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Facts
The assessee, a cooperative bank formed by amalgamation, faced additions by the AO on account of provisions for contingencies, bad debts, and fraud/embezzlement after reopening under section 147. The CIT(A) set aside the AO's order to the AO for de novo assessment, citing extensive inquiries needed.
Held
The Tribunal held that the CIT(A) should have first decided the legal issue of the validity of the reopening under section 147, especially since it was done after four years without new material, before restoring the matter for de novo assessment.
Key Issues
Whether the CIT(A) erred in setting aside the matter to the AO without deciding the issue of validity of reopening under Section 147 and whether video conferencing opportunity was denied.
Sections Cited
147, 144, 251(1)(a), 80P, 36(1)(viia), 244A, 234A, 234B, 143(3), 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW ‘A’ BENCH, LUCKNOW
A.Y. 2012-13 Uttar Pradesh Gramin Bank, vs. DCIT-Range 1, (Successor to erstwhile Allahabad U.P. Lucknow Gramin Bank), Head Office, 2nd & 3rd Floor, NBCC Commercial Complex, Vardan Khand, Gomti Nagar Extension, Lucknow PAN: AAAJU0568R (Appellant) (Respondent) Assessee by: Sh. C. Naresh, FCA Revenue by: Sh. R.K. Agarwal, CIT DR Date of hearing: 28.07.2025 Date of pronouncement: 16.10.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: [ This is an appeal filed by the assessee against the orders of the ld. CIT(A) setting aside the orders of the ld. Assessing Officer that were passed under section 147 r.w.s. 144 on 30.12.2019. The grounds of appeal are as under:-
1. On the facts and in the circumstances of the case and in law, the Id. CIT(A), NFAC erred in not granting opportunity to the Appellant Bank to present the case through video conferencing as specified under faceless appeal scheme, 2020 provided u/s. 250(68) of the Income Tax Act, 1961 ("the Act"). The Hon'ble CIT(A) be directed to grant personal hearing through video conferencing in the interest of justice. Without prejudice to the above
2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in invoking the provisions of proviso to section 251(1)(a) and setting aside the order to AO without appreciating that the order was not passed u/s 144.
3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) failed to appreciate that the DIN was issued in the name of non-existing entity and hence the order passed is invalid. Without prejudice to the above Aryavart Bank A.Y. 2012-13 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not deciding on the issue of reopening when the reopening was after 4 years from the end of the assessment year and there was no failure on part of appellant to fully and truly disclose all information and there was no new tangible material based on which the reopening was made. Without prejudice to the above 5. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not deciding the ground on deduction u/s 80P.
6. Without prejudice to above, on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not deciding on disallowance of deduction u/s 36(1)(viia) and the alternate grounds raised on the said issue.
7. Without prejudice to ground 4, on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not deciding on the issue of considering the provision made for assets with overdue of less than 90 days as provision made for bad and doubtful debts in terms of section 36(1)(viia).
8. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not deciding on disallowance of provision made for frauds, theft/ embezzlement.
9. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not deciding on the issues of short credit of TDS, interest u/s 244A, Interest u/s234A, 2348 and set off of brought forward losses.
10. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not deciding on disallowance of amortization of premium on HTM securities.”
The facts of the case are that the assessee is a Cooperative Society engaged in the business of banking. The assessee, in its present status has been formed by way of a chain of amalgamation. Erstwhile Shreyas Gramin Bank and erstwhile Aryavart Gramin Bank amalgamated into the Gramin Bank of Aryavart, which in turn amalgamated into Aryavart Bank, which is the present entity. As no return had been filed by Gramin Bank of Aryavart, a notice under section 148 was issued to that assessee. In response, it was submitted that the entity Gramin Bank of Aryavart had come into existence w.e.f. 1.04.2013, hence the return of income for A.Y. 2012- 13 had not been filed. However, the entity Aryavart Gramin Bank filed a return on 25.09.2012 and subsequently revised it on 20.04.2013. The assessment had been completed on 4.12.2014 at the returned loss. Thereafter, the ld. AO took up the assessment proceedings in the hands of the assessee (being the successor entity to Aryavart Gramin Bank and Gramin Bank of Aryavart) and it made additions to the Aryavart Bank A.Y. 2012-13 extent of Rs. 48,20,000/- on account of provisions of contingencies of Aryavart Gramin Bank; Rs.47,39,98,987/- on account of, “provisions for bad and doubtful debts” of Aryavart Gramin Bank and Rs. 70,40,000/- on account of, “provision for fraud and embezzlement” in the case of Shreyas Gramin Bank. All these additions were made in the hands of the assessee, since it was the successor entity to these banks. The order was passed under section 144 as no return of income was filed in response to the notice under section 148.
Aggrieved with the said orders, the assessee went in appeal to the ld. CIT(A). The ld. CIT(A) records the fact that he issued letters / notices on 11 occasions to the assessee and the assessee submitted its response to his notices on all these occasions. However, he observed that the issues contained in the response of the assessee required extensive enquiries and verification, which would not be possible at the level of ld. CIT(A). He, therefore, opined that it best served the interest of justice if the assessee were to get another chance to represent its case before the ld. AO. Thereafter, quoting from the provisions of the Finance Act, 2024 which made amendment to section 251 of the Income Tax Act, he set aside the matter back to the ld. Assessing Officer, to complete the assessment de novo after giving adequate opportunity to the assessee.
The assessee is aggrieved at this order of the ld. CIT(A) and has accordingly come in appeal before us. Sh. C. Naresh, FCA, arguing on behalf of the assessee submitted that the ld. CIT(A) had erred in invoking the provisions of the proviso to section 251 (1)(a) and setting aside the order to the AO, without appreciating that the order was not passed under section 144. He had failed to decide the issue of reopening when the reopening was done after four years from the end of the assessment year and there was no failure on the part of the assessee to fully and truly disclose all the information and there was no tangible material upon which the reopening was made. Besides this, the ld. AR pointed out that the ld. CIT(A) had failed to decide any of the issues on merits and had failed to allow him the opportunity for video conferencing.
Aryavart Bank A.Y. 2012-13 5. On the other hand, Sh. R.K. Agarwal, CIT DR pointed out that no prejudice had been cause to the assessee as the matter had been restored to the file of the ld. AO for a de novo assessment. It was submitted that the assessee would have every opportunity to place all submissions before the ld. AO and the ld. AO would consider them on its merits. He pointed us to the first page of the assessment order wherein it was clearly stated that the order had been passed under section 147 r.w.s. 144 of the Income Tax Act and submitted that the ld. CIT(A) was well within his powers to restore the matter to the ld. CIT(A).
We have duly considered the facts and circumstances of the case. It is observed that the assessee had challenged the reopening of the assessment under section 147 of the Income Tax Act (as the case of the assessee had been completed under section 143(3)) after the end of four years from the end of the assessment year and without reference to any new tangible material. It has been contended that the ld. AO had erred in reopening the assessment even when there was no failure on the part of the assessee to fully and truly disclose all the material facts required for re-assessment. It is seen on perusal of the assessment order that the ld. Assessing Officer has acted on account of the judgment of the Hon’ble Madras High Court in the case of CIT vs. Indian Overseas Bank 151 ITR 446 and the judgment of the Hon’ble Supreme Court in the case of Shree Sajjan Mills Limited vs. CIT 156 ITR 585, but has not recorded how the said claims made by the assessee are in the nature of contingent liabilities. The matter had been raised before the ld. CIT(A) but the ld. CIT(A) has not addressed this legal issue. We are of the opinion that before the ld. CIT(A) could restore the matter back to the file of the ld. Assessing Officer on the merits of the case, he was obliged to first decide whether the reopening of the case was in accordance with the law, in view of the specific grounds raised before him by the assessee in this regard. Therefore, we allow ground no. 4 of the assessee’s appeal and restore the matter back to the file of the ld. CIT(A), so that he may decide the legal issue. Accordingly, ground no. 4 of the assessee’s appeal is allowed while the remaining grounds being infructuous are dismissed as such.