2010 (2) TMI 1151 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessments under Section 148 of the Income-tax Act, 1961.
2. Disallowance of NPA provisions as per prudential norms.
3. Disallowance of claim under Section 36(1)(viii) of the Income-tax Act.
4. Levy of interest under Section 234B of the Income-tax Act.
5. Deletion of addition on account of share application money treated as unexplained cash credit under Section 68 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Reopening of Assessments under Section 148:
The assessments for AYs 2002-03 and 2003-04 were reopened by the AO after recording reasons and issuing notices under Section 148. The assessee contended that the reasons for reopening were not provided, citing the judgment in GKN Driveshafts (India) Ltd vs ITO. However, the CIT(A) observed that the reasons were shown to the authorized representative, and the reopening was upheld since the returns were processed under Section 143(1). The Tribunal found no infirmity in the reopening, referencing the Supreme Court's decision in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., which clarified that the AO can initiate proceedings under Section 147 if there is reason to believe that income has escaped assessment. The Tribunal dismissed the assessee's grounds, validating the reopening of assessments.

2. Disallowance of NPA Provisions:
The AO disallowed the assessee's claim for deduction of NPA provisions under Section 36(1)(viia), stating that the assessee was neither a scheduled bank nor a public financial institution. The CIT(A) upheld this disallowance, noting that the provision for NPA is not an ascertained liability and is not allowable under Section 37(1) either. The Tribunal referred to the Supreme Court's decision in M/s Southern Technologies Ltd. vs Joint Commnr. of Income Tax, which held that the provision for NPA is not deductible as it is a notional expense. Consequently, the Tribunal upheld the CIT(A)'s findings and dismissed the assessee's grounds.

3. Disallowance of Claim under Section 36(1)(viii):
The AO disallowed the assessee's claim for deduction under Section 36(1)(viii), as the loans were not used for purchasing or constructing residential houses. The CIT(A) upheld this disallowance, stating that the assessee did not establish that the loans were used for housing purposes. The Tribunal noted that the onus was on the assessee to prove that the loans were used for the intended purpose. Since the assessee failed to provide sufficient evidence, the Tribunal upheld the CIT(A)'s findings and dismissed the assessee's grounds.

4. Levy of Interest under Section 234B:
The assessee contested the levy of interest under Section 234B. The Tribunal dismissed these grounds, citing the mandatory nature of interest under Section 234B as affirmed by the Supreme Court in Commissioner Of Income Tax.vs Anjum M. H. Ghaswala And Others and other cases.

5. Deletion of Addition on Account of Share Application Money:
The Revenue appealed against the deletion of an addition of Rs. 5 lakhs treated as unexplained cash credit under Section 68. The Tribunal noted that the tax effect in this case was below the limits prescribed by the CBDT for filing appeals. The Tribunal dismissed the Revenue's appeal in limine, following the CBDT's instructions and consistent views taken by various High Courts.

Conclusion:
All three appeals were dismissed by the Tribunal, upholding the reopening of assessments, disallowance of NPA provisions and claims under Section 36(1)(viii), and the levy of interest under Section 234B, while dismissing the Revenue's appeal on the addition of share application money due to low tax effect.