Bajaj Finance Ltd.,, vs Department Of Income Tax

The Asst. Commissioner of Income Tax, Circle-8, Pune. .... Appellant

Vs.

Bajaj Finance Limited, C/o Bajaj Auto Limited, Bombay Pune Road, Akurdi, Pune - 411035 PAN : AABCB1518L .... Respondent

Assessee by : S/Shri Kirit Kamdar and Nikhil Mutha Department by : Shri B.C. Malakar Date of hearing : 22-01-2015 Date of pronouncement : 29-01-2015

ORDER

PER BENCH:

The captioned four appeals by the Revenue involve a common issue

pertaining to the same assessee, therefore, they have been clubbed and

heard together, and a consolidated order is being passed for the sake of

convenience and brevity.

2. ITA No.288/PN/2014 pertaining to assessment year 2006-07 is taken

as the lead case. This appeal by the Revenue is directed against an order of

the Commissioner of Income Tax(Appeals)-V, Pune dated 08.11.2013 which in

turn has arisen from an order passed by the Assessing Officer u/s 154 of the

Income Tax Act, 1961 (in short "the Act") dated 14.03.2012 pertaining to the

assessment year 2006-07.

2 ITA No.79/PN/2012 ITA No.521/PN/2013

3. In this appeal, the Revenue has taken the following Grounds of

Appeal:-

1. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in directing the AO to take the taxable income at Rs.64,77,81,113/- in the order passed u/s 154 of the IT Act, when the AO had rightly retained the returned income of Rs.66,11,91,012/-.

2. Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in not considering the fact that the assessed income cannot be lower than the returned income, ignoring the clearcut directions issued by the CBDT, New Delhi vide Circular No.549 dated 31.10.1989, which is also supported by the decision of Bombay High Court in the case of LML Ltd.

Vs. ACIT 66 Taxman 507 (Bom)(1993)?

4. Briefly put, the relevant facts are as follows. The respondent assessee

filed a return of income for assessment year 2006-07 on 04.12.2006 declaring

total income of Rs.66,11,91,012/-. In an assessment finalized under section

143(3) of the Act, dated 27.11.2008, the Assessing Officer, inter-alia, made an

addition of Rs.7,11,34,419/- which represented closing balance of non-

recognition of interest income on Non-Performing Assets (NPAs). The

assessee company vide its application dated 02.03.2012 canvassed before

the Assessing Officer that there was a mistake apparent from record within the

meaning of section 154 of the Act as the opening balance was not reduced

from the closing balance of the interest on NPAs while computing the

disallowance of Rs.7,11,34,419/-. The Assessing Officer verified the

contention of the assessee and found that opening balance amounting to

Rs.3,23,65,446/- was required to be reduced from the closing balance while

disallowing the interest on NPAs. As a consequence, the total income was

required to be re-computed at Rs.64,77,81,113/- i.e. as under:-

Income as per last order u/s. 154 dated 14.12.2011 - Rs.68,01,46,630/-

Less Relief u/s.154 - Rs. 3,23,65,517/- Revised Income - Rs.64,77,81,113/- 3 ITA No.79/PN/2012 ITA No.521/PN/2013

5. However, while concluding in the order passed under section 154 of the

Act, dated 14.03.2012, Assessing Officer retained the income at

Rs.66,11,91,012/- on the ground that the assessed income could not be less

than the returned income. The assessee was aggrieved with the action of

Assessing Officer in not determining the assessed income at

Rs.64,77,81,113/-, as verified by him. Assessee contested the action of the

Assessing Officer in appeal before CIT(A).

6. The CIT(A) upheld the plea of the assessee by noticing the amendment

made to section 143(3) of the Act by the Finance Act (No.2) 1998 w.e.f.

01.10.1998 whereby the Assessing Officer was empowered to refund any

amount due to the assessee as a consequence of assessment. The following

discussion by the CIT(A) is relevant in this regard.

"10. This anomaly was realized by the legislature and section 143(3) was amended by Finance(No. 2) Act, 1998 w.e.f. 01.10.1998 by issuing the words "or refund of any amount due to him" with this amendment there is no ambiguity in this regard whatsoever and the Assessing Officer was duty bound to determine the revised income which can be lower than the returned income. Accordingly, it is held that the Assessing Officer was not justified in retaining the returned income of ₹ 66,11,91,012/- in the computation of income even though he had calculated total income of ₹ 64,77,81,113/-. Therefore, he is directed to compute the total income at ₹ 64,77,81,113/- and the appellant gets the relief of ₹ 1,34,09,899/-. The ground is thus allowed."

7. Against the aforesaid, Revenue is in appeal before us by placing

reliance on the CBDT's Circular dated 31.10.1989 (supra) and the decision of

the Hon'ble Bombay High Court in the case of LML Ltd. Vs. ACIT 66 Taxman

507 (supra).

8. On the other hand, the learned Representative for the respondent

assessee pointed out that the CIT(A) has correctly appreciated the

amendments brought to section 143(3) of the Act by the Finance Act (No.2)

1998, which clearly support the stand of the assessee that the assessed 4 ITA No.79/PN/2012 ITA No.521/PN/2013

income can be below the returned income and the refund arising to the

assessee after finalization of assessment under section 143(3) of the Act

cannot be denied. In this context, our attention has also been drawn to the

detailed discussion made by the CIT(A) in the impugned order.

9. We have carefully considered the rival submissions. In our considered

opinion, the discussion made by the CIT(A) in para 10 of the impugned order,

which we have extracted above, settles the controversy in favour of the

assessee. The reliance placed by the Revenue on the CBDT's Circular dated

31.10.1989 (supra) and the decision of the Hon'ble Bombay High Court in the

case of LML Ltd. Vs. ACIT (supra) is quite mis-placed having regard to the

facts and circumstances of the present case. Ostensibly, the CBDT's Circular

dated 31.10.1989 (supra) and also the judgment of the Hon'ble Bombay High

Court in the case of LML Ltd. Vs. ACIT (supra) are in the context of

assessment year 1989-90 which were prior to the amendments made to

section 143(3) of the Act by the Finance Act (No.2) 1998 w.e.f. 01.10.1998.

As section 143(3) of the Act stood for the assessment year 1989-90, there was

no provision for refund after the regular assessment. In the present case, the

assessment years involved are 2006-07 onwards, which pertain to period after

section 143(3) of the Act was amended by the Finance Act (No.2) 1998 w.e.f.

01.10.1998. As per the amendment, the assessment under section 143(3) of

the Act, inter-alia, envisages the Assessing Officer to grant refund of any

amount due to the assessee consequent to the assessment and therefore, the

Assessing Officer is statutorily empowered to determine the revised income

which can be lower than the returned income. Therefore, in our view, the

objection raised by the Revenue to the impugned order of CIT(A) is untenable

in the eyes of the law, as it stood for the period under consideration. 5 ITA No.79/PN/2012 ITA No.521/PN/2013

10. In the result, the appeal of the Revenue for assessment year 2006-07 is

dismissed.

11. Since the facts and circumstances in the balance of three appeals are

identical to that considered by us in assessment year 2006-07 (supra),

therefore, the said decision would apply mutatis mutandis in other appeals

also.

12. Resultantly, all the captioned appeals of the Revenue are dismissed.

Order pronounced on 29th January, 2015.

Sd/- Sd/- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER

Pune, Dated: 29th January, 2015. GCVSR

Copy of the order is forwarded to: -

1) The Department; 2) The Assessee; 3) The CIT(A)-V, Pune; 4) The CIT-V, Pune; 5) The DR "B" Bench, I.T.A.T., Pune; 6) Guard File.

By Order

//True Copy// Assistant Registrar I.T.A.T., Pune