Shri Sureshchandra M. Shah, Gandhinagar V. The Income Tax Officer, Ward-4, Gandhinagar

ITA 2138/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8140 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 22-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset
• Section: 2(14); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHRI SURESHCHANDRA M. SHAH, PLOT NO. 555/2, SECTOR NO. 21, GANDHINAGAR - 382021 PAN: AFDPS5557E (APPELLANT) VS THE ITO, WARD - 4, GANDHINAGAR (RESPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R. ASSESSEE BY: S H RI MANISH J. SHAH , A.R. DATE OF HEARING : 14 - 11 - 2 017 DATE OF PRONOUNCEMENT : 22 - 11 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S A PPEAL FOR A.Y. 2007 - 08 , AR IS ES FROM ORDER OF THE CIT(A), GANDHINAGAR DATED 17 - 05 - 2014 , IN PROCEEDINGS UNDER SECT ION 271(1 ) (C) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2138 / A HD/20 14 A S SESSMENT YEAR 200 7 - 08 I.T.A NO. 2138 /AHD/20 14 A.Y. 2007 - 08 PAGE NO SHRI SURESHCHANDRA M. SHAH VS. ITO 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE C.I.T.(A PPEALS) ERRED IN UPHOLDING THE LEVY OF PENALTY OF RS.21,77,147/ - BEING 300% OF THE TAX ALLEGEDLY SOUGHT TO BE EVADED. 2. THE C.I.T.(APPEALS) ERRED IN NOT DELETING THE LEVY OF PENALTY U/S.271(1 )(C) AS IT WAS NOT A CASE OF FILING OF INACCURATE PARTICULAR S NOR WAS THE CASE OF CONCEALMENT OF PARTICULARS. 3. THE ORDER OF THE C.I.T.(APPEALS) OUGHT TO HAVE DELETED THE PENALTY IN TOTO. 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 7,23,630/ - WAS FILED ON 27 TH OCTOBER, 2007. SUBSEQUENTLY , THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) ON 15 TH SEPTEMBER, 2008. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN KIS H AN VIKAS H PATRA OF RS. 1 CRORE I N THE ASSET SIDE OF TH E BALANCE SHEET ON WHICH NO INCOME FROM INTEREST ACCRUAL WAS SHOWN. THE ASSESSING OFFICER OBSERVED TH A T ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING , THEREFORE , HE WAS ASKED TO EXPLAIN WHY NOT ACCRUED INTEREST ON KISHAN VIKAS H PATRA SHOULD BE ADDED TO HIS INCOME. IN THIS RESPECT, THE ASSESEE EXPLAINED THAT KISHAN VIKAS H PATRA IS A CAPITAL ASSET U/S. 2(14) OF THE ACT AND INCOME WOULD BE ACCOUNTED AFTER APPROVAL AND INDEXATION. THE SUBMISSION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER ON THE GROUND THAT KVP IS T H E INTEREST BEARING INVESTMENT ON WHICH ASSESSEE IS ENTITLED TO RECEIVE INTEREST WITH SPECIFIC RATE AFTER EXPIRY OF 2 & YEARS FROM THE DATE OF CERTIFICATE. HE FURTHER STATED THAT AS PER KVP RULE IN TH E CASES WHERE CERTIFICATE WERE PURCHASED ON OR AFTER 1 ST DAY OF MARCH 2003 THOSE COULD BE EN CASHED AT ANY TIME AFTER EXPIRY OF 2 YEARS AND SIX MONTHS FROM THE DATE OF THE CERTIFICATE. HE FURTHER I.T.A NO. 2138 /AHD/20 14 A.Y. 2007 - 08 PAGE NO SHRI SURESHCHANDRA M. SHAH VS. ITO 3 STATED THAT AS PER CIRCULAR NO. 687 DATED 9 TH AUGUST, 1994 I NTEREST OF KISHAN VIKAS H PATRA HAS TO BE ASSESSED TO INCOME ON ACCRUAL BASIS. HE FURTHER OBSERVED THAT IT IS A SETTLED LAW THAT ACCRUED INCOME OF THE ASSESSEE CAN BE TAXED ONLY IF HE HAS RIGHT TO RECEIVE. SINCE , IN THE ASSESSEE S CASE THE PERIOD OF TWO YEARS AND SIX MONTHS FROM THE DATE OF CERTIFICATE HAS ALREADY EXPIRED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007 - 08 , THEREFORE , THE ASSESSEE HAS RIGHT TO ENCASH THE CERTIFICATE ALONG WITH THE INTEREST ACCRUED WITH THE PRESCRIBED RATE S . ACCORDINGLY, THE ASSESSING OFFICER HAS COMPUTED INTEREST AT RS. 21 ,0 9 , 121/ - WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON WHICH THE ASSESSING OFFICER HAS ALSO INITIATED PENALTY PROCEEDINGS FOR FURNISHING INACCURATE PARTICULARS OF INCOME. DURING THE COURSE OF PENALTY PROCEEDINGS, THE ASSESSEE SUBMITTED THAT KVP OF RS. 1 CRORE IS CAPITAL ASSET UND ER 2(14) OF THE ACT INCOME WILL BE ACCOUNTED FOR WHEN APPROVED AFTER TAKING IN TO CONSIDERATION INDEXATION . HE FURTHER STATED THAT REVENUE HAS ACCEPT ED HIS ARGUMENT DURING SCRUTINY FOR THE ASSESSMENT YEAR 2004 - 05 AND 2006 - 07. ON THE OTHER HAND, TH E ASSESSING OFFICER OBSERVED THAT INTEREST ON KISHAN VIKAS H PATRA HAS TO BE ASSESSED TO INCOME TAX ON ACCRUAL BASIS AS PER CIRCULAR NO. 687 DA TED 19 TH AUGUST , 1994 . THE ASSESSING OFFICER HAS STATED THAT APPEAL AGAINST THE QUANTUM ADDITION OF THE ASSESSEE HAS BEEN DISMISSED BY THE CIT(A) AND THE ITAT. CONSEQUENTLY, THE ASSESSING OFFICER HAS LEVIED 300% PENALTY IN THE CASE OF THE ASSESSEE OF RS. 21,77,147/ - I.T.A NO. 2138 /AHD/20 14 A.Y. 2007 - 08 PAGE NO SHRI SURESHCHANDRA M. SHAH VS. ITO 4 4. AGGRIEVED AGAINST THE IMPUGNED ORDER OF T HE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE PENALTY LEVIED BY THE ASSESSING OFFICER BY OBSERVING AS UNDER : 6. I HAVE GONE THROUGH THE FACTS OF THE CASE, ASSESSMENT ORDER, ORDER PASSED BY THE HON'BLE ITAT AGAINST THE QUANTUM PROCEEDINGS AND THE PENALTY ORDER. THE APPELLANT HAS STATED BEFORE ME THAT THE ISSUE OF 'TAXABILITY OF INTEREST ACCRUED ON THE KISAN VIKAS PATRA ' IS PENDING BEFORE THE CBDT SINCE 10/03/2014. THE SUBMISSION MADE BEFORE ME DURING THE APPELLATE PROCEEDINGS IS MORE OF ALLEGATIONS THAN SUBMISSION TO DEFEND HIS CASE. THE APPELLANT HAS CONTENDED BEFORE ME THAT INCOME FROM KVP IS A CAPITAL ASSET AND HE IS ENTITLED TO INDEXATION BENEF IT. HE HAS FURTHER CONTENDED THAT SINCE KVP IS A CAPITAL ASSET AS PER SECTION 2(14) OF THE ACT, THE INCOME FROM CAPITAL ASSET IS LIABLE AS CAPITAL GAIN AND NOT AS INTEREST INCOME. AS SUCH, THE AO HAS ER RED IN LEVYING PENALTY U/S 271(1 )(C) OF THE ACT AND AR GUED TO DELETE TH E PENALTY LEVIED OF RS.21,77,247/ - . I FIND THAT THE CONTENTION OF THE APPELLANT HAS ALREADY BEEN CONSIDERED BY THE AO, BOTH DURING THE ASSESSMENT PROCEEDINGS AS WELL AS DURING THE PENALTY PROCEEDINGS. EVEN THE HON'BLE ITAT BENCH IN ITS ORD ERS DATED 12/10/2012 AND 26/4/2013 AGAINST MISCELLANEOUS A PPLICATION (REPRODUCED IN PARAS ABOVE), HAS CONSIDERED ALL ASPECTS OF THE CASE, BEFORE PRONOUNCING ITS JUDGMENT RELYING IN THE CASE OF KANTILAL SANGHVI VS ACIT (2004) 89 ITD 282. NO NEW EVIDENCES HA VE BEEN BROUGHT ON RECORD BY THE APPELLANT TO PROVE HIS CASE. FROM THE ASSESSMENT ORDER, IT IS CLEAR THAT APPELLANT CONCEALED HIS INCOME BY WAY OF FURNISHING INACCURATE PARTICULARS OF HIS INCOME IN RESPECT OF INCOME EARNED FROM INVESTMENT IN KVPS. IN VIEW THEREOF, IT IS HELD THAT THE ACTION OF THE AO IN LEVYING PEN ALTY OF RS.21,77,147/ - U/S 271(1 )(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME EARNED FROM KVPS IS HEREBY UPHELD. THE RELEVANT GROUND OF APPEAL IS REJECTED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING INFORMATION OF AUDIT REPORT, AS SESSMENT ORDER, AND COPY OF CIRCULAR NO. 687 ETC. H E HAS ALSO PLACED RELIANCE ON T H E DECISION OF CO - ORDINATE BENCH OF ITAT IN THE CASE OF PIRUZ AREEZ KHAMBATTA VS. ACIT (2015) 62 TAXMANN.COM 236 (AHMEDABAD - TRIB) (TM). ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF THE LD. CIT(A). I.T.A NO. 2138 /AHD/20 14 A.Y. 2007 - 08 PAGE NO SHRI SURESHCHANDRA M. SHAH VS. ITO 5 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULL Y. WE NOTICED THAT ASSESSEE HAS SHOWN INVESTMENT IN THE KVP OF RS. 1 CRORE IN THE BALANCE SHEET AS ON 31 ST MARCH, 2007. WE HAVE ALSO NOTICED FROM THE COPY OF ASSESSMENT ORDER PERTAINING TO ASSESSMENT YEAR 2006 - 07 AND 2005 - 06 ENCLOSED IN THE PAPER BOOK WHEREIN NO ADDITION ON INTEREST ACCRUAL ON KVP WAS MADE IN THE CASE OF THE ASSESSEE. T HE ASSESSEE HAS EXPLAINED THAT KVP OF RS. 1 CRORE WAS CONSIDERED AS CAPITAL ASSET UNDER 2(14) OF THE ACT, THEREFORE, INCOME WILL BE ACCOUNTED FOR WHEN APPROVED AF TER INDEXATION. UNDER THESE CIRCUMSTANCES , HE HAS NOT OFFERED THE INTEREST INCOME ON ACCRUAL BASIS BECAUSE THE KVP WAS NOT ENCASHED . AFTER CONSIDERING ALL THESE FACTS, WE OBSERVED THAT ASSESSEE HAS FURNISHED THE PARTICULARS PERTAINING TO HIS INCOME AND IT IS NOT CASE OF FURNISHING OF INACCURATE PARTICULAR OF INCOME . IN VIEW OF THE FACTS ELABORATED AS SUPRA WE ARE NOT INCLINED WITH THE FINDINGS OF LD. CIT(A) , THEREFORE, THE PENALTY LEVIED IS DELETED. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLO WED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 22 - 11 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABA D : DATED 22 /11 /2017 I.T.A NO. 2138 /AHD/20 14 A.Y. 2007 - 08 PAGE NO SHRI SURESHCHANDRA M. SHAH VS. ITO 6 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,