TaxTMI 
TaxTMI 
2026 (9) TMI 58
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.... Bank carrying on its business for several years. The original return of income has been filed electronically on 27.11.2014 declaring total income at Rs. 3242,84,24,670/- under normal provisions and Book Profit at Rs. 3802,00,67,847/- under section 115JB of the Income tax Act, 1961 (hereinafter 'the Act'). Subsequently, the case of the assessee was selected for scrutiny under CASS and assessment under section 143(3) was completed on 29.12.2017 determining income at Rs. 3447,12,01,760/- under normal provision of the Act and Rs. 4015,36,89,728/- under section 115JB of the Act. 2. During the assessment proceedings u/s. 143(3) of the Act in AY 2016-17 and AY 2017-18, certain issues were examined and addition and disallowances were made, with detailed reasoning provided in the assessment orders, as the assessee had not suo motu offered the same for taxation. The details of such issues are as under: i. Broken Period Interest (BPI) claimed on purchase of Securities under Held to Maturity (HTM) category. ii. Provision wage revision debited to P & L that includes any amount disallowable as per section 43B of the Act. iii. Amortization of premium paid on s....
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....spondent No. 1 was not justified to draw the inference that there was failure on the part of the Petitioner to disclose fully and truly all material facts necessary for its assessment. (d) There was no prima facie reason to believe that the Petitioner's income had escaped assessment. (e) The issue of provision for wage revision was disallowed by the Assessing Officer, however, the same was accepted by him in the Remand report, and thereafter allowed by the CIT(A) for the AY 2016- 17. 5. Respondent No. 1 rejected the objections raised by the Petitioner vide his order dated 7th March 2022. It is in these facts that the Petitioner is impugning the notice dated 31st March 2021 issued under Section 148 of the IT Act, and the order dated 7th March 2022. 6. Mr. Pardiwalla, the learned Senior Counsel for the Petitioner, reiterated the objections raised before Respondent No. 1 as set out hereinbefore, and in addition thereto, pointed out that the basis for the reopening of the present Assessment Year is because of the view taken by the successor Assessing Officer in the Assessment Orders passed for the AY 2016- 17 and AY 2017-18 wherein the six issues as enumerated i....
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....section 148 of the IT Act was issued for the AY 1997-98 for reopening the assessment on the basis that in the assessment under Section 143(3) completed on 19th March 2004 for the AY 2001-02, a claim made under Section 80IA was rejected for the reason that the conditions laid down by the said provision were not fulfilled, and therefore, allowance of the similar deduction for the AY 1997-98 had resulted in income having escaped assessment. However, for the AY 2001-02, the CIT(A) allowed the Appeal of the Assessee, and in a further Appeal by the Revenue, the Tribunal dismissed its Appeal. Further, the Revenue's appeal even before this Court was dismissed. Thus, in the Writ Petition filed for the AY 1997-98 this Court held that the entire foundation for the proposed reopening, which could even if considered to be tangible material, has crumbled, and accordingly quashed the notice under Section 148 for the AY 1997-98. 10. On the other hand, Mr. Sharma, the learned Counsel for the Respondent, strongly defended the reopening of the assessment. He submitted that though the notice under Section 148 of the IT Act was issued on 31st March 2021, which is after the expiry of the four years f....
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....during the year the assessee has provided Rs. 1020,21,51,476 being loss on account of amortisation of premium paid on investments held under HTM category. The above provision is made in accordance with the RBI guidelines, wherein it has been stated that investments in HTM category should be carried at acquisition cost. In case the purchase price is higher than the face value, the premium should be amortised over the remaining period of maturity of the security. The AO disallowed the aforesaid provision on the basis that RBI guidelines do not decide taxability. The CIT(A) deleted the disallowance made by the AO following the Tribunal order in assessee's own case for AYs 1995-96 to 1996-97 and the CIT(A) order for AYs 2002-03 to 2007-08. The Revenue before the Tribunal emphasised that there is no section under the Act that allows deduction for such amortisation of premium on securities. 136. It was contended that the issue is squarely covered in favour of the assessee by assessee's own case for assessment year 1995-96 by the order of Tribunal dated 17.09.2009, which was followed by the Tribunal in subsequent assessment year 1996-97 vide order dated 26.07.2013. Further, the B....
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....ified as NPA, did not credit interest amounting to Rs. 11,37,42,857/- on bad and doubtful debts in its profit and loss account. Consequently, the assessee did not offer the same to tax in terms of the consistent policy adopted by the assessee. Section 43D of the Act provides that in the case of a scheduled bank, income by way of interest in relation to prescribed categories of bad or doubtful debts, having regard to the guidelines issued by the RBI in relation to such debts, shall be chargeable to tax in the previous year: a. in which it is credited by the scheduled bank to its profit and loss account; or b. in which it is actually received by the bank; whichever is earlier. 77. Rule 6EA of the Rules inter alia provides the categories of advances that may be classified as bad and doubtful debts (i.e. 180 days norm). Clause (e) of rule 6EA also includes therein debts recoverability whereof has become doubtful on account of shortfalls in value of security, difficulty in enforcing and realising the securities, or inability or unwillingness of the borrower to repay the banks dues, partly or wholly. 78. We noted that the assessee does not off....
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.... no-accrual loans. The unpaid interest in respect of such loans was reversed to an account called Reserve for Doubtful Interest (RFDI) account. All subsequent interest accruals of such loans were credited to RFDI account and not to the profit and loss account. The assessee offered to tax the net amount credited to the RFDI account i.e. the interest accruals in the RFDI account net of recoveries. However, it was argued that such tax treatment leads to offering interest on non-accrual loans to tax on accrual basis, even if the same is not credited to the profit and loss account. The Mumbai Tribunal held that where the AO has not contested that the policy adopted by the assessee is not in accordance with RBI guidelines, the incidence of taxation of interest on bad and doubtful debts will be either when the same is credited to the profit and loss account for the year or in the year in which it is actually received. Mere crediting of the interest to a reserve cannot be said to be an incidence by which the said interest could be charged to tax. The aforesaid decision has been affirmed by the Bombay High Court in the case of DIT vs. American Express Bank Ltd [2015] 235 Taxman 85 (Bombay).....
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....s are stated to be perpetual, the bank has an option of issuing call option after a period of 10 years. Further these bonds are being repaid which is evident from the borrowings schedule as per the Annual Report for March 2020 which establishes the fact that these are only borrowings and not capital. 24. We have heard both the parties and find that the interest paid on these bonds are to be treated only as interest paid on borrowings and thereby is allowable as deduction while computing total income; hence ground no. 4 raised by the revenue is dismissed." (vi) Bad debts written off u/s. 36(1)(vii) without creating any provision u/s 36(1)(viia). "6. Ground No. 2 is with regard to disallowance of actual bad debts written off by misconstruing the same as provision made for bad and doubtful debts. Assessee during the year has written off bad debts amounting to Rs. 5298.42 crore. The bank every year in accordance with RBI norms creates a provision for bad and doubtful debts. The said provision is created by debiting the profit and loss account under the head Provisions & Contingencies. The said provision made every year is added back and offered to tax. The pr....
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.... assessee had not satisfied the provisions of 36(2)(v) bad debts written off cannot be allowed as deduction. The assessee submits that as evident from the facts as given above, the appellant had only debited provision for bad and doubtful debts and written off bad debts. The assessee had not claimed any deduction u/s. 36(1)(viia) and hence the question of reducing any amount towards deduction allowed in respect of provision for bad and doubtful debts allowed as deduction does not arise and hence the entire bad debts written off has been correctly claimed as deduction. The same should have been allowed as deduction based on the provisions of section 36(1)(vii) read with proviso to section 36(1)(vii) and section 36(2)(v). 9. Without prejudice to above, it is submitted that where a provision is created by debiting profit and loss account and the amount is simultaneously reduced from loans and advances in Balance sheet so that at the end of the year, the amount of loans and advances is shown net of the impugned bad debts, it amounts to write off of the debt for which assessee is entitled to deduction u/s. 36(1)(viia) as held by Hon'ble Supreme Court in case of Vijaya Bank ....
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....cordingly, the deduction for the same may be granted to the assessee." (emphasis supplied) 15. In his order, the CIT(A), on the basis of the evidence submitted as well as the Remand report of the Assessing Officer dated 14th March 2019, accepted that the provision for wage revision of Rs.98 crores should be allowed as a deduction. Thereafter, the Revenue did not challenge the order of the CIT(A) on this issue before the Tribunal. 16. Thus, it is apparent that as a consequence of the appellate orders for the AY 2016-17 none of the issues in respect of which the assessment is proposed to be reopened survive. 17. We may say that, even assuming that there is merit in the submission of Mr. Sharma, the learned Counsel for the Revenue, that while issuing the notice under Section 148 for reopening the assessment, Respondent No. 1 may have had reason to believe that the reopening is valid on the basis of the Assessment Orders passed for the AY 2016-17 and 2017- 18, in view of the order of the Tribunal for the AY 2016-17, which has been followed in the AY 2017-18 also, the very foundation on the basis of which reopening was sought has gone. The argument of the Revenue that ....