THE COMMISSIONER OF INCOME TAX vs. M/S. CANARA BANK

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF NOVEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.340 OF 2015 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX

LTU, JSS TOWER'S, BSK III STAGE

BANGALORE-560085. 2. THE ADDITIONAL COMMISSIONER OF INCOME-TAX

LTU, JSS TOWERS, BSK III STAGE

BANGALORE-560085. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,) AND: M/S. CANARA BANK BALANCE SHEET AND CENTRAL ACCOUNTS SECTION HEAD OFFICE, 112, J.C. ROAD BANGALORE-560002 PAN: AAACC 6106G. ... RESPONDENT (BY SRI. T. SURYANARAYANA, ADV.) - - - THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 30.12.2014 PASSED IN ITA NO.516/BANG/2014 FOR THE ASSESSMENT YEAR 2009-10, PRAYING TO:

2 (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. (II) ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, BANGALORE IN ITA NO.516/BANG/2014 DATED 30-12-2014 AND CONFIRMING THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (LTU) ORDER U/S 263 OF THE ACT. THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2009-10. The appeal was admitted by a bench of this Court vide order dated 22.01.2016 on the following substantial question of law: Whether the Tribunal is correct in setting aside the order u/s. 263 without appreciating that, out of provision of Rs.407,35,36,368/- made for depreciation on investment and the assessee had added back only Rs.2,32,66,62,407/- relating to investments in India and excluded Rs.1,74,68,73,967/- relating to investments

3 outside India when the CIT directed the AO to add back Rs.174,68,73,967/- on this account. 2. Facts leading to filing of this appeal briefly stated are that the assessee is a banking company. The assessee filed its return of income for the Assessment Year 2009-10 on 30.09.2009 in which total income of Rs.1691,78,60,322/- was declared. The return was processed under Section 143(1) of the Act on 25.06.2010 and subsequently, the case of the assessee was selected for scrutiny and notices under Section 143(2) and 142(1) of the Act were issued to the assessee on 13.09.2010. The Assessing Officer by an order dated 11.11.2011 inter alia made certain additions / disallowances. The Commissioner of Income Tax invoked the powers under Section 263 of the Act inter alia on the ground that the order passed by the Assessing Officer is perverse and is prejudicial to the interest of revenue inasmuch as out of provision of

4 Rs.407,35,36,368/- made for depreciation on investment by the assessee, the Assessing Officer has added only Rs.2,32,66,62,407/- relating to investments in India and excluded a sum of Rs.1,74,68,73,967/- pertaining to investments outside India. It was further held that audit report in Form 3D sated that expenditure of capital nature were charged to profit and loss account. However, the Assessing Officer did not take into account the aforesaid aspect of the matter. The Commissioner of Income Tax directed the Assessing Officer to add a sum of Rs.1,74,68,73,967/-. 3. The assessee thereupon approached the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal by an order dated 30.12.2014 by placing reliance on decision rendered by the tribunal in Income Tax Appeals No.567/Bang/99 and 591/Bang/2000 passed in relation to Assessment Year 1996-97 held that the Commissioner of Income Tax erred in holding that the

5 order passed by the Assessing Officer was erroneous and was prejudicial to the interest of the revenue and since, the tribunal has already decided this issue in favour of the assessee, the same is binding on both the parties. In the aforesaid factual background, the revenue has filed this appeal. 4. Learned counsel for the revenue submitted that the sole foundation of the order passed by the tribunal is the decision passed by the tribunal in the appeals. It is pointed out that against the decision relied upon by the tribunal, the revenue had preferred an appeal viz., I.T.A.No.2300/2005 before this court, which was decided vide judgment dated 03.03.2010 and the order passed by the tribunal was set aside and the matter was remanded to the Assessing Officer to consider the matter afresh in accordance with law. It is submitted that in view of the order passed by this court, the order passed by the tribunal deserves to be set

6 aside and the matter be remitted to the Assessing Officer for decision afresh in accordance with law. 5. On the other hand, learned counsel for the assessee submitted that merely because a decision on which reliance is placed is subsequently set aside, cannot furnish a ground to treat an order as erroneous. It is further submitted that the Commissioner of Income Tax has to exercise the power on the basis of the material, which was available to him at the time of passing of the order. Insupport of aforesaid submission, reliance has been placed on decision of the Supreme Court in 'COMMISSIONER OF INCOME TAX VS. G.M.Mittal Stainless Steel (P) Ltd.', (2003)130 TAXMAN 67 (SC). 6. We have considered the submissions made by learned counsel for the parties and have perused the record. The tribunal by placing reliance on the order passed by it in the case of assessee for Assessment Year

7 1996-97 and 1997-98 inter alia held that the revenue as well as assessee are bound by the decision rendered by the tribunal and therefore, in the light of decision rendered by tribunal, the Commissioner of Income Tax committed an error in holding that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the revenue. Accordingly, the order passed by the Commissioner of Income Tax was set aside. The Supreme Court in G.M.Mittal Stainless Steel (P.) Ltd. supra has held that power under Section 263 of the Act has to be exercised on the basis of the material, which was available at the time when the Commissioner of Income Tax passed an order, the order passed by the tribunal was operative and therefore, the Assessing Officer's order could not have been termed as erroneous. Merely because the order of the Assessing Officer was passed relying which was subsequently reversed by this court cannot justify the order passed by

8 the Commissioner of Income Tax under Section 263 of the Act. 7. In view of preceding analysis, the substantial question of law framed by a bench of this court is answered against the revenue and in favour of the assessee. In the result, we do not find any merit in this appeal, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss