Mr. John L. Sebastian, Bangalore V. ACIT, Bangalore

ITA 391/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5551 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 19-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: B N BALAKRISHNA
• Keywords: Opportunity of being heard; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.391/BANG/2010 ASSESSMENT YEAR : 2003-04 MR. JOHN L. SEBASTIAN, 7-A, D COSTA LAY OUT, 1 ST CROSS, BANGALORE 560 084. : APPELLANT VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), BANGALORE. : RESPONDENT ITA NO.470/BANG/2010 ASSESSMENT YEAR : 2005-06 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), BANGALORE. : APPELLANT VS. MR. JOHN L. SEBASTIAN, 7-A, D COSTA LAY OUT, 1 ST CROSS, BANGALORE 560 084. : RESPONDENT ASSESSEE BY : SHRI B.N. BALAKRISHNA, C.A. REVENUE BY : SMT. JACINTA ZIMIK VASHAI, ADDL.CIT(D R) ITA NOS.391 & 470BANG/10 PAGE 2 OF 12 O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THE APPEAL FOR THE A.Y. 2003-04 IS BY THE ASSESS EE AGAINST THE ORDER OF THE CIT(APPEALS)-I, BANGALORE DATED 05.01. 2010 AND THE OTHER APPEAL IS BY THE REVENUE FOR THE A.Y. 2005-06 AGAIN ST THE ORDER OF CIT(APPEALS)-I, BANGALORE, DATED 4.1.2010. BOTH TH ESE APPEALS ARE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. ITA NO.391/B/10 (ASSESSEES APPEAL A.Y. 2003-04) 2. THOUGH THE ASSESSEE HAS RAISED 20 GROUNDS IN THE APPEAL, THE MAIN ISSUES ARE AS FOLLOWS: (I) THE LEARNED COMMISSIONER OF INCOME-TAX, APPEALS -I, HAS GROSSLY ERRED IN NOT APPRECIATING THE DIFFERENCE BE TWEEN THE ACCRUED PROFITS AND DISTRIBUTED PROFITS WHILE SUBJECTING THE RECEIPT OF RS.25,00,000/- (RUPEES TW ENTY FIVE LAKHS ONLY) FOR TAX UNDER INCOME FROM OTHER SOURCES , UNDER THE HEAD INCOME FROM DIVIDEND. (II) THE LEARNED COMMISSIONER OF INCOME-TAX, APPEA LS-I, HAS GROSSLY ERRED IN NOT CONSIDERING THE SUBMISSIONS MA DE BY THE APPELLANT AT THE TIME OF HEARING ABOUT THE FACT THA T, THE SAID PAYMENT OF RS.17,50,000/- WAS RECEIVED FROM MR. LAC HIRAM NAIK, TO WHOM THE SHARES IN M/S INDIA POULTRY PRIVA TE LIMITED, WAS SOLD/TRANSFERRED AND THE AMOUNT WAS RECEIVED CO NSEQUENT TO SUCH TRANSFER, AND THE APPELLANT HAD NOT RECEIVED A NY AMOUNT FROM THE COMPANY. (III) THE LEARNED COMMISSIONER OF INCOME-TAX, APPE ALS-I, HAS GROSSLY ERRED IN NOT APPRECIATING THE SUBMISSIONS M ADE BY THE APPELLANT RELATING TO THE STATEMENT OF AFFAIRS FIEL D BY THE APPELLANT AND OTHER RECORDS PRODUCED BY THE APPELLA NT BEFORE THE RESPECTED ASSESSING OFFICER, WHICH CLEARLY ESTABLIS HED THE OPENING CASH BALANCE OF RS.6,98,070 (RUPEES SIX LAK HS NINETY EIGHT THOUSAND SEVENTY ONLY) IN THE RECORDS OF THE APPELLANT. ITA NOS.391 & 470BANG/10 PAGE 3 OF 12 3. THE ASSESSEE IS A SPECIALIST IN POULTRY FARMING AND FILED HIS RETURN OF INCOME ON 31/10/2003 DECLARING AN INCOME OF RS.48,6 6,740. SUBSEQUENTLY IN RESPONSE TO NOTICE U/S. 148 HE CONFIRMED THE SAM E INCOME. 4. THE FIRST GROUND RAISED BY THE APPELLANT RELATE S TO THE ADDITION OF RS.25,00,000 U/S. 2(22)(E) OF THE I.T. ACT. THE BR IEF FACTS ARE THAT THE ASSESSEE WAS A SHAREHOLDER IN M/S. IPF BREEDS (P) LTD. WITH 25% OF SHAREHOLDING. ON 17.11.2002 RELEVANT TO A.Y. 2003- 04, THE COMPANY PAID RS.25 LAKHS TO THE ASSESSEE, WHICH WAS CLAIMED BY T HE ASSESSEE TO BE THE PAYMENT GIVEN BY THE LIQUIDATOR AS LIQUIDATION PROF ITS. HOWEVER, THE AO TREATED THE SAME AS DEEMED DIVIDEND INCOME U/S. 2(2 2)(E) OF THE ACT. THE RELEVANT PORTION OF THE ORDER OF THE LD. AO IS REPR ODUCED HEREINBELOW FOR REFERENCE: THE ASSESSEE WAS A SHAREHOLDER OF M/S. IPF BREEDER S (P) LTD. AND ALSO A PARTNER IN ONE FIRM M/S. IPF BREEDERS. DURING THE COURSE OF HEARING THE ASSESSEE WAS ASKED TO EXPLAIN VARIOUS RECEIPTS WITH REFERENCE TO HIS VARIOUS BANK ACCOUNT S AND CAPITAL ACCOUNT. IT WAS SEEN THAT THE ASSESSEE RECEIVED TH E FOLLOWING PAYMENT FROM THE LIQUIDATOR OF M/S. IPF BREEDERS (P ) LTD. DURING THE FINANCIAL YEAR 2002-03. 17/11/2002 ------ RS.25,00,000/- THE ASSESSEE VIDE HIS WRITTEN SUBMISSION DATED 10/ 8/07 STATED THAT THIS AMOUNT CONSISTS OF BALANCE DIVIDEN D OF RS.8,20,608/- WHICH WAS DECLARED ON 5/7/99 ON WHICH TAX U/S. 115O WAS PAID BY THE COMPANY AND THE BALANCE AMOUNT WAS PART OF CAPITAL FUND DUE TO HIS SHARE OF 25% OF RS.90,00 ,000/-. ON EXAMINATION OF THE VARIOUS DETAILS SUBMITTED DU RING THE COURSE OF HEARING IT APPEARS THAT THE ASSESSEE COUL D NOT ESTABLISH ANY LINK IN RESPECT OF THE CLAIM OF BALANCE DIVIDEN D OF RS.8,20,000/-. MOREOVER, SINCE THE AMOUNT IS RECEI VED DURING THE FINANCIAL YEAR RELEVANT TO THE A.Y. 2003-04, FOR WH ICH THE ASSESSEE IS NOT ENTITLED FOR ANY EXEMPTION IN THE A BSENCE OF SEC. 10(33) FOR THAT YEAR. ITA NOS.391 & 470BANG/10 PAGE 4 OF 12 5. ON APPEAL BEFORE THE LD. CIT(A), THE ORDER OF TH E LD.AO WAS CONFIRMED AND IT WAS HELD THAT THE PAYMENT OF RS.25 LAKHS IS INCLUDIBLE IN THE FICTION OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT AND TAXABLE IN THE HANDS OF THE ASSESSEE. THE OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREINBELOW FOR REFERENCE: 5.2 THE ABOVE WAS CONSIDERED. M/S. IPF BREEDERS ( P) LTD. OR IN SHORT, COMPANY WAS INCORPORATED ON 13-5-1994 W ITH A PAID UP CAPITAL OF RS.90 LAKHS. THE SOURCE WAS SUBSIDY OF RS.25 LAKHS FROM THE GOVERNMENT OF KARNATAKA AND OUT OF THE RES T, 25% WAS PAID BY THE APPELLANT. THE COMPANY WAS SOLD THROUG H A SLUMP SALE TO M/S. GODREJ AGROVET INDIA LTD. ON WHICH PRO FIT U/S. 50B WAS COMPUTED AT RS.5.75 CRORES. THE COMPANY DECIDE D TO DISTRIBUTE THE DIVIDED ON SUCH PROFITS IN JULY, 199 9 AND ALSO DISTRIBUTED INTERIM DIVIDEND IN SEPTEMBER, 1999 AND THE BALANCE WAS PAID IN FEBRUARY, 2002. HOWEVER, TAX ON SUCH D IVIDEND DECLARED HAD ALREADY BEEN PAID BY THE COMPANY IN F. Y. 2000-01. IT IS FURTHER SUBMITTED THAT THE COMPANY WAS FINALL Y DISSOLVED ON 1-7-2007. 5.3 THE ABOVE SUBMISSION WHEN EXAMINED CRITICALLY R EVEALS CERTAIN INCONSISTENCY. UNDOUBTEDLY THE COMPANY WAS IN THE PROCESS OF LIQUIDATION IN AY 2003-2004. DIVIDEND W AS DECLARED IN JULY, 1999, A PORTION OF WHICH WAS PAID AS INTER IM DIVIDEND IN SEPTEMBER, 1999 AND THE BALANCE TAX PAID DIVIDEND W AS DISTRIBUTED IN FEBRUARY, 2002. IF THIS CAN BE CONS IDERED AS TRUE, THE SUBMISSION BEFORE THE A.O. DATED: 10-08-2007 WH EREIN IT WAS STATED THAT OUT OF THE PAYMENT OF RS.25 LAKHS RECEI VED FROM THE COMPANY ON 17-11-2002, RS.8,20,608/- PERTAINS TO BA LANCE OF DIVIDEND HAS TO BE NECESSARILY UNTRUE. 5.4 THE SECOND ARGUMENT OF THE A.R. IS THAT THE COM PANY HAS ALREADY PAID TAX ON THE ENTIRE DECLARED DIVIDEND IN MARCH, 2001 AND THEREFORE, THE DISTRIBUTION OR PAYMENT OF SUCH TAX PAID DIVIDEND ON A SUBSEQUENT DATE WOULD MEAN TAXING THE INCOME TWICE IN THE HANDS OF THE SHARE HOLDER. I CONSIDER THIS ARGUMENT HAS NO RELEVANCE IN VIEW OF THE FACTUAL FINDING ABO VE THAT NO PART OF THE PAYMENT OF RS.25,00,000/- HAS ANY ELEMENT OF TAX PAID DISTRIBUTED PROFITS. .. . ITA NOS.391 & 470BANG/10 PAGE 5 OF 12 5.4.3 THE THIRD ARGUMENT IS THAT DIVIDEND HAS TO BE PAID FROM ACCUMULATED PROFITS AND IN THIS CASE WHAT WAS PAID BY THE LIQUIDATOR WAS NOT FROM THE PROFIT BUT FROM THE SAL E OF ASSETS OF THE COMPANY AFTER CLEARING THE LIABILITIES. I DO N OT SUBSCRIBE TO THE ABOVE ARGUMENT. FIRSTLY, THE WORDS USED IS TO THE EXTENT OF ACCUMULATED PROFIT AND NOT FROM THE ACCUMULATED P ROFIT. THE WORDS ACCUMULATED PROFIT HAS NOT BEEN DEFINED AND THEREFORE IT CAN BE GIVEN AN EXTENSIVE MEANING TO INCLUDE EVEN P ROFIT FROM SLUMP SALE OF THE COMPANY WHICH WAS TO THE EXTENT O F RS.5,75,00,000/- AND THEREFORE PAYMENT OF RS.25 LAK HS THEREFROM IS DEFINITELY A PALTRY SUM. THE MEANING OF ACCUMU LATED PROFIT CANNOT BE CONFINED TO ONLY PROFITS FROM THE CARRYIN G ON OF THE BUSINESS OF THE COMPANY. HOWEVER, PROVISIONS OF SE C. 2(22)(E) OF I.T. ACT ALSO CONSIDERS THE PAYMENT BY THE LIQUI DATOR TO A SHARE HOLDER, THE PROFIT FROM THE PROCESS OF LIQUID ATION AS DIVIDEND. THUS, FROM ALL RESPECT, THE PAYMENT PART AKES THE CHARACTER OF DIVIDEND PAID TO THE APPELLANT SHAREHO LDER HAVING SUBSTANTIAL VOTING POWER IN THE COMPANY. 6. THE LD. AR SUBMITTED BEFORE US THAT M/S. IPF BR EEDERS PVT. LTD., SOLD ITS BUSINESS ENTIRELY TO M/S. GODREJ AGROVET I NDIA LTD. (GODREJ) , THROUGH A SLUMP SALE DURING THE YEAR 1999-2000 THER EBY REALISED GOOD PROFIT. THE COMPANY DECIDED TO DECLARE AN INTERIM DIVIDEND OF THE ENTIRE ACCUMULATED PROFITS AT ITS BOARD MEETING HELD DURIN G JULY, 1999 AND THE SAID DECLARATION OF INTERIM DIVIDEND WAS ALSO APPRO VED AT THE MEETING OF SHAREHOLDERS HELD ON 1.9.999. THE COMPANY PAID TH E NECESSARY DIVIDEND DISTRIBUTION TAX U/S. 115 O OF THE ACT AND COMPLIED WITH ALL THE PROVISIONS OF THE COMPANIES ACT, 1956. AS THE COMPANY HAD DEC IDED NOT TO CARRY ON ANY FURTHER BUSINESS ACTIVITY AND TO WIND UP, THE C OMPANY DISTRIBUTED PART OF ITS PROFIT AND DECLARED DIVIDEND AND PAID THE DUE T AX DURING FEBRUARY, 2002. SUBSEQUENTLY, THE VOLUNTARY LIQUIDATOR, DISTRIBUTED THE BALANCE AMOUNT IN THE COMPANY AFTER CLEARING ALL THE LIABILITIES. TH E SAID COMPANY, THE IPF BREEDERS PVT. LTD. WAS DISSOLVED ON 1.2.2007 BY THE ORDERS OF THE HONBLE HIGH COURT OF KARNATAKA. IT WAS SUBMITTED THAT TH E DIVIDEND HAVING BEEN ITA NOS.391 & 470BANG/10 PAGE 6 OF 12 DECLARED IN ACCORDANCE WITH PROVISIONS OF THE COMPA NIES ACT, THE SAID INCOME IS ASSESSABLE UNDER THE HEAD DIVIDENDS AN D ARE LIABLE TO BE ASSESSED IN THE YEAR OF ACCRUAL TO THE ASSESSEE AND NOT U/S.2(22)(E) OF THE ACT. LD. AR FURTHER SUBMITTED THAT THE CIT(A) HAS ERRED IN NOT APPRECIATING THE DIFFERENCE BETWEEN ACCRUED PROFITS AND DISTRIBU TED PROFITS WHILE SUBJECTING THE RECEIPT OF RS.25,00,000 TO TAX. 7. THE LD. DR SUPPORTED THE ORDER OF THE LD. AO AS WELL AS THAT OF THE LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE STRONG CONTENTION OF THE ASSESSEE IS THAT THE COMPANY HAS PAID TAX ON DISTRIBUTED PROFITS ALONG WITH INTERES T COMPUTED U/S. 115-O AND 115-P OF THE ACT. FURTHER, APART FROM THE SUBMISSI ONS OF THE LD. AR, WE HAVE ALSO TAKEN NOTE OF THE DETAILED STATEMENTS SUB MITTED BY THE APPELLANT FORMING PART OF THE PAPER BOOK WITH REGARD TO THE P AYMENT OF INCOME TAX IN RESPECT OF DECLARATION OF DIVIDEND U/S. 115-O OF TH E ACT ALONG WITH THE DETAILS OF AMOUNT OF PAYMENT TO THE SHAREHOLDERS FR OM PAGES 3 TO 5. CONSIDERING THE FACTS OF THE CASE, IN THE INTEREST OF JUSTICE, WE ARE OF THE CONSIDERED OPINION THAT THE SUBMISSIONS MADE BY THE LD. AR ALONG WITH THE STATEMENTS AND MATERIALS PRODUCED BEFORE US REQUIRE S A THOROUGH EXAMINATION BY THE ASSESSING OFFICER. THEREFORE, W E REMIT THIS ISSUE BACK TO THE FILE OF THE LD. AO WHO SHALL LOOK INTO ALL T HE SUBMISSIONS OF THE ASSESSEE AND DECIDE THE ISSUE AS PER LAW AFTER PROV IDING SUFFICIENT OPPORTUNITY OF BEING HEARD. GROUND (I) IS ACCORDINGLY DISPOSED OF. ITA NOS.391 & 470BANG/10 PAGE 7 OF 12 9. THE NEXT ISSUE RELATES TO THE ADDITION OF RS.17, 70,500 MADE BY THE LD. AO WITH THE FOLLOWING OBSERVATIONS: THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED THE FOL LOWING AMOUNTS FROM M/S. IPPL, HYDERABAD. 9/4/2002 - RS.17,37,500/- 1/5/2002 - RS. 11,000/- 1/6/2002 - RS. 11,000/- 1/7/2002 - RS. 11,000/- -------------------- TOTAL RS.17,70,500/- -------------------- THE ASSESSEE FAILED TO PROVIDE ANY DETAILS AND EV IDENCE IN RESPECT OF THE SOURCES OF AFORESAID AMOUNTS INSPITE OF GIVING SEVERAL OPPORTUNITIES INCLUDING SPECIFIC QUERY AS PER ORDER SHEET ENTRIES DATED 27/11/07 AND 5/12/07. HENCE THE SAME IS TREA TED AS ASSESSEES INCOME FROM OTHER SOURCES DURING THE REL EVANT ASSESSMENT YEAR AND ADDED TO THE TOTAL INCOME DECLA RED BY THE ASSESSEE. 10. LD. CIT(A) CONFIRMED THE ABOVE ADDITIONS AS FOL LOWS: 6.2. THE A.O. HAS NOT DOUBTED THE PAYMENT FOR INVE STMENT IN SHARES OF M/S. IPPL. HE HAS DOUBTED THE SOURCE OF SUCH PAYMENTS. THE EXPLANATION OFFERED DURING APPELLATE STAGE NARRATES THE SOURCE AS LACHIRAM NAIK ON TRANSFER OF HIS SHARES OF M/S. IPPL. BUT THE PAYMENT OF RS.17,71,500/- WAS F ROM SRI LACCHIRAM NAIK TO M/S. IPPL AND FROM M/S. IPPL TO T HE APPELLANT. IN THE LIGHT OF THE DISCUSSION IN THE G ROUND NOS. 3 TO 7, ABOVE, THE PAYMENT PARTAKES THE CHARACTER OF DEEMED DIVIDEND AND HAS TO BE TAXED UNDER THE HEAD INCOME FROM OTH ER SOURCES. IN FACT THE PAYMENT OF RS.17,71,500/- BY M/S. IPP L TD. TO THE APPELLANT A SUBSTANTIAL SHAREHOLDER WAS NOT ONLY AT HIS INSTANCE BUT ALSO FOR HIS INDIVIDUAL BENEFIT AND THEREFORE F ALLS WITHIN THE AMBIT OF SECTION 2(22)(E) OF IT ACT. HENCE THE ADD ITION IS CONFIRMED. GROUNDS OF APPEAL ARE DISMISSED. 11. THE SUBMISSIONS OF THE ASSESSEE ARE THAT THE CO MPANY (IPPL) HAD ONLY TWO SHAREHOLDERS VIZ., MR. T. MANAWALAN AND TH E ASSESSEE, WITH ITA NOS.391 & 470BANG/10 PAGE 8 OF 12 SHAREHOLDING OF 75% AND 25% RESPECTIVELY. ACCORDIN GLY THE SHARES HELD BY THE ASSESSEE AMOUNTED TO RS.7,50,000/-, IN ADDITION , THE ASSESSEE HAD PAID A SUM OF RS.7,13,875 TOWARDS SHARE APPLICATION MONEY. BOTH THE SHAREHOLDERS SOLD THEIR ENTIRE SHAREHOLDING TO MR. LACCHIRAM NAIK AND HIS GROUP AND RECEIVED A SUM OF RS.17,75,000 WHICH INCL UDED A SUM OF RS.3,07,625 TOWARDS REIMBURSEMENT OF EXPENSES IN CO NNECTION WITH SEVERAL VISITS TO HYDERABAD AND OTHER PLACES. THUS THE DETAILS OF AMOUNT RECEIVED ARE AS UNDER: (I) TRANSFER OF SHARES IN IPPL - 7,50,000 (II) REFUND OF SHARE APPLICATION MONEY - 7,13,875 (III) REFUND OF OUT OF POCKET EXPENSES - 3,07,825 ------------ 17,71,500 ------------- THUS, IT WAS CONTENDED BY THE LD. AR THAT THE CIT(A PPEALS) ERRED IN SUSTAINING THE ADDITION AND NOT APPRECIATING THAT T HE AMOUNT OF RS.17,50,000/- CONSISTED OF REFUND OF SHARE APPLICA TION MONEY, TRANSFER OF EQUITY SHARE CAPITAL HELD BY THE ASSESSEE IN IPPL A ND SUBMITTED THAT THE ADDITION IS TO BE DELETED. 12. WE HAVE CONSIDERED THE FACTS OF THE CASE RELATI NG TO THE ADDITION OF RS.17,50,000/- U/S. 2(22)(E) OF THE ACT AND HEARD B OTH THE PARTIES. IT IS APPARENT FROM THE ABOVE THAT THE ASSESSEE HAS NOT C O-OPERATED WITH THE REVENUE IN PROVIDING ALL THE INFORMATION REQUIRED B Y THE LD. ASSESSING OFFICER INSPITE OF SEVERAL OPPORTUNITIES BEING PROV IDED. IT APPEARS THAT THE ASSESSEE HAD FAILED IN HIS DUTIES EVEN BEFORE THE C IT(A). SINCE WE HAVE REMITTED THE OTHER ISSUE BACK TO THE FILE OF THE LD . AO, IN THE INTEREST OF JUSTICE, WE DEEM FIT TO REMIT THIS ISSUE ALSO TO TH E FILE OF THE LD. AO WHO SHALL ITA NOS.391 & 470BANG/10 PAGE 9 OF 12 EXAMINE ALL THE FACTS RELATING TO THE ISSUE AND PAS S APPROPRIATE ORDERS IN ACCORDANCE WITH LAW. IT IS ORDERED ACCORDINGLY. GROUND (II) IS THUS DISPOSED OF. 13. THE NEXT ADDITION IS OF RS.6,98,070/- ON ACCOUN T OF DIFFERENCE IN CASH BALANCE. THE BRIEF FACTS ARE THAT ON A QUERY FROM THE LD. AO REGARDING CASH BALANCE OF RS.35,266 SHOWN IN THE BALANCE SHEE T FILED ALONG WITH THE RETURN, THE ASSESSEE SHOWED THE SAME AT RS.7,33,336 VIDE LETTER DATED 10.8.2007, BASED ON WHICH THE ADDITION WAS MADE BY THE LD. AO. THE LD. CIT(APPEALS) CONFIRMED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 7.2 THE EXPLANATION MAY BE TRUE AND INNOCENT BUT THIS DOES NOT ABSOLVE THE APPELLANT FROM TAXATION OF RS.6,98, 070 AS THE AMOUNT COULD ONLY BE BROUGHT TO LIGHT BY DETECTION VIA QUERY OF THE A.O. HAD NO SUCH QUERY BEEN MADE, THE AMOUNT W OULD HAVE REMAINED UNTAXED. THE A.O. IS JUSTIFIED IN ADDING THE SUM UNDER THE HEAD OTHER SOURCES. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. LD. AR SUBMITTED BEFORE US THAT THE DIFFER ENCE OF RS.6,98,070 IS NOTHING BUT THE OPENING CASH BALANCE FOR WHICH ALL RECORDS WERE PRODUCED BEFORE THE REVENUE, HOWEVER THE LD. AO AND THE LD. CIT(A) HAS NOT LOOKED INTO THE ISSUE JUDICIOUSLY. TO VERIFY THE FACTS TH IS ISSUE IS ALSO REMITTED BACK TO THE FILE OF LD. AO. GROUND (III) IS ACCORDINGLY DISPOSED OF . ITA 470/BANG/2010 (REVENUES APPEAL A.Y. 2005-06 ) 15. THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE CIT(APPEALS)-I, BANGALORE DATED 4.1.2010. THE ONLY ISSUE FOR ADJUDICATION IN THIS APPEAL IS THAT THE CIT(A) ERRED IN DELETING THE ADDITION MADE ITA NOS.391 & 470BANG/10 PAGE 10 OF 12 AMOUNTING TO RS.7,29,973 BEING THE RECEIPT NOT ACCO UNTED BY THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR. 16. THE BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSING OFFICER FOUND THAT THE GROSS RECEIPTS OF THE ASSESSEE FROM M/S. GODREJ AGROVET LTD. AS PER TDS CERTIFICATES FILED WITH THE RETURN OF IN COME WAS RS.91,10,322. THE ASSESSEE SUBMITTED A RECONCILIATION STATEMENT A ND CLAIMED THAT AN AMOUNT OF RS.7,29,973 REPRESENTS OPENING BALANCE RE CEIVABLE FROM GODREJ. THE AO ON VERIFICATION OBSERVED THAT THE TDS CERTIF ICATES SHOWED THAT THE PERIOD PERTAINED TO 1.4.2004 TO 30.4.2004 AND FURTH ER NO SUCH AMOUNT WAS REFLECTED IN THE BALANCE AS ON 31.3.2004 RECEIVABLE FROM GODREJ. THEREFORE, HE TREATED THE AMOUNT OF RS.7,29,973 AS ASSESSEES INCOME FOR THE A.Y. 2005-06 AND THE ADDITION WAS MADE ACCORDIN GLY. 17. ON APPEAL BY THE ASSESSEE BEFORE THE FIRST APPE LLATE AUTHORITY, THE LD. CIT(APPEALS) DELETED THE ADDITION OBSERVING AS UNDER: 8.3 I SEE JUSTIFICATIONS IN THE ARGUMENT OF THE A .R. THE ASSESSING OFFICER HAS NOT DENIED THE ARGUMENT THAT THE PAYMENT RELATES TO WORK DONE IN F.Y. 2003-04. HE ONLY OBJE CTED THAT SINCE THE PAYMENT RELATES TO F.Y. 2003-04, THE SAME SHOUL D HAVE BEEN SHOWN AS INCOME OF A.Y. 2004-05 AS BILLS RECEIVABLE S AS THE APPELLANT WAS CONSISTENTLY FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING. BUT I OBSERVE, THE APPELLANT IS CONSIS TENTLY FOLLOWING CASH METHOD AS CAN BE SEEN FROM THE RECONCILIATION STATEMENT MADE PART OF THIS ORDER AS ANNEXURE-1 . I FIND THE A.R. HAS BEEN ABLE TO SUCCESSFULLY RECONCILE THE DIFFERENCE BETWE EN THE TDS CERTIFICATES AND BILLS. 8.4 IN VIEW OF THE FOREGOINGS, I CONSIDER THE ADDIT ION DESERVES TO BE DELETED. .. 18. THE LD. DR SUBMITTED THAT THE CIT(APPEALS) ERRE D IN NOT APPRECIATING THE RECEIPTS OF RS.7,29,973 HAVE NOT BEEN DISCLOSED BY THE ASSESSEE FOR ITA NOS.391 & 470BANG/10 PAGE 11 OF 12 THE A.Y. 2004-05. HE FURTHER CONTENDED THAT THE CR EDIT FOR TDS FOR RS.7,29,973 CAN BE CLAIMED IN THE A.Y. 2005-06 SINC E THE PERIOD MENTIONED IN THE TDS CERTIFICATE WAS FOR THE F.Y. 2 004-05, THEREFORE THE ASSESSMENT MADE BY THE LD. AO IS IN ORDER AND NEEDS TO BE CONFIRMED. 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE ASSESSMENT ORDER, THE LD. AO HAS CA TEGORICALLY NOTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCO UNTING, WHEREAS THE LD. CIT(A) HAS HELD THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING. SINCE THERE IS NO CLARITY IN THE FINDING OF THE REV ENUE AND THE FIRST APPELLATE AUTHORITY, WE REMIT THIS ISSUE ALSO TO THE FILE OF THE LD. AO TO ONCE AGAIN EXAMINE THE METHOD OF ACCOUNTING SYSTEM FOLLOWED BY THE ASSESSEE AND ACCORDINGLY ASSESS THE CONTRACT RECEIPTS IN THE REL EVANT ASSESSMENT YEAR IF FOUND ASSESSABLE. 20. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JUNE, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 22 ND JUNE, 2011. DS/- ITA NOS.391 & 470BANG/10 PAGE 12 OF 12 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.