AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 42
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....was no liability to pay the same which constituted deemed income of the assessee with the application of section 41(1) of I.T. Act, 1961. 2. On the facts and in the circumstances of the case and in law, the. Ld. CIT(A) has erred in deleting the addition made by the A.O on account of unidentified deposits of Rs. 41,72,658/- without appreciating the facts that the assessee has claimed these liabilities as outstanding for a number of years, but could not substantiate the genuineness of the same. 3. On the f acts and in the circumstances of the case and in la w, the Ld. CIT(A) has erred in accepting & adjudicating on the issue of amortization of premium on investments although the assessee had not filed, a claim in, this regard during assessment proceedings either by way of original return or revised return of income. 4. The appellant prays that the order the CIT(A) being erroneous in facts and in law be reversed and that of the Assessing Officer be restored. 5. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 2. Briefly stated, the facts of the case are that the assessee which is a co-operative ....
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.... as a revised return of income and its income be assessed after considering the claim in respect of expenses on account of amortization on investments so raised by it. However, the A.O being of the view that the assessee could have filed a revised return of income under Sec. 139(5) latest by 31.03.2011, therefore, observing that the aforesaid claim of the assessee was beyond the said stipulated time period, declined to admit the same. The A.O while concluding as hereinabove relied on the judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC). Alternatively, it was observed by the A.O that the assessee had in the immediately preceding year, viz. A.Y. 2008-09 debited a sum of Rs. 2,02,50,500/- as premium on investment amortized, which however was disallowed by his predecessor and the matter as on date was pending before the CIT(A). The A.O held a conviction that as the investments such as government securities and bonds were shown under the head "investments" which is a capital asset, therefore, any expenses paid for acquisition of a capital asset would be capital expenditure and could not be allowed as a deduction. The A.O on the bas....
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....its which were shown by the assessee under the head "sundry deposits", but however, were brought to tax by the A.O as ceased liability under Sec. 41(1) of the Act. The CIT(A) observed that the amount of Rs. 41,72,657/- represented the amounts which were deposited with a wrong mention of the account number or wrong mention of title, therefore, the proper credit of the said amounts could not be given to the accounts of the genuine account holders. The CIT(A) found favour with the contention of the assessee that it being a bank was simply a custodian of the money which it was liable to pay whenever demanded, even if the deposits were more than 30 years old. The CIT(A) persuaded to be in agreement with the aforesaid contention of the assessee, observed that as the aforesaid amount represented the ascertained liability for which the bank was merely a custodian and the same had to be paid as and when demanded, therefore, the same could not be characterized as a liability which had ceased to exist. It was further observed by the CIT(A) that as the A.O had added back the aforesaid sundry deposits on the presumption of cessation of liability, without placing any evidence on record that the ....
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....e was borne from the facts available on record. The CIT(A) on the basis of his aforesaid observations admitted the aforesaid additional ground of appeal raised by the assessee before him. The CIT(A) observed that the investments under consideration by the assessee were in government securities which the assessee being a bank had to purchase as per the guidelines of the RBI in order to maintain the Statutory Liquidity Ratio (SLR). The CIT(A) further observed that the SLR was maintained by the bank by parking the funds in government securities issued by both the central as well as different state governments. The CIT(A) took cognizance of the fact that the assessee in order to maintain the SLR had to purchase the government securities from the open market as the same were actively traded, and its market price (value) varied on a day to day basis, depending upon the statutory regulation imposed by the RBI, requirement of the various banks and the prevailing interest regime in the national as well as international market. The CIT(A) after deliberating on the aforesaid facts held a conviction that as the said investments were long term and therefore had to be classified as "held to matu....
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....r A.Y. 2008-09, vide his order dated 11.07.2012. 11. The CIT(A) thereafter adverted to the claim of the assessee that the A.O had erred in not allowing the deduction amounting to Rs. 50,00,000/- in respect of "Investment depreciation reserve". The CIT(A) observed that the aforesaid claim of deduction of Rs. 50,00,000/- on account of investment depreciation reserve was raised by the assessee for the first time before him and was not taken up before the A.O at all. The CIT(A) observed that the contention of the assessee that it had raised such claim in its letter dated 15.11.2011 filed with the A.O, requesting that the same may be treated as a revised return of income, was proved to be incorrect on a perusal of the aforesaid letter, which revealed that no such claim was raised by the assessee before the A.O. Notwithstanding the aforesaid facts, the CIT(A) observed that even during the course of hearing of the appeal as the assessee had neither given any written submissions, nor furnished the details regarding the nature of such deduction and basis of allowability of the same, therefore, the validity of the said claim of deduction having not be established by the assessee, thus, co....
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....claim of investment depreciation reserve of Rs. 50,00,000/-. Per Contra, the Ld. D.R. submitted that the CIT(A) had wrongly set aside the additions/disallowances made by the A.O. However, the Ld. D.R did not controvert the contention of the Ld. A.R. that the issues involved in the appeal of the department were covered by the orders passed by the coordinate benches of the Tribunal in the assesses own case for A.Ys 2008-09 and 2011-12. 13. We have heard the authorized representatives for the both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the disallowance of a sum of Rs. 25,29,602/- which though was shown by the assessee under the head "other creditors" in respect of the unrealized pay slips, but however, was held by the A.O as cessation of liability and added back to the income of assessee under Sec. 41(1) of the Act. We find that the CIT(A) being of the view that the slips which were issued by the assessee, but were not presented for payment for a period of less than six months and were lying unrealized at the end of the year, would not mean that the liability to pay on account of such unrealized slips ....
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....e of Rs. 12,09,832/- made by the A.O in respect of unrealized pay slips which were issued but not presented for payment. We further find that the order of the Tribunal was followed by another coordinate bench by the Tribunal, i.e. ITAT "E" Bench, Mumbai in the assesses own case for A.Y. 2011- 12, viz. DCIT Vs. M/s Kokan Mercantile Co-operative Bank Ltd. (ITA No. 281/Mum/2015); dated 28.07.2016. We thus in the backdrop of our aforesaid observations and finding no reason for taking a view different from that as arrived at by the aforesaid coordinate benches of the Tribunal, therefore, find no reason to dislodge the well reasoned order of the CIT(A) in respect of the issue under consideration. The Ground of Appeal No.1 raised by the revenue before us is dismissed. 15. We now advert to the disallowance of Rs. 41,72,658/- made by the A.O on account of unidentified deposits lying with the bank. We find that the CIT(A) observed that as the aforesaid amount of Rs. 41,72,657/- represented the amounts which were deposited with a wrong mention of the account number or wrong mention of title, therefore, the proper credit to the genuine account holders account could not be given by the asses....
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....ge the said claim of the assessee before concluding that the liability under consideration as claimed by the assessee had ceased to exist. We are afraid that here also as the A.O had failed to place on record any positive evidence to support his view that the aforesaid outstanding liability had ceased to exist, and had only on the basis of presumptions so inferred, therefore, we are unable to persuade ourselves to be in agreement with the said view of the A.O. We are of the considered view that the CIT(A) rightly appreciating the facts of the case in the backdrop of the settled position of law had vacated the addition of Rs. 41,72,657/- made by the A.O in the hands of the assessee under Sec. 41(1) of the Act. We thus finding no infirmity in the order of the CIT(A), therefore, uphold the same. Before parting, we may herein observe that the coordinate bench of the Tribunal, i.e. ITAT Bench "A", Mumbai in the assessee own case for A.Y. 2008-09, viz. ACIT Vs. M/s Kokan Mercantile Co-operative Bank Ltd. (ITA No. 6058/Mum/2012); dated 16.03.2016 had upheld the order of the CIT(A) and had deleted a similar disallowance of Rs. 66,82,158/- made by the A.O in respect of unidentified deposits....
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....ate authorities for entertaining an additional claim of the assessee, as long as the same is found to be borne from the facts available on record. We are of the considered view that in the backdrop of the aforesaid judgment of the Hon"ble High Court of Jurisdiction, no infirmity as regards admission by the CIT(A) of the aforesaid claim of amortization of premium of investments raised by the assessee on the basis of the facts available on record, followed by adjudication of the same, emerges from the records. We thus finding no infirmity on the part of the CIT(A) to admit and adjudicate the claim of amortization of premium of investment raised by the assessee on the basis of the facts available on record, therefore, uphold his order as regards the same. We further find that the CIT(A) had on the basis of well reasoned observations concluded that as the amortization of the premium paid on purchase of securities classified under the "HTM" category is an ascertained and determined business liability, therefore, the same being an allowable expenditure was wrongly disallowed by the A.O. We have perused the observations of the CIT(A) and find that he had after culling out the material asp....
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.... 20. We shall now advert to the appeal filed by the assessee. The assessee assailed the order of the CIT(A) before us on the following grounds of appeal : "1. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in approving the action of the learned A.O. in disallo wing an amount of Rs. 1,00,000/ - by invoking the provisions of section 14A read with rule 8D of the I.T. Rules 1962. 2. On the f acts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in not accepting and dismissing the ground of appeal pertaining to "investment depreciation reserve" claim amounting to Rs. 50,00,000/-. The Appellant craves leave to add, alter amend or delete any or all of the grounds of appeal at any time. 21. We shall first take up the disallowance of Rs. 1,00,000/- made by the A.O under Sec. 14A r.w. Rule 8D. We find that the CIT(A) being of the view that as the assessee had made a substantial investment of Rs. 2,00,00,000/- in exempt income yielding investments in shares, therefore, it could safely be concluded that expenses out of the common kitty, common management, common salaries paid to employees a....
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....tment of Rs. 2,00,00,000/- in the UTI Master Value Fund. We find that the A.O had made a disallowance under Sec. 14A only under Rule 8D(2)(iii). We find no reason to dislodge the view of the CIT(A), who we find had upheld the disallowance of Rs. 1,00,000/- made by the A.O under Sec. 14A r.w. Rule 8D(2)(iii). We thus in terms of our aforesaid observations dismiss the Ground of Appeal No. 1 raised by the assessee before us. 22. We shall now take up the contention of the assessee that the CIT(A) had erred in not accepting and dismissing the ground of appeal pertaining to "Investment Depreciation Reserve" claim of the assessee amounting to Rs. 50,00,000/-. We find that the CIT(A) observed that the aforesaid claim of deduction of Rs. 50,00,000/- on account of investment depreciation reserve was raised by the assessee for the first time before him, and was not taken up before the A.O at all. We further find that the claim of the assessee that it had raised the aforesaid issue in its letter dated 15.11.2011 was disproved by the CIT(A), who on a perusal of the aforesaid letter observed that no such claim was raised by the assessee before the A.O. We further find that notwithstanding the....