2014 (1) TMI 295 - AT - Income Tax

Whether the investment made by the assessee form part of SLR or current investment or long term investment - The assessee was prevented by sufficient cause in not placing the evidences before the lower authorities and in the interest of justice the additional evidence are admitted for adjudication Following National Thermal Power Co. Ltd. vs. CIT 1996 (12) TMI 7 - SUPREME Court - There may be several factors justifying raising of a new plea in an appeal and each case has to be considered on its own facts - The appellate authorities must be satisfied that the ground raised was bona-fide and that the same could not have been raised earlier for good reasons -The appellate authorities should exercise their discretion in permitting or not permitting the assessee to raise an additional ground/ additional evidence in accordance with law and reasons - There should be reasonable cause for furnishing additional evidence belatedly - The additional evidences filed by the assessee are admitted for adjudication - The issue is restored for fresh adjudication.

Issues Involved:
1. Disallowance of depreciation on the value of current investments.
2. Classification of non-SLR investments as current investments under "AFS" as per RBI guidelines.
3. Misclassification of non-SLR investments by the Assessing Officer and CIT(A).
4. Applicability of the Special Bench decision in New India Industries Ltd. Vs Addl. CIT to Co-Operative Banks.
5. Non-consideration of precedents set by higher courts.
6. Accounting treatment of current assets and its impact on revenue accounts.
7. Consistent accounting method followed by the assessee.
8. Partial consideration of deposition by the Assessing Officer and CIT(A).

Detailed Analysis:

1. Disallowance of Depreciation on Current Investments:
The appellant contended that the CIT(A) erred in confirming the Assessing Officer's disallowance of depreciation amounting to Rs. 28,41,84,357/-. The assessee argued that the non-SLR investments were consistently valued at cost or market value, whichever was lower, and treated as stock in trade.

2. Classification of Non-SLR Investments:
The appellant classified non-SLR investments as current investments under the "AFS" category following RBI guidelines. These investments were valued scrip-wise at market value as of 31st March. The appellant argued that both the Assessing Officer and CIT(A) failed to appreciate this consistent method of valuation.

3. Misclassification by Assessing Officer and CIT(A):
The appellant submitted that both authorities incorrectly concluded that the non-SLR investments belonged to the "HTM" category, whereas they were actually under the "AFS" category. The appellant reiterated that these investments were stock in trade and current assets valued at cost or market value.

4. Applicability of Special Bench Decision:
The appellant argued that the CIT(A) erred in applying the decision of the Special Bench of ITAT Delhi in New India Industries Ltd. Vs Addl. CIT, which pertains to Non-Banking Finance Companies and not Co-Operative Banks.

5. Non-Consideration of Precedents:
The appellant cited several cases, including United Commercial Bank vs CIT and CIT vs Karur Vysya Bank, where higher courts provided principles that the CIT(A) failed to follow. These cases supported the appellant's method of valuing current assets.

6. Accounting Treatment of Current Assets:
The appellant argued that the CIT(A) did not appreciate the accounting treatment where only net appreciation/depreciation in the value of stock in trade is credited/debited to the revenue account. This method does not show the values of opening and closing stock in the revenue account.

7. Consistent Accounting Method:
The appellant maintained that it consistently treated non-SLR investments as "AFS" and valued them at cost or market value, whichever was lower. This consistent method should have been considered by the authorities.

8. Partial Consideration of Deposition:
The appellant claimed that the Assessing Officer and CIT(A) only partially considered the deposition given by the Managing Director and ignored key responses confirming that the investments were valued at cost or market value and treated as stock in trade/current assets.

Conclusion:
The Tribunal admitted the additional evidence provided by the appellant, which included various investment portfolio review notes and scrip-wise details of depreciation. The Tribunal found that the additional evidence was crucial for determining whether the investments were SLR or non-SLR and whether they were current or long-term investments. The Tribunal remitted the issue back to the Assessing Officer for fresh consideration, directing the AO to also consider the Supreme Court judgment in Southern Technologies Ltd. vs. JCIT. The appeal was allowed for statistical purposes.

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