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Income Tax Appellate Tribunal, ‘C’ MUMBAI
आदेश / O R D E R PERM.BALAGANESH(A.M): This appeal of the assessee is directed against the order passed by the learned Commissioner of Income Tax Appeals-1, Mumbai [hereinafter referred to as the ld. CIT(A)] in Appeal No.CIT(A)-1/33/AC-II(LTU)- 2/2015-16 dated 14/10/2019 for the A.Y.2007-08 against the order passed by the learned Assistant Commissioner of Income Tax, LTU-2, Mumbai (hereinafter referred to as ‘ld. AO’) u/s 143(3) r.w.s. 264 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) dated 30/09/2015.
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The assessee has raised the following grounds of appeal:-
The Ld. CIT(A) failed to consider the facts and substance of order of AO before dismissing the appeal i.e. whether said order complied with direction of CIT u/s.264 or AO exceeded his jurisdiction while passing the impugned order. 2. The Ld. CIT(A) failed to appreciate that whereas Ld. CIT in his order u/s.264 dated 23.03.2015 directed the AO to treat return of Income filed as a valid return, AO in his order dated 30.09.2015 purportedly giving effect to the direction, in actual exceeded the direction and made additions beyond jurisdiction as to time limit and issue of notice. Hence, the order of AO is appealable and cannot be brushed aside as non-maintainable appeal.
The Ld. CIT(A) failed to appreciate that whereas appellant returned a loss of Rs.155.35 crore, the AO during regular assessment proceedings treated the return as non-est and thereby denied carry forward loss for subsequent years. When Ld. CIT on petition by appellant directed AO to treat the return as valid return, AO could not have assumed jurisdiction to make assessment making various additions amounting to Rs.2.09 crore to returned income without following requirement of issue of notice and grant of opportunity and not accepted Bank’s Claim of Bad debts u/s.36(1)(vii) amounting to Rs.26.53 crore. 4. Addition in book profit on account of expenses relating to tax free income as per Sec.14A of the Income Tax Act, 1961.
We have heard rival submissions and perused the materials available on record. The assessee in the capacity of successor to The United Western Bank Ltd (pursuant to its amalgamation with the assessee), electronically filed its return of income for the A.Y. 2007-08 on 31/10/2007 declaring loss of Rs.155,35,67,912/-. The assessee filed an acknowledgement of the return in ITR-V with the Jurisdictional AO i.e. DCIT, Satara Circle on 06/11/2007. The return was selected for scrutiny vide issuance of notice u/s.143(2) of the Act on 26/09/2008. Information in connection with assessment proceedings was also sought vide letters dated 07/07/2009, 27/07/2009 and 16/12/2009, which were duly responded by the assessee by furnishing requisite details and explanations
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thereon. In the fag end of the assessment proceedings, the ld. AO found that ITR-V filed by the assessee was not duly signed and verified by the authorised signatory. Hence, the ld. AO held that assessee company had not filed any return of income and the e-return was treated as invalid return and thereafter, the ld. AO dropped the proceedings initiated u/s 143(2) of the Act vide order dated 31/12/2009. In the said order, the ld. AO did not mention the Section under which such assessment order was passed by him. In the said assessment order, the ld. AO having treated the e-return filed by the assessee as invalid return stated that the proceedings initiated u/s.143(2) of the Act are dropped and further observed that the assessee company is not eligible to carry forward the loss of Rs.155,35,67,912/- comprising of business loss of Rs.150,96,66,329/- and the current year’s unabsorbed depreciation of Rs.4,39,01,583/-. The ld. AO, without prejudice to the aforesaid observation, further stated in the said order dated 31/12/2009 that the following disallowances are to be made in the said assessment :-
(i) Disallowance u/s.14A - Rs.1,75,00,000/- (ii) Disallowance of depreciation - (-)Rs.22,53,338/- (iii) Disallowance of depreciation on printers / computers - Rs. 29,60,059/- (iv) Disallowance on account of Earlier expenses - Rs. 1,89,648/- (v) Disallowance u/s.40A(9) Of the Act - Rs. 3,01,180/-
3.1. The ld. AO in the final paragraph of the order dated 31/12/2009 stated that the aforesaid disallowances / additions are not made since the return was held to be an invalid return and that the loss claimed by the assessee in the sum of Rs.155,35,67,912/- was not eligible to be carried forward.
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The Ld. AR submitted that during the course of assessment proceedings, the ITR-V which was duly signed by the Managing Director of the assessee bank was filed physically before the Jurisdictional AO. The assessee preferred an appeal before the ld. CIT(A) against the order dated 31/12/2009 passed by the ld. AO. This appeal was not at all listed for hearing for a long time. Reminder was sent by the assessee to the ld. CIT(A) on 23/10/2012. As no action was forthcoming, the assessee made a request to Chief Commissioner – II, Pune on 15/02/2013 to direct the ld. CIT(A)-III to take up the hearing of the appeal. On 04/03/2013, a communication was received from ld. CIT(A)-III, Pune stating that demand notice was not found attached with the appeal and assessee was asked to rectify the said defect. The assessee responded vide letter dated 13/03/2013 before the ld. CIT(A)-III, Pune stating that no demand notice u/s 156 of the Act was issued by the ld. AO alongwith assessment order dated 31/12/2009 which was passed without mentioning any section thereon. The ld. CIT(A)-III, Pune finally passed the appellate order on 30/9/2013 dismissing it as not maintainable under the provisions of Section 246A of the Act.
The assessee later filed a revision petition u/s. 264 of the Act before the ld. Commissioner of Income Tax (hereinafter referred to as ld. CIT).The assessee also filed a condonation petition for delayed filing of application u/s.264 of the Act before the ld. CIT. The ld. CIT condoned the delay and admitted the revision petition u/s.264 of the Act for adjudication. It was pleaded in the revision proceedings before the ld. CIT, that despite the fact that all the notices given by theld. AO had been duly complied with by the assessee by furnishing the requisite details and
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explanations thereon, the various disallowances proposed in the assessment order dated 31/12/2009 on without prejudice basis, were made by the ld. AO without giving any show-cause notice to the assessee and keeping assessee completely in dark with regard to the same. These disallowances were known to the assessee for the first time only in the assessment order dated 31/12/2009, thereby violating the principles of natural justice. It was also pleaded before the ld. CIT that the ld. AO ought to have invoked the provisions of Section 139(9) of the Act by giving 15 days time to the assessee to rectify the defect in not furnishing of the ITR-V duly signed by the Managing Director. It is a fact on record that the ITR-V duly signed by the Chairman and Managing Director of the Bank had already been furnished on 24/12/2009 before the ld. AO which was taken on record by the ld. AO without giving any acknowledgement to the assessee thereon. It is also a fact on record that the assessee was asked by the ld. AO vide letter dated 07/07/2009 to file hard copy of the return of income alongwith tax audit report and other details and also copy of return in form ITR-6 duly signed by the Chairman and Managing Director of the IDBI Bank. This was duly filed by the assessee before the ld. AO. It was pleaded in the revision petition u/s.264 of the Act by the assessee before the ld. CIT that the ld. AO had merely pointed out orally to the assessee’s representative that the ITR-V filed by the assessee was not signed by the authorized signatory. As soon as the same was pointed out, the assessee had indeed furnished the signed copy of ITR-V immediately on 24/12/2009 being the scheduled date of hearing before the ld. AO.
The ld. CIT(LTU)-Mumbai duly appreciated the entire contentions of the assessee and passed an order dated 23/03/2015 u/s.264 of the Act by
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condoning the delay and directed the ld. AO to treat the return filed by the assessee as a valid return. 7. The ld. AO thereafter, subsequently passed an order u/s.143(3) r.w.s. 264 of the Act on 30/09/2015 giving effect to directions of the ld. CIT. In the said assessment order, the ld. AO treated the return filed by the assessee originally as a valid return, but proceeded to make the disallowances as was originally proposed by him in the assessment order dated 31/12/2009 on without prejudice basis, wherein he had treated the return filed by the assessee as non-est/invalid.
Aggrieved by this order dated 30/09/2013 framed by the ld. AO, the assessee preferred the appeal before the ld. CIT(A)-1, Mumbai. The ld. CIT(A) again held that this appeal is not an appealable order u/s.246A of the Act and dismissed the appeal of the assessee. Aggrieved by this order, the assessee is in appeal before us.
We have heard rival submissions and perused the materials available on record. The facts narrated hereinabove together with sequence of events are not in dispute and hence, the same are not reiterated herein for the sake of brevity. At the outset, we find that the ld AO had passed an order dated 31.12.2009 without mentioning the section under which such order is passed by him and also by summarily disallowing the loss of Rs 155.36 crores and also suggesting some disallowances on without prejudice basis. In the said order, the ld AO had categorically stated that the e-return filed by the assessee is non-est and invalid. We find that the ld AO had also categorically stated that the proceedings initiated by issuing notice u/s 143(2) of the Act were dropped by him. Hence all the disallowances suggested by him in the said order, even on without
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prejudice basis, will have no legs to stand. Admittedly, this so called assessment order was passed by the ld AO without issuing notice of demand u/s 156 of the Act, which is also a statutory notice and a statutory document to be enclosed along with the assessment order. Hence it could be safely concluded that the ld AO by committing multiple mistakes in a single so called assessment order, had passed a wholly unsustainable and illegal order.
9.1. We find that the ld. CIT while disposing of the 264 petition of the assessee, had clearly directed the ld. AO to treat the return filed by the assessee originally as a valid return. Hence, the ld. AO while giving effect to the proceedings of the ld. CIT should not have travelled beyond the directions given by the ld. CIT. The ld. AO should have simply treated the return filed by the assessee originally and accepted the same without resorting to make any disallowances thereon. Even if he resorts to make any disallowance, the ld AO ought to have issued fresh notices u/s 143(2) and 142(1) of the Act duly show causing the assessee with regard to those specific issues. Instead of doing so, the ld AO had merely repeated the same disallowances as was proposed by him originally by him, on without prejudice basis, in the illegal and unsustainable so called assessment order dated 31/12/2009 passed without mentioning any section. The said disallowances were even made by the ld. AO without giving any show-cause notice to the assessee expressing his mind to make such disallowances. Hence, the said disallowances made without issuing show-cause notice deserves to be deleted on that count also.
9.2. We also find that in the giving effect proceedings to Section 264 of the Act, the ld. AR argued that statutory notices u/s.143(2) and 142(1) of
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the Act were not issued by the ld. AO and hence, the entire assessment deserves to be annulled in view of the decision of the Hon’ble Supreme Court in the case of CIT vs. Laxman Das Khandelwal reported in 18 Taxmann.com 183 (SC). But we find that the assessee has not raised any grounds of appeal to this effect and hence, we do not deem it fit to entertain this argument of the ld. AR made before us at this stage.
9.3. In view of our aforesaid observations in the facts and circumstances of the instant case, we direct the ld AO to delete all the disallowances and accept the return filed by the assessee bank in toto and allow the benefit of carry forward of loss to subsequent years. Accordingly, the grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced on 31/05/2021 by way of proper mentioning in the notice board.
Sd/- Sd/- (PAVAN KUMAR GADALE) (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 31/05/2021 KARUNA, sr.ps
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Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. 6. //True Copy// BY ORDER,
(Asstt.Registrar) ITAT, Mumbai