M/S. TAMIL NAD MERCANTILE BA vs. THE ASSISTANT COMMISSIONER O

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TCA/72/2021HC Madras25 January 2021Bench: Hon`ble Mr Justice T. S. SIVAGNANAM6 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeals in light of a subsequent event. The assessee had filed a declaration/undertaking under the Vivad Se Vishwas Scheme on 23.01.2021. The Court directed the Competent Authority to process this application under the Direct Tax Vivad Se Vishwas Act, 2020, and pass appropriate orders expeditiously. The assessee was granted liberty to restore the appeals if the decision on their declaration under Section 4 of the Vivad Se Vishwas Act was not in their favour. In such an event, the Registry was directed to entertain the restoration petition without insisting on a delay condonation application. Consequently, the substantial questions of law framed were left open, and no decision on the merits was rendered. The appeals were disposed of on this procedural basis.

What were the facts?

These appeals were filed by M/s. Tamilnadu Mercantile Bank Ltd. (the assessee) against the orders of the Income Tax Appellate Tribunal (the Tribunal) dated 09.05.2018. The assessment years under consideration are 2001-02, 2002-03, 2004-05, 2005-06, and 2006-07. The appeals challenge the Tribunal's decision to sustain additions made by the revenue authorities concerning disputed deposits received from customers, which were treated as unidentified deposits. The procedural history involves appeals filed before the High Court under Section 260A of the Income Tax Act, 1961, following the Tribunal's orders.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether disputed deposits received from customers, treated as unidentified, could be taxed in the assessee's hands under Section 68/69 of the Act, given that they were not proved and did not comply with KYC norms. 2. Whether additions of disputed deposits, treated as unidentified, in search assessments under Section 153A read with Section 143(3) were sustainable in the absence of direct evidence in search records. 3. Whether the Tribunal was correct in sustaining the addition of unidentified deposits as the assessee's income, despite the amount being seized for later disbursement to depositors, thus rendering Section 68/69 inapplicable. 4. Whether the Tribunal was correct in rejecting the alternate plea for loss from the seizure of disputed/unidentified deposits as an allowable deduction under Section 28/37(1). The assessee argued that the deposits were not unidentified and that the provisions of Section 68/69 were not applicable due to the seizure of the amount for disbursement to depositors. The assessee also contended for the allowance of loss under Section 28/37(1). The judgment does not record specific arguments from the revenue.

Which sections of the Income-tax Act were involved?

Section 260A,Section 68,Section 69,Section 153A,Section 143(3),Section 28,Section 37(1),Section 4

AI-generated summary — verify with the full judgment below

TCA.Nos.72 to 76 of 2021 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 25.01.2021 CORAM : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Ms.Justice R.N.MANJULA T.C.A.Nos.72 to 76 of 2021 and C.M.P.Nos.1251, 1262, 1263 and 1265 of 2021 M/s.Tamilnadu Mercantile Bank Ltd., Head Office: 57, V.E. Road, Tuticorin, Tamil Nadu PAN: AAACT 5558K ...Appellant in all cases Vs The Assistant Commissioner of Income Tax, Tuticorin. ...Respondent in all cases COMMON PRAYER: Appeals filed under Section 260A of the Income Tax Act, 1961 against the orders dated 09.05.2018 made in ITA.Nos.98, 99, 100, 101 and 102/Chny/2017 on the file of the Income Tax Appellate Tribunal, 'C' Bench, Chennai for the assessment years 2001-02, 2002-03, 2004-05, 2005-06 and 2006-07. 1/6 https://www.mhc.tn.gov.in/judis/ TCA.Nos.72 to 76 of 2021 For Appellant: Mr.A.S.Sriraman (in all cases) For Respondent: Mr.M.Swaminathan (in all cases) Senior Standing Counsel COMMON JUDGMENT (Delivered by

T.S.Sivagnanam,J

) These appeals filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity) are directed against the order dated 09.05.2018 made in ITA.Nos.98, 99, 100, 101 and 102/Chny/2017 on the file of the Income Tax Appellate Tribunal, 'C' Bench, Chennai ('the Tribunal' for brevity) for the assessment years 2001-02, 2002-03, 2004-05, 2005-06 and 2006-07. 2. The assessee in all these appeals have raised the following substantial questions of law for consideration: "1. Whether the disputed deposits received from the customers of the Appellant bank treated as unidentified deposits could be taxed in their hands invoking Section 68/69 of the Act as the deposits not proved as well as not accepted complying the KYC norms prescribed by the banking regulatory authorities? 2/6 https://www.mhc.tn.gov.in/judis/ TCA.Nos.72 to 76 of 2021 2. Whether the addition of disputed deposits treating such deposits as unidentified deposits in the search assessment completed u/s 153A read with Section 143(3) of the Act in the absence of direct evidence in the search records could be considered as sustainable in law? 3. Whether the Appellate Tribunal is correct in sustaining the addition of the unidentified deposits as the income of the Appellant despite the seizure of the said amount for disbursement to the deposit holders at the later point in time, thereby making the provisions of Section 68/69 of the Act not applicable to the said factual matrix of the case? 4. Whether the Appellate Tribunal is correct in rejecting the alternate plea of the loss suffered from the seizure of the disputed deposits/ unidentified deposits as allowable deduction within the scope of Section 28/37(1) of the Income Tax Act, 1961?" 3. We have heard Mr.A.S.Sriraman, learned counsel for the appellant/assessee and Mr.M.Swaminathan, learned Senior Standing Counsel appearing for the respondent-Revenue. 3/6 https://www.mhc.tn.gov.in/judis/ TCA.Nos.72 to 76 of 2021 4. The learned counsel for the appellant/assessee submits that the appellant/assessee has already filed the declaration/undertaking under the Vivad Se Vishwas Scheme on 23.01.2021 and is awaiting orders to be passed in Form No.3. 5. In the light of the subsequent event, the Competent Authority shall process the application/declaration in accordance with the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) and pass appropriate orders as expeditiously as possible. The assessee is given liberty to restore these appeals in the event the ultimate decision to be taken on the declaration filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeals and on such request made by the assessee by filing a miscellaneous petition for restoration, the Registry shall place such petition before the appropriate Division Bench for orders. 4/6 https://www.mhc.tn.gov.in/judis/ TCA.Nos.72 to 76 of 2021 6. The tax case appeals stand disposed of with the aforementioned liberty and consequently, the substantial questions of law framed are left open. No costs. Connected miscellaneous petitions are closed. (T.S.S.,J.) (R.N.M.,J.) 25.01.2021 Index: Yes/No Internet:Yes/No Speaking Judgment/Non speaking Judgment hvk To 1. The Income Tax Appellate Tribunal, 'C' Bench, Chennai. 2. The Assistant Commissioner of Income Tax, Tuticorin. 5/6 https://www.mhc.tn.gov.in/judis/ TCA.Nos.72 to 76 of 2021 T.S.SIVAGNANAM,J AND R.N.MANJULA,J hvk T.C.A.Nos.72 to 76 of 2021 and C.M.P.Nos.1251, 1262, 1263 and 1265 of 2021 25.01.2021 6/6 https://www.mhc.tn.gov.in/judis/

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