Court overturns assessments due to lack of material facts; jurisdiction under Section 263 unwarranted. Profit on securities treated as revenue.

The appeals were allowed, and the reopening of assessments after four years was annulled due to absence of material facts necessary for reopening. Assessments based on mere change of opinion without tangible material were annulled. The assumption of jurisdiction under Section 263 was found unwarranted. Profit on sale of securities was treated as revenue. Expenses disallowed under Section 14A were partially allowed. Various disallowances were overturned, including broken period interest, fees paid to SEBI, filing fees for increasing authorized capital, advertisement expenses, excess bonus provision, bad debts deduction, provision for arrears of salary, and amortization charges.

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Issues Involved:
1. Validity of reopening assessments after four years.
2. Reopening of assessments without tangible material and mere change of opinion.
3. Assumption of jurisdiction under Section 263.
4. Computation of profit on sale of securities.
5. Disallowance of expenditure incurred on earning exempted income under Section 14A.
6. Disallowance of broken period interest.
7. Disallowance of fees paid to SEBI.
8. Disallowance of filing fees to Registrar of Companies for increasing authorized capital.
9. Disallowance of advertisement and publicity expenses.
10. Addition on account of excess bonus provision.
11. Treatment of unclaimed balances written off.
12. Deduction under Section 36(1)(viia) for bad debts.
13. Disallowance of provision for arrears of salary.
14. Addition on account of amortization charges.

Detailed Analysis:

1. Validity of Reopening Assessments After Four Years:
The first common ground in these appeals concerns the validity of reopening assessments after four years from the assessment orders. The original assessments were completed under Section 143(3) of the Income-tax Act. The appellant argued that the initiation of proceedings under Section 148 was invalid as the conditions precedent for reopening were absent. The Tribunal found that there was no failure on the part of the assessee to disclose material facts necessary for the assessments, and therefore, the notices issued under Section 148 were invalid. The appeals were allowed, and the reopening was annulled.

2. Reopening of Assessments Without Tangible Material and Mere Change of Opinion:
In appeals ITA Nos.842, 845, 846 & 851/Mds/2015, the grievance was that the reopening of assessments was based on a mere change of opinion without any new tangible material. The Tribunal held that after April 1, 1989, the Assessing Officer could reopen assessments only if there was tangible material indicating income escapement. Mere change of opinion was not a valid reason for reopening. The Tribunal annulled the assessments made under Section 147.

3. Assumption of Jurisdiction Under Section 263:
In ITA No.1133/Mds/2013, the issue was the assumption of jurisdiction under Section 263. The Commissioner of Income-tax found an error in the computation of net appreciation regarding securities in the AFS and HFT categories. The Tribunal held that the assessment order was not erroneous or prejudicial to the interests of the Revenue, as the Assessing Officer had already considered the issue, resulting in excess tax. The order under Section 263 was annulled.

4. Computation of Profit on Sale of Securities:
In ITA Nos.959, 960 & 961/Mds/2014, the issue was the computation of profit on the sale of securities. The Tribunal upheld the Commissioner of Income-tax(Appeals)'s decision that the profit or loss on the sale of securities held as stock-in-trade should be treated as revenue in nature. This was supported by the Supreme Court judgment in UCO Bank and the Jurisdictional High Court decisions.

5. Disallowance of Expenditure Incurred on Earning Exempted Income Under Section 14A:
The Assessing Officer made an addition for expenses incurred on earning interest income from tax-free bonds. The Tribunal partially allowed the appeal, directing that 2% of the exempt income be disallowed, following the Jurisdictional High Court's decision in Simpson & Co. Ltd. vs. DCIT.

6. Disallowance of Broken Period Interest:
The Tribunal upheld the Commissioner of Income-tax(Appeals)'s decision to assess interest on Government securities on a due/receipt basis rather than on an accrual basis, following the Jurisdictional High Court's decision in the assessee's own case.

7. Disallowance of Fees Paid to SEBI:
The Tribunal upheld the Commissioner of Income-tax(Appeals)'s decision to treat the renewal registration fee paid to SEBI as revenue expenditure, following the Tribunal's earlier decision in the assessee's own case.

8. Disallowance of Filing Fees to Registrar of Companies for Increasing Authorized Capital:
The Tribunal upheld the Commissioner of Income-tax(Appeals)'s decision to treat the filing fees paid to increase authorized capital as revenue expenditure, following the Tribunal's decision in Navi Mumbai SEZ (P.) Ltd. vs. ACIT.

9. Disallowance of Advertisement and Publicity Expenses:
The Tribunal upheld the Commissioner of Income-tax(Appeals)'s decision to allow advertisement and publicity expenses as revenue expenditure, as they were incurred wholly and exclusively for business purposes.

10. Addition on Account of Excess Bonus Provision:
The Tribunal upheld the Commissioner of Income-tax(Appeals)'s decision to delete the addition made for excess bonus provision, as the amount had already been taxed in the respective assessment years.

11. Treatment of Unclaimed Balances Written Off:
This ground was not arising from the order of the Commissioner of Income-tax(Appeals) and was dismissed.

12. Deduction Under Section 36(1)(viia) for Bad Debts:
The Tribunal upheld the Commissioner of Income-tax(Appeals)'s decision to allow the deduction for bad debts under Section 36(1)(viia), following the Supreme Court judgment in Catholic Syrian Bank Ltd. vs. CIT.

13. Disallowance of Provision for Arrears of Salary:
The Tribunal upheld the Commissioner of Income-tax(Appeals)'s decision to delete the disallowance for provision for arrears of salary, as the assessee followed the mercantile system of accounting.

14. Addition on Account of Amortization Charges:
The Tribunal upheld the Commissioner of Income-tax(Appeals)'s decision to delete the addition for amortization charges, following the Jurisdictional High Court's decision in City Union Bank Ltd.

Conclusion:
All appeals filed by the assessee were allowed, and the appeals by the Revenue in ITA Nos.959, 960, and 961/Mds/2014 were partly allowed, while ITA Nos.962 & 963/Mds/2014 were dismissed.

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