2000 (6) TMI 806 - AT - Income Tax

Commissioner wrongly invoked s.263 after CIT(A) decision; s.36(1)(viia) deduction upheld on statutory percentage and consolidated provisions.

Syndicate Bank Versus Deputy Commissioner of Income Tax

ITAT (Bangalore) held the Commissioner erred in invoking revisionary powers under s.263 because the issue had been adjudicated by CIT(A), invoking the ... - Issues Involved:1. Jurisdiction of the Commissioner under Section 263 of the Income-tax Act, 1961.2. Merits of the disallowance of the claim under Section 36(1)(viia) of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Jurisdiction of the Commissioner under Section 263:The primary issue raised by the assessee was the jurisdiction of the Commissioner to invoke revisionary powers under Section 263. The assessee argued that the assessment for the year 1987-88 was already the subject matter of an appeal before the CIT(A), who had adjudicated the issue of relief under Section 36(1)(viia). The assessee contended that the order of the Assessing Officer had merged with the appellate order, thereby precluding the Commissioner from exercising revisionary powers. Reliance was placed on the Full Bench decision of the Karnataka High Court in CIT v. Hindustan Aeronautics Ltd., which supports the doctrine of merger.Upon reviewing the records, it was found that the CIT(A) had indeed adjudicated the issue of deduction under Section 36(1)(viia). The appellate order explicitly directed the Assessing Officer to allow the deduction as per the provisions of the section. The Tribunal noted that the revisionary powers of the Commissioner do not extend to matters already considered and decided by an appellate authority. This principle is supported by multiple judicial precedents, including decisions from the Calcutta High Court, Allahabad High Court, and Bombay High Court. Consequently, the Tribunal held that the Commissioner erred in invoking Section 263, as the issue had already been adjudicated by the CIT(A).2. Merits of the Disallowance under Section 36(1)(viia):On the merits, the Commissioner had directed the Assessing Officer to disallow the claim under Section 36(1)(viia) on the grounds that the assessee failed to create a separate provision for advances made from rural branches. The assessee argued that it had made a provision for bad and doubtful debts and was thus eligible for the deduction. The assessee also contended that Sections 36(1)(vii) and 36(1)(viia) are independent clauses, and the Assessing Officer had correctly allowed the deduction.The Tribunal observed that Section 36(1)(viia) provides for a specific deduction for scheduled banks with rural branches, calculated as a percentage of total income and aggregate average advances made by rural branches. The Tribunal noted that the Commissioner's interpretation linking the proviso to Section 36(1)(vii) with Section 36(1)(viia) was erroneous. The Tribunal emphasized that the clauses are independent and that the assessee is entitled to deductions under both, subject to the restriction on double deduction.The Tribunal further noted that the assessee had made the necessary provision for bad and doubtful debts and that the bank's consolidated accounts included provisions for rural branches. The Tribunal found that the Commissioner's adverse inference regarding the lack of a separate provision for rural advances was unwarranted. Additionally, the Tribunal pointed out that the deduction under Section 36(1)(viia) is quantified based on statutory percentages, not the actual provision amount.In conclusion, the Tribunal held that the Commissioner's order was based on misconceptions and fallacies, both in terms of jurisdiction and merits. The Tribunal directed that the impugned order be canceled, allowing the appeal in favor of the assessee.