Loading judgment…
Facts
The Revenue filed an appeal against the CIT(A)'s order, which had deleted additions made by the AO. The AO had initially framed an assessment, which was partly allowed by the CIT(A). Subsequently, the AO passed an order giving effect to the CIT(A)'s order, but later rectified it under Section 154, reiterating the additions. The present CIT(A) order examined the AO's Section 154 action and found it erroneous.
Held
The Tribunal noted that the CIT(A) had correctly deleted multiple additions made by the AO, relying on various judicial precedents, including decisions in the assessee's own case. The AO's action of reiterating these additions in a rectification order was found to be based on a misinterpretation of the CIT(A)'s earlier order.
Key Issues
Whether the AO's rectification order under Section 154, which reiterated additions already deleted by the CIT(A), was erroneous due to misinterpretation of the earlier appellate order. Whether the deletions made by the CIT(A) based on judicial precedents were justified.
Sections Cited
143(3), 115JB, 154, 250, 36(1)(viiia), 36(1)(vii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI MANOJ KUMAR AGGARWAL
आदेश / O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 01.07.2023 for the Assessment Year (hereinafter referred to as "AY”) 2009-10.
At the outset, it is noted that there is a delay of ‘474’ days in filing of this appeal. After going through the application for condonation filed by the DCIT, Circle-2(3)-1, Mumbai, we find that there is sufficient reason for the cause of delay and therefore, we condone the delay and proceed to hear the appeal on merits.
The brief facts leading to this appeal being filed before this Tribunal are that the assessee-Bank had filed its return of income (RoI) on 29.09.2009 declaring an income of Rs.67,12,21,287/-. The AO noted that after setting off brought forward business loss of Rs.66,31,69,053/- [refer Page No.65 of the Paper Book], the assessee had worked out the tax liability of Rs.9,09,22,671/- and book profit of Rs.8,02,49,489/- u/s.115JB of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘). Thereafter, the return was picked up for scrutiny and the AO framed the assessment by making some additions/disallowance vide order dated 28.12.2011 passed u/s.143(3) of the Act. [refer Page Nos.65-94 of the Paper Book]. The assessee being aggrieved by the addition/disallowance, preferred an appeal before the Learned Commissioner of Income Tax (Appeals), Tiruchirapalli, who vide order dated 28.02.2014 has partly allowed the appeal of the assessee.
Thereafter, the AO is noted to have passed order giving effect to the appellate order dated 28.02.2014 [refer Page Nos.29-54 of the Paper Book] by order dated 18.11.2016 wherein he allowed the claim of the assessee on seven (7) issues [refer Page No.25-28 of the Paper Book].
Thereafter, the AO rectified his order dated 18.11.2016 (wherein he gave effect to the Ld.CIT(A) order dated 28.02.2014), by passing the impugned order u/s.154 of the Act dated 08.12.2016 [refer Page Nos.2-24 of the Paper Book] and again reiterated his addition/disallowance as made by him in the original assessment order dated 28.12.2011 [refer Page No.65- 94 of the Paper Book]
Aggrieved by the aforesaid action of the AO u/s 154 dated 08.12.2016, the assessee preferred an appeal before the Ld.CIT(A)/NFAC who vide impugned appellate order dated 01.07.2023 found that the action of the AO passing the order u/s.154 of the Act dated 08.12.216 is erroneous, because, the Ld.CIT(A) while passing the earlier order on 28.02.2014, had allowed/deleted the additions made in the original assessment order dated 28.12.2011 and therefore the exercise of passing rectification order was due to mis understanding of the First Appellate order dated 28.02.2014. The Ld.CIT(A) is noted to have deleted the additions restored by the AO in his rectification order by holding as under:
4.1 The assessee sought and was granted a personal hearing through Video Conference held on 28/06/2023, wherein Mr. Shailesh Kothari Sr. VP and Head Taxation, Mr. Yash Lala, Sr. Associate appeared along with Shri Rinkesh Devnani CA from BSR & Co and the case was heard and discussed.
5. I have carefully considered the matter. The assessee has only one grievance against the action of the AO in adding back the relief granted by the CIT(A). I have perused the order of the CIT(A) for this year dated 28.02.2014 and find that the CIT(A) has clearly deleted the 7 additions made by the AO. It is only perhaps due to an unfortunate choice of words by the CIT(A) that the AO has interpreted the directions of the CIT(A) to mean that the AO has to "reconsider the issues". I find that in Para 3.1 of his order, the CIT(A) has clearly
deleted the addition towards broken period interest of Rs. 4,92,80,964. The CIT(A) has noted that the ITAT in the assessee's own case for AY 1999-00 & 2000-01 in & 1596/MDS/2005 has held in favour of the assessee. The CIT(A) has directed the AO to follow that ITAT order and take appropriate action which can only mean that the disallowance of RS. 4,92,80,964 is deleted.
5.1 In respect of accrued interest on NPA of Rs. 2,22,083 in Para 4 of the CIT(A) order the discussion clearly indicates that the additions is deleted and the AO has been directed to follow the decision of the Supreme Court in United Commercial Bank and consider allowing the interest on NPA. This has been misinterpreted by the AO. It is clear that the CIT(A) has deleted the addition of RS. 2,22,083. I have perused the order of the CIT(A) in detail and find that using similar language which has been misinterpreted by the AO the CIT(A) has deleted the other 5 additions as detailed in the table below:
Head of disallowance Amount Relevant Para of CIT(A) order Entertainment expenses Rs. 1,56,262 7.3 & 7.4 (Pages 9 & 10) Bad debts w/off u/s Rs. 18,71,013 11.3 to 11.5 (Pages 16 & 36(1)(vii) 17) Deduction u/s 36(1)(viia) Rs. 5,61,89,000 18 (Pages 22 & 23) Ex-gratia payment Rs. 89,47,273 15.1 & 15.2 (Pages 18 & 19) Pooja Expenses Rs. 3,72,150 17 (Pages 20 & 21)
It is evident from the order of CIT(A) that the above additions have been deleted but the AO has misinterpreted the language in the CIT(A) order. I therefore direct the AO to allow the relief of Rs. 11,70,38,745 as originally allowed by him in the order giving effect to the CIT(A) order dated 18/11/2016. Based on the discussion above, I delete such addition made in the present order under appeal.
In the result, the appeal is allowed.
Aggrieved by the aforesaid action of the Ld.CIT(A), the Revenue is before us and has raised various issues which are not emanating from the impugned order of the Ld.CIT(A) dated 01.07.2023, because, it should be borne in mind that by passing the impugned order, the Ld.CIT(A)/NFAC was examining the action of the AO passed u/s.154 of the Act dated 08.12.2016. And it also has to be kept in mind that the order passed by the Ld.CIT(A), Tiruchirapalli, by order dated 28.02.2014 u/s.250 of the Act, against the assessment order passed by the AO on 28.12.2011 has now crystallized, since the Revenue didn’t prefer any appeal against the order of the Ld.CIT(A) dated 28.02.2014.
6. And as noted, the impugned order before us has been passed by the Ld.CIT(A)/NFAC by order dated 01.07.2023 as noted supra was against the AO’s order u/s.154 of the Act dated 08.12.2016 which was per-se erroneous; and it arose due to inadvertent mistake of choice of words as correctly noted by the Ld.CIT(A) while passing the order dated 28.02.2014 wherein, the Ld.CIT(A) after deleting seven (7) additions made by the AO [vide assessment order dated 28.12.2011] finally used the expression “reconsider the issues”. We note that all the seven (7) issues are noted at Page No.3 of the Paper Book, in which tabular form (infra) has been decided by the Ld.CIT(A) by deleting the addition as under:
Sl. No. Issue Amount (in Rs.) 1 Broken period interest 4,92,80,969 2 Interest on Non-performing 2,22,083 Accounts 3 Disallowance of 1,56,262 Entertainment Expense 4 Ex- Gratia Payment 89,47,273 5 Disallowance of Pooja 3,72,150 Expenses 6 Allowable Deduction 5,61,89,000 u/s.36(1)(vila) 7 Bad Debts Written off u/s 18,71,014 36(1)(vii) and 36(1)(vila)
:: 6 ::
Moreover, we find that the aforesaid issues have been rightly decided by the Ld.CIT(A) since we find that the issues are no longer res integra. Out of the seven (7) additions made by the AO, the Ld.CIT(A) has deleted the five (5) issues by relying on the decision of the Tribunal in the assessee’s own case and other two issues by following the decision of the Hon’ble Madras High Court in the case of UCO Bank v. CIT & Catholic Syrian Bank Ltd. v. CIT. The chart below shows that the aforesaid issues are covered by judicial precedents as under:
List of case laws referred to in the order of the CIT(A) dated 28th February 2014
Internal Paper book S.No. Issues Case Laws Page Page Number Number 1 Interest on Non- Decision of the Hon'ble Pages 106-107, Performing Supreme Court in the case of 2,3,5,8,9 109, 112-113 Account (NPA) UCO Bank vs. CIT [237 ITR 889 (SC)] 2 Deduction Decision by ITAT Chennai in Pages 8-10 122-124 claimed u/s the assessee's own case 36(i)(viia) (Lakshmi Vilas Bank Ltd vs. ACITITA Nos. 552 & 553/Mds/2009) Decision by ITAT Chennai in Page 8 138 the assessee's own case (Lakshmi Vilas Bank Ltd vs. ACITITA Nos. 671 & 899/Chny/2019) 3 Ex-Gratia Decision by ITAT Chennai in Page 39 181-184 Payment the assessee's own case (Lakshmi Vilas Bank Ltd. vs. DCIT/ACIT - 4 Pooja Expenses Decision by ITAT Chennai in Pages 26, 27 170-171 the assessee's own case (Lakshmi Vilas Bank Ltd. vs. DCIT/ACIT - I.Τ.Α. Nos. 1402,1590/Mds/2012) 5 Entertainment Decision by ITAT Chennai in Pages 25, 26 169-170 Expenses the assessee's own case (Lakshmi Vilas Bank Ltd. vs. DCIT/ACIT - I.T.Α. Nos. 1402,1590/Mds/2012) 6 Bad Debts Decision of the Hon'ble Page 17 201
Written Off Supreme Court in the case of Catholic Syrian Bank Ltd vs. Commissioner of Income Tax, (AIR 2012 SC 1538) 7 Broken Interest Decision by ITAT Chennai in Page 3 207 Period the assessee's own case P(Lakshmi Vilas Bank Ltd. vs. DCIT - Ι.Τ.Α. Nos. 1596/Mds/2005)
In the light of the aforesaid discussion, looking from any angle, we find no merit in the appeal filed by the Revenue and hence, dismiss it.
In the result, appeal filed by the Revenue is dismissed.
Order pronounced on the 04th day of June, 2025, in Chennai.