Dr. Ram Prakash Miglani, Jaipur V. ITO, Jaipur

ITA 272/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5550 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDER SINGH JCIT DR DHK
• Assessee Lawyers: G M MEHTA
• Keywords: Opportunity of being heard; Notional interest
• Section: 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 272/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 DR. RAM PRAKASH MIGLANI PRAKASH CLINIC AMER ROAD, JAIPUR CUKE VS. THE ITO WARD- 7 (1) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AARPP 1110 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI G.M. MEHTA, CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI RAJENDER SINGH, JCIT-. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/12/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 29 /01/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 23-01-2014 FOR THE ASSES SMENT YEAR 2006-07 RAISING THEREIN FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A) HAD ERRED IN LAW AND ON FA CTS IN SUSTAINING APPLICATION OF PROVISIONS OF SECTION 145 (3) OF I.T. ACT WHICH PURPOSE WAS ONLY TO REJECT THE CASH SYSTEM OF ACCOUNTING ADOPTED BY THE APPELLANT WHO IS A PROFESSIONAL PERS ON (DOCTOR IN PRACTICE). ITA NO. 272/JP/2014 DR. RAM PRAKASH MIGLANI VS. ITO WARD- 7(1), JAIPUR . 2 (2) IGNORING THE LAW LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT ON IDENTICAL FACTS IN NUM BER OF JUDGEMENTS LD. CIT WAS NOT JUSTIFIED IN SUSTAINING ADDITION OF RS. 5,04,000/- WHICH IS THE PRESUMED INTEREST FROM ONE SHRI NAVEEN GROVER TO WHOM MONEY WAS ADVANCED BY ASSESSEE IN TH E F.Y. 1995-97 AND THEREAFTER FOR LAST 17 YEARS, NEITHER T HE DEBTOR IS CONTACT WITH THE ASSESSEE NOR HE HAD ANY TRANSACTIO N WITH ASSESSEE NOR HIS WHEREABOUTS ARE KNOWN TO THE ASSESSEE OR EV EN BY THE DEPARTMENT AGAINST WHOM INCOME TAX DEMANDS IN CRORE S IS OUTSTANDING (WITH ACIT, CIRCLE- 3, JAIPUR) 2.1 DURING THE COURSE OF HEARING, THE LD. AR CONTEN DS THAT THIS IS THE SECOND ROUND OF PROCEEDINGS. THIS BENCH OF ITAT VID E ITS ORDER DATED 29-10-2010 IN ITA NO. 432/JP/2010 SET ASIDE THE ISS UE BACK TO THE FILE OF THE AO BY FOLLOWING OBSERVATION. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT MATTER SHOULD GO B ACK TO THE FILE OF AO TO ASCERTAIN THE FACTUAL ASPECTS. FIRSTL Y, THE ASSESSEE HAS CLAIMED THAT HE HAS MAINTAINED CASH SY STEM OF ACCOUNTING, THEREFORE, NO ADDITION CAN BE MADE ON A CCRUAL BASIS. THIS FACT NEEDS TO BE EXAMINED BY THE AO. SECONDLY, THE ASSESSEE HAS THAT SHRI NAVEEN GROVER WHO IS NOT TRACEABLE AND THE LOAN GIVEN BY ASSESSEE HAS BECOME TIME BARRED AND, THEREFORE, ASSESSEE IS NOT EVEN ABLE TO FILE SUIT AGAINST SHRI NAVEEN GROVER FOR RECOVERY OF THE PRIN CIPAL AMOUNT. THEREFORE, THERE IS NO QUESTION OF MAKING ANY ADDITION ON THE BASIS OF ACCRUAL OF INTEREST. IF TH ESE FACTS ARE CORRECT AND SHRI NAVEEN GROVER IS NOT TRACEABLE AND THE RECOVERY OF PRINCIPAL AMOUNT IS NOT POSSIBLE AS THE SAME HAS BECOME BARRED BY LIMITATION, THEN A FRESH VIEW HAS TO BE TAKEN. RELIANCE HAS BEEN PLACED ON TWO DECISIONS O F HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. VTC ITA NO. 272/JP/2014 DR. RAM PRAKASH MIGLANI VS. ITO WARD- 7(1), JAIPUR . 3 LEASING & FINANCE LTD., 39 TAX WORLD 211 (RAJ.) AND IN CASE OF CIT VS. ROOPCHAND NAVAL CHAND GANDHI, 39 TA X WORLD 225 (RAJ.) HAS TO BE TAKEN INTO CONSIDERATION . IN ONE OF THE DECISIONS I.E. IN CASE OF CIT VS. VTC LERASI NG & FINANCE LTD. (SUPRA), THE HONBLE HIGH COURT HAS HE LD THAT EVEN ON ACCRUAL BASIS NO ADDITION CAN BE MADE AS TH E REAL INCOME ONLY TO BE TAXED. IN THE PRESENT CASE THE A SSESSEE FROM THE DAY ONE IS ALLEGING THAT NO INCOME IS RECE IVED BY THE ASSESSEE. THEREFORE, NO TAX CAN BE CHARGED ON AN INCOME WHICH IS NOT RECEIVED OR NOT RECEIVABLE EVEN . THE RATIO OF THIS DECISION IS NOT CONSIDERED BY LD. CIT (A) THOUGH DECISION WAS CITED BY HIM. THEREFORE, IN VIEW OF TH ESE FACTS AND CIRCUMSTANCES, WE SET ASIDE THE ORDER OF LD. CI T (A) AND RESTORE THE MATTER TO THE FILE OF AO FOR PASSING A FRESH ORDER IN LIGHT OF OUR OBSERVATIONS ABOVE AND AFTER AFFORD ING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE PERUSAL OF ITAT ORDER REVEALS THAT THE AO WAS A SKED TO ASCERTAIN WHETHER THE ASSESSEE IS FOLLOWING CASH SYSTEM OF AC COUNTING OR NOT. THE AO IN THE SECOND ROUND AT PARA 3 HAS GIVEN A CLEAR FINDING THAT IN AUDIT REPORT FILED IN FORM NO. 3CB THE METHOD OF ACCOUNTI NG EMPLOYED IS CLEARLY SHOWN ON CASH BASIS OF ACCOUNT. THUS IN TEREST CANNOT BE ADDED ON NOTIONAL BASIS UNLESS IT IS ACTUALLY RECEIVED BY THE ASSESSEE. DESPITE THIS CLEAR FINDING, NOTIONAL INTEREST HAS BEEN ADDE D WITHOUT RECEIPT THEREOF. IT HAS NOT BEEN DISPUTED THAT SHRI NAVEEN GROVAR, THE DEBTOR IS ABSCONDING SINCE LAST 17 YEARS AND IS NOT TRACEABLE THUS THE PRINCIPAL AMOUNT ITSELF IS UNRECOVERABLE. IT IS PLEADED THAT ONCE THE ASSESSEE IS ITA NO. 272/JP/2014 DR. RAM PRAKASH MIGLANI VS. ITO WARD- 7(1), JAIPUR . 4 FOLLOWING CASH SYSTEM OF ACCOUNTING AND LATER ON IS NOT TRACEABLE SINCE LAST 17 YEARS THEN THERE IS NO JUSTIFICATION IN ADD ING THE NOTIONAL INTEREST DESPITE DIRECTION OF ITAT. 2.2 THE LD. DR SUPPORTED THE ORDER OF THE LD. CIT(A ). 2.3 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. I FIND MERIT IN THE CONTENTION S OF THE LD. AR OF THE ASSESSEE. THIS BENCH OF ITAT HAS DIRECTED THE AO TO EXAMINE THE ABOVE TWO ASPECTS. THE AO HAS NOT DISPUTED THE FACT THAT THAT ASSESSEES METHOD OF ACCOUNTING IS CASH SYSTEM WHICH CLEARLY MEANS TH AT UNLESS INTEREST IS ACTUALLY RECEIVED THE SAME CANNOT BE TREATED AS INC OME AND TAXED ON NOTIONAL BASIS. IN THESE FACTS AND CIRCUMSTANCES, N OTIONAL INTEREST INCOME CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE THAT T OO FROM THE SAID DEBTOR SHRI NAVEEN GROVAR WHO IS ABSCONDING SINCE LAST 17 YEARS, NOT TRACEABLE AND WITH PRINCIPAL AMOUNT IN JEOPARDY. IN VIEW THER EOF, THE IMPUGNED ADDITION CANNOT BE SUSTAINED WHICH IS DELETED. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 272/JP/2014 DR. RAM PRAKASH MIGLANI VS. ITO WARD- 7(1), JAIPUR . 5 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 /01/2 016 SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29 /01/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- DR. RAM PRAKASH MIGLANI , JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO,WARD- 7 (1), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.272/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR