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TMI Blog2025 (1) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... tiny and statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the AR of the assessee bank filed the requisite details from time to time. The Assessing Officer completed the assessment u/s 143(3) of the Act on 16.10.2019 determining the total income of the assessee at Rs.1602,32,47,330/- by making the following additions: a. Disallowance of deduction claimed u/s 36(1)(viia) - Rs.879,11,91,472 b. Addition on account of profit on sale of investments - Rs.156,93,61,000 c. Disallowance u/s 14A r.w. Rule 8D - Rs.2,74,04,686 d. Disallowance of write back provision for restructured advance - Rs.260,75,46,000 e. Disallowance of write back provision for standard assets - Rs.31,14,41,362 f. Disallowance of prior period expenses - Rs.1,16,38,539 g. Addition on account of payment of donation - Rs.28,08,900 3. In appeal, the Ld. CIT(A) / NFAC gave part relief to the assessee. 4. Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee as well as the Revenue are in appeal by raising the following grounds: Grounds raised by the assessee in ITA No.259/PUN/2024 1. The order of the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. 5.2. Without prejudice to the above, the learned CIT(A) failed to appreciate the fact that even if the provisions of section 115JB are applicable, the computation fails and as such, book profit cannot be computed as per section 115JB. 6. Without prejudice to Ground No. 5, the learned CIT(A) erred in confirming the addition of various items to the book profit which are beyond the scope of the Section 115JB. 6.1. The learned CIT(A) failed to appreciate the fact that the various items added to the book profit are not covered by the Explanation to Section 115JB. 7. The order of the learned CIT(A) is against the principles of natural justice. 7.1. The learned CIT(A) erred in not allowing hearing through VC, inspite of a specific request for the same by the Appellant. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal Grounds raised by the Revenue in ITA No.428/PUN/2024 1. On the facts and the circumstances and in law, the ld. CIT(A) erred in allowing loss of valuation to Held to Maturity (HTM) securities, when HTM securities are capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing his order for assessment year 2015-16 upheld the action of the Assessing Officer. 9. The Ld. Counsel for the assessee at the outset drew the attention of the Bench to the order of the Tribunal in assessee's own case for assessment year 2010-11 and submitted that the Tribunal has restored the issue to the file of the Assessing Officer by observing as under: "3.3 Both sides heard. Orders of the authorities below perused. In ground No.1 of appeal the assessee has assailed the findings of Commissioner of Income Tax (Appeals) in disallowing assessee's claim u/s. 36(1)(vii) of the Act on account of write off of debts by non rural branches of assessee Bank. We observe that identical issue had come up before the Tribunal in assessee's own case in ITA No. 1505/PN/2008 and in ITA Nos. 1135 to 1138/PN/2013 (supra). The relevant extract of the findings of Coordinate Bench on the issue are reproduced here-in under : "28. By way of Ground of Appeal No.3, assessee has raised a claim of deduction of Rs.68,06,15,000/- u/s 36(1)(vii) of the Act on account of write off on debts by the non-rural branches of the assessee bank. The learned counsel for the assessee explained that the said c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer with certain directions. However, the Revenue is in appeal before the Hon'ble High Court against the order of the Tribunal. 12. After hearing both the sides and considering the fact that an identical issue has already been decided by the Tribunal in assessee's own case for assessment years 2010-11 and 2015-16 and the issue has been restored to the file of the Assessing Officer with certain directions, therefore, in absence of any contrary material brought to our notice, we deem it proper to restore the issue to the file of the Assessing Officer with similar directions as given by the Tribunal in assessee's own case for assessment year 2010-11 and 2015-16. Needless to say, the Assessing Officer shall afford reasonable opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The ground of appeal No.2 raised by the assessee is accordingly allowed for statistical purposes. 13. In ground of appeal No.3, the assessee has challenged the order of the Ld. CIT(A) / NFAC in confirming the disallowance of prior period expenses of Rs.1,16,38,539/-. 14. Facts of the issue in brief, are that the Assessing Officer, on exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al has restored the issue to the file of the Assessing Officer with certain directions. 18. The Ld. DR on the other hand fairly conceded that the issue has been restored to the file of the Assessing Officer with certain directions. 19. After hearing both the sides, we find an identical issue had come up before the Tribunal in assessee's own case in the immediately preceding assessment year and the Tribunal at paras 5 and 6 had discussed the issue and restored the same to the file of the Assessing Officer with certain directions. The relevant observations of the Tribunal read as under: "5. Next comes the second issue of disallowance of prior period expenditure amounting to Rs.1,72,73,670/- made in both the lower proceedings. Suffice to say, both the learned lower authorities are of the view that once the assessee follows mercantile system of accounting, it ought to have claimed and recognized the impugned expenditure in the year of accrual than that of the actual expenditure. The assessee's case on the other hand is the impugned expenditure item pertaining to prior period stood crystallized in the relevant previous year only. Both the learned representatives also invited our att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been confirmed by the Ld. CIT(A)/ NFAC. It is the submission of the Ld. Counsel for the assessee that given an opportunity, the assessee is in a position to substantiate its case by filing the requisite details. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore this issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate its case by filing the requisite details to the extent of Rs.28,08,900/- and decide the issue as per fact and law. Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee. We hold and direct accordingly. The ground No.4 raised by the assessee is accordingly allowed for statistical purposes. 25. The ground of appeal No.5 raised by the assessee relates to the order of the Ld. CIT(A) / NFAC in holding that provisions of section 115JB of the Act are applicable to the assessee bank. 26. After hearing both the sides, we find the Assessing Officer during the course of assessment proceedings noted that the assessee has not calculated book profit and MAT liability. He, therefore, issued a show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,93,61,000/-. He therefore, issued a show cause notice to the assessee to furnish the details. After considering the various decisions and rejecting the explanations given by the assessee, the Assessing Officer made addition of Rs.156,93,61,000/- to the total income of the assessee by observing as under: "(8.5) Thus, on the basis of above discussion, the issue is concluded as under. (a) The concept of trading account submitted by the assessee during the assessment proceeding is not acceptable. As discussed above, the bank has two different types of "assets", namely, a 'trading asset and a 'capital asset. The distinction between them cannot be glossed over and ignored. Further, the assessee has not reflected any opening or closing stock in the books of account or in the trading account. Further, the assessee cannot prepare trading account for capital assets which goes beyond the basic concept of accountancy and provision of the law, hence, concept of trading account is unacceptable (b) The HTM securities are investment of capital nature, thus, these are not required to Mark to Market. Resultantly the loss or gain pertains to HTM category is not to be taken into consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings under section 271(1)(c) are initiated separately." 34. In appeal, the Ld. CIT(A) / NFAC deleted the addition by observing as under: "6.5 During the appellate proceedings, the appellant stated that this issue has been decided in favour of the appellant by the Hon'ble jurisdictional ITAT in the appellant bank's own case for the assessment year 2010-11 in ITA No. 1370/PUN/2014 order dated 11.03.2019. In the said order, vide para 5.3 and 5.4, the ITAT allowed the appeal of the bank by holding that the investments of the bank are stock in trade and the depreciation on HTM securities are allowable deduction. Further, in the latest decision the Hon'ble ITAT vide order dated 27.06.2019 in the appellant bank's own case for the assessment year 2011-12 in ITA no.634/PUN/2017 & for the assessment year 2012-13 in ITA No. 635/PUN/2017, decided the issue in favour of the appellant bank.. 6.6 that this issue has been duly considered by my predecessor in the earlier years i.e. A. Y.2012-13 & 2013-14. His findings in A.Y.2013-14 are reproduced below. "I have carefully considered the facts of the case as well as reply of the appellant. In this case, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-Tax reported in (2010) 320 ITR 577 has held that the directions of the RBI have nothing to do with computation of Income under the Act. We further find that on the identical issue Karnataka High Court in Karnataka Bank Ltd. v. Assistant Commissioner of Income-Tax 2013 (356) ITR 549 has inter-alia observed as follows: "...That the order passed by the authorities holding that in view of the RBI guidelines, the assessee is estopped from treating the investment as stockin-trade is not correct...." 8. In the view of the clear finding of fact recorded by the impugned order of the Tribunal that the securities HTM are stock-in-trade and the income on sales have been offered to tax as business income, has not been shown to be perverse. 9. In the above view, proposed question of law at Sr.No.(i) as formulated does not give rise to any substantial question of law and not entertained." 37. We find an identical issue had come up before the Tribunal in assessee's own case for assessment year 2015-16 vide order dated 30.06.2022 and the relevant observations of the Tribunal read as under: "11. We now advert to the Revenue's cross appeal ITA No.596/PUN/2020 raising the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Appeal No. 920 of 2015. For the sake of completeness the relevant extract of the findings of Tribunal in ITA No. 1370/PUN/2014 (supra) on this issue are reproduced here-in-below : "5.3 Both sides heard on the issue of disallowance of claim of loss in respect of securities held under HTM category. Both sides are unanimous in stating that the present issue was subject matter of appeal before the Tribunal in ITA No. 1505/PN/2008 and in ITA Nos. 1135 to 1138/PN/2013 (supra). The Co-ordinate Bench adjudicated the issue by observing as under: "20. In the background of the aforesaid legal position, a premise which can be drawn is that for the purposes of valuation of the closing stock it is permissible for the assessee to value it at the cost or market value, whichever is lower. In-fact, the Hon'ble Supreme Court in the case of Chainrup Sampatram vs. CIT, (1953) 24 ITR 481 (SC) held that the assessee is entitled to value the closing stock either at cost price or market value, whichever is lower. In the present case, Revenue does not dispute that the method of the valuation adopted by the assessee, namely, valuing the stock either at cost price or market value whichever is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck-intrade" by the assessee-bank. In our opinion, the plea of the learned CIT-DR is quite untenable primarily because the very nature of banking activities allowed as per the Banking Regulation Act, 1949 are in the sphere of business / trade activities; and, accordingly the recognition of investments in HTM category as "stock-in-trade" is not dependent on the frequency of their sale / purchase carried out by the assessee-bank. 21. In view of the aforesaid discussion, we, therefore, conclude by holding that in the present case the method of valuation of the closing stock adopted by the assessee i.e. cost or market value, whichever is lower is fair and proper and the income-tax authorities have erred in not accepting the same. The orders of the authorities below on this aspect are hereby reversed." 5.4 The ld. AR has further drawn our attention that the decision of Tribunal has been upheld by the Hon'ble Bombay High Court in Income Tax appeal No. 920 of 2015 (supra). The copy of the Hon'ble High Court order dated 27-02-2018 was furnished before us. A perusal of same shows that one of the question of law before the Hon'ble High Court for consideration was : "(i) Whether on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter to the file of the Assessing Officer for verification on the issue of disallowance of write back of provision for restructured advance amounting to Rs.260,75,46,000/-. 40. After hearing both the sides, we find the Assessing Officer disallowed the claim of write back provision of restructured advance of Rs.260,75,46,000/- by observing as under: "(10.2) The assessee however did not furnish even single documentary evidence which could justify its claim of deduction of Restructured advance. The assessee has merely stated that, since, the write back of provision of Rs. 260.75 crore has already been offered to tax in earlier years; the same should not be added back and taxed again. However, the assessee did not furnish the corresponding balance sheet and computation of income. It may be noted here that the assessee bank has been claiming deduction for bad debts and also of write off of bad debts and further it claiming deduction on account of written back of restructured advance which is already a part of bad debts Since the assessee' claim of deduction towards bad debts has already been allowed again deduction on account of write back of restructured advance cannot be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal No.3 relates to the order of the Ld. CIT(A) / NFAC in restoring the issue of disallowance of write back provision for standard assets amounting to Rs.31,14,41,362/-. 45. After hearing both the sides, we find the Assessing Officer disallowed an amount of Rs.31,14,41,362/- being disallowance of write back provision for standard assets by observing as under: "(11.3) Since, the assessee has not furnished any proof/details in respect claim, of its a show cause notice dated 09/10/2019 was issued, extending further opportunity by 15/09/2019 to furnish the details/proof of the above claim. It was further mentioned in the show cause notice, if it fails to produce the details, entire amount will be added back to the total income. However, nothing could be furnished by the assessee except the same reply as submitted in earlier submissions. Since, the assessee' claim of deduction towards bad debts has already been allowed, again deduction on account of write back provision for standard assets cannot be allowed. Further the assessee was also failed to furnish documentary evidence such as details of accounts and the years for which for which provisions were made, whether the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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