JCIT, Kumbakonam V. M/s. The Kumbakonam Mutual Benefit Fund Limited, Kumbakonam

ITA 182/CHNY/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68714 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 07-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI. BEFORE DR.O.K. NARAYANAN, VICE-PRESIDENT & SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 182/MDS/2011 ASSESSMENT YEAR: 2006-07 & C.O. NO. 42/MDS/2011 [IN I.T.A. NO.182/MDS/2011] THE JOINT COMMISSIONER OF INCOME TAX, KUMBAKONAM RANGE, KUMBAKONAM. VS. M/S. THE KUMBAKONAM MUTUAL BENEFIT FUND LIMITED., 145, TSR BIG STREET, KUMBAKONAM. [PAN : AADFT0308D] (APPELLANT) (RESPONDENT/ CROSS OBJECTOR ) APPELLANT BY : SHRI T.N. BETGERI, JCIT RESPONDENT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE DATE OF HEARING : 17.09.2013 DATE OF PRONOUNCEMENT : 17.09.2013 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPALLI DATED 11.11.20 10 RELEVANT TO THE ASSESSMENT 2006-07. 2. BRIEF F ACTS OF THE CASE ARE THAT THE ASSESSEE, M/S KUMBAKO NAM MUTUAL BENEFIT FUND LIMITED, IS ENGAGED IN ACCEPTIN G DEPOSITS AND LENDING I II I.T.A. .T.A. .T.A. .T.A. NO. NO. NO. NO.182 182182 182/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O. NO. 42/M/11 C.O. NO. 42/M/11 C.O. NO. 42/M/11 C.O. NO. 42/M/11 2 LOANS TO THE MEMBERS. THE ASSESSEE FILED ITS RETURN DECLARING TOTAL INCOME OF RS.3,29,57,632/- FOR THE ASSESSMENT YEAR UNDER CONS IDERATION AND THE SAME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND S UBSEQUENTLY THE SAME WAS SELECTED FOR SCRUTINY. A NOTICE UNDER SECTION 1 43(2) OF THE ACT WAS ISSUED AND ASSESSEE WAS ASKED TO FILE DETAILS IN RE SPECT OF THE AMOUNT OF RS.57,73,021/- NOT RECOGNIZED FOR THE ASSESSMENT YE AR UNDER CONSIDERATION. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS SUBM ITTED THAT THE COMPANY HAS DERIVED INCOME FROM INTEREST ON LOANS GIVEN BY IT AND INTEREST INCOME FROM BANK DEPOSITS. THE REVENUE AND EXPENDITURE ARE ACCOUNTED ON ACCRUALS VIS-A-VIS, GOING CONCERN BASIS, BECAUSE TH OSE MORTGAGE LOANS, THE COLLECTION OF WHICH IS IN ARREARS FOR MORE THAN ONE YEAR, IT WAS DECIDED TO POSTPONE THE RECOGNITION OF THE REVENUE ON ACCOUNT OF UNCERTAINTY AS PER AS-9 AND THE SAME SHALL BE RECOGNIZED ONLY WHEN THE COLLECTION IS REASONABLY CERTAIN. SINCE THE INTEREST WAS NOT ACCO UNTED, THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE AND ACCORDINGLY , THE ASSESSMENT WAS COMPLETED. 3. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MA TTER IN APPEAL BEFORE THE LD. CIT(APPEALS). 4. THE LD. CIT(APPEALS), AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE, HAS HELD AS UNDER: I II I.T.A. .T.A. .T.A. .T.A. NO. NO. NO. NO.182 182182 182/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O. NO. 42/M/11 C.O. NO. 42/M/11 C.O. NO. 42/M/11 C.O. NO. 42/M/11 3 4. THE AFORESAID DECISIONS OF THE SUPREME COURT HA VE BEEN FOLLOWED BY HON'BLE HIGH COURT IN THE CASE OF CIT V S INDIA EQUIPMENT LEASING LIMITED [293 ITR 350 (MDS). WHAT FOLLOWS FR OM THE JUDGMENT IS THAT THE INTEREST ON THE LOAN WILL BE TAXED ON A CCRUAL BASIS IN THE CASE OF EACH BORROWER UNLESS IT IS SEEN FROM THE ACCOUNT OF EACH BORROWER THAT THERE HAS BEEN ANY MOVEMENT IN HIS ACCOUNT IN LAST THREE YEARS THAT IS NO AMOUNT HAS BEEN PAID BY THE BORROWER IN CONSE QUENT THREE YEARS. ONLY THEN FROM FOURTH YEAR ONWARDS THE APPELLANT WI LL BE FREE NOT TO RECOGNIZE ACCRUED INTEREST IN THE ACCOUNT OF THE BO RROWER SINCE IT IS TREATED AS STICKY LOAN. THEREFORE, IN THE LIGHT OF THE ABOVE JUDGMENT, THE APPELLANT COMPANY WAS ASKED TO FURNISH A LIST OF BO RROWERS (OUT OF 80 BORROWERS) IN WHOSE CASE THERE HAS NOT BEEN ANY MOV EMENT IN THEIR RESPECTIVE ACCOUNTS DURING THE PERIOD 01.04.2002 TO 31.03.2003. THE APPELLANT HAS CARRIED OUT VERIFICATION IN THE ACCOU NT OF EACH BORROWER AND HAS INFORMED THAT IN THE CASE OF 48 BORROWERS A MOUNTING TO RS. 5416605 OF INTEREST THAT THERE WAS NO MOVEMENT DURI NG THE LAST THREE YEARS AND IN CASE OF OTHER ACCOUNTS THERE WERE NEGL IGIBLE MOVEMENTS. THEREFORE, IT IS APPARENT THAT THE APPELLANT COMPAN Y HAVE TO CLASSIFY ONLY THOSE 48 ACCOUNTS AS 'STICKY' AND DOES NOT CLA SSIFY THE BALANCE 5 ACCOUNTS AMOUNTING TO RS. 356416 AS STICKY ACCOUNTS . WHEN THE MONEY WAS BEING RETURNED BY THE BORROWERS EVEN ON PIECE M EAL BASIS TO THE APPELLANT COMPANY, IT CANNOT BE SAID THAT THESE LOA NS HAVE BECOME STICKY AND THEREFORE INCOME WAS UNRECOGNIZABLE. CON SEQUENTLY, THE APPELLANT COMPANY WAS EXPECTED TO SHOW ACCRUED INTE REST INCOME IN CASE OF ALL THESE BORROWERS. WHEREAS THE APPELLANT COMPANY HAS FAILED TO RECOGNIZE SUCH ACCRUED INTEREST AS THE INCOME OF THE COMPANY DURING THE YEAR. ACCORDINGLY, I AM INCLINED TO AGREE WITH THE VIEWS OF THE ASSESSING OFFICER THAT OUT OF THE INTEREST OF RS.57 73021, RS. 356416 HAD ACCRUED TO THE APPELLANT COMPANY IN THE FINANCIAL Y EAR RELEVANT TO THE I II I.T.A. .T.A. .T.A. .T.A. NO. NO. NO. NO.182 182182 182/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O. NO. 42/M/11 C.O. NO. 42/M/11 C.O. NO. 42/M/11 C.O. NO. 42/M/11 4 AY 2006-07 AND THE SAME IS FULLY TAXABLE IN THIS YE AR IN THE LIGHT OF THE DECISION OF JURISDICTIONAL HIGH COURT. ACCORDINGLY, ADDITION MADE BY ASSESSING OFFICER AMOUNTING TO RS. 356416 ON THIS I SSUE IS CONFIRMED AND ADDITION MADE TO THE EXTENT OF RS. 54,16,605 IS DELETED. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING, THE LD. DR HAS SUBMITTE D THAT THE ASSESSEE HAS NOT FILED ANY DETAILS OF BORROWERS, WHO ARE NOT PAY ING INTEREST FOR THE PERIOD FROM 01.03.2002 TO 31.03.2003. THESE DETAILS WERE F ILED ONLY BEFORE THE LD. CIT(APPEALS). THEREFORE, IT IS VIOLATION OF RULE 46 A OF THE INCOME TAX RULES AND REQUESTED THAT THE ORDER OF THE LD. CIT(APPEALS ) MAY BE SET ASIDE AND REMITTED THE MATTER BACK TO THE ASSESSING OFFICER T O EXAMINE AND CONSIDER AFRESH. HE ALSO RELIED ON THE DECISION OF THE HONB LE MADRAS HIGH COURT IN THE CASE OF CIT V. M/S. SAKTHI FINANCE LIMITED IN T .C.(A) NOS. 282 AND 283 OF 2007 VIDE ORDER DATED 12.02.2013. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT ALL THE DETAILS IN RESPECT OF BORROWERS, WHO W ERE NOT PAYING INTEREST FOR THE PERIOD FROM 01.03.2002 TO 31.03.2003 WERE FILED BEFORE THE LD. CIT(APPEALS) AND SUBMITTED THAT THE SAME CAN BE VER IFIED BY THE ASSESSING OFFICER. 8. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND ALSO ORDERS OF AUTHORITIES BELOW. THE CASE OF THE ASSESS EE IS THAT THE ASSESSEE I II I.T.A. .T.A. .T.A. .T.A. NO. NO. NO. NO.182 182182 182/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O. NO. 42/M/11 C.O. NO. 42/M/11 C.O. NO. 42/M/11 C.O. NO. 42/M/11 5 HAS NOT RECEIVED INTEREST FROM CERTAIN BORROWERS AM OUNTING TO RS.57,73,021/-. THE SAID AMOUNT WAS RECOGNIZED BY T HE ASSESSEE ON THE GROUND THAT THE BORROWERS ARE NOT PAYING INTEREST S INCE ONE YEAR AND THEREFORE, THE ASSESSEE HAS DECIDED TO POSTPONE THE RECOGNITION ON ACCOUNT UNCERTAINTY OF ARREARS. THE ASSESSEE HAS NOT FILED THE LIST OF BORROWERS BEFORE THE ASSESSING OFFICER AND IT HAD FILED THE S AME BEFORE THE LD. CIT(APPEALS). THE LD. CIT(APPEALS), AFTER CONSIDERI NG THE LIST OF BORROWERS SUBMITTED BY THE ASSESSEE, PARTLY ALLOWED THE APPEA L FILED BY THE ASSESSEE WITHOUT OBTAINING REMAND REPORT FROM THE ASSESSING OFFICER. WE FIND THAT THE LIST OF BORROWERS IS A CRUCIAL DOCUMENT TO DECIDE W HETHER TO RECOGNIZE OR NOT TO RECOGNIZE THE INCOME BY THE ASSESSING OFFICER. T HEREFORE, SUCH CRUCIAL LIST OF BORROWERS NOT FILED BEFORE THE ASSESSING OFFICER FOR VERIFICATION, ETC. AND WITHOUT ASSOCIATING THE ASSESSING OFFICER, THE LD. CIT(APPEALS) HAS ACCEPTED THE LIST OF BORROWERS AND DECIDED THE ISSUE, AMOUNT S TO VIOLATION OF RULE 46A OF THE INCOME TAX RULES. UNDER THESE FACTS AND CIRC UMSTANCES, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) AND REMIT THE MAT TER BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO DECID E THE ISSUE AFRESH BY KEEPING IN VIEW OF THE CASE LAW RELIED ON BY THE LD . CIT(APPEALS) AS WELL AS THE LD. DR IN ACCORDANCE WITH LAW AFTER ALLOWING SU FFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. I II I.T.A. .T.A. .T.A. .T.A. NO. NO. NO. NO.182 182182 182/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O. NO. 42/M/11 C.O. NO. 42/M/11 C.O. NO. 42/M/11 C.O. NO. 42/M/11 6 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 10. THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE APPEAL OF THE REVENUE. SINCE, WE HAVE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) AND REMITTED THE MATTER BACK TO THE ASSESSING OFFICER, THE CO BECOMES INFRUCTUOUS AND ACCORDINGLY, DISMISSED AS INFRUCTUO US. 11. IN THE RESULT, THE CO FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 17 TH OF SEPTEMBER, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 17.09.2013 VM/- TO: THE ASSESSEE/A.O./CIT(A)/CIT/D.R.