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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM
State Bank of India (Assessee/ Appellant) for A.Y. 2019-20, against the Revisionary order passed under Section 263 of The Income-Tax Act, 1961 (The Act) by The Pr. Commissioner of Income Tax, Mumbai-2, (The Learned PCIT) on 9th March, 2023, holding that assessment order passed by the National Faceless Assessment Centre [The ld. AO] on 29th September, 2021, under Section 143(3) read with section 144B of the Act is ‘erroneous and prejudicial to the interest
The assessee is aggrieved with the same and has preferred 35 grounds as under:-
“The appellant objects to the order of the Principal Commissioner of Income-tax-2, Mumbai (PCIT) dated 9 March 2023 issued under section 263 for the aforesaid assessment year on the following grounds:
1. Validity of the Proceedings 1.1 The learned PCIT erred in invoking the provisions of section 263 of the Income-tax Act, 1961 and setting aside the assessment order dated 29 September 2021 passed by the Assessing Officer under section 143(3) of the Act by holding that the said order was erroneous and prejudicial to the interest of the Revenue.
1.2 The learned PCIT erred in holding that the learned Assessing Officer has passed the without conducting sufficient enquiry.
1.4 The learned PCIT erred in not appreciating that the provisions of section 263 cannot be invoked in the present case as the order sought to be revised was a subject matter of appeal pending for disposal, wherein some of the grounds involved are the same on which the revision is made.
1.5 The learned PCIT erred in not appreciating that when two views are possible and the Assessing Officer has adopted one of the views, the power of revision under section 263 cannot be exercised.
1.6 The learned PCIT erred in not appreciating that the possibility of a further enquiry cannot make an order erroneous and prejudicial to the interests of the revenue.
1.7 The learned PCIT erred in not appreciating that issues already decided in favour of the appellant by the High Court/ Income-tax Appellate Tribunal (ITAT) cannot be covered under section 263.
1.8 The learned PCIT erred in setting aside various issues for examination to the Assessing Officer which is not in accordance with section 263 and therefore, the same is invalid, beyond jurisdiction and hence barred by limitation.
Taxing of income from foreign branches of INR 26,68,18,55,028 2.1 The learned PCIT erred in directing the AO to tax income earned from foreign branches amounting to INR 26,68,18,55,028.
2.2 The learned PCIT erred in not following the decision of Mumbai Tribunal in the case of Bank of India (27 taxmann.com 335), affirmed by the Bombay High Court in 64 taxmann.com 215 as also adopted by the Hon'ble Tribunal in its order for AY 2008-09.
2.3 The learned PCIT erred in relying on the Notification No. 91/2008 dated 28.08.2008, without appreciating that the said notification is in contradiction to the judgment of Supreme Court in the case of Azadi Bachao Andolan and PAVL Kulandagan Chettiar and hence not valid.
2.4 The learned PCIT erred in not appreciating that as the income has been taxed in the source state, the income from the relevant foreign branches is not taxable in India in terms of the Article 7 of the tax treaties.
2.5 The learned PCIT erred in not appreciating that when under the relevant tax treaty, it is provided that tax 'may be charged in a particular State in respect of the specified income, it is implied that tax will not be charged by the other State. It has 2.6 The learned PCIT erred in observing the following in para 8.1.2 without appreciating the facts in the correct perspective:
....The above approach specifically mentioned in the DTAA also disproves the approach of the assessee. It is noted that the assessee has claimed a much higher amount as exempt from Indian tax than the amount on which tax has been paid in foreign country. It is the assessee's argument that what has been offered to tax in the other country as per respective Article 7 of the DTAA, such amount of income is to be excluded from the total income as per the application of Section 90/respective DTAA. This argument of the assessee has been rejected. However, without prejudice, in the case of the assessee, it is seen that the assessee has claimed a much higher amount as exempt from Indian tax on account of application of Article 7 of DTAA than the amount on which tax has been paid in foreign country as per Article 7 i.e. the income which is not offered to tax in foreign country under Article 7 of the DTAA has also been claimed exempt on the plea that the same is covered under Article 7. Thereby the Thus, above conclusions are without appreciating the facts in the correct perspective, invalid and thus ought to be rejected.
2.7 The learned PCIT erred in alleging that the approach adopted by the appellant is leading to a claim more beneficial than intended by the tax treaty.
2.8 The learned PCIT erred in alleging that the appellant is paying lesser taxes in India and in foreign country in comparison its domestic tax liability in India, which has led to evasion of taxes.
2.9 The learned PCIT erred in referring to synthesized version of the tax treaties, which is contrary to the rules of interpretation and also erred in making reference to the Articles of Multilateral Convention to implement Tax Treaty [MLI], without appreciating that the provisions of MLI are not applicable for the year under consideration.
2.10 The learned PCIT has erred in alleging that the appellant has incorrectly computed a higher amount of income eligible for relief, without appreciating the facts in correct perspective, which is contrary to the law, invalid and without jurisdiction.
3.1 The learned PCIT erred in setting aside the said matter without verifying the facts and submissions made by the Bank instead of directing the AO to allow the DTR claim of INR 2,19,37,66,786 in respect of foreign branches where income exemption is not claimed by the Bank.
3.2 The learned PCIT erred in setting aside the said matter without verifying the facts and submissions made by the Bank instead of directing the AO to allow the DTR claim of INR 2,25,65,13,368 in respect of foreign branches where income exemption as claimed by the Bank has been denied.
Deduction under section 36(1)(vii)
4.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
4.2 The learned PCIT erred in setting aside the said matter to the AO without appreciating the facts and the submissions made by the Bank.
4.3 The learned PCIT erred in not appreciating that the deduction amounting to INR 546,94,32,62,993 4.4 The learned PCIT erred in not appreciating that the provisions of section 36(2)(v) and proviso to section 36(1)(vii) are not applicable, as no deduction under section 36(1)(vila) is claimed by the appellant. The case of the appellant is supported by, inter alia, the judgment of the Supreme Court in the case of Catholic Syrian Bank Ltd. v. CIT [2012] (343 ITR 270).
4.5 The learned PCIT erred in observing that the Bank has changed its accounting policy in assessment year 2011-12 and claimed deduction under section 36(1)(vii) on account of provision written off.
4.6 The learned PCIT erred in holding that the deduction allowed under section 36(1)(vila) in previous years is to be deducted from bad debts claimed in the current year.
4.7 The learned PCIT erred in not appreciating that once the Supreme Court in Vijaya Bank's case has held that the amount has to be debited to the profit and loss account, the question of then 4.8 The learned PCIT erred in not appreciating that the said deduction has been allowed by the ITAT from AYs 1996-97 to 1998-99 and also by the Assessing Officer from AYs 2011-12 to 2015- 16. Therefore, this view is a tenable view and hence outside the purview of revision under section 263.
Taxing interest accrued but not due of INR 2,14,18,93,832 5.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
5.2 The learned PCIT erred in not appreciating that the ground of appeal filed by the Department on the exact same issue before the Bombay High Court for AY 1996-97 in appellant's own case has been dismissed and the Special Leave Petition filed before the Supreme Court is also dismissed. Accordingly, the issue is well settled in favour of the Bank and hence outside the purview of section 263.
5.3 The learned PCIT erred in holding that the approach of the Bank of taxing interest on securities on due basis is contrary to the principles of accountancy.
6.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
6.2 The learned PCIT erred in not appreciating that the ground of appeal filed by the Department before the Bombay High Court for AY 1996-97 has been dismissed and the Special Leave Petition filed before the Supreme Court is also dismissed. Accordingly, the issue is well settled in favour of the Bank and hence outside the purview of section 263.
6.3 The learned PCIT has erred in not following the Supreme Court judgment in Citibank's case.
(Civil appeal no. 1549 of 2006) and the Bombay High Court judgment in the case of American Express (258 ITR 601) by stating that the same is contrary to the facts of the case.
Disallowance under section 14A 7.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the 7.2 The learned PCIT erred in not appreciating that if no expenditure has been incurred in relation to exempt income, the provisions of section 14A do not apply.
7.3 The learned PCIT erred in not appreciating that only actual expenses directly relatable to earning exempt income can be taken into account for the purpose of disallowance and not estimated or notional expenditure.
7.4 The learned PCIT erred in not appreciating that the Bank has not borrowed any funds for granting loans/investing in tax free securities. He has also erred in not appreciating that the investments have been made out of own funds/mixed funds.
7.5 The learned PCIT erred in not appreciating that no disallowance can be made in respect of investments which have not earned any exempt income during the previous year.
7.6 The learned PCIT erred in not appreciating that interest expenses and administrative expenses related to shares held as stock-in-trade should not be considered for the purpose of calculation of disallowance under section 14A.
Disallowance of amortization of premium paid on securities in Held to Maturity [HTM] category-INR 19,18,69,28,708 8.2 The learned PCIT erred in not appreciating that the ground of appeal filed by the Department before the Bombay High Court for AY 1996-97 has been dismissed and the Special Leave Petition filed before the Supreme Court is also dismissed. Accordingly, the issue is well settled in favour of the Bank and hence outside the purview of section 263.
8.3 The learned PCIT erred in not appreciating that the investments of the Bank are trading securities, though, following RBI instructions, securities have been classified under various categories.
8.4 The learned PCIT erred in not appreciating that the amortization of premium is in the nature of deferred revenue expenditure and is deductible in terms of the judgments of the Supreme Court in the case of Madras Industrial Investment Corporation Ltd. v. CIT [1997] (225 ITR 802).
8.5 The learned PCIT erred in not following the decision of the Delhi High Court in the case of CIT v/s. Vashist Chay Vyapar Ltd. [330 ITR 440] affirmed the Supreme Court in 301 CTR 263.
8.7 The learned PCIT erred in not appreciating that the amortizations of premium paid on securities in HTM category is in accordance with RBI guidelines and hence the same was in accordance with ICDS VIII-Part B.
Taxing interest income from Non-Performing Assets [NPA] of INR 69,11,81,466 9.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
9.2 The learned PCIT erred in not appreciating that section 430 is applicable only in cases where interest is received or credited to the profit and loss account. In the present case, the interest on NPA is neither received nor credited to the profit and loss account and accordingly, the provisions of section 43D read with Rule 6EA are not applicable.
9.3 The learned PCIT erred in not appreciating that the said issue is decided by the ITAT in Bank's own case for AY 2008-09. Accordingly, the issue is well
Taxing of recovery of bad debts written off in earlier years of INR 1,16,63,06,194 10.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
10.2 The learned PCIT erred in not appreciating that provisions of section 41(4) are not applicable in the present case, since deduction is not claimed under section 36(1)(vii) in respect of recoveries which are claimed to be non-taxable.
10.3 The learned PCIT erred in not appreciating that the recovered bad debts for which deduction was claimed under section 36(1)(vii) in the earlier years has been duly offered to tax in the current year.
10.4 The learned PCIT erred in not appreciating that the said issue is squarely covered by the decision of the Bangalore Tribunal in Bank's own case (State Bank of Mysore, which is now merged with the Appellant) (33 SOT 7) as directed by the Hon'ble Tribunal as well the decision of the Mumbai Tribunal in the Bank's own case for AY 2008-09 [ITA No. 3644/Mum/2016), wherein the said issue has been decided in favour of the Bank by way of a speaking order.
11.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
11.2 The learned PCIT erred in not appreciating that IPDIs are not in the nature of equity but are in the nature of borrowings/debt and that the RBI also regards IPDIs as debt instruments.
11.3 The learned PCIT erred in not appreciating that the interest paid on IPDIs is for money borrowed through issue of IPDIs and accordingly, the interest paid on IPDIs falls within the definition of interest under section 2(28A).
11.4 The learned PCIT erred in not considering the alternate claim of the Bank that interest on IPDI is allowable under section 37(1).
11.5 The learned PCIT erred in relying on the decision held in the case of Pepsu Road Transport Corpn v CIT, reported in 130 ITR 18 (P&H).
11.6 The learned PCIT erred in not appreciating that the said issue is decided by the ITAT in Bank's own case (i.e., State Bank of Bikaner & Jaipur in ITA No. 2873/Mum/2019). Accordingly, the issue
Disallowance of depreciation on leased assets of INR 1,01,09,650 12.1 The learned PCIT erred in directing the AO to disallow a sum of INR 1,01,09,650 being depreciation on leased assets.
12.2 The learned PCIT erred in not appreciating that the Bank is the owner of the leased assets and has used the assets for the purposes of its business i.e., leasing and it is accordingly entitled to depreciation in respect of the same as per the provisions of section 32.
12.3 The learned PCIT erred in not appreciating that as the Bank had complied with the conditions laid down in the CBDT circulars, it was entitled to depreciation on the leased assets.
Disallowance of provision for pension of INR 24,51,10,00,000 13.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
13.2 The learned PCIT erred in not appreciating that the provision is in respect of actual liability 13.3 The learned PCIT erred in holding that the provisions of sections 36(1)(iv), 36(1)(v), 40A(7) and 40A(9) are applicable without appreciating that the provision is towards pension liability and not a contribution to any fund.
13.4 The learned PCIT erred in holding that the provision towards pension liability is not admissible under section 37(1) of the Income Tax Act as these provisions are in respect of contingent liabilities.
13.5 The learned PCIT erred in not following the judgment of the Supreme Court in the case of Bharat Earth Movers (245 ITR 428) on the above issue that had been relied on by the Bank.
13.6 The learned PCIT erred in not following the judgement of the jurisdictional Mumbai ITAT in Bank's own case [erstwhile State Bank of Saurashtra which has since merged with the Bank) for AY 2009-10 and also for AY 2008-09 in the case of State Bank of India. Accordingly, the Issue is well settled in favour of the Bank and hence outside the purview of section 263.
Loss on sale of assets to Asset Reconstruction Companies [ARCs] of INR 1,73,37,00,000 14.2 The learned PCIT erred in not appreciating that as the loss on sale of assets to ARCs of INR 173.37 crore is actually suffered in the current year, the same is hence allowable.
Disallowance under section 40(a)(ia)- Reimbursement of leave fare concession [LFC] of INR 59,70,00,000 15.1 The learned PCIT erred in setting aside the said matter to the AD for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
15.2 The learned PCIT erred in not appreciating that non-deduction of tax was under the specific direction of the interim order of the Hon'ble High Court of Madras dated 16.02.2015 in WP11991 of 2014 and accordingly the question of invoking the provisions of section 40(a)(ia) does not arise.
15.3 The learned PCIT erred in not appreciating the decision of Tribunal in the Bank's own case for AY 2008-09, 2010-11, 2011-12 and 2012-13 [TOS appeals], wherein it is held that the Bank is not
Disallowance of Corporate Social Responsibility [CSR] expenses of INR 1,24,00,000 16.1 The learned PCIT erred in directing the AO to disallow a sum of INR 1,24,00,000 being CSR expenses.
16.2 The learned PCIT erred in not appreciating that the Bank is governed by State Bank of India Act, 1955 and section 135 of the Companies Act, 2013 does not apply to the Bank.
16.3 The learned PCIT erred in not appreciating that Explanation 2 to section 37(1) refers to any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 and not the Reserve Bank of India or any other guidelines.
Foreign exchange gain / loss on account of revaluation of monetary items INR 9,41,24,61,299 17.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
Taxing of commission earned on issuance of Letter of Credit (LC) and Bank Guarantees (BG)
18.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
18.2 The learned PCIT erred in holding that the amount of commission received is income having accrued at the time the bank issued the guarantee.
18.3 The learned PCIT further erred in holding that the commission received is like a fee for issuing the guarantee and is not a contingent receipt or advance, which is returnable at the end of the guarantee period.
18.4 The learned PCIT erred in not appreciating that the LC/BG commission relating to the previous year only can be taxed and the balance pertaining to the subsequent period or periods had to be carried forward in accordance with the consistent accounting policy followed by the Bank.
Taxing of deferred payment guarantee ('DPG') commission of INR 65,33,65,914 19.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
19.2 The learned PCIT erred in holding that the amount of commission received is an income having accrued at the time the bank issued the guarantee.
19.3 The learned PCIT further erred in holding that the commission received is like a fee for issuing the guarantee and is not a contingent receipt or advance, which is returnable at the end of the guarantee period.
19.4 The learned PCIT erred in not appreciating that the DPG commission relating to the previous year only can be taxed and the balance pertaining to the subsequent period or periods had to be carried forward in accordance with the consistent accounting policy followed by the Bank. The Bank submits that the method adopted by it is in accordance with the correct accounting and legal principles.
20.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.20.1 The learned PCIT erred in holding that the provision was a contingent liability, without appreciating the liability had accrued and was an ascertained liability.
20.2 The learned PCIT erred in not following the jurisdictional judicial pronouncements that had been relied on by the Bank, and also erred in not providing any reasoning for the same.
20.3 The learned PCIT erred in not appreciating that the said issue is decided by the ITAT in Bank's own case for AY 2008-09. Accordingly, the issue is well settled in favour of the Bank and hence outside the purview of section 263.
Disallowance of staff welfare expenses (Payments to schools towards reservation of seats)
21.1 The learned PCIT erred in setting aside the said matter to the AO for examination without appreciating that as the Bank has not incurred any expense towards staff welfare during the year, 21.1 Without prejudice to the above, the learned PCIT erred in not appreciating that issue is decided in favour by the Bombay High Court for AY 1996- 97 in appellant's own case has been dismissed and the Special Leave Petition filed before the Supreme Court is also dismissed. Accordingly, the issue is well settled in favour of the Bank and hence outside the purview of section 263.
Taxing of Interest on Income-tax refund not received of INR 10,71,89,413 22.1 The learned PCIT erred in erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
22.2 The learned PCIT erred in not holding that the interest withdrawn by the tax department is in the nature of interest paid by the Bank for other assessment years and is therefore allowable as a deduction.
22.3 The learned PCIT erred in not appreciating that as the interest of INR 10,71,89,413 was offered to tax in the earlier years, the reversal/withdrawal of the same ought to be deductible.
23.1 The learned PCIT erred in setting aside the said matter to the AD for examination without appreciating that as the Bank has not claimed any deduction towards depreciation on securities, there is no question of any further disallowance.
Taxation of opening balance of Foreign Currency Translation Reserve [FCTR) as on 1 April 2018.
23.1 The learned PCIT erred in erred in setting aside the said matter to the AO for examination without appreciating that the said issue is outside the purview of section 263 in light of the facts and legal submissions made by the Bank.
23.2 The learned PCIT erred in not appreciating that in terms of the CBDT circular no. 10/2017 dated 23 March 2017 opening balance of FCTR as on 1 April 2016 pertaining to exchange difference on monetary items for non-integral operations is required to be recognized in the previous year relevant to AY 2017-18 to the extent not recognized in the income computation in the past.
23.3 The learned PCIT erred in not appreciating that as the foreign exchange gain on revaluation of monetary items of INR 9,41,24,61,299 is already offered to tax, there is no question of anu further addition in the matter and therefore the issue is
Disallowance of Provision on Employee benefits of INR 21,53,00,000 25.1 The learned PCIT erred in directing the AO in disallowing a sum of INR 21,53,00,000 towards provision made towards various long term employee benefits such as resettlement, silver jubilee award, provision for LFC/HTC, etc.
25.2 The learned PCIT erred in holding that the aforesaid expenses are covered by provisions of section 438.
25.3 The learned PCIT erred in not appreciating that above provision in the nature of ascertained liability and hence is allowable as a deduction.
Additions under MAT provisions
MAT not applicable to the Bank 26.1 The learned PCIT erred in holding that provisions of section 115JB are applicable to the Bank without appreciating that the Bank is incorporated under the State Bank of India Act, 1955, and is not a company incorporated under the Companies Act, 2013, and therefore the provisions of section 115JB of the Income-tax Act, 1961 are not applicable to the Bank.
Disallowance of provision for bad and doubtful debts 27.2 The learned AO erred in not appreciating that as the said amount of INR 54,617.72 crore has been debited to the profit and loss account and correspondingly reduced from the loans in Balance Sheet, the same is akin to a write-off on the basis of the Supreme Court judgement in the case Vijaya Bank and is therefore, not covered in clause (f) to Explanation 1 to section 115JB (i.e., diminution in fair value of assets).28. Disallowance of write-off of provision towards fraud on other assets of INR 63.97 crore 28.1 The learned PCIT erred in setting aside the said matter to the AO without appreciating the facts and the submissions made by the assessee.
28.2 The learned PCIT erred in not appreciating that write back from provision towards fraud on other assets need not be added back to book profits as the same was added back while calculating book profit in the earlier years in which the provision was created.
Taxing of income from foreign branches INR 2699.39 crore 29.2 The learned PCIT has erred in not appreciating that if an item of receipt which does not fall under the definition of 'income' it falls outside the purview of the computation provisions of Income tax Act and cannot also be included in 'book profit' under section 115JB.
Disallowance under section 14A 30.1 The learned PCIT erred in setting aside the said matter to the AO without appreciating the facts and the submissions made by the assessee.
30.2 The learned PCIT erred in not appreciating that the provisions of Rule 8D cannot be invoked under MAT provisions.
Disallowance of provision for pension 31.1 The learned PCIT erred in setting aside the said matter to the AO without appreciating the facts and the submissions made by the assessee.
31.2 The learned PCIT erred in not appreciating that provision for pension cannot be covered by clause (c) to Explanation 1 to section 115JB.
31.3 The learned PCIT erred in not appreciating that provision for wage revision was determined on the basis of actuarial valuation and represents 31.4 The learned PCIT erred in not following the judgement of the jurisdictional Mumbai ITAT in Bank's own case [erstwhile State Bank of Saurashtra which has since merged with the Bank] for AY 2009-10 and Bank's own case for AY 2008- 09. Accordingly, the issue is well settled in favour of the Bank and hence outside the purview of section 263.
Disallowance of provision for wage revision of INR 1,620 crore 32.1 The learned PCIT erred in setting aside the said matter to the AO without appreciating the facts and the submissions made by the assessee.32.2 The learned PCIT erred in not appreciating that provision for wage revision cannot be covered by clause (c) to Explanation 1 to section 115JB.
32.3 The learned PCIT erred in not appreciating that the provision for wage revision was created on a scientific and reasonable basis and hence, was an ascertained liability.
32.4 The learned PCIT erred in not appreciating that the said issue is decided by the ITAT in Bank's own case for AY 2008-09. Accordingly, the issue is well settled in favour of the Bank and hence outside the purview of section 263.
33.1 The learned PCIT erred in setting aside the said matter to the AO without appreciating the facts and the submissions made by the assessee.
33.2 The learned PCIT erred in not appreciating that as there has been a reversal on account of depreciation on investments which is already included in the book profit, there cannot be any other addition in the matter.
33.3 The learned PCIT erred in not appreciating that as there has been no prejudice to the revenue, the said issue is outside the purview of section 263.
Provision for NPAs on account of adoption of IFRS at foreign offices 34.1 The learned PCIT erred in setting aside the said matter to the AO without appreciating the facts and the submissions made by the assessee.
34.2 The learned PCIT erred in not appreciating that the assessee had not claimed any deduction in this respect of the said provision in MAT computation.
34.3 The learned PCIT erred in not appreciating that as there has been no prejudice to the revenue, the said issue is outside the purview of section 263.
35.1 The learned PCIT erred setting aside the same without providing any reason or justification for the same.
35.2 The learned PCIT erred in not appreciating that the assessee had not claimed any deduction in respect of unabsorbed depreciation in the MAT computation.
35.3 The learned PCIT erred in not appreciating that as there has been no prejudice to the revenue, the said issue is outside the purview of section 263.” 03. Brief facts of the case show that i. Assessee is a largest public sector bank, filed its return of income on 27thNovember, 2019, declaring income ₹ Nil as income after setting of losses of ₹5,927 crores. The return was revised on 30thJune 2020 at an income of ₹3242,81,57,073/-, which was set off from brought forward losses. ii. The case of the assessee was selected manually under compulsory scrutiny for the reason that there was a survey. iii. Notice under Section 143(2) of the Act was issued on 28thSeptember 2020. v. As the case of the assessee was examined on that aspect the explanation of the assessee was obtained and thereafter it was held by the learned Assessing Officer that assessee has committed default by not deducting tax at source on the amount of interest under Section 194A of the Act paid to the originator of ₹790,10,01,162/- and therefore, Provision of Section 40(a)(ia) of the Act are violated and 13% thereto is required to be added to the total income of the Assessee. vi. Accordingly, the addition of ₹273,03,348/- was made on such disallowance. The assessee was also not granted set off of brought forward losses.
The assessment order was passed under Section 143(3) read with section 144B of the Act on v. conditions specified under explanation 2, to Section 263 of the Act are also not satisfied.
vi. Issues raised in notice under Section 263 of the Act are already subject matter of appeal and therefore, on such issues order under Section 263 of the Act cannot be passed. vii. On [13] different issues there are judicial precedents by various appellate authorities in assessee bank’s own case in favour of the assessee, therefore, on those issues jurisdiction under Section 263 of the Act cannot be assumed. viii. Where two views are possible and one of the views is adopted by the learned Assessing Officer jurisdiction under Section 263 of the Act does not lie. ix. Assessee bank has made several claims in the computation of total income on the basis of consistently followed judicial precedents and therefore, such issues cannot be taken under Section 263 of the Act. x. Non-examination of the issues by the learned Assessing Officer per se does not make xi. Mere possibility of further enquiry also does not give the jurisdiction for revision of the order. xii. On eight different issues covered in the notice there are direct decisions of the Hon'ble Supreme Court and Hon'ble Bombay High Court, or other High Courts are available and therefore, on such grounds order under Section 263 of the Act cannot be made.
Thus, assessee gave a detailed submission on each of the issues raised in the notice and addendum to the notice under Section 263 of the Act and stated that on all the issues the order under Section 263 of the Act is not sustainable.
The learned PCIT considered the explanation of the assessee. It was stated that the learned Assessing Officer has not looked into any other issues except the issues in the survey and therefore, the Revisionary order is passed to make any enquiry or verification which should have been made by the learned Assessing Officer. It is held that no other issues were discussed, enquired, verified or examined at all by the learned Assessing Officer thereby leaving unexamined and unenquired on number of issues which are relevant for the assessment and determination of total income of the
After considering all the arguments of the assessee, he referred to each of the issue raised by the assessee on its own merit and then passed order under Section 263 of the Act on 9thMarch 2023 stating that the assessment order passed without making any enquiry on the issues raised in notices u/s 263 of the Act , rendered the assessment order erroneous and prejudicial to the interest of the Revenue. Assessee is aggrieved with that order.
The learned Authorized Representative submitted as under:-
iii. There are several issues which are covered in favour of the assessee by the decision of the Hon'ble High Court and Income Tax appellate Tribunal in assessee’s own case. Thus, there is a view available on those particular issues and the learned Assessing Officer has taken that view in favour of the assessee, therefore, to that extent the order passed by the learned Assessing Officer cannot be said to be erroneous. For this proposition, he relied upon the decision of Hon'ble Supreme Court in case of CIT vs. G.M. Mittal Stainless Steel (P) Ltd. 263 ITR 255 that when the order of the Hon'ble High Court on the issue are not opposed before by the Hon'ble Supreme Court, revision proceedings under Section 263 of the Act cannot be made. v. Detailed chart was submitted of all the 30 issues covered in both the notices showing whether the issue is pending before the learned CIT (A), notes placed in computation of total income is made, whether the issue is decided in favour of the assessee in its own case and whether issue is already decided in favour of the assessee. Therefore, the learned AR was of the view that the assumption of jurisdiction under Section 263(3) of the Act is devoid of any merit. vi. He further referred to a paper book containing 306 pages to support his cases. He further submitted a compilation of all the 30 issues involved in both the show cause notices issued by the learned principal Commissioner of income tax. According to that , only two issues listed at serial number 18 and 25 where the
The learned Departmental Representative vehemently supported the order of the ld.PCIT. Hesubmitted that the i. argument of the learned Authorized Representative that its limited scrutiny case is devoid any evidence. He submits that the assessment order itself says that it is a case of complete scrutiny. He submitted that a survey was carried out under Section 133A of the Act and post survey proceedings and in the case of securitization trust it was noted that assessee has failed to deduct tax at source on interest given to the originator. Therefore, over and above the issues found in survey the assessment order is required to be made on complete scrutiny. Therefore, it cannot be the case that the learned Assessing Officer was required to iii. As no enquiries were carried out on any other issues by the learned Assessing Officer thus, it is also not a case of lack of adequate enquiry but complete absence of inquiry. iv. With respect to the argument that the appeal has been filed before the learned CIT (A) and therefore, those issues cannot be subject matter of Revision under Section 263 of the Act. He referred to the decision of the Hon'ble Supreme Court in 98 taxman 457 in CIT vs. Shri Arbuda Mills Ltd., wherein it has been v. With respect to the decision of the Hon'ble High Court and ITAT in favour of the assessee, he submits that such orders have not at all attained any finality as all these issues are further challenged. Therefore, on those issues the interest of the Revenue is prejudice and hence Section 263 of the Act can also be applied to such issue.
vi. That even if the issues are decided by the Higher Judiciary, even the issues are covered needs to be examined with nature , quantification and measurement of the amount of deduction/ disallowance. When ld. AO is not at all aware about such issues, such decisions, it makes that assessment order erroneous and also prejudicial to the interest of revenue. vii. He referred to the chart submitted by the learned authorized representative stating ix. He further mentioned that 11 issues are stated to be already decided in favour of the assessee in assessee’s own previous assessment years. He submits that at least facts of the current year are required to be compared with the orders of the various appellate authorities in earlier years, disallowance or claim of the assessee needs to be quantified. There is no reference of any previous appellate orderaside its applicability for the current year. It is squarely covered by explanation 2 of section 263 of the act.
We have carefully considered rival contentions and perused the orders of the ld. AO passed u/s 143 (3) of the Act and also the Order of theld. PCIT passed u/s 263 of the Act.
According to provisions of section 263 of the Act, the specified authorities such as principal Commissioner of Income Tax in this case are authorized to call for and examine the record of any proceedings under this act. On such examination, if he considers that any order passed by the assessing officer in such proceedings is erroneous insofar as it is prejudicial to the interest of the revenue, then he is duty-bound to give the assessee an opportunity of hearing. He may also make or cause to make such enquiry as he deems necessary. After that, he may pass the orders as the circumstances of the case justify such as he can enhance, modify or cancel the assessment and may also direct a fresh assessment. Thus, on perusal of records of the proceedings, if he finds that the order of the assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue, he can assume the jurisdiction. However, he is duty- bound to hold that the order is erroneous as well as (a) any order passed by the assessing officer is passed without making enquiries or verification which should have been made,
(b) order is passed where any relief is allowed without inquiring into the claim and (c ) order passed by the assessing officer is not so passed in accordance with any order, direction or instructions issued by the board under section 119, and,
(d) order which does not consider any decision against the assessee rendered by the jurisdictional High Court or honourable Supreme Court in the case of the assessee or any other person.
In the present case before us the assessee is one of the largest income tax assesses of the country. As we came to know from the argument of both the parties as well as the order of the learned principal Commissioner of Income Tax that there are several legacy issues in the assessment for each assessment year. The assessee has stated that there are multiple issues which are already decided in favour of the assessee, which form part of the notes on computation of total income, not considered favorably by the assessing officer. Therefore, assessee has filed an appeal before the concerned
Now we look at the assessment order passed under section 143 (3) read with section 144B of The Income Tax Act passed by the National faceless assessment Centre Delhi on 29/9/2021. This was passed on the return of income filed by the assessee on 27/11/2019 wherein total income declared was Rs. Nil after setting of brought forward losses of Rs. 5,927,13,25,976/–. This was revised at net profit of Rs. 3,242,81,57,073/– which was set off against brought forward losses. From the assessment order it can also be gathered that there was a survey under section 133A (2A)of the Act on the assessee. The learned AO categorically stated in the first paragraph of the assessment order that ‘the case was manually selected under compulsory scrutiny for the reason that there was a survey.’ Based on this, statutory notices were issued under section 143 (2)of the Act on 28/9/2020. The issue raised in the survey was considered, a draft assessment order was issued on 23/9/2021, against which assessee filed an objection on 24/9/2021, and consequently, the learned assessing officer reached that on certain payments assessee was required to make tax deduction at source, which has not been made on
Subsequently, on 6/2/2023 the learned CIT further pointed out other nine issues on which there is no enquiry made by the learned assessing officer. On the issue of provision for wage revision, the learned PCIT referred to the instruction number 17/2008
From the above show cause notice the learned principal Commissioner of income tax categorically asked that the order passed by the learned assessing officer is erroneous in so far as it is prejudicial to the interest of the revenue as it has been made without making any enquiry, leave aside the issue of inadequate enquiry, passed in contravention of CBDT circular etc. and contrary to the provision of the Act for computation of Book Profit u/s 115 JB of The Act.
‘ I case is pertaining to survey under section 133A of The Income Tax Act 1961.
The notice does not say that the case is selected forlimited scrutiny. The learned departmental representative firstly submitted scrutiny guidelines for assessment year 2019 – 20 issued by the CBDT as per communication dated 5/9/2019 and stated that case is pertaining to survey under section 133A of the Income Tax Act excluding those cases were books of accounts, documents etc. were not impounded and returned income is not less than returned income of preceding assessment year, such cases are selected for ‘complete scrutiny’. Therefore, we do not find any reason to say that that the case of one of the largest taxpayers of the countryis selected for ‘limited scrutiny’ to only examine the issues arising in the survey. Even the notice issued under section 143 (2) uses the word “initially’. The assessee has raised the issue that these guidelines do not apply to the assessee since the guidelines were issued on 5 September 2019 whereas the case
Further mere disclosure in notes to the computation of total income, furnishing some statutory forms and reports, which were not looked atat all by the ld. AO, gives jurisdiction to the ld. PCIT to revise such assessment orders. 030. On the issue of ld.AO accepting one of the possible views debars the revisionary authorities in exercising a jurisdictions u/s 263 of the act is judicially settled principle. However, to reach at the conclusion that there are judicially divergent views on the issues, the ld. AO should reach that conclusion and then follow one of the views , definitely debars the revisionary authority, but in this case the ld. AO does not know that there is an issue in the assessment of the assessee which is judicially interpreted differently. So, there is no question of ld. AO accepting one of the possible views. The ld. AO is
We are completely in agreement with the learned CIT DR so far as the compilation of 35 issues are concerned where some of the issues are claimed to be pending before the learned CIT – A which are not considered and decided at all, some of the issues are mentioned in the computation of total income, which does not have any consequences, some of the issues are decided in favour of the assessee in assessee’s own case is a for earlier years, this needs to be verified quantified and then followed if there is no adverse view or change in law. Further several issues the assessee is claiming that those are decided in somebody else cases and assessee says that issue is covered in his own cases, may that be the case but examination at least. Therefore, even on this count, the order under section 263 of the act deserves to be upheld.
Assessee has raised 35 groundson each of the issues on which ld. PCIT has passed an order u/s 263 of the Act. We hold that when the ld. AO did not examine any of the issues, provisions of explanation 2 (a) and (c) of Section 263 of the Act are clearly hit, correctly invoked by the ld. PCIT. Therefore, there is
Thus, we uphold the order passed by the ld. PCIT u/s 263 of the act holding that the assessment order passed by the ld. AO is erroneous in so far as it is prejudicial to the interest of the revenue.
Before parting, we are really surprised to know how the assessment proceedings in the case of one of the largest assesses of the country, which is one of the largest banks of the country has been carried out by the national faceless Assessment unit.It has legacy issues of several million INR.We reproduce some of the order sheet entries made by the ld. AO which will give an idea about how the assessment proceedings were conducted in this case at least. This has been submitted by the learned CIT DR as per letter dated 26/2/2024 to state that all the historical issues in the case of the assessee were notified to the assessing officer by range review unit.
In this case notice was issued first on 28/9/2020 by the ACIT Circle 2 (2) (1), Mumbai.In response to notice under section 143 (2) assessee submitted on “This case was received for scrutiny with the reason “A survey was conducted by ITO – 2 (2) (1), Mumbai. As there was no survey report/findings of the survey action attached along with a letter was sent to Thereafter on 28/9/2021 the draft assessment order approved by the range assessment unit was issued. On 28/9/2021 all the data sent to the review unit. On 28/9/2021 clarification was shot from range review unit which is as under:-
“ 1 AO RU may verify assessments done for earlier years and identify the legacy additions. AO – RU to verify the notices issued by AU and the submission made by the assessee and clarify whether all legacy issues were properly examined by AU or not. If no, point out the specific issues which were not examined by the AO and suitable suggestion may be made to
In this case, when survey was conducted is not available either in the assessment order, in the order sheets, or in the order of the learned principal Commissioner of income tax. However, it is apparent that on 23/9/2021 (the assessment order was passed on 29/9/2021), the AO that he did not receive the survey report. He also sounded the issue to the principal Commissioner of income tax. Further on 27/9/2021 he was not aware whether the assessment is to be made by the central charge or faceless scheme. The first notice he issued under section 142 (1) on 14/9/2021.A final show cause notice was issued on 23/9/2021 as the assessment was getting time barred on 30/9/2021. On 28/9/2021 there was a reference of some legacy
We are reminded of a quote from Ayn Rand that “The hardest thing to explain is the glaringly evident which everybody had decided not to see.” It speaks volumes about the manner in which the assessment order was passed by the learned AO.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 28/08/2024.
Sd/- Sd/- (PAVAN KUMAR GADALE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 28/08/2024 Sudip Sarkar, Sr.PS Copy of the Order forwarded to:
1. 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, Mumbai 4. 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai