TaxTMI 
TaxTMI 
2025 (1) TMI 903
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubsequently, the case was selected for scrutiny 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: Ground....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y please be deleted. 5.1. The learned CIT(A) failed to appreciate the fact that the provisions of Section 115JB are not applicable to the appellant. 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 Reve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs.219.32 crore working as per Rule 6ABA of the Income Tax Rules. Rejecting the various explanations given by the assessee, the Assessing Officer disallowed an amount of Rs.879,11,91,472/-. 8. In appeal, the Ld. CIT(A) / NFAC following 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ground has to be restored to the file of the Assessing Officer in line with the decision of the Tribunal in assessment year s 2010-11 and 2015-16. 11. 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. 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 statisti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal. 17. The Ld. Counsel for the assessee at the outset submitted that an identical issue had come up before the Tribunal in assessee's own case for assessment year 2015-16 and the Tribunal 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of any details furnished before him. 24. We have heard the rival arguments made by both the sides and perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC. It is an admitted fact that due to non submission of the details of Rs.28,08,900/-, the Assessing Officer made disallowance which has 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en HTM securities are capital in nature. 33. Facts of the case, in brief, are that the Assessing Officer, on examination of Schedule 14 of financials, noted that there is profit on sale of investments at Rs.170,69,49,000/- after adjustments of loss on sale of investments at Rs.123,75,88,000/- and there is net profit of Rs.156,93,61,000/-. 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 ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r appeal before the Hon'ble Bombay High Court. (8.7) In view of above discussion, an amount Rs.156,93,61,000/- (which was reduced in computation) as profits on sale of investment, being net profit on sale of investment is hereby added to the total income of the assessee. Further, since the assessee has furnished inaccurate particulars of its income thereof, 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 & fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as Investments and, therefore, for the purpose of the Act also HTM securities should be considered to be the Investments. It is well settled that merely because RBI guidelines direct a particular treatment to be given to particular asset, the same would not necessarily hold good for the purposes of income chargeable to tax under the Act. In fact, the Supreme Court in Southern Technologies Limited v. The Joint Commissioner 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and in ITA Nos. 1135 to 1138/PN/2013 decided on 17-08-2014. The issue of allowability of loss on valuation of HTM securities is recurring in assessment years after assessment years. The Co-ordinate Bench in assessee's own case for assessment year 2010-11 in ITA No. 1370/PUN/2014 (supra) has decided this issue in favour of the assessee by placing reliance on the order of Tribunal in ITA No. 1505/PN/2008 and now the same has been upheld by the Hon'ble Bombay High Court in Income 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 pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urities prior to their maturity. Therefore, as per the learned CIT-DR, such securities could not be considered as "stock-in-trade". The aforesaid plea of the Revenue has been assailed by the learned Counsel for the assessee bank. He has furnished a statement showing net profit on sale of HTM Securities as per the Balance Sheet for the various assessment years, viz. 2006- 07 to 2009-10. On this basis, it is sought to be contended that the HTM category securities are also viewed as :"stock-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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the assessee. The Revenue's sole substantive grievance as well as main appeal in ITA No.596/PUN/2020 stand rejected accordingly." 38. Respectfully following the decision of the Tribunal and the Hon'ble High Court in assessee's own case, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC in allowing the loss of valuation to Held to Maturity (HTM) Securities. The ground No.1 raised by the Revenue is accordingly dismissed. 39. Ground of appeal No.2 relates to the order of the Ld. CIT(A) / NFAC in restoring the matter 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....matter to the file of the Assessing Officer, the Tribunal has the power to restore the issue to the file of the Assessing Officer. We, therefore, restore the issue to the file of the Assessing Officer for due verification and decide the issue afresh in accordance with law. 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 Revenue is accordingly allowed for statistical purposes. 44. Ground 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....