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Facts
The assessee, Union Bank of India, faced reassessment proceedings under Section 148 for Assessment Years 2016-17 and 2017-18, after original assessments were completed under Section 143(3). The Assessing Officer made additions related to the opening balance of Foreign Currency Translation Difference (FCTR) and interest accrued but not due, based on reasons recorded alleging income had escaped assessment. The Ld. CIT(A) upheld both the validity of the reassessment and the additions made.
Held
The Tribunal ruled that the reassessment proceedings were invalid, concluding they were based merely on a 'change of opinion' without any new tangible material or information that was not already available during the original assessment proceedings. Citing precedents from the Hon'ble Bombay High Court (HDFC Bank Ltd., Castrol India Ltd.) and the Supreme Court (Kelvinator of India Ltd.), the Tribunal held that such reopening amounts to a review, which is not permissible under Section 147 of the Income Tax Act. Consequently, the reassessment proceedings for both assessment years were quashed.
Key Issues
The key legal issue was the validity of reassessment proceedings initiated under Section 148, specifically whether the reopening was based on new tangible material or merely constituted a 'change of opinion' by the Assessing Officer regarding income escaping assessment related to FCTR and interest accrued but not due.
Sections Cited
Section 143(3), Section 148, Section 147, Section 144B, Section 43AA, Section 115JB, Section 145(2), Section 36(1)(viia)
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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
The captioned appeal The captioned appeals by the assessee and Revenue for by the assessee and Revenue for assessment year 2016 assessment year 2016-17 are directed against order dated 17 are directed against order dated 16.02.2024 passed by the Ld. Commissioner of Income-tax 16.02.2024 passed by the Ld. Commissioner of Income 16.02.2024 passed by the Ld. Commissioner of Income (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. National Faceless Appeal Centre, Delhi [in short ‘the Ld. National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’]. The appeal for assessment year CIT(A)’]. The appeal for assessment year 2017-18 preferred by the 18 preferred by the assessee, is directed against order dated 16.02.2024 passed by the is directed against order dated 16.02.2024 passed by the is directed against order dated 16.02.2024 passed by the Ld. CIT(A). As common grounds Ld. CIT(A). As common grounds are involved in these appeals involved in these appeals therefore, same were heard together and disposed off by way of this therefore, same were heard together and disposed off by way of this therefore, same were heard together and disposed off by way of this consolidated order for convenience. consolidated order for convenience.
Firstly, we take up the appeal of the assessee for assessment Firstly, we take up the appeal of the assessee for assessment Firstly, we take up the appeal of the assessee for assessment year 2017-18 for adjudication. The grounds raised by the assessee 18 for adjudication. The grounds raised by the assessee 18 for adjudication. The grounds raised by the assessee are reproduced as under: are reproduced as under:
Validity of assessment order Validity of assessment order 1.1 On the facts and in the circumstances of the case and in law, the 1.1 On the facts and in the circumstances of the case and in law, the 1.1 On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the order passed u/s 144B, even when no time CIT(A) erred in upholding the order passed u/s 144B, even when no time CIT(A) erred in upholding the order passed u/s 144B, even when no time was given to appellant to furnish replies to the draft assessment order. was given to appellant to furnish replies to the draft assessment order. was given to appellant to furnish replies to the draft assessment order. Reopening of Assessment Reopening of Assessment 2.1 On the facts and in the circumstances of the case and in law, the la. 2.1 On the facts and in the circumstances of the case and in law, the la. 2.1 On the facts and in the circumstances of the case and in law, the la. CIT(A) erred in upholding the reopening proceedings even when no new rred in upholding the reopening proceedings even when no new rred in upholding the reopening proceedings even when no new tangible material was found and the reopening was based on materials tangible material was found and the reopening was based on materials tangible material was found and the reopening was based on materials already on record. already on record. 2.2 On the facts and in the circumstances of the case and in law, the Id. 2.2 On the facts and in the circumstances of the case and in law, the Id. 2.2 On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in upholding the reo CIT(A) erred in upholding the reopening proceedings even when the pening proceedings even when the reopening was only based on a change of opinion. reopening was only based on a change of opinion.
M/s Union Bank of India M/s Union Bank of India 3 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 Addition on account of opening balance of FCTR Addition on account of opening balance of FCTR 3.1 On the facts and in the circumstances of the case and in law, the Id. 3.1 On the facts and in the circumstances of the case and in law, the Id. 3.1 On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the order of AO charging t CIT(A) erred in confirming the order of AO charging to tax the opening o tax the opening balance of Foreign Currency Translation Difference (FCTR). balance of Foreign Currency Translation Difference (FCTR). 3.2 On the facts and in the circumstances of the case and in law, the Id. 3.2 On the facts and in the circumstances of the case and in law, the Id. 3.2 On the facts and in the circumstances of the case and in law, the Id. CIT(A) ought to have appreciated that even as per transition provisions of CIT(A) ought to have appreciated that even as per transition provisions of CIT(A) ought to have appreciated that even as per transition provisions of Income Computation and Disclos Income Computation and Disclosure Standards (ICDS), it is only the income ure Standards (ICDS), it is only the income arising in the previous year which can be charged to tax. arising in the previous year which can be charged to tax. 3.3 Without prejudice to above, Income Computation and Disclosure 3.3 Without prejudice to above, Income Computation and Disclosure 3.3 Without prejudice to above, Income Computation and Disclosure Standards (ICDS), the Id. Standards (ICDS), the Id. CIT(A) failed to note that as per the provisions of CIT(A) failed to note that as per the provisions of the Act, it is only the income of the previous year that can be charged to it is only the income of the previous year that can be charged to it is only the income of the previous year that can be charged to tax and the Income Computation and Disclosure Standards (ICDS) clearly tax and the Income Computation and Disclosure Standards (ICDS) clearly tax and the Income Computation and Disclosure Standards (ICDS) clearly provide that in case of conflict the provisions of the Act shall provide that in case of conflict the provisions of the Act shall provide that in case of conflict the provisions of the Act shall prevail. Addition on account of interest accrued but n Addition on account of interest accrued but not due 4.1 On the facts and in the circumstances of the case and in law, the Id. 4.1 On the facts and in the circumstances of the case and in law, the Id. 4.1 On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the order of AO charging to tax the amount of CIT(A) erred in confirming the order of AO charging to tax the amount of CIT(A) erred in confirming the order of AO charging to tax the amount of interest accrued but not due on securities, without appreciating that the interest accrued but not due on securities, without appreciating that the interest accrued but not due on securities, without appreciating that the charge to tax will arise onl charge to tax will arise only if there is a right to receive the income. y if there is a right to receive the income. 4.2 On the facts and in the circumstances of the case and in law, the Id. 4.2 On the facts and in the circumstances of the case and in law, the Id. 4.2 On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in relying on Question no. 18 of CBDT circular 10/2017 where CIT(A) erred in relying on Question no. 18 of CBDT circular 10/2017 where CIT(A) erred in relying on Question no. 18 of CBDT circular 10/2017 where the issue related to computation of capital gain and was not on the issue related to computation of capital gain and was not on the issue related to computation of capital gain and was not on computation of income from business or profession. computation of income from business or profession.
Briefly stated, facts of the case are that the assessee filed its Briefly stated, facts of the case are that the assessee filed its Briefly stated, facts of the case are that the assessee filed its return of income on 29.11.2017 and assessment u/s 143(3) of the return of income on 29.11.2017 and assessment u/s 143(3) of the return of income on 29.11.2017 and assessment u/s 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) was completed on tax Act, 1961 (in short ‘the Act’) was completed on tax Act, 1961 (in short ‘the Act’) was completed on 26.12.2019 determining total income at Rs.53,43,27,11,690/ etermining total income at Rs.53,43,27,11,690/- etermining total income at Rs.53,43,27,11,690/ under under under normal normal normal provisions provisions provisions of of of the the the Act Act Act and and and book book book profit profit profit of of of Rs.6,24,44,64,632/- u/s 115JB of the Act. Subsequently, the u/s 115JB of the Act. Subsequently, the assessment was reopened by way of issue of notice u/s 148 of the assessment was reopened by way of issue of notice u/s 148 of the assessment was reopened by way of issue of notice u/s 148 of the Act after recording reasons t Act after recording reasons to believe that income escaped o believe that income escaped assessment. Thereafter, statutory notices were issued and after assessment. Thereafter, statutory notices were issue assessment. Thereafter, statutory notices were issue considering submission of the assessee, the Assessing Officer made considering submission of the assessee, the Assessing Officer made considering submission of the assessee, the Assessing Officer made
M/s Union Bank of India M/s Union Bank of India 4 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 addition for opening balance opening balance foreign currency translation reserves foreign currency translation reserves amounting to Rs.103,89,93,69 amounting to Rs.103,89,93,694/- and interest accrued but not due and interest accrued but not due, amounting to Rs.314,72,09,352/ 314,72,09,352/-.
5. On further appeal, the assessee challenged the validity of the On further appeal, the assessee challenged the validity of the On further appeal, the assessee challenged the validity of the reassessment proceedings as well as addition on merit. The Ld. reassessment proceedings as well as addition on merit. The Ld. reassessment proceedings as well as addition on merit. The Ld. CIT(A) upheld the validity of the assessment as well as sustained CIT(A) upheld the validity of the assessment as well as CIT(A) upheld the validity of the assessment as well as the addition on merit. the addition on merit.
6. Aggrieved, the assessee is in appeal before the the assessee is in appeal before the Income-tax the assessee is in appeal before the Appellate Tribunal ( in short the ‘Tribunal’) Appellate Tribunal ( in short the ‘Tribunal’)by way of raising by way of raising grounds as reproduced above. grounds as reproduced above.
Before us, the assessee filed a Paper Book containing pages 1 Before us, the assessee filed a Paper Book containing pages 1 Before us, the assessee filed a Paper Book containing pages 1 to 99.
With reference to ground No. 2 challenging reopening With reference to ground No. 2 challenging reopening With reference to ground No. 2 challenging reopening proceedings on the ground proceedings on the ground of ‘change of opinion’, t of ‘change of opinion’, the Ld. counsel for the assessee referred reasons recorded available on page 2 and 3 for the assessee referred reasons recorded available on page 2 a for the assessee referred reasons recorded available on page 2 a of the Paper Book and submitted that no new tangible material or of the Paper Book and submitted that no new tangible material or of the Paper Book and submitted that no new tangible material or information has been referred by the Assessing Officer for reopening information has been referred by the Assessing Officer information has been referred by the Assessing Officer of the assessment, therefore, the Assessing Officer has reopened the therefore, the Assessing Officer has reopened the therefore, the Assessing Officer has reopened the assessment merely on the assessment merely on the basis of change of opinion on the same ion on the same very material, which was available to him during the assessment which was available to him during the assessment which was available to him during the assessment proceedings u/s 143(3) of the Act. The Ld. counsel for the assessee proceedings u/s 143(3) of the Act. The Ld. counsel for the assessee proceedings u/s 143(3) of the Act. The Ld. counsel for the assessee referred to the decision of the Hon’ble Bombay High Court in the referred to the decision of the Hon’ble Bombay High Court in the referred to the decision of the Hon’ble Bombay High Court in the M/s Union Bank of India M/s Union Bank of India 5 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 case of HDFC Bank Ltd. reported in 162 taxm HDFC Bank Ltd. reported in 162 taxm HDFC Bank Ltd. reported in 162 taxmann.com 390 (Bom). The Ld. counsel also referred to the decision of the Hon’ble The Ld. counsel also referred to the decision of the Hon’ble The Ld. counsel also referred to the decision of the Hon’ble Bombay High Court in the case of Castrol India Ltd. Castrol India Ltd. reported in Bombay High Court in the case of 162 taxmann.com 51 162 taxmann.com 51.
8.1 On the contrary, the Ld. Departmental Representative (DR) On the contrary, the Ld. Departmental Representative (DR) On the contrary, the Ld. Departmental Representative (DR) referred to the decision of t referred to the decision of the Hon’ble Punjab and Haryana High he Hon’ble Punjab and Haryana High Court in the case of Greater Mohali Area Development Authority v. Court in the case of Greater Mohali Area Development Authority v. Court in the case of Greater Mohali Area Development Authority v. DCIT CWP No. 26125 of 2017. DCIT CWP No. 26125 of 2017.
8.2 The reasons recorded for the year under consideration are The reasons recorded for the year under consideration are The reasons recorded for the year under consideration are reproduced as under: reproduced as under:
“Sir/ Madam/ M/s, Sir/ Madam/ M/s, Subject: Communication of Subject: Communication of reasons of reopening u/s 147 for A.Y reasons of reopening u/s 147 for A.Y - 2017-18 in the case of UNION BANK OF INDIA reg. 18 in the case of UNION BANK OF INDIA reg. The assessee Union Bank of India, PAN: AAACU0564G, for A.Y.2017 The assessee Union Bank of India, PAN: AAACU0564G, for A.Y.2017 The assessee Union Bank of India, PAN: AAACU0564G, for A.Y.2017-18 is assessed to tax in this charge. In this case return of income was filed on assessed to tax in this charge. In this case return of income was filed on assessed to tax in this charge. In this case return of income was filed on 29.11.2017 declaring tot 29.11.2017 declaring total income at Rs. 4432,02,01,950/-. The assessment . The assessment was completed u/s. 143(3) of the IT Act assessing the total taxable income was completed u/s. 143(3) of the IT Act assessing the total taxable income was completed u/s. 143(3) of the IT Act assessing the total taxable income of Rs. 5343,27,11,090/ of Rs. 5343,27,11,090/-.
It is found from the return and the details available on record that, the 2. It is found from the return and the details available on record that, the 2. It is found from the return and the details available on record that, the assessee's income chargeable assessee's income chargeable to tax has been under assessed on account of to tax has been under assessed on account of following issues: following issues: 2.1 Foreign Exchange gains not offered to tax in accordance with 43AA r.w.s Foreign Exchange gains not offered to tax in accordance with 43AA r.w.s Foreign Exchange gains not offered to tax in accordance with 43AA r.w.s 145(2) of the Act.: In assessee's case, on examination of Annual Accounts of 145(2) of the Act.: In assessee's case, on examination of Annual Accounts of 145(2) of the Act.: In assessee's case, on examination of Annual Accounts of the assessee, it was found from Schedule the assessee, it was found from Schedule 2 being Reserves &Surplus to 2 being Reserves &Surplus to Balance Sheet under the head Foreign Currency Translation Reserve the Balance Sheet under the head Foreign Currency Translation Reserve the Balance Sheet under the head Foreign Currency Translation Reserve the balance in FCTR as on 01.04.2016 was reported at Rs. 10775.91 Lakh. As balance in FCTR as on 01.04.2016 was reported at Rs. 10775.91 Lakh. As balance in FCTR as on 01.04.2016 was reported at Rs. 10775.91 Lakh. As per section 43AA of the IT Act as amended by Finance Act 2018 with per section 43AA of the IT Act as amended by Finance Act 2018 with per section 43AA of the IT Act as amended by Finance Act 2018 with retrospective effe retrospective effect from AY 2017-18, any gain or loss arising on account of 18, any gain or loss arising on account of any change in foreign exchange rates shall be treated as income or loss as any change in foreign exchange rates shall be treated as income or loss as any change in foreign exchange rates shall be treated as income or loss as the case may be and such gain or loss shall be computed in accordance with the case may be and such gain or loss shall be computed in accordance with the case may be and such gain or loss shall be computed in accordance with the ICDS notified by the government under sub s the ICDS notified by the government under sub section (2) of section 145. ection (2) of section 145. The assessee has however not offered the opening balance of FCTR for The assessee has however not offered the opening balance of FCTR for The assessee has however not offered the opening balance of FCTR for M/s Union Bank of India M/s Union Bank of India 6 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 computing taxable income resulting in under assessment of taxable income computing taxable income resulting in under assessment of taxable income computing taxable income resulting in under assessment of taxable income to this extent for the year. to this extent for the year. 2.2 Interest accrued, but not due, not offered to tax on Interest accrued, but not due, not offered to tax on accrual basis: accrual basis: It is found from the found from the computation sheet filed by the assessee that deduction was computation sheet filed by the assessee that deduction was claimed for an amount of Rs. 31472.09 claimed for an amount of Rs. 31472.09 Lakhs towards interest accrued but Lakhs towards interest accrued but not due as on last day of the previous year. As clarified by CBDT in circular not due as on last day of the previous year. As clarified by CBDT in circular not due as on last day of the previous year. As clarified by CBDT in circular No.10/2017, interest income needs to be offered on accrual basis. As per , interest income needs to be offered on accrual basis. As per , interest income needs to be offered on accrual basis. As per ICDS notified by the government under sub section (2) of section 145 interest ICDS notified by the government under sub section (2) of section 145 interest ICDS notified by the government under sub section (2) of section 145 interest income needs to be offered to tax on accrual basis and assessee has not income needs to be offered to tax on accrual basis and assessee has not income needs to be offered to tax on accrual basis and assessee has not offered the same to tax in computing taxabl offered the same to tax in computing taxable income resulting in under e income resulting in under assessment of taxable income to this extent for the year. assessment of taxable income to this extent for the year. DEEPAK SHUKLA DEEPAK SHUKLA DCIT/ACIT, Cir. DCIT/ACIT, Cir.-3(4), Mumbai (In case the document is digitally signed please (In case the document is digitally signed please refer Digital Signature at the bottom of the page) refer Digital Signature at the bottom of the page)”
We have heard rival su We have heard rival submission of the parties bmission of the parties on the issue of validity of the reassessment. We find that the Ld. CIT(A) has validity of the reassessment. We find that the Ld. CIT(A) has validity of the reassessment. We find that the Ld. CIT(A) has rejected the contention of the assessee that there was no new rejected the contention of the assessee that there was no new rejected the contention of the assessee that there was no new tangible material and assessment has been reopened merely on the tangible material and assessment has been reopened merely on the tangible material and assessment has been reopened merely on the basis of the change of the basis of the change of the opinion based on the same material opinion based on the same material which was available during regular assessme which was available during regular assessment. The Ld. CIT(A) in nt. The Ld. CIT(A) in para 6.2.3 of the impugned order has rejected the contention of the 3 of the impugned order has rejected the contention of the 3 of the impugned order has rejected the contention of the assessee that no new material is available observing as under: assessee that no new material is available observing as under: assessee that no new material is available observing as under:
“6.2.3 In view of the 6.2.3 In view of the above, the appellant's contention that all the above, the appellant's contention that all the documents were already available with the Department while documents were already available with the Department while documents were already available with the Department while completing the assessment earlier u/s. 143(3) of the Act and no other completing the assessment earlier u/s. 143(3) of the Act and no other completing the assessment earlier u/s. 143(3) of the Act and no other new tangible material was available there to reopen the assessment is new tangible material was available there to reopen the assessment is new tangible material was available there to reopen the assessment is not acceptable. able.” 9.1 The Ld. CIT(A) with reference to the foreign exchange gains not The Ld. CIT(A) with reference to the foreign exchange gains not The Ld. CIT(A) with reference to the foreign exchange gains not offered to tax in accordance with section 43AA r.w.s. 145(2) of the offered to tax in accordance with section 43AA r.w.s. 145(2) of the offered to tax in accordance with section 43AA r.w.s. 145(2) of the Act upheld the validity of the reassessment on the reasoning that Act upheld the validity of the reassessment on the reasoning that Act upheld the validity of the reassessment on the reasoning that M/s Union Bank of India M/s Union Bank of India 7 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 Assessing Officer reopened t Assessing Officer reopened the assessement in view of change in iew of change in section 43AA of the Act with retrospective effect from assessment section 43AA of the Act with retrospective effect from assessment section 43AA of the Act with retrospective effect from assessment year 2017-18. Regarding another issue of interest accrued 18. Regarding another issue of interest accrued, the Ld.
Regarding another issue of interest accrued CIT(A) in para 6.2.6 observed observed that assessee did not offer the interest that assessee did not offer the interest on accrual basis as clarified by th on accrual basis as clarified by the Central Board of Direct Taxes e Central Board of Direct Taxes (CBDT). The relevant paragraph of the order (CBDT). The relevant paragraph of the order of the Ld. of the Ld. CIT(A) are reproduced as under: reproduced as under:
“6.2.5 However, the issue involved in the above case i.e., change in 6.2.5 However, the issue involved in the above case i.e., change in 6.2.5 However, the issue involved in the above case i.e., change in the method of accounting followed by the assessee. In the instant the method of accounting followed by the assessee. In the instant the method of accounting followed by the assessee. In the instant case, the assessment order is reopened based on escapement of case, the assessment order is reopened based on escapement of case, the assessment order is reopened based on escapement of income noticed after completion of the assessment u/s. 143(3) of the income noticed after completion of the assessment u/s. 143(3) of the income noticed after completion of the assessment u/s. 143(3) of the Act. The Assessing Officer has identified that the appellant has not Act. The Assessing Officer has identified that the appellant has not Act. The Assessing Officer has identified that the appellant has not disclosed Foreign Currency Translation Reserve balance a disclosed Foreign Currency Translation Reserve balance a disclosed Foreign Currency Translation Reserve balance as per Section 43AA introduced as per Finance Act 2018 with retrospective Section 43AA introduced as per Finance Act 2018 with retrospective Section 43AA introduced as per Finance Act 2018 with retrospective effect from AY 2017 effect from AY 2017-18. Which needs to be computed in accordance 18. Which needs to be computed in accordance with ICDS notified by the government under Section 145(2) of the It with ICDS notified by the government under Section 145(2) of the It with ICDS notified by the government under Section 145(2) of the It Act. The Assessing Officer found that the appellan Act. The Assessing Officer found that the appellant has not offered the t has not offered the opening balance of FTCR for computing total income resulting in under opening balance of FTCR for computing total income resulting in under opening balance of FTCR for computing total income resulting in under assessment of total income and thus reopened the assessment. assessment of total income and thus reopened the assessment. assessment of total income and thus reopened the assessment. 6.2.6 The Assessing Officer has also noticed that interest accrued but 6.2.6 The Assessing Officer has also noticed that interest accrued but 6.2.6 The Assessing Officer has also noticed that interest accrued but not due was not offered to tax o not due was not offered to tax on accrual basis and as clarified by n accrual basis and as clarified by CBDT circular No. 10 /2017, interest income needs to be offered on CBDT circular No. 10 /2017, interest income needs to be offered on CBDT circular No. 10 /2017, interest income needs to be offered on accrual basis as per ICDS which has resulted in escapement of income accrual basis as per ICDS which has resulted in escapement of income accrual basis as per ICDS which has resulted in escapement of income chargeable to tax to the tune of Rs.314.7209 crores. chargeable to tax to the tune of Rs.314.7209 crores.” 9.2 Apparently, according to according to the Ld. CIT(A), the issue was not the issue was not considered while completing assessment u/s 143(3) of the Act and considered while completing assessment u/s 143(3) of the Act and considered while completing assessment u/s 143(3) of the Act and being based on a tangible material available from the record, so he being based on a tangible material available from the record, so he being based on a tangible material available from the record, so he upheld validity of the reassessment. The relevant para of the Ld. validity of the reassessment. The relevant para of the Ld. validity of the reassessment. The relevant para of the Ld. CIT(A) is reproduced CIT(A) is reproduced as under:
“6.2.8 It is evident from the above that the objections raised by the 6.2.8 It is evident from the above that the objections raised by the 6.2.8 It is evident from the above that the objections raised by the assessee against reopening of the assessment u/s. 147 of the Act assessee against reopening of the assessment u/s. 147 of the Act assessee against reopening of the assessment u/s. 147 of the Act were disposed of by the Assessing Officer. The Assessing Officer has were disposed of by the Assessing Officer. The Assessing Officer has were disposed of by the Assessing Officer. The Assessing Officer has reopened the assessment as he has reason t reopened the assessment as he has reason to believe that income o believe that income
M/s Union Bank of India M/s Union Bank of India 8 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 chargeable to tax has escaped assessment. The reason to believe is on chargeable to tax has escaped assessment. The reason to believe is on chargeable to tax has escaped assessment. The reason to believe is on tangible material available from record wherein the issues were not tangible material available from record wherein the issues were not tangible material available from record wherein the issues were not considered while completing assessment u/s 143(3) of the IT Act. considered while completing assessment u/s 143(3) of the IT Act. considered while completing assessment u/s 143(3) of the IT Act.” 9.3 Further, the Ld. CIT(A) re Further, the Ld. CIT(A) referred to the decision of the Hon’ble ferred to the decision of the Hon’ble Supreme Court in the case of Export Credit Guaranteed India Ltd. Supreme Court in the case of Export Credit Guaranteed India Ltd. Supreme Court in the case of Export Credit Guaranteed India Ltd. (supra) wherein it is held that wherein it is held that when there was a failure on the part there was a failure on the part of the Assessing Officer to apply his mind during the original of the Assessing Officer to apply his mind during the original of the Assessing Officer to apply his mind during the original assessment proceedin assessment proceedings on the points which asses gs on the points which assessment was sought to be reopened, it would not be case of change of opinion. sought to be reopened, it would not be case of change of opinion. sought to be reopened, it would not be case of change of opinion.
9.4 However, we may like to However, we may like to refer to the finding of the Hon’ble the finding of the Hon’ble Bombay High Court in the case of HDFC Bank Ltd. (supra) wherein, Bombay High Court in the case of HDFC Bank Ltd. (supra) wherein, Bombay High Court in the case of HDFC Bank Ltd. (supra) wherein, the Hon’ble High Cour the Hon’ble High Court has observed that the information which t has observed that the information which formed reasons to believe formed reasons to believe for escapement of the assessment was escapement of the assessment was already available during the assessment proceedings and there was during the assessment proceedings and there was during the assessment proceedings and there was nothing new which had been brought on nothing new which had been brought on record, then it would be a record, then it would be a clear case of change of opinion. The relevant finding of the Hon’ble of opinion. The relevant finding of the Hon’ble High Court is reproduced as under: High Court is reproduced as under:
“4. The fact that the reasons recorded by the AO for reopening the 4. The fact that the reasons recorded by the AO for reopening the 4. The fact that the reasons recorded by the AO for reopening the assessment are based entirely on the documents already filed by assessment are based entirely on the documents already filed by assessment are based entirely on the documents already filed by Assessee, cannot be disputed. Mr. Mistri Assessee, cannot be disputed. Mr. Mistri tendered a compilation of tendered a compilation of documents containing copies of the return of income, the computation documents containing copies of the return of income, the computation documents containing copies of the return of income, the computation of total income, Form No. 3CD, Annual Report and the assessment of total income, Form No. 3CD, Annual Report and the assessment of total income, Form No. 3CD, Annual Report and the assessment order. In the annexure to the statement of income filed, there is order. In the annexure to the statement of income filed, there is order. In the annexure to the statement of income filed, there is mention of write off and provis mention of write off and provisions relating to prior years, which have ions relating to prior years, which have been added and allowable expenses from the same being interest on been added and allowable expenses from the same being interest on been added and allowable expenses from the same being interest on Fixed Deposits and interest of Security Deposits have been deducted. Fixed Deposits and interest of Security Deposits have been deducted. Fixed Deposits and interest of Security Deposits have been deducted. The notes to computation also provides "The interest expense in The notes to computation also provides "The interest expense in The notes to computation also provides "The interest expense in respect of Secur respect of Security Deposit and Fixed Deposit has been reconciled ity Deposit and Fixed Deposit has been reconciled during the previous year and a sum of Rs. 17,00,88,104/ during the previous year and a sum of Rs. 17,00,88,104/-towards the towards the under provision of interest liability for Fixed Deposit and Rs. under provision of interest liability for Fixed Deposit and Rs. under provision of interest liability for Fixed Deposit and Rs. 2,38.96,444/- towards the under provision of interest liability for towards the under provision of interest liability for M/s Union Bank of India M/s Union Bank of India 9 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 Security Deposit, being the amounts determined and crystalized ty Deposit, being the amounts determined and crystalized ty Deposit, being the amounts determined and crystalized during the previous year has been claimed as allowable deduction." during the previous year has been claimed as allowable deduction." during the previous year has been claimed as allowable deduction."
Form No. 3CD filed by Assessee under Section 44AB of the Act, at 5. Form No. 3CD filed by Assessee under Section 44AB of the Act, at 5. Form No. 3CD filed by Assessee under Section 44AB of the Act, at Annexure-XV, mentions prior period income or expenditure of prio XV, mentions prior period income or expenditure of prio XV, mentions prior period income or expenditure of prior period credited or debited to the Profit and Loss Account amounting to period credited or debited to the Profit and Loss Account amounting to period credited or debited to the Profit and Loss Account amounting to Rs. 678,263,876/ Rs. 678,263,876/-, which is the amount, which was added in the , which is the amount, which was added in the annexure to statement of total income. In the Director's Report annexure to statement of total income. In the Director's Report annexure to statement of total income. In the Director's Report annexed to the annual returns, there is mention of provi annexed to the annual returns, there is mention of provi annexed to the annual returns, there is mention of provisions, contingencies and write offs contingencies and write offs - extra-ordinary items and it is disclosed ordinary items and it is disclosed that an amount of Rs. 17.01 crores was a shortfall in the General that an amount of Rs. 17.01 crores was a shortfall in the General that an amount of Rs. 17.01 crores was a shortfall in the General Ledger balance of Term Deposits and an amount of Rs. 2.39 crores Ledger balance of Term Deposits and an amount of Rs. 2.39 crores Ledger balance of Term Deposits and an amount of Rs. 2.39 crores was a shortfall in the General Ledger balance was a shortfall in the General Ledger balance of Security Deposits. of Security Deposits. The Profit and Loss Account also provides for write offs and other The Profit and Loss Account also provides for write offs and other The Profit and Loss Account also provides for write offs and other provisions relating to prior years amounting to Rs. 6783 lakhs and in provisions relating to prior years amounting to Rs. 6783 lakhs and in provisions relating to prior years amounting to Rs. 6783 lakhs and in the schedules forming part of accounts, it is stated as under : the schedules forming part of accounts, it is stated as under : the schedules forming part of accounts, it is stated as under : "Special provisions for interest "Special provisions for interest expenses include, (a) an amount of Rs. 1701 lakhs, being the shortfall in the an amount of Rs. 1701 lakhs, being the shortfall in the an amount of Rs. 1701 lakhs, being the shortfall in the General Ledger balance as compared to the aggregate of Live General Ledger balance as compared to the aggregate of Live General Ledger balance as compared to the aggregate of Live Term Deposits in the books of the Bank. This being provision Term Deposits in the books of the Bank. This being provision Term Deposits in the books of the Bank. This being provision for under provided liability of prior years, is accounted for under provided liability of prior years, is accounted for under provided liability of prior years, is accounted as part of "Write off & other provisions relating to prior vears" in the of "Write off & other provisions relating to prior vears" in the of "Write off & other provisions relating to prior vears" in the current year Profit and Loss Account. current year Profit and Loss Account. (b) an amount of Rs. 239 lakhs, being the shortfall in the an amount of Rs. 239 lakhs, being the shortfall in the an amount of Rs. 239 lakhs, being the shortfall in the General Ledger balance of Security Deposits as compared to General Ledger balance of Security Deposits as compared to General Ledger balance of Security Deposits as compared to the aggregate of Live Secu the aggregate of Live Security Deposits in the books of the rity Deposits in the books of the Bank. This being provision for under provided liability of prior Bank. This being provision for under provided liability of prior Bank. This being provision for under provided liability of prior years, is accounted as part of "Write off & other provisions years, is accounted as part of "Write off & other provisions years, is accounted as part of "Write off & other provisions relating to prior years" in the current year Profit and Loss relating to prior years" in the current year Profit and Loss relating to prior years" in the current year Profit and Loss Account." Account."
Therefore, all the inf 6. Therefore, all the information which formed reason to believe ormation which formed reason to believe escapement of income, was already made available during the escapement of income, was already made available during the escapement of income, was already made available during the assessment proceedings. There was nothing new, which has been assessment proceedings. There was nothing new, which has been assessment proceedings. There was nothing new, which has been brought on record because these materials were on the face of brought on record because these materials were on the face of brought on record because these materials were on the face of documents available before the A documents available before the AO. Therefore, the ITAT came to a O. Therefore, the ITAT came to a conclusion that it was a clear case of change of opinion. conclusion that it was a clear case of change of opinion.” 9.5 Further, the Hon’ble High Court in the case of Castrol India Further, the Hon’ble High Court in the case of Castrol India Further, the Hon’ble High Court in the case of Castrol India Ltd. (supra) has observed as under: Ltd. (supra) has observed as under:
“19. However, Assessing Officers without appreciating the true import However, Assessing Officers without appreciating the true import However, Assessing Officers without appreciating the true import of the aforesaid decision of the Supreme Court, continue to reopen of the aforesaid decision of the Supreme Court, continue to reopen of the aforesaid decision of the Supreme Court, continue to reopen assessments on the ground of income having escaped assessment assessments on the ground of income having escaped assessment assessments on the ground of income having escaped assessment despite the fact that all the material and information was alr despite the fact that all the material and information was alr despite the fact that all the material and information was already
M/s Union Bank of India M/s Union Bank of India 10 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 available with him while passing the original assessment order. available with him while passing the original assessment order. available with him while passing the original assessment order. Furthermore, while conclusive proof of escapement of income may not Furthermore, while conclusive proof of escapement of income may not Furthermore, while conclusive proof of escapement of income may not be necessary to reopen an assessment, the least that is required is a be necessary to reopen an assessment, the least that is required is a be necessary to reopen an assessment, the least that is required is a requisite belief based on tangible material which requisite belief based on tangible material which was Shivgan not was Shivgan not accessible to the AO or that which was deliberately withheld by accessible to the AO or that which was deliberately withheld by accessible to the AO or that which was deliberately withheld by Assessee, which then would amount to non Assessee, which then would amount to non-disclosure of relevant disclosure of relevant information. When an assessment is sought to be reopened within a information. When an assessment is sought to be reopened within a information. When an assessment is sought to be reopened within a period of four years of the end of the releva period of four years of the end of the relevant assessment year, the nt assessment year, the test to be applied is whether there is tangible material to do so. What test to be applied is whether there is tangible material to do so. What test to be applied is whether there is tangible material to do so. What is tangible is something which is not illusory, hypothetical or a matter is tangible is something which is not illusory, hypothetical or a matter is tangible is something which is not illusory, hypothetical or a matter of conjecture. An AO, who has plainly ignored relevant materials in of conjecture. An AO, who has plainly ignored relevant materials in of conjecture. An AO, who has plainly ignored relevant materials in arriving at an asse arriving at an assessment acts contrary to law. The facts in the ssment acts contrary to law. The facts in the present case clearly show that the AO was infact in the knowledge of present case clearly show that the AO was infact in the knowledge of present case clearly show that the AO was infact in the knowledge of and in possession of all the relevant details regarding the deductions and in possession of all the relevant details regarding the deductions and in possession of all the relevant details regarding the deductions on account of CSR. The computation sheets, the tax audit report, the on account of CSR. The computation sheets, the tax audit report, the on account of CSR. The computation sheets, the tax audit report, the receipts from the donees and the other relevant documents were all eceipts from the donees and the other relevant documents were all eceipts from the donees and the other relevant documents were all provided and disclosed by Petitioner. It is thus a clear case of 'change provided and disclosed by Petitioner. It is thus a clear case of 'change provided and disclosed by Petitioner. It is thus a clear case of 'change of opinion' by the AO. The notice of reopening assessment does not by of opinion' by the AO. The notice of reopening assessment does not by of opinion' by the AO. The notice of reopening assessment does not by any measure disclose any material leave aside a any measure disclose any material leave aside any information ny information leading to formation of cogent and requisite belief. The finding of the leading to formation of cogent and requisite belief. The finding of the leading to formation of cogent and requisite belief. The finding of the Apex Court in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) must not Apex Court in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) must not Apex Court in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) must not be used by AO to reopen assessments to review the original be used by AO to reopen assessments to review the original be used by AO to reopen assessments to review the original assessment order on the basis of a chang assessment order on the basis of a change of opinion of the AO, as e of opinion of the AO, as done in the present case. Further, the reasons to believe notice itself done in the present case. Further, the reasons to believe notice itself done in the present case. Further, the reasons to believe notice itself indicates that the AO was already seized with information prior to indicates that the AO was already seized with information prior to indicates that the AO was already seized with information prior to passing of the original assessment order and as such, there is no passing of the original assessment order and as such, there is no passing of the original assessment order and as such, there is no tangible information on tangible information on the basis of which he has allegedly formed the the basis of which he has allegedly formed the requisite belief. requisite belief.” 9.6 In view of the above decision of the Hon’ble Jurisdictional High In view of the above decision of the Hon’ble Jurisdictional High In view of the above decision of the Hon’ble Jurisdictional High Court, it is settled that reopening of the assessment on the material it is settled that reopening of the assessment on the material it is settled that reopening of the assessment on the material and information which was already available on the record while and information which was already available on the and information which was already available on the passing the original assessment order passing the original assessment order, amounts to change of amounts to change of opinion which is not permitted in opinion which is not permitted in law. Further, . Further, In CIT vs. Kelvinator of India Ltd Kelvinator of India Ltd. 256 ITR 1 , the Full Bench of the Delhi , the Full Bench of the Delhi High Court was considering a case of reopening u/s 147 within 4 High Court was considering a case of reopening u/s 147 with High Court was considering a case of reopening u/s 147 with years from the end of the assessment year. The Court held that years from the end of the assessment year. The Court held that years from the end of the assessment year. The Court held that when a regular order of assessment is passed in terms of section when a regular order of assessment is passed in terms of section when a regular order of assessment is passed in terms of section 143 (3) of the Act, a presumption can be raised that such an order a presumption can be raised that such an order a presumption can be raised that such an order
M/s Union Bank of India M/s Union Bank of India 11 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 has been passed on application of mind. It was held that if it be has been passed on application of mind. It was held that has been passed on application of mind. It was held that held that an order which has been passed purportedly without held that an order which has been passed purportedly without held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the application of mind would itself confer jurisdiction upon the application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything Assessing Officer to reopen the proceeding without anything Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority further, the same would amount to giving premium to an authorit further, the same would amount to giving premium to an authorit exercising quasi-judicial function to take benefit of its own wrong. It judicial function to take benefit of its own wrong. It judicial function to take benefit of its own wrong. It was held that section 147 of the Act does not postulate conferment was held that section 147 of the Act does not postulate conferment was held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment of power upon the Assessing Officer to initiate reassessment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion proceedings upon a mere change of opinion. On appeal b . On appeal by the department to the Supreme Court Supreme Court in 320 ITR 561(SC), in 320 ITR 561(SC), dismissing the appeal, held as under: , held as under:
“ On going through the changes, quoted above, made to Section 147 of “ On going through the changes, quoted above, made to Section 147 of “ On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of opening could be done under above two conditions and fulfillment of opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer the said conditions alone conferred jurisdict ion on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect to make a back assessment, but in section 147 of the Act [with effect to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition from 1st April, 1989], they are given a go by and only one condition has remained, viz., that ...4/- www.taxguru.in - 4 has remained, viz., that ...4/ 4 - where the Assessing Officer has reason to believe that income has escaped Assessing Officer has rea son to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, assessment, confers jurisdiction to reopen the assessment. Therefore, assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to re 1st April, 1989, power to re-open is much wider. However, one open is much wider. However, one needs to give a schematic interpretation to the words “reason to needs to give a schematic interpretation to the words “reason to needs to give a schematic interpretation to the words “reason to believe” failing which, we are afraid, Section 147 would give arbitrary g which, we are afraid, Section 147 would give arbitrary g which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of powers to the Assessing Officer to re open assessments on the basis of “mere change of opinion”, which cannot be per se reason to re “mere change of opinion”, which cannot be per se reason to re-open. “mere change of opinion”, which cannot be per se reason to re
M/s Union Bank of India M/s Union Bank of India 12 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024
We must also keep in mind the conceptual difference between We must also keep in mind the conceptual difference between power to We must also keep in mind the conceptual difference between review and power to re-assess. The Assessing Officer has no power to review and power to re assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be review; he has the power to re assessment has to be based on fulfillment of certain pre-condition and if the concept of based on fulfillment of certain pre condition and if the concept of “change of opinion” is removed, as contended on behalf of the “change of opinion” is removed, as contende d on behalf of the Department, then, in the garb of re-opening the assessment, review Department, then, in the garb of re opening the assessment, review would take place. One must treat the concept of “change of opinion” as would take place. One must treat the concept of “change of opinion” as would take place. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the Assessing Officer. built test to check abuse of power by the Assessing Officer. built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re Hence, after 1st April, 1989, As sessing Officer has power to re-open, provided there is “tangible material” to come to the conclusion that provided there is “tangible material” to come to the conclusion that provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Reasons must have a there is escapement of income from assessment. Reasons must have a there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the live link with the formation of the belief. Our view gets support from the live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under made to Section 147 of the Act, as quoted hereinabove. Under made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only the Direct Tax Laws (Amendment) Act, 1987, Parliament not only the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words “reason to believe” but also inserted the word deleted the words “reason to believe” but also inserted the word deleted the words “reason to believe” but also inserted the word “opinion” in Section 147 of the Act. However, on receipt of “opinion” in Section 147 of the Act. However, on receipt of “opinion” in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words entations from the Companies against omission of the words entations from the Companies against omission of the words “reason to believe”, Parliament re-introduced the said expression and “reason to believe”, Parliament re introduced the said expression and deleted the word “opinion” on the ground that it would vest arbitrary deleted the word “opinion” on the ground that it would vest arbitrary deleted the word “opinion” on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the powers in the Assessing Officer. We quote hereinbelow the relevant powers in the Assessing Officer. We quote hereinbelow the portion of Circular No.549 dated 31st October, 1989, which reads as portion of Circular No.549 dated 31st October, 1989, which reads as portion of Circular No.549 dated 31st October, 1989, which reads as follows:
“7.2 Amendment made by the Amending Act, 1989, to reintroduce “7.2 Amendment made by the Amending Act, 1989, to reintroduce “7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe' in Section 147.-- the expression `reason to believe' in Section 147. --A number of representations were received against the omission of the words representations were received against the omission of the words `reason to believe' from Section 147 and their substitution by the `reason to believe' from Section 147 and their substitution by the `reason to believe' from Section 147 and their substitution by the `opinion' of the Assessing Officer. It was pointed out that the `opinion' of the Assessing Officer. It was pointed out that the `opinion' of the Assessing Officer. It was pointed out that the M/s Union Bank of India M/s Union Bank of India 13 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 meaning of the expression, `reason to believe' had been explained in meaning of the expression, `reason to believe' had been explained in meaning of the expression, `reason to believe' had been explained in a number of court rulings in the past and was well settled and its a number of court rulings in the p ast and was well settled and its omission from section 147 would give arbitrary powers to the omission from section 147 would give arbitrary powers to the omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of Assessing Officer to reopen past assessments on mere change of Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again opinion. To allay these fears, the Amending Act, 1989, has again opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to amended section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in believe' in place of the words `for reasons to be recorded by him in believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, writing, is of the opinion'. Other provisions of the new section 147, writing, is of the opinion'. Other provisions of the new section 147, however, remain the same.” however, remain the same.”
For the afore-stated reasons, we see no merit in these civ stated reasons, we see no merit in these civ stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs.” filed by the Department, hence, dismissed with no order as to costs filed by the Department, hence, dismissed with no order as to costs 9.7 In our opinion, after completion of the assessment u/s 143(3) In our opinion, after completion of the assessment u/s 143(3) In our opinion, after completion of the assessment u/s 143(3) of the Act, for reopening of the assessment for reopening of the assessment, there has to be so , there has to be some trigger by way of either either information received from the external information received from the external source or from the internal source and without such trigger source or from the internal source and without such trigger source or from the internal source and without such trigger reopening of the assessment merely to relook reopening of the assessment merely to relook into the assessment into the assessment on the issues, which had been considered during the regular which had been considered during the regular which had been considered during the regular assessment proceedings assessment proceedings, will amount to review of the assessment to review of the assessment order by the Assessing Officer order by the Assessing Officer, which is not permitted in law under which is not permitted in law under the provisions of section 147 the provisions of section 147 of the Act. The Assessing Officer can he Assessing Officer can only only reassess reassess the the assessment assessment wherever wherever income income escaped escaped assessment, and not the review and not the review the order passed by him order passed by him. In view of the above discussion and respectfully following the decision of the the above discussion and respectfully following the decision of the the above discussion and respectfully following the decision of the Hon’ble Bombay High Court in the case of HDFC Bank Ltd. (supra) Hon’ble Bombay High Court in the case of HDFC Bank Ltd. (supra) Hon’ble Bombay High Court in the case of HDFC Bank Ltd. (supra)
M/s Union Bank of India M/s Union Bank of India 14 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 and Castrol India Ltd. (supra), we set aside the finding of the Ld. and Castrol India Ltd. (supra), we set aside the finding of the Ld. and Castrol India Ltd. (supra), we set aside the finding of the Ld. CIT(A) on the issue of v CIT(A) on the issue of validity of the reassessment and we quash the reassessment and we quash the reassessment proceedings. The ground No. 2 of the appeal of the reassessment proceedings. The ground No. 2 of the appeal of the reassessment proceedings. The ground No. 2 of the appeal of the assessee is accordingly allowed. assessee is accordingly allowed.
9.8 Since, we have already quashed the reassessment pr Since, we have already quashed the reassessment pr Since, we have already quashed the reassessment proceedings therefore, the ground therefore, the ground Nos. 3 and 4 of the assessee challenging the e challenging the merit of the addition and merely rendered academic and therefore, merit of the addition and merely rendered academic and therefore, merit of the addition and merely rendered academic and therefore, we are not adjudicating upon the same. we are not adjudicating upon the same.
In the appeal for assessment year 2016 In the appeal for assessment year 2016-17, the assessee 17, the assessee challenged validity of the reassessment on the ground of the change challenged validity of the reassessment on the ground of the change challenged validity of the reassessment on the ground of the change of opinion and also challenged the addition on merit whereas the pinion and also challenged the addition on merit whereas the pinion and also challenged the addition on merit whereas the Revenue has challenged the deletion of the claim of the other Revenue has challenged the deletion of the claim of the other Revenue has challenged the deletion of the claim of the other expenses of the assessee. expenses of the assessee.
10.1 We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. relevant material on record. For ready reference, the reasons reference, the reasons recorded for the year under consideration are reproduced as under: recorded for the year under consideration are reproduced as under: recorded for the year under consideration are reproduced as under:
“Sir/ Madam/ M/s, Sir/ Madam/ M/s, Subject: Communication of reasons of reopening u/s 147 for A.Y Subject: Communication of reasons of reopening u/s 147 for A.Y Subject: Communication of reasons of reopening u/s 147 for A.Y - 2016-17 in the case of UNION BANK OF INDIA reg. 17 in the case of UNION BANK OF INDIA reg. The assessee has filed the e The assessee has filed the e-return electronically on 29.11.2016 declaring return electronically on 29.11.2016 declaring total income of Rs.3557,10,04,800/ total income of Rs.3557,10,04,800/- under normal provision of the Income under normal provision of the Income tax Act and offered book profit of Rs. 1351,60,22,686/ tax Act and offered book profit of Rs. 1351,60,22,686/-u/s 115JB of the u/s 115JB of the Income tax Act. This case was select Income tax Act. This case was selected for scrutiny and assessment for ed for scrutiny and assessment for A.Y. 2016-17 was completed on 15.03.2019 after scrutiny and assessed 17 was completed on 15.03.2019 after scrutiny and assessed 17 was completed on 15.03.2019 after scrutiny and assessed income of Rs.5899,19,42,910/ income of Rs.5899,19,42,910/- under normal provision of the Income tax under normal provision of the Income tax
M/s Union Bank of India M/s Union Bank of India 15 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 Act and Book profit of Rs.5732,81,61,169/ Act and Book profit of Rs.5732,81,61,169/- U/s 115JB of the Income tax U/s 115JB of the Income tax Act.
2. Subsequently bsequently on perusal of the records it was observed that an amount on perusal of the records it was observed that an amount of Rs.4291,01,61,000/ Rs.4291,01,61,000/- is debited as Provision and Contingencies to the is debited as Provision and Contingencies to the Profit and loss account. However the assessee in their computation added Profit and loss account. However the assessee in their computation added Profit and loss account. However the assessee in their computation added back an amount of Rs.3715,28,10,596/ back an amount of Rs.3715,28,10,596/- as Provision for Bad and Doubtful ovision for Bad and Doubtful Debts (i.e NPA) and claimed an amount of Rs. 1937,62,60,435/ Debts (i.e NPA) and claimed an amount of Rs. 1937,62,60,435/ Debts (i.e NPA) and claimed an amount of Rs. 1937,62,60,435/- u/s 36(1)(viia) of the IT Act while arriving the taxable income. The assessee 36(1)(viia) of the IT Act while arriving the taxable income. The assessee 36(1)(viia) of the IT Act while arriving the taxable income. The assessee computation in this regard had also been accepted and the deduction of computation in this regard had also been accepted and the deduction of computation in this regard had also been accepted and the deduction of Rs. 2022,31, 14, Rs. 2022,31, 14,876/- was allowed u/s 36(1)(viia) of the IT Act. was allowed u/s 36(1)(viia) of the IT Act. Further it was noticed that the break of Rs.4291,01,61,000/ was noticed that the break of Rs.4291,01,61,000/- is given at point 11 is given at point 11 under the head Additional disclosures (page 252 of Annual Report) in under the head Additional disclosures (page 252 of Annual Report) in under the head Additional disclosures (page 252 of Annual Report) in Notes to Accounts. As per the details the assessee had Notes to Accounts. As per the details the assessee had debited provision debited provision for NPA amounting to Rs.4655.03 Crore and adjusted the other provisions for NPA amounting to Rs.4655.03 Crore and adjusted the other provisions for NPA amounting to Rs.4655.03 Crore and adjusted the other provisions from it and debited the net Provision of Rs.4291,01,61,000/ from it and debited the net Provision of Rs.4291,01,61,000/ from it and debited the net Provision of Rs.4291,01,61,000/- to P&L Account. It is pertinent to mention here that while computing the Book Profit an It is pertinent to mention here that while computing the Book Profit an It is pertinent to mention here that while computing the Book Profit an amount of Rs. 429 amount of Rs. 4291,01,61,000/- was added back as Disallowed for was added back as Disallowed for Provision of expenses. Provision of expenses. Hence the Net Provision amounting to Rs.4291,01,61,000/ Hence the Net Provision amounting to Rs.4291,01,61,000/ Hence the Net Provision amounting to Rs.4291,01,61,000/- should have been added back while computing the Income, whereas only an amount of been added back while computing the Income, whereas only an amount of been added back while computing the Income, whereas only an amount of Rs.3715,28,10,596/ Rs.3715,28,10,596/-had been added back while computing the taxable computing the taxable income in assessment under normal provision of the IT Act. This has income in assessment under normal provision of the IT Act. This has income in assessment under normal provision of the IT Act. This has resulted resulted resulted in in in under under under assessment assessment assessment of of of income income income to to to the the the extent extent extent of of of Rs.575,73,50,404/ Rs.575,73,50,404/-. 2.1 Therefore I am of the view that income to the extent of amount of Therefore I am of the view that income to the extent of amount of Therefore I am of the view that income to the extent of amount of Rs.575,73,50,404/ Rs.575,73,50,404/-, as explained above, has escaped assessment. as explained above, has escaped assessment. 2.2 Further, it was noticed that the assessee had claimed amounting to Rs. Further, it was noticed that the assessee had claimed amounting to Rs. Further, it was noticed that the assessee had claimed amounting to Rs. 1937,62,60,435/ 1937,62,60,435/- as deduction under section 36(1)(viia) of the IT Act. As as deduction under section 36(1)(viia) of the IT Act. As per their computation the assessee had claimed deduction of Rs. per their computation the assessee had claimed deduction of Rs. per their computation the assessee had claimed deduction of Rs. 1525,44,08,636/ 1525,44,08,636/- i.e 10% on aggregate rural advance amounting to Rs. i.e 10% on aggregate rural advance amounting to Rs. 15254.41 crore from the Rural branch and Rs.412,18,51,799/ 15254.41 crore from the Rural branch and Rs.412,18,51,799/ 15254.41 crore from the Rural branch and Rs.412,18,51,799/- as 7.5% of the Gross total income. the Gross total income. The assessee during assessment furnished the list assessment furnished the list of Rural Branch and aggregate average adv of Rural Branch and aggregate average advance made during the year in ance made during the year in support of their claim. It was noticed from the list, that huge advances support of their claim. It was noticed from the list, that huge advances support of their claim. It was noticed from the list, that huge advances were shown against few Branches and claimed it as Rural branch eligible were shown against few Branches and claimed it as Rural branch eligible were shown against few Branches and claimed it as Rural branch eligible for deduction under section 36(1)(viia) of the IT Act. for deduction under section 36(1)(viia) of the IT Act. The categories of Branches The categories of Branches were test checked from RBI press release were test checked from RBI press release dated 1 st November 2011 i.e Branch locator as per census 2011 and dated 1 st November 2011 i.e Branch locator as per census 2011 and dated 1 st November 2011 i.e Branch locator as per census 2011 and found that eight branches were classified as Semi Urban and metropolitan found that eight branches were classified as Semi Urban and metropolitan found that eight branches were classified as Semi Urban and metropolitan Branch under the column Population Group by RBI, where as assessee Branch under the column Population Group by RBI, where as assessee Branch under the column Population Group by RBI, where as assessee had considered it as Rural Branch. As per census of 2011, RBI had idered it as Rural Branch. As per census of 2011, RBI had idered it as Rural Branch. As per census of 2011, RBI had classified the six branches as Semi Urban Branch and two branches as classified the six branches as Semi Urban Branch and two branches as classified the six branches as Semi Urban Branch and two branches as Metropolitan Branch (list Attached). The total average advance amounting Metropolitan Branch (list Attached). The total average advance amounting Metropolitan Branch (list Attached). The total average advance amounting
M/s Union Bank of India M/s Union Bank of India 16 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 to Rs.881.06 crore is shown against these branches and R to Rs.881.06 crore is shown against these branches and RBI notified these BI notified these branches as Semi urban and Metropolitan Branch, hence the advances branches as Semi urban and Metropolitan Branch, hence the advances branches as Semi urban and Metropolitan Branch, hence the advances made from these branches is not qualified for deduction under section made from these branches is not qualified for deduction under section made from these branches is not qualified for deduction under section 36(1)(viia) of the IT Act. Hence required to be disallowed while assessment. 36(1)(viia) of the IT Act. Hence required to be disallowed while assessment. 36(1)(viia) of the IT Act. Hence required to be disallowed while assessment. However, it was allowed However, it was allowed in the assessment and has resulted in excess in the assessment and has resulted in excess grant of deduction of Rs.88.10 crore (i.e 10% of Rs.881.10 crore) u/s grant of deduction of Rs.88.10 crore (i.e 10% of Rs.881.10 crore) u/s grant of deduction of Rs.88.10 crore (i.e 10% of Rs.881.10 crore) u/s 36(1)(viia) of the IT Act. Due to that income was under assessed to that 36(1)(viia) of the IT Act. Due to that income was under assessed to that 36(1)(viia) of the IT Act. Due to that income was under assessed to that extent. As per RBI Branch locator as per census 201l Categories As per RBI Branch locator as per census 201l Categories State District Bank Centre Population Population Amount Uttar Pradesh Agra Union Bank of Malpura Semi-urban urban 70.91 India Uttar Pradesh Ghazipur Union Bank of Karimuddinpur Semi-urban urban 20.29 India urban 57.3 Uttar Pradesh Mathura Union Bank of Avarni Semi-urban India Madhya Pradesh Indore Union Bank of Indore-Mid Metropolitan Metropolitan 528.39 India Corporate Andhra Pradesh Krishna Union Bank of Enikepadu-Grand Metropolitan Metropolitan 88.4 India Maharashtra Nagpur Union Bank of Kandri Semi-urban urban 37.99 India Maharashtra Raigad Union Bank of Kharghar Semi-urban urban 31.13 India Maharashtra Raigad Union Bank of Kharghar Sector-4 Semi Urban Semi Urban 46.65 India 2.3 Therefore I am of the view that income to the extent of amount of Therefore I am of the view that income to the extent of amount of Therefore I am of the view that income to the extent of amount of Rs.88,10,60,000/ Rs.88,10,60,000/-, as explained above, has escaped assessment. , as explained above, has escaped assessment. 2.4 Further it 2.4 Further it was observed from the Profit and loss account that the was observed from the Profit and loss account that the assessee had offered Miscellaneous Income of Rs. 1329,78,42,000/ assessee had offered Miscellaneous Income of Rs. 1329,78,42,000/ assessee had offered Miscellaneous Income of Rs. 1329,78,42,000/-under Other Income (Schedule Other Income (Schedule-14) and also debited an amount of Rs. 14) and also debited an amount of Rs. 1193,52,28,000/ 1193,52,28,000/- as Other Expenditure ( schedule-16) under the head 16) under the head Operating Expenses. However the minor head wise detail of the perating Expenses. However the minor head wise detail of the perating Expenses. However the minor head wise detail of the miscellaneous income and expenditure was not available in the records. In miscellaneous income and expenditure was not available in the records. In miscellaneous income and expenditure was not available in the records. In absence of details the adjustment (i.e addition and deduction) made by the absence of details the adjustment (i.e addition and deduction) made by the absence of details the adjustment (i.e addition and deduction) made by the assessee in their computation while computing assessee in their computation while computing the taxable income could the taxable income could not be verified. 2.5 Therefore I am of the view that income to the extent of amount of Rs. Therefore I am of the view that income to the extent of amount of Rs. Therefore I am of the view that income to the extent of amount of Rs. 1193,52,28,000/ 1193,52,28,000/-, as explained above, has escaped assessment. , as explained above, has escaped assessment. DEEPAK SHUKLA DEEPAK SHUKLA DCIT/ACIT, Cir. DCIT/ACIT, Cir.-3(4), Mumbai (In case the document is digitally signed please (In case the document is digitally refer Digital Signature at the bottom of the page) refer Digital Signature at the bottom of the page)”
M/s Union Bank of India M/s Union Bank of India 17 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024 10.2 We note that in the instant assessment year also the We note that in the instant assessment year also the We note that in the instant assessment year also the Assessing Officer has reopened the assessment on perusal of the Assessing Officer has reopened the assessment on perusal of the Assessing Officer has reopened the assessment on perusal of the records available with him and no new information or material to records available with him and no new information or material to records available with him and no new information or material to trigger for reopening has been referred by the Assessing Officer reopening has been referred by the Assessing Officer reopening has been referred by the Assessing Officer. With regard to the ‘miscellaneous income miscellaneous income’, the Assessing Officer has the Assessing Officer has recorded reasons for verification only recorded reasons for verification only.
10.3 We have already held that the Assessing Offi We have already held that the Assessing Offi We have already held that the Assessing Officer is not permitted to reopen permitted to reopen the assessment only on the basis of the only on the basis of the material already available on record, material already available on record, without any fresh information without any fresh information or the material, and therefore, following our finding in assessment and therefore, following our finding in assessment and therefore, following our finding in assessment year 2017-18, the reassessment proceedings 18, the reassessment proceedings for assessment year assessment year 2016-17 is also held to be based on the change of opinion held to be based on the change of opinion held to be based on the change of opinion, which is not permitted in law, therefore, we quash not permitted in law, therefore, we quash the reassessment the reassessment proceedings for assessment year 2016 proceedings for assessment year 2016-17 also. The grounds of 17 also. The grounds of appeal of the assessee challenging validity of the reassessment are appeal of the assessee challenging validity of the reassessment are appeal of the assessee challenging validity of the reassessment are accordingly allowed.
10.3 Since, Since, Since, we we we have have have already already already quashed quashed quashed the the the reassessment reassessment reassessment proceedings, the ground on merit raised by the assessee as well as proceedings, the ground on merit raised by the assessee as well as proceedings, the ground on merit raised by the assessee as well as Revenue are rendered merely academic and therefore, we are not Revenue are rendered merely academic and therefore, we are not Revenue are rendered merely academic and therefore, we are not adjudicating upon the same. adjudicating upon the same.
M/s Union Bank of India M/s Union Bank of India 18 & 1676/MUM/2024 ITA Nos. 1677 & 1676/MUM/2024 1959/MUM/2024
In the result, the appeal of the a In the result, the appeal of the assessee for assessment year ssessee for assessment year 2016-17 and 2017-18 are allowed whereas appeal of the Revenue 18 are allowed whereas appeal of the Revenue 18 are allowed whereas appeal of the Revenue for assessment year 2016 for assessment year 2016-17 is dismissed.
Order pronounced in the open nounced in the open Court on 11/07/2024. /07/2024.