+DCIT CC- 7(2), MUMBAI vs. SAHEBRAO DESHMUKH CO.OP. BANK LTD., MUMBAI

Per contra, the Ld. Authorised Representative for the Assessee giving 7. a factual background to the deduction of INR 90,72,553/- claimed by the Assessee submitted that the aforesaid amount represented amortized amount of goodwill arising on account of merger of Shahupuri Nagari Sahakari Bank Ltd. with the Assessee during the financial year relevant to Assessment Year 2010-11 claimed as deduction by the Assessee in terms of the letter, dated 26/02/2009, issued by Reserve Bank of India. The Assessee had amortized payment of INR 4,53,62,781/- (representing excess liability over assets taken over on account of merger) as goodwill equally over a period of 5 years and claimed amortized amount as deduction in 5 assessment years (i.e. Assessment Years 2010-2011 to 2014-2015). No such disallowance was made in the immediately preceding four assessment years in which identical deduction has been claimed by the Assessee. Assessment Year 2014-2015 was the 5th and final year in which deduction of INR 90,72,553/- has been claimed by the Assessee. The Ld. Authorised Representative for the Assessee submitted that the Assessing Officer did not have any fresh tangible material to initiate reassessment proceedings. The revenue audit objection did not point out any new fact and therefore, could not form the basis of initiating reassessment proceedings. In the preceding assessment years, the claim of deduction had been examined during scrutiny assessment proceedings and was allowed. The Ld. Authorised Representative for the Assessee also placed reliance upon paragraph 6 of the order passed by the CIT(A) and reiterated the submissions made before the CIT(A).

(Assessment Year: 2014-2015) We have heard the rival contention, perused the material on record 8. and examined the position in law.

On perusal of record it emerges that during the previous year 9. relevant to Assessment Year 2010-2011 Shahupuri Nagari Co- operative Bank was merged with the Assessee with effect from 25/04/2009. The total liability of the said bank exceeded the total assets by INR 4,53,62,781/-. The aforesaid amount was claimed by the Assessee as goodwill/excess loss taken over which was amortized equally over the period of 5 assessment years starting from Assessment Year 2010-2011 and ending with Assessment Year 2014-2015. For Assessment Year 2010-2011 assessment was completed under Section 143(3) of the Act and identical deduction claimed by the Assessee was allowed. During the course of the aforesaid assessment proceedings, the Assessing Officer allowed deduction for INR 90,72,577/- (being 1/5th of INR 4,53,62,781/-) after requisite inquiry/verification. However, while computing the income the Assessing Officer failed to allow deduction for the same and therefore, the Assessee moved rectification application under Section 154 of the Act which was allowed vide rectification order dated 07/05/2015. On perusal of the assessment order for the Assessment Year 2011-2012, 2012-2013, and 2013-2014, we find that no disallowance was made in respect of identical deduction claimed by the Assessee. For the Assessment Year 2014-2015 also during regular scrutiny assessment no disallowance was made in this regard. Subsequently, the Assessing Officer initiated reassessment proceedings under Section 147 of the Act recording the following reasons:

“The assessee has e-filed its return of income on 24.11.2014 declaring income at Rs 7,02,55,918/--The case was selected for scrutiny under CASS and accordingly notice u/s 143(2) of the Act issued and served 5 (Assessment Year: 2014-2015) on the assessee. Subsequently, the case was assessed u/s 143(3) of the I.T. Act determining the total income at Rs.7,02,55,918/-.

On perusal the material on record, it is found as under; “The assessment of the above assessee was done under scrutiny manner after assessing taxable income at Rs.7,02,55,918/-. It is observed from the Profit and loss account assessee bank has claimed 1/5th cost differed merged of Shahupuri Bank of Rs. 90,72,553/- and the same was allowed by department. In submission, it was stated that the assessee has acquired the Shahupuri Nagari Co-op Bank with effect from 25.04.2009. While taken over the assessee incurred more liability than assets of Shahpri Co-op Bank Total liability as per audited balance sheet Rs. 13,86,52,068/- as on 25.04.2009 Total asset as per audited balance sheet Rs. 9,32,89,286/- Excess of liability over asset Rs.4,53,62,781/- This excess liability of Rs. 4,53,62,781/- is claimed as goodwill paid by the Bank and claimed 1/5th every year. As assessee bank has acquired the Shahupuri bank therefore all the assets and liabilities of the amalgamating co-op bank immediately before the merger become the assets and liabilities of the amalgamated co-op bank and the successor co-op bank can set off and carry forward business loss and depreciation allowances of the predecessor co-op bank. Here in this case of claim of 1/5th cost differed on a/c of merger of Shahupuri Bank amounting to Rs. 90,72,553/- was not in order the same should have been disallowed. However this was not done.

Omission to do so has resulted in under assessment of income of Rs. 9,72,553/-with consequent to short levy of tax of Rs 41,01,401/- including interest under section 234B. In view of the above, I am satisfied that this is a fit case for reopening the assessment u/s 147 r. w. explanation 2(c) of the I.T. Act. Since, there is a failure on the part of the assessee to disclose fully and truly material facts necessary for its assessment, the assessment for A.Y. 2014-15 is proposed to be reopened u/s 147 of the I.T. Act.” (Emphasis Supplied) 6 (Assessment Year: 2014-2015) On perusal of the above reasons recorded for reopening of the 10. assessment, it is clear that the Assessing Officer was not in possession of any new tangible material and the reassessment proceedings were initiated merely on the basis of revenue audit objection. The revenue audit objection did not point out any new fact which was not already on record. We note that both, the revenue audit objection and the reasons recorded made reference to the Profit & Loss Account of the Assessee for the relevant previous year. It is admitted position that Shahupuri Nagari Co-operative Bank merger with the Assessee during the financial year relevant to the Assessment Year 2010-11. Identical deductions were claimed by the Assessee during the Assessment Year 2010-11, 2011-12, 2012-13 and 2013-14 have been allowed by the Revenue. Despite this, the revenue audit objection merely stated that deduction claimed by the Assessee should have been disallowed. The Assessing Officer also issued notice under Section 148 of the Act without application of mind and without providing any basis or reasoning by merely placing reliance on the audit objection. In the case of CIT Vs. P.S.V. Beedies Pvt. Ltd.: 237 ITR 13 (SC)], the Hon’ble Supreme Court has held that reopening of the case on the basis of factual error pointed out by the audit party is permissible under law. However, on perusal of audit objection [placed at page 6 to 8 of the paper-book] we find that no such factual error has been pointed out by the Assessing Officer. In the facts and circumstances of the present case, we are of the view that the reassessment proceedings were initiated under Section 147 of the Act without any tangible material to form the basis of belief that income had escaped assessment. We concur with the CIT(A) that notice issued under Section 148 of the Act was void-ab-initio and therefore, the order dated 28/12/2019, passed under Section 143(3) read with Section 147 of the Act is null and void. In view of (Assessment Year: 2014-2015) the aforesaid, we do not find any infirmity in the order passed by the CIT(A). Accordingly, Ground No. 1 and 2 raised by the Revenue are dismissed, while Ground No. 3 and 4 are dismissed as being infructuous.

In result, the present appeal preferred by the Revenue is dismissed. 11.

Order pronounced on 29.12.2023.