2017 (5) TMI 968 - AT - Income Tax

Reopening of the assessment - Held that - We find that in this matter the original order was passed u/s. 143 (1). The AO had issued a notice within the time u/s.148 after regarding the reasons for reopening. We find that the CIT(A)has upheld the re-opening, as it was based on justifiable reasons. Certain facts about the reopening would be dealt with in the subsequent paragraphs. Considering the totality of the facts of the case, we are of the opinion that there is no need to interfere with the order of the CIT (A). Hence, we dismiss the ground raised about reopening. Deduction u/s. 80P - Held that - No affidavit of the CA concerned has been filed to prove that he had made the claim before the then FAA on his own and not as per the instructions of the assessee. The case of the assessee can be easily summarised in a Hindi proverb- Chitt bhee meri Pat bhee meri. To save itself from the penal provisions, it claimed that it was a cooperative bank and for claiming deduction u/s. 80P now it claims that it is not a cooperative bank. As per the settled principles of taxation jurisprudence, as discussed in the earlier paragraphs, assessees and the AO. s are not allowed to approbate and reprobate. Rule of consistency is applicable to both the parties. The assessee has not filed any application before the then FAA requesting him to cancel the penalty order and claiming that submissions made by it were factually wrong. In the case under consideration, the assessee itself has claimed that it was a cooperative bank and the reopening is also based on the claim made by it before the FAA during the penalty proceedings. A person coming to judicial forums is supposed to come with clean hands. We are aware that morality and ethics are not part of the tax jurisprudence and we are also not deciding a moral issue. But, it does not mean that assessee can take a stand as per its convenience resulting in depriving the Sovereign of its due taxes. In our opinion, considering the peculiar facts and circumstances of the case under consideration, the order of the FAA does not suffer from any legal or factual infirmity. Therefore, confirming the same, we decide second ground of appeal against it. Audit fees and provision for gratuity - Held that - FAA has given a categorical finding of fact that the assessee did not file any submission with regard to both the issues, before him, during the appellate proceedings. Before us also no documentary evidence was produced about payment of audit fees. In these circumstances, in our opinion, the FAA was justified in rejecting the claim made by the assessee. Grounds 2. b. and 2. c. stand dismissed.

Summary

Issues Involved:
1. Reopening of the assessment.
2. Disallowance of deduction under Section 80P.
3. Disallowance of audit fees.
4. Disallowance of provision for gratuity.
5. Initiation of penalty proceedings.

Issue-wise Detailed Analysis:

1. Reopening of the Assessment:
The first ground of appeal concerns the reopening of the assessment. The original order was passed under Section 143(1). The Assessing Officer (AO) issued a notice within the time frame under Section 148 of the Income Tax Act, citing justifiable reasons for reopening. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the reopening, finding it to be based on valid reasons. The tribunal found no need to interfere with the CIT(A)'s order and dismissed the ground raised about reopening.

2. Disallowance of Deduction under Section 80P:
The second and most significant ground deals with the disallowance of deduction under Section 80P, audit fees, and provision for gratuity. The assessee claimed a deduction of ?93.57 lakhs under Section 80P of the Act. The AO observed that the assessee accepted deposits from its members and provided credit facilities, claimed audit fees of ?2.14 lakhs, and a provision for gratuity of ?2.09 lakhs. The AO disallowed the audit fees due to lack of proof of tax deducted at source and the provision for gratuity, considering it non-allowable. Regarding the Section 80P claim, the AO noted that the assessee had accepted cash deposits exceeding ?20,000, leading to a penalty under Section 271D of the Act, which was later deleted by the First Appellate Authority (FAA). The FAA classified the assessee as a cooperative bank under the Banking Regulation Act, 1949, and disallowed the Section 80P deduction.

The assessee appealed, arguing that it was not a cooperative bank and that the Chartered Accountant (CA) misrepresented facts before the FAA. The FAA upheld the AO's decision, stating that the assessee had not objected to the reopening during the assessment proceedings. The tribunal noted the principle of approbate and reprobate, which prevents a party from taking contradictory positions. The assessee's earlier claim that it was a cooperative bank to avoid penalty contradicted its current stance. The tribunal upheld the FAA's order, dismissing the second ground of appeal.

3. Disallowance of Audit Fees:
Grounds 2.b and 2.c pertain to the disallowance of audit fees and provision for gratuity. The FAA found that the assessee did not submit any evidence regarding these issues during the appellate proceedings. No documentary evidence was produced before the tribunal either. Consequently, the FAA's decision to reject the claims was deemed justified, and these grounds were dismissed.

4. Disallowance of Provision for Gratuity:
The disallowance of the provision for gratuity was addressed along with the audit fees. The FAA's categorical finding that the assessee did not provide any submissions or documentary evidence was upheld by the tribunal, leading to the dismissal of this ground as well.

5. Initiation of Penalty Proceedings:
The third ground of appeal, dealing with the initiation of penalty proceedings, was considered premature and not maintainable, and hence, it was not adjudicated.

Conclusion:
For the assessment year 2012-13, the facts were identical to those of AY 2008-09, except for the amount of deduction claimed under Section 80P. Following the order for AY 2008-09, the tribunal found no legal infirmity in reopening the assessment and dismissed the ground of appeal dealing with the levy of penalty.

As a result, the appeals filed by the assessee for both assessment years were dismissed. The order was pronounced in the open court on 17th May 2017.