The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench while granting relief to the Union Bank of India quashed reassessment as no new material brought on record.
The assessee, Union Bank of India, erstwhile Andhra Bank is a Government of India Undertaking engaged in banking business and governed by Banking Companies (Regulation) Act, 1949. Return of income for assessment year 2010-11 was originally filed declaring income of Rs.917,60,29,790/-. Later revised Return was filed declaring income of Rs.750,28,41,861/-. The case was selected for scrutiny under section 143(3) and was heard on various dates. Assessment was completed by order dated 28.01.2013 determining the total income at Rs. 1228,80,67,890/-.
The AO reopened the assessment on the grounds that as per the Schedule 8 in respect of investment an amount of Rs. 25,10,37,0001- was actually decreased from total investment as Depreciation on Investment. An amount of Rs.385,78,19,885 was claimed as deduction as per revised computation of income sheet.
The AO highlighted the CBDT circular dated November 26, 2008 wherein it is stated that the actual deduction made in the books of e/c shall only be debited in r/o any provision u/s36(vii) & 36(vii-a). On the same line, as the actual debited amount is only Rs.25,10,37,000/-, the deduction claimed as Rs. 385,78, 19,885/- is not in order. The differential amount of Rs. 362,67,82,885/- needs to be added back as taxable income. Accordingly the assessment has been reopened within the provisions of section 147 of Income Tax Act 1961.
The assessee contended that the Commissioner of Income Tax (Appeals) failed to appreciate the fact that once an income is taxed under the head Business and Profession, then the closing stock should be considered as stock in trade and the valuation loss arising by valuing the same at lower of cost or market value is an allowable deduction.
The coram of S.S.Godara and L.P.Sahu clarified that the reopening of assessment can be quashed on two counts. Firstly, no new material was brought on record by the AO in the reopening of assessment to establish that the income of the assessee has escaped assessment as the assessee has already disclosed all the information necessary for completion of original assessment and secondly,the reopening of assessment made beyond four years from the AY under consideration.
The ITAT while quashing the reassessment observed that the AO reopened the assessment based on change of opinion.
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