TaxTMI 
TaxTMI 
2021 (11) TMI 1230
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....erest of Revenue. 3. The facts in brief are that the assessee in the present case is a cooperative bank and under liquidation. The assessee for the year under consideration has filed its return of income declaring total income at Rs. NIL after adjusting its profit of Rs. 21,64,079.00 against the brought forward losses. The income declared by the assessee was accepted by the AO in the assessment framed under section 143(3) of the Act vide order dated 29-08-2016. 3.1 However, the learned PCIT found that the bank is under the process of liquidation with effect from 18-10-2001. Furthermore, the losses incurred by the assessee in the earlier years for Rs. 9,13,97,708.00 was not available for carry forward from the assessment year 2013-14. Thus, the income generated by the assessee for Rs. 21,64,079.00 was not eligible for set-off against the losses which has resulted under statement of income. Thus, the learned PCIT proposed to hold the order of the AO as erroneous insofar prejudicial to the interest of revenue. 3.2 The assessee in response to such show cause notice submitted that it has availed the insurance claim from the DICGCI against the deposits from the pu....
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....of Hon'ble Supreme Court in the case of Malabar industrial Co. Ltd. VS CIT reported in 243 ITR 83 wherein it was observed as under: 6. A bare reading of this provision makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied with twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1). 7.1 Before we go into the discussion whether the income of the current year is eligible to set off against the brought forward business loss, we note that there was the specific contention raised by the assessee before the learned PCIT that the income of the assessee has been diverted by overriding title of DICGCI. This fact can be verified from the submission of the assessee before the learned PCIT w....
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....on Rs. 3,65,71,875/- which was utilized for the purpose of repayment of depositors to the extent of Rs. 1 Lakh. However, according to DICGCI Act, bank was authorized to realize its assets and advances coercively and whatever proceeds are realized, bank could utilize such proceeds for repayment of liabilities of depositors and other liabilities. In view of the aforesaid mandate available by virtue of DICGCI Act, a deficit of Rs. 1,05,461/- arose in the hands of the assessee in the process of recovery and repayment. Under the circumstances, it was the case of the assessee before the CIT (A) that bank under liquidation shall not have any taxable income till the liability of DICGCI is fully paid off due to diversion of income at source. 7. The CIT (A) has examined the issue threadbare and has recorded a finding in favour of the assessee for non-applicability of Section 139(3) of the Act in the circumstances which reads as under: "4. DECISIONS: I have considered the facts of the case and the argument of the appellant carefully. All three grounds are taken together for adjudication. The factual matrix as per para-3 above have been kept in mind while decid....
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.... gone through judgement of Supreme Court as well as judgement of Gujarat High Court in the case of Visnagar Nagarik Sahakari Bank Ltd. (Supra) as jurisdictional High Court has upheld statutory obligation upon banks under liquidation availing insurance claim for deposits and in fact such liability has been fully paid off to DICGCI and therefore till such obligation all funds realised by bank under liquidation are diverted at source entire income of assessee based on observation in the case of Moti Lal Chhadami Jain v/s CIT 190 ITR 1 (SC) r.w judgement in the case of Smt. Sarla Devi K. v/s. CIT 222 ITR 211 (Kerala) and associated. Power Company Ltd. 218 I T R 195 (SC.) therefore entire interest income and share dividend income is diverted at source and bank under liquidation has no discretion or authority to apply such funds as it wishes and hence such funds are not available to appellant as income and therefore such income is not taxable in the hands of appellant. In view of facts and ratio laid down in the case laws (supra), ground No. 1 & 2 are allowed. As appellant has not made any submissions on capital nature of receipts subsequent to liquidation as per contention raised i....