Akola Urban Cooperative Bank Ltd. Vs ACIT (ITAT Nagpur)
Loss on Sale of NPAs Is a Business Loss; Section 263 Cannot Be Invoked to Circumvent Binding ITAT Precedent: Nagpur ITAT
The assessee, a co-operative bank, claimed a deduction of ₹14.71 crore as loss arising from the sale of Non-Performing Assets (NPAs) to an asset reconstruction company. The assessment was completed under Section 143(3) read with Section 144B, accepting the returned income at Nil.
The PCIT invoked Section 263, alleging that the AO had not specifically examined the claim. According to the PCIT, the loss on sale of NPAs was a capital loss rather than a business loss. The assessment was accordingly set aside for fresh verification.
The Nagpur ITAT observed that the assessee had furnished its computation, audited financial statements, tax audit report, details of deductions, bank accounts, cash-flow statement and other relevant documents during the scrutiny proceedings. Merely because the assessment order did not contain an elaborate discussion could not lead to the inference that no inquiry was conducted.
More importantly, the Tribunal had already held in the assessee’s own case for AY 2015-16 that the loss arising from the sale of NPAs was an allowable business loss. Therefore, the PCIT could not proceed on the contrary premise that it constituted a capital loss.
The Tribunal emphasised that authorities subordinate to it are bound to follow its decisions unless reversed or stayed by a higher judicial forum. Section 263 cannot be employed to indirectly unsettle or circumvent a binding Tribunal ruling.
The PCIT had also failed to record any categorical finding that the deduction was legally inadmissible and had merely directed a fresh inquiry. Revision cannot be ordered for a fishing or roving inquiry without demonstrating that the assessment order is both erroneous and prejudicial to the interests of the Revenue.
Accordingly, the Tribunal held that the revision rested on an erroneous legal premise and violated the principles of judicial discipline and consistency. The Section 263 order was quashed and the assessee’s appeal was allowed.
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