CITIZEN CREDIT CO OPERATIVE BANK LTD,MUMBAI vs. ADDL CIT RG 1(2), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dtd.12.06.2014,of the CIT(A)-2,Mumbai the assessee has filed the present appeal.The effective ground of appeal is about denial of deduction of Rs.1.42 Crores,u/s.36(1) (viii)of the Act. Brief Facts : 2.Assessee-bank filed its return of income on 28.09.2011,declaring income of Rs.24.91 Crores.As per the acknowledgement generated,on return electronically transmitted,the income was same.Central Processing Center(CPC)vide its intimation issue u/s.143(1)of the Act,determined the income of the assessee at Rs.27.12 Crores.Thus,there was difference of Rs.2.20 Crores between the income returned by the assessee and the intimation issued by the CPC.It applied for rectification,vide its letter dated 08.02.2013.CPC vide letter dated 22.03. 2013,intimated the assessee as under: “Subsequent assessment/proceedings have been initiated by your Assessing Officer and hence your application for rectification cannot be taken up at CPC.” During the scrutiny assessment proceedings,before the AO,the assessee explained that the difference of Rs.2.20 Crores was arising on account of deduction u/s.36(1)(viii) of the Act (Rs.1.42 Crores)and double disallowance of investment depreciation allowance(Rs.78.93 lakhs).The AO while completing the assessment did not accept both the claims for the reason that supporting documents were not filed by the assessee .

6412/M/14-Citizen Credit 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA).Before him,the assessee reiterated the facts which had been narrated by us in the earlier paras.It was contended that the assessee was eligible for deduction u/s. 36(1)(viii) of the Act, and the same ought to be allowed. After considering the available material,the FAA held that the CPC had processed the return on the basis of data furnished,that the assessee had shown the profit before tax as per the P&L at Rs.26.92 crores,that CPC, Bangalore processed the return on that basis, that assessee thereafter had sought a rectification in the figure and had requested to take the figure at Rs. 24,91,05,826/- as against the figure of Rs.26.92 crores, shown in the original return, that such a change in data was not accepted because it did not match with the other relevant data already filed for the purpose of arriving at the net profit from the business/profession, that a perusal of the columns of the e-return revealed that there was no specific claim made u/s. 36(1)(viii), that no deduction was claimed in the relevant columns for an amount of Rs.1.42 crores to match the claim of deduction u/s. 36(1), that the assessee had not made the claim for deduction while filing the original return, that the only option available to it was to file a revised return of income, that the assessee had failed to furnish a revised return within the due date, that in absence of a revised return, claim made by the assessee could not be entertained. With regard to the double disallowance of Rs.78.93 lakhs, the FAA allowed the relief to the assessee.

4.During the course of hearing before us,the Authorised Representative (AR) contended that deduction u/s.361)(viii) was allowable to a co-operative bank to the extent of 25% of the income assessed under the head business or profession if it was carried to the reserve account, that in the e-return of income there was no separate column for specifying the deduction u/s. 36(1)(viii) to the amount carried to special reserve, that the only column provided was title, transfer to reserve and surplus, that accordingly the assessee disclosed the amount carried to special reserve in column 50 while filing the e-return, that the reasoning of the AO that deduction could not be allowed in absence of supporting document was incorrect, that the claim for deduction was made in return of income as also in the rectification application made u/s.154 of the Act, that a similar adjustment was made by CPC in the intimation issued for AY.2012-13,(pg-126-130 of the PB),that the adjustment was on account of denial of deduction u/s.36(1)(viii), that an application filed by the assessee for rectification intimation was revised and the original returned income was accepted (Pg-115-118 of the PB), he relied upon the case of Pruthvi Brokers and Shareholders Pvt.Ltd.(349ITR336), of the Hon'ble 2

6412/M/14-Citizen Credit Bombay High Court.The Departmental Representative(DR)argued that the assessee had not filed a revised return for the new claim, that the AO had rightly negated the claim.

5.We have heard the rival submissions and perused the material before us.We find that the assessee had filed e-return and later on submitted an application to rectify the mistake, that the assessee had claimed that it was entitled to deduction u/s. 36(1)(viii) of the Act, that the AO and the FAA rejected the claim made by the assessee, that in the AY 2012-13, in similar circumstances the CPC had accepted the claim made by the assessee. Here,we would like to mention that the purpose behind enacting the Act is to tax the income and collect due taxes for State Exchequer. For collecting the taxes and assessing the income, procedure has been laid down. It is true that without following a certain procedure, no system can work.But,the procedure cannot take place of substance. The Act contain provisions that deal with assessment,re-assessment and rectification of mistakes/revision of orders etc.The basic purpose of all these exercises is that Sovereign is not deprived of its share of taxes and the taxpayers are not fastened with unwarranted tax-liability. As early as 1955 CBDT had directed its field officers not to take advantage of ignorance of the assesses while framing assessments.Because,no State would like to rob its taxpayers of rightful fruits of their hardwork.Therefore,it is the duty of the officers,administering the Act,to see to it that Act is implemented in law and spirit.In the case under consideration the assessee’s rectification order was not passed because procedure,as interpreted by the officers,did not allow the correction of mistake.The stand taken by the AO and the CPC resulted in non adjudication of an issue that would have been decided,had there been no CPC.We are unable to understand as to whether the computerisation is meant for making the life of a common taxpayer easier or to complicate the assessment procedure.

Leaving the discussion behind,we would like to hold that the stand taken by the FAA cannot be endorsed.As an appellate authority and a senior officer of the department it is expected of him to ensure that justice is done to both the sides-to the State and the Subject.In the matter of Pruthvi Brokers(supra)the Hon’ble Bombay High Court has held as under: An assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. The appellate authorities have the discretion to permit such additional claims to be raised. The appellate authorities have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The words “could not have been raised” must be 6412/M/14-Citizen Credit