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2020 (12) TMI 301 - AT - Income TaxRectification of mistake u/s 254 - enhancement on the valuation difference of securities by CIT-A holding that the said valuation was not done in accordance with RBI guidelines - HELD THAT - Tribunal categorically held that assessee had fully complied with RBI Circular dated 01/07/2011 with regard to valuation of securities at the time of shifting of securities from AFS to HTM category and this Tribunal had also held that the shifting loss incurred would be squarely allowable as deduction - enhancement made by CIT(A) should have been deleted by this Tribunal which was not done. Workings for valuation difference was furnished by the assessee on without prejudice basis but complied with the directions of the ld. CIT(A) by filling up the data in the prescribed format given by the ld. CIT(A). Hence, there is no need for the assessee to file any evidence before us to counter the said workings as admittedly the assessee has only complied with the directions of ld. CIT(A) by furnishing the requisite details on without prejudice basis. Observation made by this Tribunalthat assessee has not provided any evidence before us to counter the said workings given before the ld. CIT(A) is incorrect. This constitutes mistake apparent on record within the meaning of Section 254(2) - we accordingly, deem it fit to modify para 6.3 of our order as under - 6.3.- We find that in the instant case, the depreciation of investments at the time of shifting from AFS to HTM category had been debited by the assessee as an expenditure in consonance with RBI Circular dated 01/07/2011 referred to supra. The said shifting loss is squarely allowable as deduction.
Issues Involved:
1. Classification and valuation of securities held by the assessee. 2. Deduction of shifting loss on securities. 3. Enhancement of assessment by CIT(A) due to valuation differences. 4. Tribunal's observations and subsequent rectification request by the assessee. Issue-wise Detailed Analysis: 1. Classification and Valuation of Securities: The assessee, a bank, held securities as "stock in trade" under two categories: Available For Sale (AFS) and Held to Maturity (HTM). The income derived from these securities was assessed as business income. Following the RBI Circular dated 01/07/2011, the assessee shifted securities from AFS to HTM, valuing them at the lower of cost or market value on the date of shifting. This led to a claimed deduction of ?159,74,79,854 for the shifting loss, which was allowed by the CIT(A). 2. Deduction of Shifting Loss: The assessee claimed a deduction for the shifting loss incurred due to the reclassification of securities from AFS to HTM, in compliance with the RBI Circular. The CIT(A) admitted this additional ground and allowed the deduction, relying on the Bombay High Court's decision in CIT v. HDFC Bank Ltd. [2014] 368 ITR 377. 3. Enhancement of Assessment by CIT(A): The CIT(A) enhanced the assessment by ?3,43,236, representing the increase in the market value of a specific security (7.56% GOI 2014) between the date of shifting and the end of the financial year. The CIT(A) argued that the shifting loss should be reduced by this increase in value. The Tribunal noted that the assessee had complied with the RBI Circular for the initial valuation but did not provide evidence to counter the CIT(A)'s revised valuation, leading to the enhancement. 4. Tribunal's Observations and Rectification Request: The Tribunal initially agreed that the CIT(A)'s remarks were contradictory regarding compliance with the RBI Circular. It held that the shifting loss was allowable as a deduction but did not interfere with the enhancement due to the lack of counter-evidence from the assessee. The assessee filed a Miscellaneous Application, arguing that all necessary evidence had been submitted and that the Tribunal's dismissal of ground No.3 was based on a mistake apparent from the record. The Tribunal acknowledged this mistake and modified its earlier order, allowing the assessee's ground No.3 and dismissing the revenue's ground No.8. Conclusion: The Tribunal rectified its previous order, recognizing that the assessee had indeed complied with the RBI Circular and provided the necessary evidence. The enhancement of ?3,43,236 by the CIT(A) was deemed incorrect, and the assessee's appeal was allowed. The Miscellaneous Application was thus granted, correcting the Tribunal's earlier observations.
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