2013 (3) TMI 558 - AT - Income Tax

Principle of merger - Revision U/s 263 of the Income Tax Act, 1961 - Under assessment of Book Profit - Interest U/s 244A - Held that - Rs 81.32 crores in respect of depreciation on investments has already been added back to assessee s income, vide appeal effect order dated 5th March 2010 (copy placed before us at page 34 of the paper-book), and as such revision order was not warranted in respect of the same. The appeal effect order stands merged with the assessment order, and once the adjustment is carried out, there cannot be any occasion to invoke powers under section 263 in respect of the same. Decision in the case of CIT Vs Yokogawa India Ltd (2011 (8) TMI 766 - KARNATAKA HIGH COURT) followed. Decision of non-jurisdictional high court - held that - No doubts, the views so expressed are by a non jurisdictional High Court. However, there being nothing to the contrary by Hon ble jurisdictional High Court, or, for that purpose, by any of the Hon ble High Court, these views bind us as well. In any case, the set off of amortization with admissible depreciation does not appeal to us, nor any conceptual or legal basis for the same was demonstrated to us. However, we need not really deal with that aspect of the matter on this factual matrix. In view of these discussions, in respect of all the three issues, the impugned revision order is devoid of legally sustainable merits. - Decided in favor of assesse.

Summary

Issues:
1. Revision of assessment order under section 263 of the Income Tax Act, 1961.
2. Denial of deduction for investment depreciation and provision for NPA.
3. Incorrect treatment of investment depreciation and amortized amount.
4. Applicability of Section 115JB adjustments to the bank.

Issue 1: Revision of assessment order under section 263 of the Income Tax Act, 1961:
The appeal challenged the order of the Commissioner of Income Tax (CIT) under section 263, setting aside the Assessing Officer's order for fresh assessment. The appellant contended that the CIT's order was illegal and should be quashed. The CIT's grounds for revision included denial of deduction for investment depreciation, under-assessment of book profits, and incorrect treatment of provisions. The appellant argued that the CIT's powers under section 263 did not extend to issues already decided in appeal. However, the CIT found errors in the assessment order and directed a fresh assessment, emphasizing the need for clear findings on all issues.

Issue 2: Denial of deduction for investment depreciation and provision for NPA:
The CIT raised concerns regarding the denial of deduction for investment depreciation and provision for Non-Performing Assets (NPA) in the assessment. The appellant argued that the CIT's revision powers did not extend to issues already decided in appeal. The appellant also contended that the denial of deductions was incorrect and contrary to the legal provisions. The CIT found errors in the assessment related to the treatment of investment depreciation and provisions for NPA, leading to the direction for a fresh assessment.

Issue 3: Incorrect treatment of investment depreciation and amortized amount:
The assessment faced challenges regarding the treatment of investment depreciation and the amortized amount of premium on Held to Maturity (HTM) securities. The appellant argued that the treatment of investment depreciation was in accordance with legal principles. The CIT identified errors in the assessment related to the amortized amount and the treatment of investment depreciation, leading to the decision for a fresh assessment with the correct application of the law.

Issue 4: Applicability of Section 115JB adjustments to the bank:
The issue of adjustments under Section 115JB concerning the bank's provisions for diminution in the value of assets was raised. The appellant cited a judgment by the Karnataka High Court in favor of the assessee, supporting the contention that the provisions made were not liable under the mentioned section. The Tribunal found merit in the appellant's arguments and held that the adjustments were not erroneous, leading to the decision to set aside the revision order.

In conclusion, the Tribunal allowed the appeal, setting aside the revision order under section 263 of the Income Tax Act, 1961. The detailed analysis of each issue highlighted discrepancies in the assessment order, leading to the direction for a fresh assessment considering the correct legal provisions and factual circumstances. The judgment emphasized the importance of clear findings on all issues and the correct application of the law in assessment proceedings.