SMT NEELU SHARMA, Kota V. ITO, Kota

ITA 256/JPR/2011

• Counselvise Citation: 25623114 RSA 2011
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 28-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, SMC JAIPUR (BEFORE SHRI SHRI N.L. KALRA) ITA NO.256/JP/2011 ASSESSMENT YEAR : 2005-2006 SMT. NEELU SHARMA, VS. I.T.O. WARD-2(2), KOTA. KOTA. (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY: ADJOURNED APPLICATION RE JECTED DATE OF HEARING: 25.10.2011 DATE OF PRONOUNCEMENT : ORDER THE ASSESSEE HAS FILED AN APPEAL AGAINST ORDER OF LD. CIT (A) AJMER DATED 28.01.2011. 2. THE FIRST GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.4399/- AS ACCRUED INTEREST ON IDBI B ONDS WHEN THE ASSESSEE IS FOLLOWING CASH SYSTEM CONSISTENTLY. 2 3. THE A.O. HAS MADE ADDITION ON THE BASIS THAT INT EREST HAS ACCRUED. BEFORE LD. CIT (A), THE ASSESSEE SUBMITTED AS UNDER: ASSESSEE MAINTAINS ACCOUNTS ON CASH BASIS AND WHICH IS ALLOWABLE U/S 145 OF THE INCOME TAX ACT, 1961. ASSESSEE HAS MADE INVE STMENT IN IDBI BONDS IN WHICH INTEREST FLUCTUATE YEAR TO YEAR AND AS SUC H WHATEVER AMOUNT THE ASSESSEE RECEIVES SHE SHOWS IT UNDER INCOME FROM OTHER SOURCES. THIS IS SOMETHING WHICH THE ASSESSEE HAS FOLLOWED IN A.Y : 2004-05 ALSO. THIS IS THE METHOD WHICH THE ASSESSEE WILL FOLLOW IN THE FU TURE AS WELL. AS EVIDENT, IN A.Y. 2004-05, ASSESSEE RECEIVED INTEREST RS.2100 AND WAS SHOWN UNDER INCOME FROM OTHER SOURCES. DURING A.Y: 2005-06, A SSESSEE RECEIVED RS.101 ONLY AND IS CORRECTLY SHOWN BY THE ASSESSEE IN UNDER INCOME FROM OTHER SOURCES. THE CASH BASIS OF ACCOUNTING FOR IN COME FROM OTHER SOURCES IS A METHOD REGULARLY EMPLOYED BY THE ASSES SEE AND IS ALLOWABLE U/S 145. THUS, THE ADDITION MADE BY THE LD. ITO IS BASELESS AND WAS MADE WITHOUT CONSIDERING THE EFFECTIVE PROVISIONS OF THE INCOME TAX ACT, 1961 AND SHOULD BE DELETED. 4. THE LD. CIT (A) CONFIRMED THE ADDITION AFTER OBS ERVING AS UNDER: ARGUMENT OF THE APPELLANT IS NOT ACCEPTABLE. AS MEN TIONED BY AO IN THE ASSESSMENT ORDER, LAST YEAR APPELLANT HAS DECLARED INTEREST OF RS.2,100/- FROM IDBI BONDS. THIS CLEARLY INDICATES THAT INTERE ST IS BEING DECLARED ON ACCRUAL BASIS. AO HAS THEREFORE RIGHTLY MADE ADDITI ON OF RS.4399/- AND THE SAME IS CONFIRMED. 5. THE ASSESSEE HAS AN OPTION TO HAVE EITHER CASH S YSTEM OR MERCANTILE SYSTEM. THE A.O. IN HIS ORDER HAS NOT RECORDED A FINDING THAT T HE CASH SYSTEM OF ACCOUNTING IS REJECTED. IT IS ALSO NOT THE CASE OF REVENUE THAT S UCH INTEREST HAS NOT BEEN SHOWN BY THE ASSESSEE IN THE YEAR IN WHICH IT HAS BEEN RECEIVED. IF SUCH INTEREST HAS NOT BEEN SHOWN IN THE YEAR OF RECEIPT THEN THE ACTION BE TAKEN FOR TH AT YEAR. HENCE THE ADDITION OF RS.4399/- IS DELETED. 3 6. THE SECOND GROUND OF APPEAL IS THAT LD. CIT (A) HAS CONFIRMED THE ADDITION OF RS.48,800/- PAID AS L.I.C. PREMIUM BECAUSE THE SAME IS SHOWN AS INVESTMENT ON THE DEBIT SIDE OF BALANCE SHEET. 7. BEFORE THE LD. CIT (A), THE ASSESSEE SUBMITTED A S UNDER: ASSESSEE HAS DEPOSITED RS.48800/- OF LIC PREMIUM AN D THE RECEIPT WAS ANNEXED WITH THE RETURN OF INCOME AND ASSESSEE HAS SHOWN THE SAME IN THE HEAD SUNDRY INVESTMENT AND ADVANCES IN THE BALANC E SHEET AS ON 31.3.2005. THE TOTAL OF THE HEAD SUNDRY INVESTMENT AND ADVANCES WAS RS.214500 AND THE LIST OF THE ITEMS COMPRISED THERE IN WAS FILED WITH THE REPLY OF THE ASSESSEE WHICH CLEARLY SHOWS THE AMOUN T RS.48800 PAID TOWARDS LIC PREMIUM BY THE ASSESSEE AND AS SUCH RIG HTLY DEPICTED IN THE BALANCE SHEET FILED WITH THE LD. AO. IT DEPENDS ON THE ACCOUNTING POLICY OF THE ASSESSEE AS TO WHAT TREATMENT HE GIVES TO LIC P REMIUM. ASSESSEE MAY TREAT IT AS A PERSONAL EXPENDITURE AND THE DEBIT BA LANCE OF THE SAME MAY BE DEBITED TO THE CAPITAL ACCOUNT; ALSO THE SAME MA Y BE TREATED AS AN INVESTMENT AND THE DEBIT BALANCE MAY BE SHOWN AS IN VESTMENT IN THE BALANCE SHEET. IN BOTH THE CASES THE PAYMENT IS MAD E BY THE ASSESSEE ONLY, WHICH IS THE CRUX OF THE MATER AND THIS WAS THE ONL Y REQUIREMENT LAID U/S 88 OF THE INCOME TAX ACT, 1961. SECTION 88 NOWHERE MANDATED THAT THE PAYMENT SO MADE FOR THE LIC PREMIUM SHOULD BE DEBIT ED TO CAPITAL ACCOUNT ONLY. SINCE, THE ASSESSEE HAS MADE THE PAYM ENT AND HAS RIGHTLY SHOWN THE SAME IN THE BALANCE SHEET, THE PRINCIPLE OF SUBSTANCE OVER FORM SHOULD BE APPLIED AND ASSESSEE SHOULD BE ALLOWED TH E MUCH DESERVED REBATE U/S 88. FOR YOUR HONOURS KIND PERUSAL, WE ARE HEREWITH FILING THE COPY OF REPLY FILED BEFORE THE AO AT THE TIME OF HE ARING WHICH DEPICTS THE PAYMENT MADE FOR LIC PREMIUM AS PART OF INVESTMENTS . ALSO WE ARE ANNEXING THE CHART OF BALANCE SHEETS PRECEDING YEA R FIGURE AND INVESTMENT MADE DURING THE YEAR UNDER CONSIDERATION . THIS WILL CLEAR THAT ASSESSEE HAS DEPOSITED LIC PREMIUM IN THE CURRENT Y EAR FROM HER INCOME. THUS, THE ADDITION MADE BY THE LD. ITO IS BASELESS AND WAS MADE WITHOUT CONSIDERING THE EFFECTIVE PROVISIONS OF THE INCOME TAX ACT, 1961 AND SHOULD BE DELETED. 8. THE LD. CIT (A) HAS CONFIRMED THE ADDITION AFTER OBSERVING AS UNDER: 4 ARGUMENT OF THE APPELLANT IS NOT ACCEPTABLE. DURING THE YEAR APPELLANT HAS SHOWN TOTAL DRAWINGS OF RS.41,250/- ONLY. MOREO VER AS MENTIONED BY AO IN THE ASSESSMENT ORDER, FROM THE PERUSAL OF BAN K ACCOUNT OF APPELLANT IT IS OBSERVED THAT THERE ARE NO WITHDRAWALS OF SUB STANTIAL AMOUNTS PRIOR TO MAKING THIS PAYMENT OF LIC PREMIUM. ADDITION OF RS.48,800/- IS JUSTIFIED IN SUCH A SITUATION AND THE SAME IS CONFI RMED. 9. THE ACCOUNTING OF L.I.C. PREMIUM CAN EITHER BE S HOWN BY DEBITING THE CAPITAL ACCOUNT AND SHOWING THE BALANCE IN BALANCE SHEET OR PREMIUM PAID CAN BE SHOWN AS AN ASSET IN BALANCE SHEET. THE EXPLANATION GIVEN IS CO RRECT. THERE IS NO CASE OF MAKING ADDITION OF RS.48,800/-. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN OPEN COURT ON 28.10.201 1 SD/- (N.L. KALRA) ACCOUNTANT MEMBER DATED : 28.10.2011 *S.KUMAR* COPY FORWARDED TO:- 1. SMT. NEELU SHARMA, KOTA 2. THE INCOME TAX OFFICER, WARD-2(2), KOTA. 3. THE CIT 4. THE CIT(A), 5. THE D/R, ITAT, JAIPUR 6. THE GUARD FILE IN ITA NO.256/JP/2011 BY ORDER A.R.,I.T.A.T., JAIPUR