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TMI Blog2015 (4) TMI 1265X X X X Extracts X X X X X X X X Extracts X X X X ..... gh reopening was made after the end of the four years from the assessment orders. When the original assessment was completed u/s.143(3) of the Act, according to the ld. AR, the very initiation of proceedings under sec.148 was bad in law because, the conditions precedent to the reopening of assessment were absent in these cases. He submitted that in these cases, the original assessments were completed u/s.143(3) of the Act and no action to be taken for reopening of such assessment after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for those assessment years. He submitted that the Commissioner of Income-tax(Appeals) even after satisfying himself satisfied that the assessment was reopened after four years in these cases, when the original assessment was completed u/s.143(3) of the Act and there was no omission on the part of the assessee to disclose fully and truly all materials for the purpose of assessment, instead of deciding the issue, he remitted the issue back to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant assessment year is liable to invalid, the same to be annulled. Our view is fortified by the judgment of the Madras High Court in the case of Fenner (India) Ltd. v. ITO reported in 241 ITR 672, wherein it was held that to initiate any proceedings u/s.147 of the Act, after the expiry of four years from the end of the assessment year, the Assessing Officer must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee, which was not done by the Assessing Officer. Accordingly, the appeals in ITA Nos.838, 839, 840, 841, 843, 844, 847, 848, 849 & 850/Mds/2014 are allowed. 5. Next, we will consider ITA Nos.842, 845, 846 & 851/Mds/2015. In these cases, the grievance of the assessee is that though original assessment was completed u/s.143(3) of the Act, the Assessing Officer reopened the assessment without any tangible material came into his possession and came to the conclusion that there is escaped income and reopening is only mere change of opinion. It cannot be per se the reason to reopen the assessment. In these cases, the facts are that the assessment was completed under sec.143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue, least it would amount to taxing notional profits. The Assessing Officer worked out cumulative depreciation in respect of AFS and HFT categories as on 31.3.2008 at Rs. 7,44,48,952/-, whereas the correct figure is Rs. 5,56,123,549/-. The ld. AR submitted that as against this, the Commissioner of Income-tax observed that the Assessing Officer failed to bring to tax cumulative depreciation already allowed in respect of AFS and HFT categories upto 31.3.2007 to the extent of Rs. 3,72,86,663/-. According to the AR, the Assessing Officer considered the depreciation in respect of AFS and HFT categories as on 31.3.2008 at Rs. 7,44,48,952/- though it was only Rs. 5,56,13,549/-. Thus, it means that the Assessing Officer taxed the amount on this issue in excess. He further submitted that it is necessary for an assessment order to be erroneous as well as prejudicial to the interests of the Revenue, so as to be revised under sec.263. So, the assessment order was not fulfilled the twin conditions, which are mentioned in sec.263 of the Act. 11. The ld. DR relied on the order of the Commissioner of Income-tax. 12. We have heard both the parties and perused the materials on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee bank. It is further noted by the Commissioner of Income-tax(Appeals) that the investments in question were Government securities and were held as stock in trade of the assessee bank and any loss on sale of securities should be treated only as a revenue loss. In this connection the CBDT circular No.599 dated 24.4.1991 has been relied. The decisions of the Supreme Court in the case of UCO Bank, 240 ITR 355, and the decision of the Jurisdictional High Court in the cases of CIT vs Karur Vysya Bank Ltd., 273 ITR 510 and CIT vs. City Union Bank Ltd., 291 ITR 144 are in support of the stand taken by the assessee and the Assessing Officer has also now allowing the claim for the assessment year 2010-11, the addition made by the Assessing Officer is deleted by the Commissioner of Income-tax(Appeals). Aggrieved, the Revenue is in appeal before us. 15. We have heard both the parties. In our opinion, this issue is squarely covered in favour of the assessee by the judgment of the Supreme Court in the case of UCO Bank, cited supra. The same view was taken by the Jurisdictional High Court in the case of CIT vs. The Karur Vysya Bank Ltd. in T.C.(Appeals) No.2139 of 2008 dated 13.7.2009, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdictional High Court in assessee's own case, cited supra and decided the issue in favour of the assessee. In view of the above, we are inclined to uphold the order of the Commissioner of Income-tax(Appeals) on this issue. 16. The next ground in ITA Nos. 959, 960, 961/Mds/2014 is with regard to disallowance of expenditure incurred on earning of exempted income by invoking the provisions under sec.14A of the Act. 17. The Assessing Officer made addition on account of proportionate expenses incurred on earning interest income from tax free bonds, which is an exempted income. On appeal, the Commissioner of Income-tax(Appeals), deleted the addition following the decision of the Punjab & Haryana High Court in the case of CIT v. Hero Cycles Ltd, in ITA No.331 of 2009. 18. The ld. DR relied on the order of the Assessing Officer and prayed to confirm the same. According to the ld. AR, the assessee has not incurred so much amount of expenditure to earn interest income as alleged by the Assessing Officer. He relied on the order of the Commissioner of Income-tax(Appeals). 19. We have heard both the parties and perused the materials on record. Similar issue was considered by the Jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy been decided in favour of the assessee by the Jurisdictional High Court in assessee's own case for the assessment years 1991- 92, 1995-96 and 1996-97 vide judgment dated 12.3.2012 in TC(A) Nos. 1166 to 1168. Respectfully following the aforesaid decision, we allow the claim of the assessee and this ground of the Revenue is rejected. 23. The next ground in ITA Nos. 959, 960 & 961Mds/2014 is with regard to disallowance of fees paid to SEBI. 24. The facts of the case are that the amount paid to SEBI by the assessee , was a renewal registration fee and the assessee has to make such payment periodically to continue to act as a Merchant Banker under (Merchant Bankers) Regulations, 1992. The fee has not resulted in the creation of acquisition of a capital asset nor any enduring advantage has been received. Merchant Banking division is an existing business of the assessee and the expenditure by way of fee paid to SEBI is only an integral part of the profit making process and there was no indication that the payment made was for the purpose of acquisition of an asset or a right of a permanent character. Therefore, the assessee contended that the expenditure so incurred is revenue in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be treated only as a revenue expenditure and relied on the decision of the Jurisdictional High Court in the case of Kisenchand Chellaram's case reported in 130 ITR 385. On appeal, the Commissioner of Income-tax(Appeals) held that when an expenditure was related to circulating capital or stockin- trade then it should be treated only as a revenue expenditure. In the case of the assessee, cash was the stock-in-trade. The enhancement of authorized capital is to have more working capital. Therefore, the filing fee paid to ROC is only a revenue expenditure. Further he noted that the amount of Rs. 6,40,390/- consists of Rs. 6,00,000/- paid as filing fee to enhance the authorized capital and the balance of Rs. 40,390/- expended towards filing fee for annual returns, financial statements and resolutions. He held that these expenses were incurred wholly and exclusively for the purpose of the business of the assessee, which does not result in acquisition of any asset. Accordingly, the Commissioner of Income-tax(Appeals) deleted the addition. 28. After hearing both the parties, we find that the same issue came up for consideration before the Tribunal, Mumbai Bench 'B' in the case of Navi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by the assessee wholly and exclusively for the purpose of carrying on the business and it is to be allowed. Accordingly, we confirm the order of the Commissioner of Income-tax(Appeals) and reject this ground. 32. The next ground in ITA No.960/Mds/2014 is with regard to addition made on account of excess bonus provision debited in profit and loss account relating to earlier years. 33. The facts of the case are that during the financial year, the assessee had transferred the excess provisions of Rs. 7,82,754/- in the books of accounts towards bonus payable for the assessment years 1996-97, 1997-98 & 1998-99 to miscellaneous income and the amount credited to miscellaneous income was deducted while preparing the memo of income. The assessee contended that the bonus is claimed every year only payment basis and the amount transferred has already been suffered tax in respective assessment years. After considering the facts of the case, the Commissioner of Income-tax(Appeals) has deleted the addition. 34. We have heard both the sides and perused the materials on record. In our opinion, the assessee claimed bonus every year in respective assessment years and the amount transferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee contended that the Assessing Officer has failed to note that the proviso clause of sec.36(1)(vii) is to prevent double deduction in the case of a bank to which clause (viia) applies and both the sections are independent of each other. This line of interpretation is in consonance with the CBDT Circular dated 14.06.1979 vide Chaturvedi Vol.II, page 1469(4th Edition). The assessee contended that the claim of bad debts of non-rural debts has been allowed by the CIT(A) for the assessment years 1991-92 to 1995-96. In assessee's own case, the Jurisdictional High Court has allowed the claim of deduction fully u/s.36(1)(vii) as reported in 291 ITR 144 for the assessment years 1992-92, 1993-94 & 1994-95. To support its view, the assessee relied on the judgment of the Supreme Court in the case of Catholic Syrian Bank Ltd. vs. CIT, Thrissur dated 17.2.2012 in Civil Appeal No.1143 of 2011, wherein it was held that the schedule commercial banks would continue to get the full benefit of the write off of irrecoverable debts u/s.36(1)(vii) in addition to the benefit of deduction for the provision made for bad and doubtful debts u/s.36(1)(viia). After considering the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing mercantile system of accounting and accounting system of recognition of expenditure on accrual basis is accepted method of accounting. Hence, the Commissioner of Incometax( Appeals) is justified in deleting the addition. This ground is rejected. 43. The next ground in ITA No.963/Mds/2014 is with regard to deletion of addition on account of amortization charges, though it was a capital expenditure. 44. The facts of the case are that the Assessing Officer has made an addition of Rs. 5,49,275/- on account of amortization charges. Against this, the assessee went in appeal before the Commissioner of Income-tax(Appeals). The assessee contended that amortization charges represents only actual depreciation written off by way of reduction of cost of securities in the books of accounts in respect of a very few specified securities as per the direction of RBI. The excess of cost price over the face value of securities has been written off and claimed. Therefore, the loss claimed is legally allowable. This issue is covered in favour of the assessee by the decision of the Jurisdictional High Court in the case of City Union Bank Ltd. (291 ITR 144). Accordingly, the claim of the aseess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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