view of the above discussion, by following the judgment of the Supreme Court in the case of Parashuram Pottery Works Co. Ltd. (supra) we hold that in view of proviso to Section 147 read with Section 149 of the Income Tax Act, the assessment completed u/s 143(3) cannot be reopened after expiry of four years from the end of the relevant assessment year provided there was failure or omission on the part of the Assessee to disclose fully and truly all material facts necessary for completing the assessment.

Now let us examine whether the Assessee has disclosed fully and truly all material facts relevant for assessment. For the assessment year 1989-90, the assessing officer reopened the assessment on the ground. that the interest on purchase of securities has to be disallowed in view of the judgment of the Apex Court in the case of Vijaya bank Ltd. (supra). Therefore, we have to see whether the Assessee has furnished the details of interest of payment on purchase of securities to the assessing officer before the completion of the (sic) Assessee-bank furnished complete particulars pertaining to broken period interest. It is also not in dispute that the statement which accompanied the return of income discloses the interest on purchase of securities. Admittedly, the Assessee all along claiming the interest payment as revenue expenditure. The assessing officer was continuously allowing the claim of the Assessee as revenue expenditure, therefore, for these years also the Assessee claimed the interest payment as revenue expenditure. In the factual circumstances, it is an admitted case of both parties that the Assessee has furnished the entire particulars and the assessing officer has also for earlier assessment years accepted the claim of the Assessee continuously, in our opinion, it cannot be said that there was a negligence on the part of the assessing officer to apply the law laid down by the apex court or to reopen the assessment within four years from the end of the assessment year. The failure "of the assessing officer to reopen the assessment within four years cannot be shifted to the shoulders of the Assessee. Therefore, in our opinion the assessing officer cannot reopen the case after expiry of four years on the basis of the judgment of the apex court in view of the proviso to Section 147 as interpreted by the judgment of the apex court in the case of Parashuram Pottery Works Co. Ltd. (supra) and by the judgment of the Madras High Court in the case of Revathy CP. Equipment Ltd. (supra). In view of the above,, we uphold the order of the Commissioner (Appeals) for the assessment years 1989-90 and 1990-91.

From the reading of the above, it is made clear that the Assessee claimed revenue expenditure before the assessing officer by relying on the materials and also produced the materials regarding the interest payment. Therefore, there is no failure on the part of the Assessee with regard to the disclosure of the facts before the assessing officer. Further, the Tribunal has come to a conclusion that the Assessee (sic--assessing officer) cannot reopen the case after the period of four years. There is also a concurrent finding of the authority below that there is a complete disclosure of the materials by the Assessee, which is based on the valid material evidence. The order of the Tribunal is in accordance with law. Hence, we do not find any error, illegality or infirmity in the order of the Tribunal warranting interference. Under such circumstances of the case, no substantial question of law arises out of the order of the Tribunal for our consideration. Therefore, the order of the Tribunal is hereby confirmed.

In respect of Tax Case (Appeal) Nos. 1353 to 1355 of 2009 are concerned, it is seen from the order of the Tribunal that the Tribunal has only remanded the matter to the assessing officer with a direction to redo the assessments afresh. It is only a remand order. The learned standing counsel appearing for the revenue is unable to state how the said remand order would affect the interest of the revenue. Further, the learned Counsel is unable to produce any material to show that the order of the Tribunal would cause irreparable loss, hardship and prejudice to the interest of the revenue. Hence, we do not find any error, illegality or infirmity in the order of the Tribunal warranting interference. Under these circumstances of the case, no substantial question of law arises out of the order of the Tribunal for our consideration. Therefore, the order of the Tribunal is hereby confirmed.

In the result, the appeals are devoid of merits and hence, the same are dismissed. No costs. Consequently, connected miscellaneous petitions are closed.