ICICI BANK LTD vs. DEPUTY COMMISSIONER OF INCOME TAX-2(3)(1) AND 2 ORS

PDF · subscribers
WP/3108/2022HC Bombay31 October 2023Author: HON'BLE SHRI JUSTICE K.R. SHRIRAM, HON'BLE JUSTICE DR. NEELA KEDAR GOKHALE7 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the reopening of assessment under Section 147 of the Income Tax Act, 1961, could not be sustained. The Court noted that the first proviso to Section 147 imposes a four-year limit for reopening assessments made under Section 143(3) unless there was a failure to disclose material facts. The reasons recorded for reopening were based on the effect given to the CIT(A)'s order and did not indicate any failure on the part of the assessee to disclose material facts. The Court found that the queries raised during the original assessment proceedings under Section 142(1) regarding the deductions under Section 36(1)(vii), 36(1)(viia), and 36(1)(viii) were answered by the assessee, and these claims were discussed in detail in the assessment order. The subsequent reopening was based on a change of opinion, which the Court stated is not permissible in law and does not constitute justification for believing that income chargeable to tax has escaped assessment. Consequently, the Rule was made absolute, and the petition was allowed, quashing the notice dated 24.03.2021 and the order dated 17.02.2022.

What were the facts?

The assessee, ICICI Bank Ltd., filed its return of income for Assessment Year 2013-14, which was later revised. The case was selected for scrutiny, and queries were raised concerning deductions under Sections 36(1)(vii), 36(1)(viia), and 36(1)(viii) of the Income Tax Act, 1961. The assessee provided explanations and revised workings. An assessment order was passed on January 23, 2017. Subsequently, based on audit objections, a notice under Section 148 of the Act was issued, alleging that income had escaped assessment due to excess deductions allowed under the aforementioned sections. The assessee filed objections, which were rejected by an order dated February 17, 2022. The assessee filed a writ petition challenging the notice under Section 148 and the order rejecting its objections.

What were the issues?

1. Whether the notice issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2013-14 is sustainable, considering it was issued after the expiry of four years from the end of the relevant assessment year, and whether the Revenue has discharged the onus to prove a failure on the part of the assessee to truly and fully disclose material facts necessary for the assessment? (Question of law and fact, concerning Section 147 and Section 148 of the Act). Assessee's contention: The notice under Section 148 is not sustainable as it was issued after four years, and the reasons do not indicate any failure to disclose material facts. The reopening is based on a change of opinion, which is not permissible. Revenue's contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 36(1)(vii),Section 36(1)(viia),Section 36(1)(viii),Section 143(3),Section 144C(3),Section 148,Section 147,Section 250

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
1/7 502-oswp-3108-2022-J.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3108 OF 2022 ICICI Bank Ltd. ICICI Bank Towers, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051. …Petitioner Versus 1. Deputy Commissioner of Income Tax-2(3) (1), having his office at Room No.552, Aayakar Bhavan, M.Karve Road, Mumbai – 400 020. 2. National Faceless Assessment Centre, Mayur Vhavan, Barakhamba Road, Delhi – 110 001. 3. Union of India through Ministry of Law Aayakar Bhavan, Maharshi Karve Road, Mumbai – 400 020. …Respondents Ms. A. Vissanji, for Petitioner. Mr. Suresh Kumar, for Respondents-Revenue. CORAM: K. R. SHRIRAM & NEELA GOKHALE, JJ. DATED: 31st October 2023

ORAL JUDGMENT (Per K.R. Shriram, J.):

1.

Rule. Rule made returnable forthwith by consent of parties.

2.

Petitioner had filed its return of income for Assessment Year 2013-14 on 29th November 2013 declaring total income of Rs.85,82,23,14,680/-. The said return was revised on 31st March 2015 declaring total income of Rs.85,70,52,53,270/-. Petitioner filed Gaikwad RD 2023:BHC-OS:12971-DB CNR No : HCBM020074682022 Uploaded on - 02/11/2023 Downloaded on - 31/10/2026 01:00:15

2/7 502-oswp-3108-2022-J.doc the said return along with audited accounts, Form 3CD and other prescribed documents. Petitioner’s case was selected for scrutiny and various queries were raised particularly in respect of deductions under Section 36(1)(vii), 36(1)(viia) and 36(1)(viii) of the Income Tax Act, 1961 (“the Act”). Petitioner responded and explained that the amount of bad debts claimed have been revised in the revised return on account of a change in the credit balance which was taken as per the revised claim in the return for the preceding Assessment Year 2012-13. 3. In its reply dated 12th August 2016, Petitioner submitted detailed explanation with respect of the deductions for bad debts claimed under Section 36(1)(vii) of the Act with reference to relevant circulars of Central Board of Direct Taxes (“CBDT”) as well as deduction claimed under Section 36(1)(viia) of the Act. Petitioner also submitted a working of the deductions and later revised working of deductions and revised statement were also submitted along with other documents.

4.

After considering the submissions made by Petitioner together with the documents submitted, Respondent No.1 passed an assessment order dated 23rd January 2017 under Section 143(3) read with Section 144C(3) of the Act.

5.

The claim for deduction under Section 36(1)(viii) has been Gaikwad RD Uploaded on - 02/11/2023 Downloaded on - 31/10/2026 01:00:15

3/7 502-oswp-3108-2022-J.doc discussed in paragraph 15 of the said assessment order. Respondent No.1 has noted that “since the claim is linked to the business income, computed under the head ‘Profits and Gains of Business and Profession’ the same would be subject to change depending on the final figure of business income determined after considering various disallowances/additions but not exceeding Rs.760,00,00,000/- being the amount appropriated during the year by the assessee to the Special Reserve Account”.

6.

Petitioner preferred an appeal against the assessment order pertaining to issues unreleated to deductions under Section 36(1) (vii), Section 36(1)(viia) and Section 36(1)(viii) of the Act. The Commissioner of Income Tax (Appeals) (“CIT(A)”) passed an order dated 24th January 2009. Respondent No.1 gave effect to CIT(A)’s order on 29th March 2019. Respondent No.1 added back the net bad debts of Rs.167,69,24,260/- after adjusting earlier years provision of Rs.564,81,45,059/- and allowed deduction of Rs.166,86,41,107/- under Section 36(1)(vii) of the Act after adjusting the provision of Rs.565,64,28,212/- for bad and doubtful debts allowed as per order giving effect passed for assessment year 2012-13. The amount of Rs.760,00,00,000/- was allowed under Section 36(1)(viii) of the Act whereas the deduction of Rs.950,71,42,265/- was allowed under Section 36(1)(viia) of the Act in the said order giving effect to the CIT(A)’s order for the relevant assessment year. Gaikwad RD Uploaded on - 02/11/2023 Downloaded on - 31/10/2026 01:00:15

4/7 502-oswp-3108-2022-J.doc

7.

Subsequently, based on audit objections, Petitioner was served with a notice under Section 148 of the Act stating that Petitioner’s income has escaped assessment. Petitioner was also supplied with reasons for issue of the notice under Section 148 of the Act. The reasons recorded state that on verification of record, it was observed that in the order dated 29th March 2019 giving effect to the order of the CIT(A): (a) provision for bad debts was allowed in excess at Rs.564,81,45,059/- instead of Rs.499,98,11,924/-; (b) deduction under Section 36(1)(viii) was allowed in excess at Rs.760,00,00,000/- instead of Rs.657,83,50,134/-; Respondent No.1 relied upon the judgment of the Apex Court in the case of Goetze (India) Ltd. v. CIT,1 that deduction had to be restricted to the amount claimed in the return; (c) excess deduction had been allowed under Section 36(1)(viia) of the Act to the extent of Rs.130,89,42,096/-. Respondent No.1 concluded, relying upon the judgment of the Apex Court in Goetze (India) Ltd. (supra), by stating that bad debts and the provision for bad debts had been allowed in excess, that the deduction had to be restricted to the claims made in the return of income and hence income was underassessed.

8.

Petitioner filed its objections vide letter dated 14th December 2021. Petitioner was called upon to submit further details which Petitioner did and then order dated 17th February 2022 rejecting 1 284 ITR 323. Gaikwad RD Uploaded on - 02/11/2023 Downloaded on - 31/10/2026 01:00:15

5/7 502-oswp-3108-2022-J.doc Petitioner’s objections came to be passed. This order is also impugned in the Petition.

9.

It is Petitioner’s case that since the notice under Section 148 of the Act was issued after the expiry of four years from the end of relevant assessment, the onus is on Respondents to prove that there was failure on the part of Petitioner to truly and fully disclose material facts required for the assessment. Ms. Vissanji submitted that the reasons do not indicate that there was failure to disclose and, therefore, on this ground alone the notice is not sustainable.

10.

Though repeatedly time was taken to file affidavit in reply, no reply has been filed.

11.

We have considered the reasons recorded for reopening of the assessment under Section 147 of the Act. In our view, the reopening cannot be sustained.

12.

The first proviso to Section 147 prescribes a limit of four years for reopening an assessment in a case where an assessment has been made under Section 143(3) of the Act and there is no failure on part of the assessee to disclose fully and truly all material facts necessary for assessment. Petitioner has been assessed under Section 143(3) of the Act.

13.

We have considered the reasons and the entire basis for Gaikwad RD Uploaded on - 02/11/2023 Downloaded on - 31/10/2026 01:00:15

6/7 502-oswp-3108-2022-J.doc forming a reason to believe that there has been escapement of income is the effect that the assessing officer gave while giving effect to CIT(A)’s order dated 29th March 2019 under Section 250 of the Act. In paragraph 2.1 of the reasons, it states that “On verification of records it is observed that the while giving effect to CIT(A)’s order u/s. 250 IT Act dated 29/03/2019 revealed that while computing the assessed income…..”. In paragraph 2.2, it states that “Further, on verification of records it is observed that the while giving effect to CIT(A)’s order u/s. 250 IT Act dated 29/03/2019 revealed that while computing the assessed income….”. And in paragraph 2.3, it states that “Further, on verification of records it is also observed that the while computing the assessed income had allowed deduction of Rs.950,71,42,265/- u/s. 36(1)(viia) of IT Act. Further, it is observed from details of Computation of Income for AY 2013-14 submitted by assessee that assessee had claimed following deduction u/s. 36(1) (viia) of IT Act [Statement 18 of Computation of Income]…..”. All these only refer to the Assessment Order giving effect to CIT(A)’s order. These do not indicate that there was no failure on the part of Petitioner to truly and fully disclose material facts.

14.

During the assessment proceedings, the Assessing Officer had issued notices under Section 142(1) and also issued questionnaires from time to time with respect to Petitioner’s claim under Section 36(1)(vii), Section 36(1)(viia) and Section 36(1)(viii) of the Act and Gaikwad RD Uploaded on - 02/11/2023 Downloaded on - 31/10/2026 01:00:15

7/7 502-oswp-3108-2022-J.doc Petitioner has answered all those queries. In the assessment order, Petitioner’s claim under Section 36(1)(vii) read with Section 36(1) (viia) and Section 36(1)(viii) of the Act has been discussed in detail and certain amount of bad debts had been disallowed. In fact, Petitioner had carried that in appeal to CIT(A) and an order giving effect to the order passed by the CIT(A) came to be passed. Therefore, the reasons as recorded for reopening indicate only change of opinion which again is not permissible in law. This change of opinion does not constitute justification and/or reasons to believe that income chargable to tax has escaped assessment.

15.

In the circumstances, Rule made absolute. Petition is allowed in terms of prayer clause (a) which reads as under: “(a) This Hon’ble Court may be pleased to issue under Article 226 of the Constitution of India an appropriate direction, order or writ including a writ in the nature of Certiorari calling for the records of the case and after satisfying itself as to the legality thereof, quash and set aside the notice dated 24.03.2021 (Exhibit ‘M’) and the order dated 17.02.2022 (Ex.R) issued by the Respondent No.1 for the relevant assessment year.” (NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) Gaikwad RD Uploaded on - 02/11/2023 Downloaded on - 31/10/2026 01:00:15 Powered by TCPDF (www.tcpdf.org)

More judgments on Section 36(1)(vii)

All 1,429 judgments and leading authorities on Section 36(1)(vii) →

Recent GST High Court judgments

Search GST case law →