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Facts
The assessee bank filed appeals against the orders of CIT(A) for AY 2013-14 and AY 2020-21. For AY 2013-14, the assessee had challenged an addition of Rs. 9,66,65,844/- on account of bad debts, which was initially accepted by the AO in a subsequent order.
Held
The tribunal held that the assessee cannot challenge the original addition as it was not contested earlier, and the subsequent order of the AO with nil additions did not obliterate the original addition. For AY 2020-21, the tribunal found no merit in the assessee's claim for additional deduction of bad debts, as it was sought through a rectification petition which was not permissible.
Key Issues
Whether the assessee can challenge an addition that was not contested in the original assessment year by invoking the doctrine of merger, and whether a rectification petition can be used to claim an additional deduction for bad debts.
Sections Cited
147, 143(3), 36(1)(viia), 36(1)(vii), 250, 154, 246, 251
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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: HON’BLE SHRI MANU KUMAR GIRI & HON’BLE SHRI AMITABH SHUKLA
अपीलार्थी की ओर से/ Assessee by : Mr.Varun Ranganathan,Advocate for Mr.Ravi Kannan, Advocate. प्रत्यर्थी की ओर से / Revenue by : A.Sasikumar, CIT सुनवाई की तारीख/Date of Hearing : 17.02.2025 घोषणा की तारीख /Date of Pronouncement : 21.02.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M : These appeals are filed by the assessee against the order bearing DIN & Order No.ITBA/NFAC/S/250/2023-24/1059368128(1) dated 04.01.2024 for the AY-2013014 and No.ITBA/NFAC/S/250/2023- 24/1059435158(1) dated 06.01.2024 for the AY-2020-21 of the Learned Commissioner of Income Tax [herein after “CIT(A), National Faceless Appeal Center[NFAC], Delhi. Through the aforesaid appeals the Page - 1 - of 14 assessee has challenged order u/s 250 dated 04.01.2024 & 06.01.2024 passed by NFAC, Delhi. Both the appeals are of the same assessee and hence adjudicated by this common order for the purposes of convenience.
Assessment Year: 2013-14 2.0 The only issue contested in the impugned appeal, through its grounds of appeal is regarding the decision of the Ld. CIT(A) in dismissing the appeal of the assessee vide his order dated 04.01.2024. The Ld. Counsel for the assessee submitted that the action of the Ld. CIT(A) is erroneous. Consequently a request was made to remit the case back to the Ld.AO for re-adjudication. 3.0 Before proceeding further we deem it necessary to briefly recapitulate the brief factual matrix of the case. The appellant assessee is Cooperative Bank. It had filed its return of income for AY-2013-14 declaring loss of Rs.1,60,84,017/- on 30.09.2013. The case was selected for scrutiny wherein the Ld. AO, inter-alia, made an addition of Rs.9,66,65,844/- on account of inadmissible claim of bad debts in his order u/s 143(3) dated 22.03.2016. The Ld. AO had noted that, in terms of decision of Hon’ble Apex Court in the case of Catholic Syrian Bank, the deduction u/s 36(1)(viia) is only available to provisions for rural advances.
Page - 2 - of 14 It is an admitted fact on records that this order was not contested by the assessee before any appellate authority. 4.0 Further, in assessee’s case another order u/s 147 r.w.s 144B was passed dated 12.03.2022 wherein the Ld. AO had apparently reopened the matter to verify the number of rural branches qua claim of deduction u/s 36(1)(viia). The Ld. AO completed the assessment making nil additions and determining total income at Rs.8,60,3,830/- as done in the order dated 22.03.2016 supra. The assessee contested this order before the Ld.CIT(A), which is subject matter of present appeal. In the impugned order the Ld. CIT(A) dismissed the appeal after observing as under:- “….Hence, considering the above facts and discussions above from point no.-(i) to (vi), it is clear that there is NIL addition made by the AO in its said re-assessment Order dated 12.03.2022. It appears that, no appeal has been preferred by the Appellant assessee against the original assessment order of the AO (dated 22.06.2016 passed u/s 143(3) of Income-tax Act 1961). Which means that, the Appellant has accepted the said original assessment order of the AO dated 22.06.2016 and thus no relief can be given by this authority, also there is nothing new in this re-assessment order of the AO dated 12.03.2022 and thus there is no addition made by AO other than what is already accepted by the Appellant assesse. Further, in view of the grossly negligent behavior of the appellant assessee bank, this Appellate authority dismisses this appeal of the Appellant assessee….. 5.0 We have heard rival submissions in the light of material available on records. We have noted that in realty the assessee was trying to contest before the Ld.CIT(A) the addition made by the Ld.AO on account Page - 3 - of 14 of bad debts of Rs.9,66,65,844/- vide his order dated 22.03.2016. The issue i.e seminal to the controversy is whether the law permits the assessee to do so now. The Ld. Counsel for the assessee submitted that by way of Doctrine of merger the order dated 22.03.2016 had merged with the order dated 12.03.2022 and hence it is entitled to contest the addition under bad debts made in the impugned order dated 22.03.2016. The Ld. DR on the other hand argued that the assessee had taken a conscious call of not contesting the addition made in order dated 22.03.2016 within the statutorily available time limits and therefore cannot agitate the same later. It was further submitted that there is no addition made in the order u/s 147 dated 12.03.2022 by the Ld. AO and hence the Ld. CIT(A) is correct in dismissing the appeal of the assessee in limine as non-maintainable. We find sufficient force in the arguments of the Ld. DR. 5.1 The controversy embedded in the present appeal of the appellant assessee has been examined w.r.t. the statutory provisions of the act as well as the facts and circumstances of the case. In principle the assessee has contested the order u/s 251 of the act passed by the Ld. First Appellate Authority. Before the Ld. CIT(A) the appellant assessee had assailed order u/s 147 r.w. 143(3) dated 12.03.2022 of Ld.AO. This bring us to the question as to the powers of Ld.AO u/s 147 Page - 4 - of 14 of the act. Briefly put section 147 empowers an assessing officer to bring to tax any income which has escaped assessment for reasons specified in the statute. Thus, a notice u/s 148 is issued by the Ld. AO to examine the issue as to whether any income has escaped assessment. It is noteworthy that this is the stage of prima face belief of the Ld. AO and not a conclusive finding which only comes upon detailed enquiry and investigation into the case, confronting the tax payer, examining material, evidence on record etc. 5.2 Section 246 of the act entails that “any assessee aggrieved” by the order of the Ld. AO passed under different statutory provisions of the act including u/s 147, possess a right to contest the impugned order by which it is “aggrieved”. The word “aggrieved” order would mean an order which causes an injury or harm to the taxpayer and the same in the case of Direct Tax Jurisprudence would mean raising of additional tax demand and / or interest or penalty. Thus, an order u/s 251 is passed by the Ld. First Appellate Authority qua an order appealed against u/s 246. The most essential ingredient for appeal to be filed u/s 246 and for the Ld. First Appellate Authority to pass an order u/s 251 is the presence of element of assessee being “aggrieved”. 5.3 Coming to the grounds on which an order u/s 147 r.w 143(3) can be assailed is two fold. Firstly it can be challenged on the legal issue of Page - 5 - of 14 jurisdictional insufficiency or else on the issues concerning merits of the addition. The grounds concerning jurisdictional challenge may, inter-alia, include matters like issue of notice being time barred or change of opinion to reopen the case etc. As regards merits the order can be assailed on the premise of opportunities of heard not being granted, reliance upon weak or negligible evidences or inadequate / inappropriate interpretation of the statute. 5.4 We have noted that when, viewed in the above context, there is nothing to challenge the order u/s 147 r.w. 143(3) dated 12.03.2022. There is nothing on records that the issue of jurisdiction u/s 147 was raised by the assessee either before the Ld.AO during reassessment proceedings or assailed before the Ld. CIT(A). Nothing has been brought on records to allude towards jurisdictional insufficiency of the reassessment proceedings u/s 147. As far as merits of the case are concerned, there cannot be any case of grievance to the assessee because the Ld. AO did not make any additions. In fact in all fairness it is noted that the Ld. AO had initiated proceedings u/s 147 to examine an aspect of the percentage of rural branches which the assessee bank was having qua its claim of deduction u/s 36(1)(vii), however upon noting absence of any deficiency, the Ld. AO proceeded not to make any further disturbance. It is pertinent to point out that 147 action is always taken Page - 6 - of 14 to add to or improve upon the quantum of income assessed in the original order, be it u/s 143(1) or u/s 143(3). It is thus seen that there was no case for the assessee getting aggrieved by the order of the Ld. AO, which would have warranted filing of an appeal u/s 246 before the Ld. First Appellate Authority. The views of the Ld. First Appellate Authority extracted in para 4.0 herein above, have therefore been found to be totally in order. The decision of the Ld.CIT(A) that as the assessee has not contested the order dated 22.03.2016 in which the addition of Rs.9,66,65,844/- was made by the Ld.AO on account of bad debts, the same cannot now be contested in a roundabout manner by invoking the hypothesis of doctrine of merger. Merely because the Ld. AO has reopened the assessment on connected matter and proceeded to conclude that no further addition is required to be made would not mean that the original addition stands obliterated. Both the assessment orders dated 22.03.2016 and dated 12.03.2022 are on different footings and cannot be treated as composite orders. We therefore find force in the argument of the Ld. CIT(A) as to when there is no addition no relief can be given to the assessee. Accordingly, we confirm the order of the Ld. CIT(A) and dismiss all the grounds of appeal raised by the assessee.
Page - 7 - of 14 7.0 The only issue emanating through the grounds of appeal raised by the appellant assessee is regarding the action of the Ld. CIT(A) in not considering the petitions submitted by the appellant assessee u/s 154 during the course of assessment proceedings. The appellant had also raised the issue that proper opportunity was not given to it. 8.0 For the purposes of clarity we deem it necessary again to briefly recapitulate the factual matrix of the case. Return declaring income of Rs.9,54,13,800/- was filed by the assessee on 03.12.2020. The case was completed under the complete scrutiny category by order u/s 143(3) dated 08.09.2022 by the Ld. AO in the impugned order. As it was complete scrutiny category case, the Ld. AO conducted detailed enquiries and investigations including obtaining necessary details from the assessee, before completing the assessment at returned income. Thus it is an undisputed fact on records that the order u/s 143(3) dated 08.09.2022 was passed without making any addition to the assessee’s hand. The Ld. Counsel or the assessee has contended that it had mistakenly restricted its claim of deduction of bad debts u/s 36(1)(vii) to Page - 8 - of 14. Rs.6,53,00,000/- as against Rs.32,54,56,080/- in its return of income and that the additional claim was made during the course of assessment proceedings but has been denied by the Ld. AO. The Ld. AR submitted that its appeal made before the Ld. First Appellate Authority challenging Ld. AO’s action u/s 154, was rejected, inter-alia, for non-compliance as well as no mistake existing in assessment order which required any amendments. 8.1 The Ld. Counsel for the appellant assessee has drew our attention to its letter dated 11.01.2022. It is the case of the assessee that it had made the request to the Ld. AO for consideration of its claim of bad debts during the assessment proceedings. For the purposes of clarity, we reproduce the impugned letter as below:-
Page - 9 - of 14
Page - 10 - of 14 8.2 The Ld. CIT,DR fiercely argued that impugned letter had no contextual reference with any facts of the case. It was submitted that firstly the subject line of the said letter dated 11.01.2022 states that it is for rectification u/s 154. The Ld. CIT, DR argued that the impugned request had nothing to do with the controversy of asking the Ld. AO for consideration of bad debts. Pointing towards inaccuracy / deficiency / factual incongruence of the impugned document, the Ld. CIT, DR submitted that the DIN No. etc submitted in the subject line is again not connected with the present case. 9.0 The Ld. CIT, DR drew our attention to the order of Ld. First Appellate Authority wherein it had confirmed the order of the Ld.AO. Perusal of column No.11 of Form-35 indicates that the assessee had challenged that its claim for additional claim of bad debts was not allowed by the Ld. AO. Column No.2(a) of said Form-35 indicates that the appeal was made against the 154 of the order dated 29.09.2022. The Ld. First Appellate Authority has observed in his order dated 06.01.2024 that it had issued notices to the assessee which were not complied and also the fact that hearing were fixed as per adjournment sought by the appellant. The Ld. First Appellate Authority also noted that as no addition was by the Ld. AO in his assessment order dated 08.09.2022 there cannot be any case of grievance to the assessee. Accordingly, Page - 11 - of 14 applying the above reasoning the Ld. First Appellate Authority dismissed assessee’s appeal. 10.0 We have heard rival submissions in the light of material available on records. The only issue that emanates from the present appeal is the grievance of the assessee of non-consideration of its request made before the Ld. AO for allowance of higher amount of bad debts which was mistakenly omitted to be claimed in the return of income. Material available on records indicates that but for letter dated 11.01.2022 for rectification u/s 154, there is nothing to allude that such request was made. We find sufficient force in the argument of the Ld. CIT, DR that the impugned letter being a request u/s 154 cannot be substituted as a request for any revised computation of income. The Ld. CIT, DR also argued that in compliance to the decision of Hon’ble Apex Court in the case of Goetze India Ltd 284 ITR 323, even otherwise the Ld. AO was precluded from admitting any revised computation of income during assessment proceedings. It was stated that as per the decision of Hon’ble Apex Court in the case of Goetze India Ltd supra only appellate authorities are permitted to admit such claims, if and when made before them. We have noted from the grounds of appeal raised before the Ld. CIT(A) that no such request was made for admission of any revised
Page - 12 - of 14 computation of income. We have also noted from the grounds appeal raised before us that no such claim was made. 11.0 Accordingly, we have noted that there is no case made out in favour of the appellant assessee to disturb the order of Ld. First Appellate Authority. The assessee had assailed the Ld.AO’s action u/s 154. The Ld. CIT(A) has rightly observed that when there is no addition made in the assessment order there cannot be any scope for any amendment therein. It is settled principle of law that section 154 of the act only provides for attendance to any arithmetical or typographical errors. In the present case since there was no such error, the Ld. First Appellate Authority cannot be faulted for rejecting assessee’s appeal u/s 154. Consequently, we hold that there is no case for any interference to the order of the Ld. CIT(A) and the same is therefore sustained. All the grounds appeal raised by the assessee, through original memo, are therefore dismissed. 12.0 During the course of the present proceedings the assessee, vide its letter 12.08.2024, has raised an additional ground of appeal challenging the action of the Ld. CIT(A) of rejecting its appeal without giving reasonable opportunity. We have noted that the Ld. CIT(A) has clearly recorded in para VI & VII of his order that opportunities were given to the assessee which were not availed by the assessee. It is trite law Page - 13 - of 14 that a litigant has to remain serious and compliant while prosecuting its case before a judicial authority. Accordingly, we do not find any force in the additional ground raised by the assessee and the same is also dismissed. 13.0 In the result the appeals of the assessee are decided as under:-
ITA No.584/Chny/2024 AY-2020-21 Dismissed
Order pronounced on 21st , February-2025 at Chennai