Income Tax Appellate Tribunal - Pune
The Nasik Merchants Co-Op Bank Limited, ... vs Ito, Ward-16(2), Hyderabad, Hyderabad on 22 October, 2018
आयकर अपील
य अ धकरण] पण
ु े यायपीठ "एक सद य" पण
ु े म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "SMC", PUNE
BEFORE
SHRI ANIL CHATURVEDI, AM
आयकर अपील सं
. / ITA No.805/Hyd/2017
नधा रण वष / Assessment Year : 2005-06
The Neelakanta Co-op. Urban Bank Ltd., .......... अपीलाथ /
In the case of merger with the Nashik
Appellant
Merchants Co.op. Bank Ltd.,
A-16, Babubhai Rathi Chowk, Satpur,
Nashik - 422 007.
PAN : AABCN4696H.
बनाम v/s
The Income Tax Officer, .......... यथ /
Ward 16(2). Hyderabad.
Respondent
Assessee by : Shri Pramod Shingte.
Revenue by : Shri Rajesh Gawli.
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing : 15.10.2018 Date of Pronouncement: 22.10.2018
आदे श / ORDER
PER ANIL CHATURVEDI, AM :
1. This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (A) - 4, Hyderabad dt.20.01.2011 for the assessment year 2005-06.
2. The relevant facts as culled out from the material on record are as under :-
Assessee is a Co-operative Bank, who electronically filed its return of income for A.Y. 2005-06 on 30.10.2005. The case was taken up for scrutiny and thereafter, assessment was framed u/s 2 ITA No.805/Hyd/2017 143(3) of the Act and the loss was assessed at Rs.6,62,326/-.
Subsequently, the assessment was re-opened by issuing notice u/s 148 of the Act dt.04.01.2010 and which was served on the assessee. Thereafter, the case was taken up for scrutiny and assessment was framed u/s 143(3) r.w.s 147 of the Act vide order dt.21.12.2010 and the total taxable income was determined at Rs.4,33,598/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.01.02.2017 (in appeal No.0239/10-11/ITO, Wd.16(2)/CIT(A)-4/Hyd/16-17) enhanced the income of the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal and has raised the following grounds :
"1. On the facts and circumstances of the case and in law the Ld.CIT(A) erred in making the enhancement to the income assessed by the Assessing Officer on account of new source of income. It is most humbly submitted that the CIT(A) has exceeded the powers conferred under Section 250 of the Income Tax Act, 1961, and therefore entire action is bad in law.
Without prejudice to the above ground following grounds are on merit.
2. On the facts and circumstances of the case and in law the Ld.CIT(A) erred in treating the interest income of Rs.11,19,673/- under the head Income from Other Sources by disregarding the fact that interest is earned during the course of business activity of the appellant and entire income therefore is attributable to the business activity and therefore addition deserves to be deleted."
3. Before me, at the outset, Ld.A.R. submitted that though assessee has raised two grounds but both the grounds are inter- connected. Hence, both the grounds are considered together.
4. Before me, Ld.A.R. submitted that the case of the assessee was re-opened for the reason that the amount of Rs.10,95,924/- was found debited to the Profit and Loss account under the head 3 ITA No.805/Hyd/2017 'Provisions' and which was claimed as deduction and was allowed in the assessment originally framed u/s 143(3) of the Act. AO was of the view that the aforesaid Provision was not allowable as deduction and accordingly, the case was re-opened by issuing notice u/s 148 of the Act. Thereafter, in the assessment framed u/s 143(3) r.w.s. 147 of the Act, the amount of Rs.10,95,924/- was disallowed. Before AO, it was submitted that after making addition on account of disallowance of Provision, the gross total income turns out to be positive and therefore the assessee be allowed deduction u/s 80P of the Act. It was also submitted that deduction was not claimed in the return of income as the income returned by the assessee was a loss. The claim of deduction u/s 80P of the Act was denied by AO. Before Ld.CIT(A), a prayer was made for allowing the deduction u/s 80P of the Act. Ld.A.R. submitted that Ld.CIT(A) directed the AO to grant deduction u/s 80P of the Act to the extent of Rs.4,33,598/- but however Ld.CIT(A) noted that assessee had earned interest from non- members which according to him should have been taxed under 'income from other sources' and on such interest deduction u/s 80P of the Act was not allowable. Ld.CIT(A) after considering the submissions of the assessee and after relying on the decision of Hon'ble Apex Court in the case of Bangalore Club Vs. CIT reported in (2013) 350 ITR 509 enhanced the income and directed the AO to add Rs.11,19,673/- under the head 'income from other sources'. Aggrieved by the order of enhancement, assessee is now in appeal.
4ITA No.805/Hyd/2017
5. Before me, Ld.A.R. submitted that Ld.CIT(A) in the Appellate Proceedings cannot introduce a new source of income as his power of enhancement is restricted only to the income which was the subject matter of consideration for the purposes of assessment by the AO. Ld.A.R. submitted that under the provisions of Sec.251(1)(a) of the Act. Ld.CIT(A) has power to enhance, revise or cancel the assessment but has no power to make addition by searching a new source of income, which was neither discussed in the assessment order nor mentioned in the return filed by the assessee. He further submitted Ld.CIT(A) has gone beyond his jurisdiction in enhancing the assessment. He further submitted that whenever the question of taxability of income from a new source and which has not been considered by the AO is concerned, the jurisdiction to deal with the same can be dealt with u/s 147/148 and u/s 263 of the Act provided that the requisite conditions stipulated in the respective sections are satisfied. In support of his contention that Ld.CIT(A) cannot introduce a new source of income, he relied on the decisions of CIT Vs. Shapoorji Pallonji Mistry reported in 44 ITR 891 (SC), CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria reported in 66 ITR 443 (SC) and CIT Vs. Sardarilal and Company reported in 120 taxamann 295 (Delhi). He further submitted that the Pune Tribunal in the case of M/s Vijay Builders Vs. ITO (ITA No.863/PUN/2016 order dt.25.02.2015) and in the case of Ram Infrastructure Ltd. Vs. JCIT (ITA No.746/PUN/2013 order dt.30.12.2016) after relying on the aforesaid decisions of Hon'ble Apex Court and Hon'ble Delhi High Court has held that Ld.CIT(A) 5 ITA No.805/Hyd/2017 has no power to enhance the income of the assessee by introducing a new source of income. On the merits of addition, with respect to the interest earned from other members, he submitted that all investments whether out of surplus funds or otherwise made by the Co-operative Society which form part of the business of the Bank is attributable to the business of banking carried out by it and qualifies for deduction u/s 80P of the Act and for this proposition, he relied on the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Baroda Peoples Co-operative Bank Ltd., reported in (2006) 280 ITR 282. He also placed reliance on the decisions of Pune Tribunal in the case of Rajmata Urban Co-op Bank Limited Vs. ITO (ITA No.479/PUN/2010 order dt.28.10.2010) and the case of ACIT Vs. The Rayat Sevak Co-operative Bank Ltd., (ITA No.1960/PUN/2013 order dt.27.10.2014). He also placed on record the copy of the above decisions. He therefore submitted that firstly Ld.CIT(A) was not justifying in enhancing the income and secondly even on merits, assessee is eligible for deduction u/s 80P of the Act.
6. Ld.D.R. on the other hand, supported the order of AO and Ld.CIT(A) and submitted that u/s 251(1)(a), Ld.CIT(A) has power of enhancement. He further submitted that there is a link between enhancement of income and deduction u/s 80P of the Act. He further placed reliance on the decision of Hon'ble Apex Court in the case of Citizen Co-operative Society Ltd., Vs. ACIT in Civil Appeal No.10245 of 2017 judgment dt.08.08.2017 6 ITA No.805/Hyd/2017
7. Ld.A.R. in the rejoinder submitted that the reliance placed by the Ld.D.R. on the decision of Hon'ble Apex Court in the case of Citizen Co-operative Society Ltd., Vs. ACIT (supra) is mis- placed as the issue was different before Hon'ble Apex Court. He further submitted that the reliance placed by the Ld.CIT(A) in the case of Bangalore Club Vs CIT (supra) is also misplaced as it was with respect to mutuality and therefore a different issue.
8. I have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to enhancement of income by Ld.CIT(A) and on such enhanced income, denial of deduction u/s 80P of the Act. It is an undisputed fact that while deciding the appeal, Ld.CIT(A) has enhanced the income of the assessee by Rs.11,19,673/-. It is also a fact that the issue on which the Ld.CIT(A) had enhanced the income was not considered by AO and was therefore not a subject matter of appeal before Ld.CIT(A). I find that identical issue about enhancement of income arose before the Co-ordinate Bench of the Tribunal of Pune in the case of M/s. Vijay Builders Vs. ITO (in ITA No.863/PUN/2013 dt.25.02.2015). The Co- ordinate Bench of the Tribunal after considering the decision of Hon'ble Apex Court in the case of CIT Vs. Shapoorji Pallonji Mistry (supra), CIT Vs. Rai Bahadur Hardutroy Motilal Chamaria (supra) and CIT Vs. Sardarilal and Company (supra) has decided the issue in favour of the assessee by holding as under : 7 ITA No.805/Hyd/2017
"14.1 Even otherwise also we are of the considered opinion that the Ld.CIT(A) was not justified in enhancing the income of the assessee by Rs.25 lakhs. The Hon'ble Supreme Court in the case of CIT Vs. Shapoorji Pallonji Mistry (Supra) has held that it would not be open to the AAC to introduce into assessment new sources, as his power of enhancement is restricted only to income which was subject matter of consideration for purposes of assessment. The Hon'ble Supreme Court in the case of Rai Bahadur Hardutroy Motilal Chamaria (Supra) has held that the power of enhancement of AAC is restricted to subject matter of assessment or in assessment order. We find that following the above decisions the Hon'ble Delhi High Court in the case of Sardarilal and Company (Supra) has held that whenever question of taxability of income from a new source of income is concerned which has not been considered by the AO, jurisdiction to deal with same in appropriate cases may be dealt with u/s.147/148 and section 263 if requisite conditions are satisfied. It is inconceivable that in presence of such specific provisions a similar power is available to the first appellate authority. The Hon'ble Delhi High Court in the case of Union Tyres (Supra) has also held similar view and held that it is not open to the appellate commissioner to introduce in assessment a new source of income and assessment has to be confined to those items of income which was subject matter of original assessment. The relevant observations of Hon'ble Delhi High Court at para Nos. 11 to 13 of the order reads as under :
XXXXX XXXX 14.2 In view of the above decisions we hold that the Ld.CIT(A) has no power to enhance the income of the assessee by introducing ITA No.863/PN/2013 M/s. Vijay Builders 16 a new source of income which had not been considered by the AO. Addition, if any, on that account can be made by taking recourse into provisions of section 147/148 and section 263. We accordingly hold that both factually as well as legally the Ld.CIT(A) is not justified in enhancing the income of the assessee by Rs.25 lakhs. We accordingly set aside the order of the CIT(A) on this issue and direct the AO to delete the addition.
15. In the result, the appeal filed by the assessee is allowed."
9. Before me, Revenue has not placed any contrary binding decision in its support nor has pointed out any distinguishing feature in the facts of the present case and to the case of M/s. Vijay Builders Vs. ITO (supra). I further find that the decisions relied upon by the Ld.D.R. are distinguishable and not applicable to the present case. I therefore, following the decision of Co- 8 ITA No.805/Hyd/2017 ordinate Bench of the Tribunal in the case of M/s. Vijay Builders Vs. ITO (supra) and following the same reasoning hold that Ld.CIT(A) was not justified in enhancing the income of the assessee and accordingly set aside the order of Ld.CIT(A) on this issue. Since the enhancement itself has been set aside, I find the issue of deduction u/s 80P of the Act on the enhancement of income to be academic. I accordingly set aside the order of Ld.CIT(A) and direct the AO to delete the addition. Thus, the ground of the assessee is allowed.
10. In the result, the appeal of the assessee is allowed.
Order pronounced on 22nd day of October, 2018.
Sd/-
(ANIL CHATURVEDI) लेखा सद य / ACCOUNTANT MEMBER पण ु े Pune; दनांक Dated : 22nd October, 2018.
Yamini आदे श क# $ त&ल'प अ(े'षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A)-4, Hyderabad.
4. The Pr.CIT-4, Hyderabad.
5 "वभागीय %त%न&ध, आयकर अपील य अ&धकरण, "एक सद+य" / DR, ITAT, "SMC" Pune;
6. गाड. फाईल / Guard file.
आदे शानस ु ार/ BY ORDER // True Copy // व0र1ठ %नजी स&चव / Sr. Private Secretary आयकर अपील य अ&धकरण ,पुणे / ITAT, Pune.