THE ARYAPURAM CO-OPERATIVE URBAN BANK LTD.,,RAJAHMUNDRY vs. THE CIT,, RAJAHMUNDRY

आदेश / O R D E R

PER V. DURGA RAO, Judicial Member:

These appeals filed by the assessee is directed against order of the

Commissioner of Income Tax, Rajahmundry vide

F.No.Hqrs/45/263/CIT/RJY/2012-13 dated 22.3.2013 and against order

of the Commissioner of Income Tax (Appeals), Rajahmundry vide ITA

No.23/14-15/266/AC,C-1, RJY/2014-15 dated 27.2.2015 for the

assessment year 2007-08.

engaged in the business of banking, filed a return of income for the

assessment year 2007-08 admitting total income at ` Nil on 29.10.2007.

The return filed by the assessee was processed u/s 143(1) of the

Income Tax Act, 1961 (hereinafter called as 'the Act'). Subsequently,

the case was selected for scrutiny and assessment was completed u/s

143(3) of the Act on 31.12.2009 determining taxable income at

`1,67,11,890/-. Subsequently, a notice u/s 148 of the Act was issued on

the assessee and in response to the notice, assessee filed return of

income admitting gratuity amount paid of ` 7,50,000/-. The same is

accepted and assessment is completed u/s 143(3) r.w.s. 148 of the Act

on 31.12.2010 on total income at ` 1,74,61,890/-.

ITA Nos.260 /Vizag/2013 & 172/Vizag/2015 The Aryapuram Co-Op. Urban Bank Ltd., RJY 3. Subsequently, the Commissioner of Income Tax has issued a show

cause notice dated 4.3.2013 by exercising power conferred on him u/s

263 of the Act and called the explanation from the assessee as to why

the order passed by the A.O. cannot be revised on the ground that the

A.O. while passing the order u/s 143(3) r.w.s. 147 of the Act has not

considered (i) Bonus/Exgratia of ` 15,35,863/- (ii) interest on share

capital of ` 72,73,357/- (iii) leave encashment fund ` 25,23,857/- and

after considering the explanation given by the assessee, the

Commissioner of Income Tax has passed an order directing the A.O. to

redo the assessment by an order dated 22.3.2013.

the Tribunal. The Ld. Counsel for the assessee has submitted that the

assessment was reopened on the ground that the gratuity contribution

was not offered for taxation. The assessee offered his income for

taxation subsequent to the notice u/s 148 of the Act. The A.O. accepted

the return filed by the assessee and assessment is completed.

Therefore, Ld. Counsel for the assessee argued that there is no error in

the order passed by the A.O. and notice issued by the CIT u/s 263 of

the Act dated 14.3.2013 is illegal and without jurisdiction. The Ld.

Counsel for the assessee further submitted that the notice issued by the

Commissioner in respect of bonus, interest on share capital, leave 3

ITA Nos.260 /Vizag/2013 & 172/Vizag/2015 The Aryapuram Co-Op. Urban Bank Ltd., RJY encashment as pointed out by the Ld. Commissioner relates to

assessment u/s 143(3) of the Act by order dated 31.12.2009, which

cannot be raised as per sub clause (2) of section 263 of the Act and

submitted that the order passed by the Ld. Commissioner has to be

quashed. He also relied on the judgement of the Hon’ble Supreme

Court in the case of CIT Vs. Alagendran Finance Ltd. (2007) 75 CCH

0720 ISCC.

Ld. Commissioner of Income Tax.

on record and gone through the orders of the authorities below. In this

case, the A.O. has completed the assessment u/s 143(3) of the Act on

31.12.2009 by determining total taxable income at ` 1,67,11,890/-.

Subsequently, a notice u/s 147 of the Act was issued on the ground that

the contribution towards the gratuity is escaped from the assessment.

In response to the notice issued by the A.O., the assessee offered an

amount of ` 7,50,000/- towards the contribution to the gratuity and the

A.O. has accepted the same and assessment is completed on

31.12.2010 on total income of ` 1,74,61,890/-.

ITA Nos.260 /Vizag/2013 & 172/Vizag/2015 The Aryapuram Co-Op. Urban Bank Ltd., RJY 7. Subsequently, the Ld. Commissioner has issued a show cause

notice on 14.3.2013 on the ground that the A.O. while passing the order

u/s 143(3) of the Act has committed certain commissions and omissions

and the order is erroneous, therefore, it has to be revised u/s 263 of the

Act. We find that the A.O. has issued a show cause notice u/s 148 of

the Act on the ground that there is an escapement of an amount of `

7,50,000/- towards the gratuity payment and for that assessment is

reopened, the assessee has offered the same amount for taxation and

accordingly assessment is completed. Therefore, order passed by the

A.O. u/s 143(3) r.w.s. 147 of the Act dated 31.12.2010 cannot be said to

be erroneous and prejudicial to the interest of the revenue.

Commissioner wanted to revise the order passed by the A.O. u/s 143(3)

r.w.s. 147 of the Act on the ground that there are certain omissions and

commissions in the order passed u/s 143(3) of the Act. We find that

when there are certain omissions and commissions which appear to the

Ld. Commissioner are erroneous and prejudicial to the interest of the

revenue, he has power u/s 263 of the Act to revise the order. In this

case, the A.O. has reopened the assessment for the escapement of

income and the same is offered for taxation and assessment is

completed. We find that the order passed by the A.O. u/s 143(3) r.w.s. 5

ITA Nos.260 /Vizag/2013 & 172/Vizag/2015 The Aryapuram Co-Op. Urban Bank Ltd., RJY 147 of the Act dated 31.12.2010 is neither erroneous nor prejudicial to

the interest of the revenue. Therefore, on this count, the order passed

by the Ld. Commissioner u/s 263 of the Act dated 22.3.2013 is quashed.

is concerned, we find that if the order passed by the A.O. is erroneous

and prejudicial to the interest of the revenue, the Ld. Commissioner u/s

263 of the Act has power to review the order subject to sub section (2)

of section 263 of the Act. In this case, the assessing officer passed an

order u/s 143(3) of the Act on 31.12.2009. If at all, the

Ld.Commissioner wanted to exercise power u/s 263 of the Act, he has to

issue a notice on or before 31.12.2011. In this case, he has issued

notice on 04.03.2013 and the order was passed on 22.3.2013, which is

time barred. Therefore, on this count, the order passed by the Ld.

Commissioner cannot survive. In this context, the Hon’ble Supreme

Court in the case of CIT Vs. Alagendran Finance Ltd. (supra) held that

“In respect of an issue it was not subject matter of

reassessment, limitation u/s 263(2) of the Act would run from

the date of original assessment and revisional proceedings

initiated in respect of such issue beyond the period of two years

from the date of original assessment were barred by

limitation”. Keeping in view of the facts and circumstances of the case 6

ITA Nos.260 /Vizag/2013 & 172/Vizag/2015 The Aryapuram Co-Op. Urban Bank Ltd., RJY and respectfully following the judgment of the Hon’ble Supreme Court in

the above case, we hold that the order passed by the Ld. Commissioner

dated 22.3.2013 is time barred, and has to be quashed, accordingly, the

same is quashed. Thus, this appeal filed by the assessee is allowed.

143(3) r.w.s. 263 of the Act dated 27.3.2014, the very same order

passed u/s 263 of the Act which is the basis for the assessment order

has already been quashed in the above appeal. Therefore, this appeal

cannot survive and the same is dismissed.

No.260/Vizag/2013 is allowed; and in ITA No. 172/Vizag/2015 is

dismissed.

The above order was pronounced in the open court on 18th May’18.

Sd/- Sd/- ( ड.एस. . . . सु�दर "संह) (वी. दुगा�राव) (D.S. SUNDER SINGH) (V. DURGA RAO) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 18.05.2018 VG/SPS

ITA Nos.260 /Vizag/2013 & 172/Vizag/2015 The Aryapuram Co-Op. Urban Bank Ltd., RJY

आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-

आदेशानुसार / BY ORDER // True Copy //

Sr. Private Secretary ITAT, VISAKHAPATNAM