RBL BANK LIMITED,KOLHAPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -1, KOLHAPUR, KOLHAPUR

The brief facts of the case are that, the assessee is a Scheduled Commercial Bank and having business segments of Corporate and Institutional Banking, (C&IB) Commercial Banking (CB) and Financial inclusion, Treasure and Financial Markets Operations. The assessee has filed return of income for the A.Y. 2020-21 disclosing a total income of Rs. 11,18,42,61,080/- on 12.02.2021 and the return of income was processed u/sec 143(1) of the Act. Subsequently, the case was selected for scrutiny under the CASS and notice u/sec 143(2) and u/sec142(1) of the Act are issued along with the questionnaire and a issued show cause notice to submit the explanations and necessary evidences in support of the claims made in the return of income filed. The Assessing Officer(A.O) has dealt on the facts, provisions of the Act, legal decisions and submissions on the six disputed issues and assessed the total income of Rs. 15,30,91,74,282/- and passed the order u/sec 143(3) r.w.s 144B of the Act dated 24.09.2022. Subsequently, the assessee has challenged the order, in the writ petition on the ground of violation of principles of natural justice and the assessment order was quashed vide order dated 8.08.2023 and remanded the matter back to the Assessing officer for denovo adjudication in accordance with law. In compliance to the directions of the Hon'ble High Court, the Assessing officer has issued notices and provided opportunity to the assessee to submit the information and notices u/sec142(1) of the Act are issued along with the questionnaire and a issued show cause notice to submit the explanation and necessary evidences in support of the claims made in the return of income filed.

The Assessing Officer(A.O) on perusal of the Audited financial statements has dealt on the issues and submissions (i) deduction claimed on account of discount on issue of the ESOP scheme and the assessee has filed details, explanations and judicial decisions but the AO found that the deduction claimed by the assessee is not in compliance with the guidelines and the provisions of the Act and relied on judicial decisions and disallowed the claim of Rs. 1,67,09,68,356/-.(ii) On the second disputed issue, the A.O found that the assessee has claimed deduction on account of income tax cess and the A.O relied on the provisions of the Act , finance Act and judicial decisions and disallowed amount of Rs. 108,263,647/-.(iii) on the third disputed issue, the Ld.AO found that assessee has incurred expenditure of Rs. 23,30,000/- imposed as penalty by the SEBI for non-compliance of regulations and claimed as business expenditure. The A.O was not satisfied with the explanations and disallowed Rs. 23,62,200/-.(iv) On the fourth disputed issue, the AO found that the assessee has made investments earning dividend income as per balance sheet and the A.O called for various clarifications and details for invoking the provisions of sec14A of the Act. The dealt on the facts , provisions , legal decisions and computed the disallowance u/sec14A r.w.r 8D of Rs.2,68,88,623 (v). On the last disputed issue, the .AO found that assessee has claimed broken period interest on investment of HTM category and the assessee was called to furnish the details the assessee has filed submissions but the AO was not satisfied with the explanations and disallowed the amount of Rs. 58,58,25,308/- and finally assessed the total income of Rs.13,57,85,72,214/- and passed the order u/sec 143(3) r.w.s260 r.w.s 144B of the Act dated 28.10.2023. 4. Subsequently, the Pr. CIT on perusal of the records and information found that the order passed by the AO under section 143(3) r.w.s 260 r.w.s144B of the Act is erroneous and prejudicial to the interest of the revenue and issued revision notice U/sec 263 of the Act dated 8.01.2025 referred at Para 2 of the order and the assessee has filed detailed submissions and explanations on the claim of deduction u/sec36(1)(vii)(a) of the Act and deduction u/sec80G of the act vide letter dated30.01.2025 referred at Para2.1 of the revision order. Whereas the Pr.CIT was not satisfied with the explanations and submissions and is of the opinion that the order passed by the AO is erroneous and prejudicial to the interest of the revenue, and accordingly issued directions to the AO dealt at Para 4.2 to 10 of the order and passed the order u/sec263 of the Act dated31.03.2026. Aggrieved by the order of the Pr.CIT, the assessee has filed an appeal before the Hon’ble Tribunal 5. At the time of hearing, the Ld. AR submitted that the Pr. CIT has erred in considering the order passed by the AO is erroneous and prejudicial to the interest of the revenue, irrespective of the fact that the assessee has complied with the information and the notices through ITBA and the A.O. having verified and examined the facts has accepted the same. The Ld. AR submitted that the assessee, in the first assessment proceedings in lieu of notice issued u/sec142(1) of the Act dated 29.10,2021 along with the annexure, the A.O has called for various details including other deduction claimed in schedule BP of ITR i.e under sec36(1)(viia) of the Act and details in support of deduction under chapter VI i.eu/sec80Gof the Act and the assessee has filed the details vide letter dated 8.11.2021. And the AO having considered these facts, has applied his mind and made an enquiry and also complied with the scrutiny guidelines and accepted the claim. Whereas the observations of the Pr. CIT are not correct that, the claim/ deduction under section 36(1)(vii)(a) of the Act involves complex factual determination and the claim was allowed in a mechanical manner without application of mind. Similarly, the A.O has allowed the claim of deduction u/sec80G of the Act without calling any requisite documents and making inquires on the claim. The Ld. AR substantiated the submissions with paper book and judicial decisions and prayed for allowing the appeal. Per Contra, the Ld. DR submitted that the AO has not considered the facts and has not conducted enquiry nor verification before accepting the claims. The Ld. DR relied on the order of the Pr.CIT. 6. We heard the rival submissions and perused the material on record. The Ld.AR envisaged that the order passed by the Pr.CIT is bad in law as the order revised under revision proceedings passed by the Pr. CIT is not erroneous and not prejudicial to the interest of the revenue. The Ld. AR submitted that the assessee in the first assessment proceedings in lieu of notice issued u/sec 142(1) of the Act dated 29.10.2021 along with the annexure, the A.O has called for various details including other deduction claimed in schedule BP of ITR i.e under sec36(1)(viia) of the Act and details in support of deduction under chapter VI i.eu/sec80Gof the Act and the assessee has filed the details vide letter dated 8.11.2021 & 29.12.2021. Whereas the Assessing Officer has dealt on the facts, provisions of the Act legal decisions and submissions on the six disputed issues and assessed the total income of Rs. 15,30,91,74,282/- and passed the order u/sec 143(3) r.w.s 144B of the Act dated 24.09.2022. Subsequently, the assessee has challenged the order, in the writ petition before the Honble High Court Of Bombay on the ground of violation of principles of natural justice i.e no personal hearing was granted before the impugned order passed u/sec 143(3) r.w.s 144B of the Act dated 24.09.2022. And the said assessment order was quashed vide order dated 8.08.2023 and remanded the matter back to the Faceless Assessing officer for denovo adjudication in accordance with law. The contentions of the Ld. AR that, the AO has considered the submissions, facts and the method of accounting in the books of account and accepted the claim. We considered the submissions of the Ld.AR and find that in the first assessment proceedings details were filed on the claim of deduction u/sec36(1)(vii)(a) of the Act and deduction u/sec80G of the Act. Whereas on perusal of the submissions made by the assessee vide letter dated 8.11.2021 placed at page29 to 75 of the paper book in particular at page 34 in respect of deduction u/sec80G of the Act, the assessee has submitted “Annexure-7” with list of details of donations i.e vendor name, Pan, amount allowed. Similarly in respect of deduction u/sec36(1)(vii)(a) of the Act, the assessee has submitted a note and Anneure18,19 &20, working, computation of aggregate average advances for the purposes of clause(viia)of subsection(1)of section36 under rule 6ABA and CBDT instructionno17/2008 placed at page 67 to 75 of the paper book. Further, we find that the A.O has not called for additional details nor made calculations on these two disputed issues in the assessment proceedings before passing the order dated 24.09.2022. Subsequent to the assessment order was quashed vide order dated 8.08.2023 and remanded the matter back to the Faceless Assessing officer for denovo adjudication in accordance with law.

The Assessing Officer, as per the directions of the Honble High Court of Bombay, has issued two notices u/sec142(1) of the Act dated 29.09.2023 & 7.10.2023 placed at page 108 to 131 of the paper book, and on perusal of these notices, the A.O has called for information and details in respect of other claims and deduction but not on the disputed issues of deduction u/sec36(1)(vii)(a) of the Act and deduction u/sec80G of the Act. Further the assessee has made submission/ reply vide letter dated 10.10.2023 in lieu of two notices issued u/sec142(1) of the Act referred above. The Assessee s submissions are strictly restricted to the points and disputed issues referred in the notices. The Pr.CIT has dealt on the facts, information and provisions of law on claim of deduction u/sec 36(1)(vii)(a) of the Act and deduction u/sec80G of the Act, which proves that the Assessing Officer has not applied his mind and not made enquiries on the disputed issues nor called for any information on these disputed issues in the denovo adjudication proceedings. We considering the facts, circumstances and are of the opinion that the matter needs to be verified and reasons for claim should be justified by the assessee as discussed above . Accordingly, we do not find infirmity in the order of the Pr.CIT on the directions to Assessing officer and we up hold the same and dismiss the grounds of appeal of the assessee.

In the result, the appeal filed by the assessee is dismissed.