The Anand People's Co.Op.Bank, Anand V. The Income Tax Officer, Ward (1), Anand

ITA 1521/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1656 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOMUGYAN PAL
• Assessee Lawyers: P B DOSHI
• Keywords: Principle of natural justice; Bonafide belief
• Section: 143(3)

Judgement Text

IT A NO. 1 521 /AHD/2013 A.Y . 2008 - 09 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHRI S.S. GODARA , JUDICIAL MEMBER I TA NO. 1 521 /AHD /201 3 ASSESSMENT YEAR: 200 8 - 09 THE ANAND PEOPLE S CO - OP. BANK, VS. INCOME TAX OFFICER , PEOPLE S PALACE, WARD (1), ANAND . SARDAR GUNJ ROAD, ANAND 388 001. [PAN AA AA T 2812 Q ] (APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI P.B. DOSHI , A.R. RESPONDENT BY : S HRI SOMUGYAN PAL , SR. D.R. DATE OF HE ARING : 1 8 .0 4 . 20 16 DATE OF PRONOUNCEMENT : 11 .0 5 .2016 O R D E R PER ANIL CHATURVEDI, A .M. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LEARNED CIT ( A ) - I V , BARODA DATED 18.02 .2013 FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE REL EVANT FACTS AS CULLED OUT F R OM THE MA TERIALS ON RECORD ARE AS UNDER : - 3. THE ASSESSEE IS A C O - OPERATIVE BANK DOING BUSINESS OF BANKING AND IS UNDER LIQUIDATION , AND LIQUIDATOR IS NOMINATED TO ADMINISTRATE THE WORKING OF B ANK . ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YE A R 2008 - 09 ON 26.09.2008 DECLARING TOTAL INCOME AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT ) VIDE ORDER DA TED 14.12.2010 AND THE TOTAL INCOME BEFORE SETTING OF BROUGHT FORWARD LOSS WAS DETERMINED AT RS. 18,48,552/ - INTER ALIA BY ADDING INTEREST OF IT A NO. 1 521 /AHD/2013 A.Y . 2008 - 09 PAGE 2 OF 7 RS.18,29,894/ - . ON THE AFORESAID ADDITION OF INTEREST, THE ASSESSING OFFICER VIDE ORDER DATED 24.06.2011 HELD THAT THE ASSESSEE HAS CONCEAL E D PARTICULARS OF INCOME AND THUS EXPLANATION - 1 TO SECTION 271 (1) OF THE ACT WAS APPLICABLE AND THE ASSESSEE WAS THEREFORE LIABLE FOR PENALTY UNDER SECTION 271 (1)(C) OF THE ACT. HE ACCORDINGLY LEVIED A PENALTY OF RS.5,68,113/ - . AGGRIEVED BY T HE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE CARRIED THE MATTER BEFORE THE LD . CIT( A ) WHO UPHELD THE PENALTY LEVIED BY THE ASSESSING OFFICER BY HOLDING AS UNDER : - 7.1 THE AO IN HIS PENALTY ORDER U/S 271(L)(C) OF THE ACT HAS MENTIONED THAT NO DETAILS/ RECONCILIATION COULD BE FILED BY THE APPELLANT BEFORE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO, THE APPELLANT WAS NOT ABLE TO FURNISH ANY DETAILS AS CALLED FOR VIDE HIS OFFICE LETTER DATED 20/6/2011. AS PER THE AO, IT WAS THE ONLY CONTENTI ON OF THE APPELLANT THAT IT FOLLOWED CASH SYSTEM OF ACCOUNTING AND THE BANK FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING. AS PER THE AO THE INTEREST RECEIVED/ACCRUED ON THE FIXED DEPOSITS WITH ORIENTAL BANK OF COMMERCE AMOUNTING TO RS. 18,48 , 552/ - HAD NOT BEEN OFFERED FOR TAXATION. AS PER THE AO, THE APPELLANT HAD NOT BEEN ABLE TO RECONCILE THE INTEREST RECEIVED FROM ORIENTAL BANK OF COMMERCE EVEN TODAY AND IT HAD NOT BEEN ABLE TO SHOW WITH EVIDENCE THAT THIS INTEREST HAS BEEN OFFERED FOR TAXATION IN THE SUBSEQU ENT YEAR. AS PER THE AO, THE APPELLANT HAD ALSO NOT BEEN ABLE TO SHOW THE BASIS ON WHICH THEY HAD SHOWN INTEREST INCOME OF RS. 34,52,628/ - IN THEIR PROFIT AND LOSS ACCOUNT, DETAILS OF FDRS KEPT WITH ORIENTAL BANK OF COMMERCE, DATE OF DEPOSIT, INTEREST EARNE D [YEAR - WISE], INTEREST OFFERED FOR TAXATION [YEAR - WISE], TOTAL INTEREST RECEIVED ON MATURITY OF FDRS, WHEN THE FDRS WERE MATURED, ETC. AS PER THE AO, NO APPEAL HAD ALSO BEEN FILED BY THE APPELLANT AGAINST THE ADDITION OF INTEREST MADE IN THE ASSESSMENT O RDER BEFORE THE ID. CIT (A). AS PER THE AO, IT IS ALSO NOT OUT OF PLACE TO MENTION HERE THAT THE APPELLANT WAS ALSO DOING THE BUSINESS OF ACCEPTING FDRS ETC. IN THE YESTER YEARS AND THE PROCEDURE OF CREDITING INTEREST ON FDRS IS BEST KNOWN TO THE APPELLAN T AND IN THEIR PROFIT AND LOSS ACCOUNT. ON THE OTHER HAND THE AR OF THE APPELLANT VIDE HIS SUBMISSION DATED 15 - 02 - 2013 HAS STATED THAT THE APPELLANT IS REGULARLY FOLLOWING CASH METHOD OF ACCOUNTING AND ACCORDINGLY IT HAD SHOWN INTEREST INCOME ON RECEIPT BA SIS IN THE BOOKS OF ACCOUNTS. BUT THIS STATEMENT OF AR OF THE APPELLANT IS NOT SUPPORTED BY ANY RECORDS OR BOOKS OF ACCOUNT. DURING THE COURSE OF PENALTY PROCEEDINGS THE AO VIDE HIS LETTER DATED 20 - 06 - 2011 ASKED THE APPELLANT TO EXPLAIN THE BASIS ON WHI CH THE INTEREST INCOME OF RS. 34,52,628/ - WAS SHOWN BY IT IN ITS P&L ACCOUNT. T HE AO REQUESTED THE APPELLANT TO GIVE THE FDR NUMBER, DATE OF DEPOSIT, INTEREST EARNED YEARWISE, TOTAL INTEREST RECEIVED ON MATURITY OF FDRS IN RESPECT IT A NO. 1 521 /AHD/2013 A.Y . 2008 - 09 PAGE 3 OF 7 OF ADDITION MADE ON ACCOUNT OF INTEREST OF RS. 18,48,552/ - . TH E APPELLANT WAS ALSO REQUESTED TO FURNISH PHOTO COPIES OF FDRS ON WHICH IT HAD EARNED INTEREST OF RS. 18,48,552/ - DURING THE YEAR AND WHICH WAS MATURED IN SUBSEQUENT YEAR. THE AO VIDE HIS ABOVE LETTER 20 - 06 - 2011 WA S SPECIFICALLY ASKED THE APPELLANT TO FURNISH A COPY OF RETURN OF INCOME FILED BY IT IN THE SUBSEQUENT YEAR ALONG WITH ALL THE ENCLOSURE SHOWING THE INTEREST INCOME OF RS. 18,48,552 / - ON MATURITY. HOWEVER, IT IS MENTIONED BY THE AO IN THE PENALTY ORDER THAT ALL THESE DETAILS AND EVIDENCES WERE NOT FILED BY THE APPELLANT. IN MY OPINION ALL THESE VITAL EVIDENCES AND DETAILS AS CALLED FOR BY THE AO DURING THE COURSE OF PENALTY PROCEEDINGS SHOULD HAVE BEEN FILED BY THE APPELLANT. EVEN DURING THE COURSE OF APPELL ATE PROCEEDINGS, THE APPELLANT HAS NOT FILED THE ABOVE DETAILS AND EVIDENCES. THE AR OF THE APPELLANT HAS MERELY FILED SUBMISSION DATED 15 - 02 - 2013 AND VIDE THE SAME HE HAS STATED THAT THE APPELLANT IS REGULARLY FOLLOWING CASH METHOD OF ACCOUNTING AND ACCOR DINGLY IT HAS SHOWN INTEREST INCOME ON RECEIPT BASIS IN THE BO O KS OF ACCOUNTS. AS STATED ABOVE THE SUBMISSION OF AR OF THE APPELLANT IS NOT SUPPORTED BY EVIDENCES. THE AR OF THE APPELLANT IN HIS ABOV E SUBMISSION DATED 15 - 02 - 2013 HAS FURTHER STATED THAT THE APPELLANT HAS SHOWN INTEREST OF RS. 4,21,998/ - OUT OF TOTAL ACCRUED INTEREST OF RS. 18,29,894/ - FROM OBC AS INCOME OF THE CURRENT YEAR ON THE BASIS OF CASH METHOD ACCOUNTING. THE AR HAS FURTHER STATED THAT THE REMAINING INTEREST OF RS. 14,07,976/ - HAS BEEN S HOWN AS INCOME IN THE SUBSEQUENT YEAR AS AND WHEN RECEIVED BY THE APPELLANT. AGAIN THIS VERY STATEMENT OF AR OF THE APPELLANT IS NOT SUPPORTED BY ANY EVIDENCES AND RECORDS. THE STATEMENT OF AR OF THE APPELLANT IS OF VERY GENERAL NATURE. THE AR HAS STATED T HAT THE REMAINING INTEREST OF RS. 14,07,976/ - HAD BEEN SHOWN AS INCOME IN THE SUBSEQUENT YEAR BY THE APPELLANT AS AND WHEN THE SAME WAS RECEIVED. BUT IT IS NOT EXPLAINED AS TO HOW MUCH INTEREST HAS BEEN SHOWN IN WHICH PARTICULAR YEAR AND HOW THE SAME HAS BE EN OFFERED FOR TAX IN THE RETURN OF INCOME. NO COPY OF SUCH RETURNS OF INCOME FOR SUBSEQUENT YEARS ARE FILED OR PRODUCED BY THE AR SHOWING THAT THE REMAINING PART OF INTEREST OF RS.14,07,976/ - HAS ACTUALLY BEEN OFFERED BY THE APPELLANT FOR TAXATION IN SUBS EQUENT YEARS. THE APPELLANT NEITHER DURING THE COURSE OF PENALTY PROCEEDINGS NOR DURING THE COURSE OF APPELLATE PROCEEDINGS HAVE FILED RELEVANT RECORDS AND EVIDENCES IN SUPPORT OF ITS ABOVE CLAIM. ALL THESE FACTS CLEARLY SHOW THAT THE APPELLANT HAS CONCEAL ED THE PARTICULARS OF INCOME AND THEREFORE THE AO HAS RIGHTLY LEVIED THE PENALTY OF RS. 5,68,113/ - U/S 271(L)(C) OF THE IT ACT ON THE ADDITION OF RS. 18,48,552 / - . I, THEREFORE, CONFIRM THE PENALTY OF RS. 5,68,113/ - AS LEVIED BY THE AO U/S 271(L)(C) OF THE IT ACT. THUS, THE ABOVE GROUNDS OF APPEAL OF THE APPELLANT ARE DISMISSED. 4. AGGRIEVED BY THE ORDER OF LD . CIT ( A ), THE ASSESSEE IS IN APPEAL BEFORE US A ND HAS RAISED T HE FOLLOWING GROUNDS : - IT A NO. 1 521 /AHD/2013 A.Y . 2008 - 09 PAGE 4 OF 7 (1) T HE ASSESSING OFFICER AND ID.CIT (A) BARODA BOTH HAVE ERRED IN LAW IN LEVYING PENALTY U/S 271(L)(C) OF THE ACT OF RS.5, 68,113/ - . (2) T HE ASSESSING OFFICER AND ID.CIT (A) BARODA BOTH HAVE ALSO ERRED IN LAW IN CONSIDERING THE DISALLOWANCE OF INTEREST OF RS.18,29,894 / - AS CONCEALED INCOME IN AS MUCH AS THE ASSESSEE B ANK HAD SHOWN INTEREST INCOME ON CASH METHOD AS PER THE ACCOUNTING METHOD REGULARLY FOLLOWED BY THE ASSESSEE. (3) T HE ORDER OF THE ASSESSING OFFICER IS ILLEGAL AGAINST THE NATURAL JUSTICE AND GOOD CONSCIENCE. 5. BEFORE US, LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE SOLITARY ISSUE IN THE APPEAL IS WITH RESPECT TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 6. BEFORE US , THE LD . AUTHORISED REPRESENTATIVE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND THE LD . C IT(A) AND FU RTHER SUBMITTED T HAT THE ASSESSEE IS IN T HE PROCESS OF LIQUIDATION, L IQUIDATOR HAS BEEN APPOINTED BY THE STATE GOVERNMENT. THE ASSESSEE IS REGULARLY FOLLOWING CASH METHOD OF ACCOUNTING. DURING THE YEAR, THE ASSESSING OFFICER ON THE BASIS OF A IR INFORMATI ON NOTICED THAT THE ASSESSEE HAD RECEIVED INTEREST FROM BANKS AMOUNTING TO RS.18,2 9 ,89 4 / - WHICH WAS NOT ACCOUNT E D BY THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE THAT IT WA S FOLLOWING CASH METHOD OF ACCOUNTING WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER. ASSESSING OFFICER PROCEED E D TO ADD THE INTEREST INCOME & ON THE ADDITION OF AFORESAID INTER E ST , LEVIED PENALTY UNDER SECTION 271 (1)(C) OF TH E ACT. BEFORE US , LEARNED AUTHORIS E D REPRESENTATIVE FURTHER SUBMITTED THAT INTEREST WAS FROM TH E DEPOSITS PLACED WIT H ORIENTAL B A NK OF COMMERCE . ORIENTAL BANK OF COMMERCE H A S CREDITED INTER E ST TO ASSESSEE S ACCOUNT AS IT WAS FOLLOWING ACCRUAL BASIS BUT S INCE ASSESSEE WAS FOLLOWING C ASH METHOD OF ACCOUNTING, IT H AS CONSIDERED INTEREST INCOME ONLY TO THE EXTENT IT WAS RE CEIVED FROM ORIENTAL BANK OF COMMERCE AND ACCORDINGLY ACCOUNTED RS.4,21,998/ - IN THE YEAR UNDER CONSIDERATION & THE BALANCE AMOUNT OF IT A NO. 1 521 /AHD/2013 A.Y . 2008 - 09 PAGE 5 OF 7 RS.14,07,976/ - WAS SHOWN AS INCOME IN SUBSEQUENT Y E ARS. HE FURTHER SUBMITTED THAT THE ADDITION HAS ARISEN ONLY ON ACCOUNT OF DIFFERENT METHOD OF ACCOUNTING FOLLOWED BY THE ORIENTAL BANK OF COMMERCE AND THE ASSESSEE AND BY NOT ACCOUNTING THE INCOME ASSESSEE HAS NOT SAVED ON TAXES AS NO TAXES WERE PAYABLE BY ASSESSEE IN VIEW OF BROUGHT FORWARD LOSSES. HE FURTHER SUBMITTED THA T THE INTEREST WAS NOT INCLUDED IN THE TAXABLE INCOME A S IT WAS UNDER BONAFIDE BELIEF THAT THE ENTIRE INTEREST W A S NOT TA X ABLE IN THE Y E AR UND E R CONSIDERATION IN VIEW OF THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THE BALA NCE INTEREST HAS BEEN ACCOUNTED IN SUBSEQUENT ASSESSMENT YEAR. H E FURTHER PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS. SSP PVT. LTD. (2008) 302 ITR 43 (P&H). HE SUBMITTED THAT PENALTY BE DELETED. 7 . LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, SUPPORTED ORDER OF ASSESSING OFFICER AND THE LD . CIT (A) . 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE INTERES T RECEIVED FROM ORIENTAL BANK OF COMMERCE WHICH WAS NOT ACCOUNTED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AS IT WAS FOLLOWING CASH METHOD OF ACCOUNTING . BEFORE US , THE ASSESSEE HAS INTER ALIA SUBMITTED THAT IT WAS UNDER A BONAFIDE BELIEF THAT THE AMOUNT IS TAXABLE IN THE YEAR OF RECEIPT AS IT WAS FOLLOWING CASH METHOD OF ACCOUNTING AND THE NON - I N CLUSION OF INTEREST AS INCOME WAS NOT WITH INTENTION TO EVADE TAX AS COULD BE SEEN FROM THE FACT THAT THE ASSESSEE HAD CARRY FORWARD LOSSES. IT WAS FURTHE R SUBMITTED THAT THE ASSESSEE HAD DISCLOSED ALL THE MATERIAL FACTS AND THERE WAS NO CONCEALMENT OF INCOME. THE AFORESAID F ACTS HAVE IT A NO. 1 521 /AHD/2013 A.Y . 2008 - 09 PAGE 6 OF 7 NOT BEEN CONTROVERTED BY REVENUE. FURTHER, IT IS SETTLED LAW THAT PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE TWO INDEPENDENT PROCEEDINGS AND T HE PENALTY ORDER CANNOT BE SOLELY BASED ON THE REASONS GIVEN IN THE ORIGINAL ORDER OF ASSESSMENT . FURTHER APART FROM THE FALSITY OF THE EXPLANATION GIVEN BY THE ASSESSEE , THE DEPARTMENT MUST HAVE BEFORE IT, BEFORE LEVYING THE PENALTY, COGENT MATERIAL OR EVIDENCE FROM WHICH IT COULD BE INFERRED THAT ASSESSEE HAS CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME OR HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS WELL SETTLED THAT THE PARAMETERS OF JUDGING TH E JUSTIFICATION FOR ADDITION MADE IN THE ASSESSMENT CASE OF THE ASSESSEE IS DIFFERENT FROM THE PENALTY IMPOSED ON ACCOUNT OF CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS OF INCOME AND THAT CERTAIN DISALLOWANCE/ADDITION COULD LEGALLY BE MADE IN TH E ASSESSMENT PROCEEDINGS ON THE PREPONDERANCE OF PROBABILITIES BUT NO PENALTY COULD BE IMPOSED U/S. 271(L)(C) OF THE ACT ON THE PREPONDERANCE OF PROBABILITIES AND REVENUE HAS TO PROVE THAT THE CLAIM OF EXPENSES BY THE ASSESSEE WAS NOT GENUINE OR WAS INFLAT ED OR THE NON INCLUSION OF INCOME WAS TO REDUCE ITS TAX LIABILITY. CONSIDERING THE AFORESAID FACTS AND ALSO THE FACT THAT THE ASSESSEE IS UNDER LIQUIDATION AND HAS BROUGHT FORWARD LOSSES, WE ARE OF THE VIEW THAT IN THE PRESENT CASE NO CASE FOR LEVY OF PEN ALTY UNDER SECTION 271(1) (C) OF THE ACT HAS BEEN MADE O UT. WE THUS DIRECT THE DELETION OF PENALTY UNDER SECTION 271(1) (C) OF THE ACT. THUS, THE GROUND OF ASSESSEE IS ALLOWED. 9 . IN T HE RESULT, A PPEAL OF THE AS S ESSE E IS ALLOWED. ( THIS ORDER P RONOUNCED IN THE OPEN COURT TODAY ON TH E 11 TH DAY OF MAY , 201 6 . ) SD/ - SD/ - S.S. GODARA ANIL CHATURVEDI ( JUDICIAL MEMBER) ( ACCOUNTANT MEMBER) AHMEDABAD, THE 11 TH DAY OF MAY , 2016 PBN/* IT A NO. 1 521 /AHD/2013 A.Y . 2008 - 09 PAGE 7 OF 7 COPIES TO: (1) THE APPEL LANT ( 2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD