2022 (2) TMI 112 - AT - Income Tax

Rectification u/s 154 - non following of Instruction No.17/2008 dated 26.11.2008 during the course of appeal proceedings - HELD THAT - AR stated on merits that the issue is covered by the decision of Hon ble Supreme Court in the case of CIT vs. Nawanshahar Central Co-opertive Bank Ltd. 2005 (8) TMI 28 - SC ORDER wherein the Board Circular No.18/2015 dated 02.11.2015 has clarified that the investments held by the banking concern are part of business of banking and therefore the income from the same is taxable under the head profits and gains of business . According to him the natural corollary of the circular and the decision of Hon ble Supreme Court is that the investments remained at the end of the year has to be treated as stock-in-trade and the settled principle is that the stock-in-trade should be valued at lower of cost or market value. Similar are the facts in assessee s case. Claim of deduction u/s.36(1)(viia) - The issue is squarely covered by Co-ordinate Bench decision of ITAT in assessee s own case in 2019 (3) TMI 1002 - ITAT CHENNAI for assessment year 2007-08 and moreover this issue is covered by the decision of Hon ble High Court of Calcutta in the case of PCIT vs. Uttarbanga Kshetriya Gramin Bank 2018 (5) TMI 903 - CALCUTTA HIGH COURT - In view of the above both the issues are covered as noted above the issue cannot be taken up under rectification proceedings. The issue is first of all highly debatable and requires legal arguments. Even otherwise both the issues i.e. depreciation on investments and claim of deduction u/s.36(1)(viia) of the Act both are covered in assessee s own case by Tribunal Benches as well as by the Hon ble Jurisdictional High Court in assessee s own case and the Hon ble High Court of Calcutta. Hence we find no error in the order of CIT(A) and hence the appeal of Revenue is dismissed.

Summary

Issues:
1. Appeal by Revenue challenging CIT(A) order on depreciation on investment and deduction u/s.36(1)(viia) as debatable.

Analysis:
1. The appeal by Revenue challenges the CIT(A) order upholding issues of depreciation on investment and deduction u/s.36(1)(viia) as debatable and not rectifiable under section 154 of the Income Tax Act, 1961. The Revenue contends that the CIT(A) erred in not considering certain instructions and jurisdictional ITAT judgments. The CIT(A) had rectified the original assessment order, which was further challenged by the Revenue through a rectification application. The CIT(A) found both issues to be debatable and not falling under the purview of rectification u/s.154.

2. The arguments put forth by both the Revenue and the assessee were considered by the Tribunal. The Revenue failed to establish how the provisions of section 154 could be applied to the issues of depreciation on investments and deduction u/s.36(1)(viia). The Tribunal noted that the CIT(A) had already considered and decided these issues based on the material presented during assessment proceedings. The CIT(A) concluded that the issues were debatable and not eligible for rectification u/s.154, as they required legal arguments and were covered by previous judgments in favor of the assessee.

3. The assessee's representative highlighted that the issues of depreciation on investments and deduction u/s.36(1)(viia) were extensively debated during the proceedings. The Tribunal noted that the issues were covered by decisions of the Jurisdictional High Court and the Supreme Court, as well as by previous Tribunal decisions in the assessee's favor. The Tribunal found no error in the CIT(A) order and dismissed the Revenue's appeal, affirming that the issues were indeed debatable and legally covered in favor of the assessee.

4. The Tribunal's decision was based on the understanding that the issues raised by the Revenue were not mere mistakes apparent from the records but rather complex and debatable matters that had been thoroughly considered and decided upon by the CIT(A). The Tribunal upheld the CIT(A)'s findings that the issues of depreciation on investments and deduction u/s.36(1)(viia) were not suitable for rectification under section 154 of the Income Tax Act, 1961. Consequently, the appeal filed by the Revenue was dismissed, affirming the CIT(A)'s order.