The DCITAnand Circle, Anand V. National Dairy Development Board, Anand

ITA 3243/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6418 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV AGARWAL
• Assessee Lawyers: R S SHAH
• Keywords: Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI D. K. TYAGI, JUDICIAL MEMBER AND SHRI D. C. AGARWAL, ACCOUNTANT MEMBER I.T.A. NO. 3243/ AHD/2009 (ASSESSMENT YEAR 2006-07) DCIT, ANAND CIRCLE ANAND VS. NATIONAL DAIRY DEVELOPMENT BOARD, POST BOX NO.40, ANAND-388001 PAN/GIR NO. :AABCN2029C (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI RAJIV AGARWAL, CIT DR RESPONDENT BY: SHRI R. S. SHAH, AR O R D E R PER SHRI D. K. TYAGI, JUDICIAL MEMBER:- THIS IS REVENUES APPEAL PREFERRED AGAINST THE ORD ER OF CIT(A) IV, BARODA FOR THE ASSESSMENT YEAR 2006-07. THE REVENU E HAS TAKEN FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITIONS OF INTEREST INCOME OF RS. 5,95,82,828/-FOLLOWING THE ITAT'S DECISION FOR THE A.Y.2003-04 AND IGNORING THE FACT THAT THE ASSESSEE WAS FOLLOWING C ASH SYSTEM OF ACCOUNTING FOR INTEREST INCOME WHEN IT WAS NOT A TAXABLE ENTIT Y AND SWITCHED OVER TO MERCANTILE SYSTEM OF ACCOUNTING WITH RETROSPECTIVE EFFECT WHEN IT BECAME TAXABLE, SO THAT SUCH INTEREST INCOME ESCAPED FROM THE TAX NET. 2. THE GROUND OF APPEAL IS REGARDING TAXATION OF IN TEREST INCOME OF RS.5,95,82,828/- ACCRUED PERTAINING TO FINANCIAL YE AR 2001-02 AND EARLIER YEAR BUT TAXED BY THE A.O. IN ASSESSMENT YEAR 2006- 07 DUE TO ITSRECEIPT IN I.T.A.NO. 3243/AHD/2009 2 THE FINANCIAL YEAR 2005-06. BEFORE CIT(A), IT WAS POINTED OUT BY THE ASSESSEE THAT THE ISSUE IS SQUARELY COVERED BY THE ITAT ORDER IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 FOLLOWING WHICH LD, CIT(A) HAD DELETED THE SIMILAR ADDITION IN ASSESSME NT YEAR 2004-05 AND 2005-06. THE LD. CIT(A) FOLLOWING THE ITATS ORDER IN I.T.A.NO. 454/AHD/2006 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04, WHEREIN FOLLOWING WAS HELD: THE INCOME OF THE ASSESSEE IS CHARGEABLE TO TAX FROM T HE ASSESSMENT YEAR IN QUESTION AND IT IS THIS YEAR WHE N THE INCOME OF THE ASSESSEE IS TO BE ASSESSED ON THAT BASIS. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS FOLLOWING MERCANTIL E SYSTEM OF ACCOUNTING AND INTEREST INCOME IS TO BE ASSESSED ON THAT BASIS. THE INCOME THAT HAS NOT ACCRUED IN THE YEAR UNDER CONSIDERATION, BUT HAD ACCRUED IN THE EARLIER YEAR, WOULD NOT BE ASSESSABLE MERELY BECAUSE IT HAS BEEN RECEIVED IN T HE IMPUGNED YEAR. THE SUPREME COURT IN THE CASE OF UNITED COMME RCIAL BANK VS. CIT (SUPRA) HELD THAT FOR THE PURPOSE OF I NCOME-TAX, WHAT IS TO BE SEEN IS THE REAL INCOME WHICH IS DEDU CED ON THE BASIS OF THE ACCOUNTING SYSTEM REGULARLY MAINTAINED BY THE ASSESSEE AND THAT PROCESSING WAS DONE BY THE ASSESS EE IN THE PRESENT CASE. THE OBSERVATIONS OF THE REVENUE AUTHORITIES THAT THE INCOME OF RS.1,05,27,20,724/- RECEIVED BY THE A SSESSEE IN THE YEAR UNDER CONSIDERATION WOULD ESCAPE TAX, IS N OT FULLY CORRECT IN THE SENSE THAT IT IS NOT THE INCOME OF T HE YEAR UNDER CONSIDERATION. IT WAS THE INCOME OF THE EARLIER YEA R, AND IN THAT YEAR, THE ASSESSEE WAS NOT LIABLE TO TAX. AS THE AS SESSEE IS FOLLOWING THE SYSTEM OF ACCOUNTING AS ACCRUAL, SUCH INCOME CANNOT BE ASSESSED ON CASH BASIS WHEN IT HAD ACCRUE D IN THE EARLIER YEARS. THE ADOPTION OF THE SYSTEM OF MERCANTILE FOR ACCOUNTING FOR THE INCOME IS A RECOGNIZED METHOD UN DER THE ACCOUNTING STANDARD ISSUED U/S.145(2) OF THE ACT. I T IS ALSO AS PER THE REQUIREMENT OF ACCOUNTING STANDARD ISSUED B Y THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THEREF ORE, THE REVENUE IS NOT JUSTIFIED IN STATING THAT CHANGE WAS NOT BONAFIDE. DELETED THIS ADDITION. I.T.A.NO. 3243/AHD/2009 3 3. SINCE THE ADDITION WAS DELETED BY LD. CIT(A), FO LLOWING THE DECISION OF ITAT FOR THE ASSESSMENT YEAR 2003-04, WE DO NOT FEEL ANY NEED TO INTERFERE WITH THE ORDER PASSED BY HIM AND THE SAME IS HEREBY CONFIRMED. 4. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 5. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MAY 2011. SD./- SD./- (D.C. AGARWAL) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED: 25 TH MAY, 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE 1. DATE OF DICTATION 25.5.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25.5.2011. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.25.5.11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 25.5.11 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.27.5.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27.5.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..