Gnanaprakash Dominic, Mangalore V. Asst.DIT, Mangalore

ITA 447/BANG/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95394 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-11-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 24-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARESH SAKA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE B BENCH, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.447(BNG)/2015 (ASSESSMENT YEAR : 2011-12) SHRI GNANAPRAKASH DOMINIC, VINCENT ARANHA, 16-5-348, VAS LANE, MANGALORE PAN NO.AGWPA3061F APPELLANT VS THE ASST. DIRECTOR OF INCOME-TAX, INTL.TRANSACTION, MANGALORE RESPONDENT ASSESSEE BY : SHRI RAVISH RAO, CA REVENUE BY : SHRI NARESH SAKA, ADDL.CIT DATE OF HEARING : 30-11-201 5 DATE OF PRONOUNCEMENT : 11-12-2015 O R D E R PER SHRI INTURI RAMA RAO, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-12, BANGALORE DATED 19-01-2015 FOR THE ASSESSMENT YEAR : 2011-12. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN ITS APPEAL; 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN ASSE SSING TO TAX DURING THE ASST YEAR 2011-12, THE INTEREST ACCRUED IN EARLIER YEARS THE LEARNED ASSESSING OFFICER, AFTER OBTAININ G THE CORRECT INTEREST FIGURES SHOULD HAVE PROCEEDED TO ASSESS IN ACCORDANCE WITH THE PROVISIONS OF LAW. THE INCOME BY WAY OF IN TEREST SHOULD 2 ITA NO.447 (B)/2015 HAVE BEEN ASSESSED ON ACCRUAL BASIS AND ACCORDINGLY FOR THE ASST YEAR 2011-12 INTEREST INCOME ON FIXED DEPOSITS WAS T14,975.06 FROM SYNDICATE BANK AND .32,349.57 FROM CANARA BANK. ONLY THESE TWO FIGURES TOTALING TO Z.47, 324. 63 SHOULD HAVE BEEN ASSESSED AS INCOME FROM OTHER SOURCES FOR THE ASST YEAR 2011-12. 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN ADDIN G A SUM OFT. 4, 36,109.00 TO THE INCOME OF THE ASSESSEE AS INTER EST INCOME, ON CASH BASIS. IT INCLUDES THE INTEREST PERTAINING TO THE EARLIER ASSESSMENT YEARS ALSO AS THE AS THE PERIOD OF DEPOS IT IS SPREAD OVER TO DIFFERENT PREVIOUS YEARS I.E. 23-12- 2008 TO 01-06-2010.THE INTEREST RELATING TO THE PERIOD 01-0 4-2010 TO 31- 03-2011 ONLY SHOULD HAVE BEEN ADDED UNDER THE ACCRU AL SYSTEM. 3. THE ADDITION OF THE INTEREST EARNED BY THE ASSES SEE DURING DIFFERENT PREVIOUS YEAR TO CURRENT YEAR'S TO TAL INCOME BY THE LEARNED ASSESSING OFFICER IS OPPOSED TO THE GENERAL ACCEPTED PRACTICE AND THE SYSTEM FOLLOWED B Y THE APPELLANT CONSISTENTLY. THE APPELLANT HAS DECLARED ACCRUED INCOME ON FD AS APPEARING IN 26AS. 3 ITA NO.447 (B)/2015 4. THE INTEREST EARNED ON SAVINGS BANK ACCOUNT MAIN TAINED IN CONNECTION WITH AGRICULTURAL OPERATIONS IS TO BE TR EATED AS AGRICULTURAL INCOME ONLY. IT HAS BEEN HELD BY VARIO US COURTS THAT INTEREST EARNED ON SAVINGS BANK ACCOUNT OF A B USINESS IS ASSESSABLE AS BUSINESS INCOME. THE SAME PRINCIPL E IS APPLICABLE HERE AND THE INTEREST ON SAVINGS BANK AC COUNT HAS TO BE ADDED TO AGRICULTURAL INCOME. 5. THE LEARNED FIRST APPELLATE AUTHORITY HAS NOT CO NSIDERED THE SUBMISSIONS MADE AND HAS PASSED THE ORDER WHICH IS NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW. 6. BASED ON THE ABOVE GROUNDS AND OTHER GROUNDS THA T MAY BE PERMITTED TO BE URGED AT THE TIME OF HEARING IT IS PRAYED TO SET ASIDE THE ADDITION OF Z. 4. 47.490.00 MADE TO INCOM E FROM INCOME FROM OTHER SOURCES. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS A NON-RESIDENT INDIAN. THE RETURN OF INCOME FOR TH E ASSESSMENT YEAR 2011- 12 WAS FILED ON 26-03-2012 DECLARING TOTAL INCOME O F RS.30,207/-. AGAINST THE SAID RETURN OF INCOME THE ASSESSMENT WAS COMPLE TED BY THE ADIT 4 ITA NO.447 (B)/2015 (ITL.TAXN.) MANGALORE VIDE ORDER DATED 22-11-2013 A T A TOTAL INCOME OF RS.4,77,490/-. WHILE DOING SO, THE AO MADE ADDITIO N OF INTEREST EARNED ON DEPOSIT WITH CANARA BANK OF RS.2,36,649/- AND SYNDI CATE BANK OF RS.1,78,916/- AND THE INTEREST EARNED FROM SB ACCOU NT OF RS.11,173/-. WHEN THE ASSESSEE WAS CALLED UPON TO EXPLAIN AS TO WHY THE INTEREST INCOME SHOULD NOT BE BROUGHT TO TAX THE ASSESSEE EX PLAINED THAT THE INTEREST INCOME WAS OFFERED TO TAX ON ACCRUAL BASIS OF INCOME ACCRUED DURING THE PREVIOUS EAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION IS ONLY RS.30,207/- WHICH WAS OFFERED TO TAX AND THE C ONTENTION OF THE ASSESEE HAS BEEN TURNED DOWN BY THE AO BY HOLDING A S UNDER; CONSIDERING THE ABOVE LINE OF ARGUMENT AN ATTEMPT WAS MADE TO FIND OUT THE ACCEPTABILITY OF CLAIM BY COL LECTING THE DETAILS FROM THE BANKERS. FROM THE DETAILS FURNISHED BY THE BANKERS FOLLOWING FACTS CAME TO LIGHT. AS REGARDS THE INTEREST EARNINGS FROM SYNDICATE BAN K, HAMPANKATTA, THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.1,99,460/- INCLUDING AN AMOUNT OF RS.1,78,916/- MENTIONED IN TABLE ABOVE FOR THE YEAR UNDER SCRUTIN Y AND 5 ITA NO.447 (B)/2015 SUBJECTED THE ENTIRE AMOUNT TO TDS FOR THE SAME YEA R. WHEREAS THE ASSESSEE HAS NOT DECLARED ANY AMOUNT AS INTEREST FROM THE ABOVE SOURCE. AS REGARDS INTEREST RECEIVED FROM CANARA BANK VALEN CIA BRANCH, IT IS SEEN FROM THE CLOSURE OF DEPOSITS THE BANK HAS PAID AN AMOUNT OF RS.2,36,649/- ON THOSE DEPOSITS W HICH WERE CLOSED AND AMOUNTS WERE REPATRIATED. HOWEVER , IT IS ALSO LEARNT FROM THE DETAILS FURNISHED BY THE SAID BANK THAT IT HAS MADE TDS ON AN AMOUNT OF RS.32,349/- ONLY AS IT HAS SUBJECTED THE BALANCE AMOUNT TO TDS ON ACCRUAL BASI S FOR EARLIER YEARS. WHEN THE ABOVE FINDINGS COMPARED WITH THE RETURNS O F THE ASSESSEE FOR EARLIER YEARS FOLLOWING FACTS REVEALED . THE ASSESSEE HAS NOT DECLARED ANY INCOME FROM SYNDI CATE BANK FOR EARLIER YEARS. THE ASSESSEE HAS ADMITTED ONLY RS.51,730/- IN HIS R ETURN OF INCOME FOR AY: 2010-11 WHICH IS NOTHING BUT INTERES T FROM CANARA BANK BUT THAT DOES NOT INCLUDE THE INTEREST OF RS.1,83,888/- WHICH WAS SHOWN AS PAID Y THE BANK ON THE DEPOSITS WHICH WERE PREMATURELY CLOSED DURING THE S UBJECT ASSESSMENT YEAR FOR REPATRIATION. SO THE ENTIRE INT ERESTS 6 ITA NO.447 (B)/2015 RECEIVED ON ACCOUNT OF CLOSURE OF DEPOSITS DURING T HE YEAR ARE STILL LIES UNTAXED. THE RETURNS REVEALED THAT THE INCOMES ADMITTED BY T HE ASSESSEE WERE NOT OF ACCRUAL BASIS. SO THOUGH THE PAYER ACCOUNTS FOR THE SAME ON ACCRUAL BASIS, WHEN THE EL EMENT OF INCOME THAT HAS TO BE CONSIDERED IN THE HANDS OF TH E PAYEE, IT RIGHT TO CONSIDER IT ON RECEIPT BASIS. SO THE ENTIR E INTEREST RECEIVED FROM THE ABOVE TWO BANKS WHICH WERE RECEIV ED DURING THE PREVIOUS YEAR RELEVANT TO SUBJECT ASSESS MENT YEAR WILL BE THE INCOME FROM THESE SOURCES FOR THE CURRE NT YEAR ONLY. INTERESTINGLY, IT IS ALSO LEARNT FROM THE INCOME DE CLARED BY THE ASSESSEE FOR DIFFERENT YEARS THAT THE BASIS FOR THE TOTAL INCOME DETERMINED BY THE ASSESSEE WAS NOTHING BUT R ECEIPTS THOSE ARE BEING REFLECTED IN FORM 26AS. FROM THE FOREGOING DISCUSSION, NOW IT IS CLEAR THAT THE ASSESSEE EARNINGS TO THE EXTENT OF RS.1,99,460/- FR OM SYNDICATE BANK AND RS.2,36,649/- WHICH COMES TO RS.4,36,109/- HAS BEEN OMITTED IN THE RETURN OF THE ASSESSEE THAT NEEDS TO BE BROUGHT TO TAX. THE AUTHORIZED REPRESENTATIVES SUBMISSION THAT THE SAME ARE TO BE CONSIDERED ON ACCRUAL BASIS IS HEREBY REJECTED FOR THE REASONS 7 ITA NO.447 (B)/2015 ALREADY DISCUSSED. THE ABOVE SUM OF RS.4,36,09/- IS HEREBY ADDED TO THE INCOME OF THE ASSESSEE FOR THE SUBJECT ASSESSMENT YEAR. 4. ON APPEAL BEFORE THE CIT(A) THE ACTION OF THE AO IN BRINGING TO TAX THE INCOME EARNED IN FD OF THE BANKS OF RS.4,36,109 /- WAS CONFIRMED B Y HOLDING AS UNDER; I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMST ANCES F THE CASE AND AM OF THE CONSIDERED OPINION THAT A SU M OF RS.4.36 LAKHS WAS RECEIVED BY THE ASSESSEE DURING T HE YEAR IT IS CLEAR FINDING OF THE AO THAT SUCH AMOUNT S HAVE NOT BEEN BROUGHT OR OFFERED TO TAX EARLIER. IN SUCH CASE THERE IS ABSOLUTELY NO JUSTIFICATION INTO ENTERING INTO THE CONTROVERSY OF WHETHER SUCH INCOME NEEDS TO BE TAXED ON ACCRUAL OR RECEIPT BASIS. THE TERM DEPOSIT RECEIPTS WERE AND ENCASHED PREMATURELY DURING THE YEAR AND THE ASSESSEE RECEIV ED THIS AMOUNT IN HIS HANDS DURING THE YEAR. INCOME FROM INTEREST HAS ARISEN DURING THE YEAR IN HIS HANDS AND NO PART OF THIS INCOME HAS BEEN OFFERED TO TAX IN ANY EARLIER YEAR. THE ASSESSEE WAS FULLY AWARE F THE SITUATION AND IT WAS DUTY UPON HIM TO REPORT THIS INCOME RECEIVED DURING THE YEAR AS THE SAME HAD BOTH ACCRUED AND ARISEN TO HIM IN THIS VERY YEAR TAKING RECOURSE TO IGNORANCE OF THE LAW AND 8 ITA NO.447 (B)/2015 DEPENDENCE ON FORM 26AS CANNOT ABSOLUTE THE ASSESSE E AS HE WAS A GUIDED AND REPRESENTED BY A QUALIFIED ACCOUNTANT. HENCE THERE IS NO REASON TO INT4ERFERE IN THE ACTION OF THE AO. THE SAME IS HEREBY UPHELD WITH R ESPECT TO THE ARGUMENT THAT A SUM OF RS.11,173/- REPRESENTS AGRICULTURAL INCOME IT IS SUFFICIENT TO SAY THAT TH E SAME IS HIGHLY MISCONCEIVED AND FALLACIOUS AND CANNOT BE TE NABLE. THE INTEREST INCOME HAS CLEARLY BEEN DERIVED FROM S AVINGS BANK ACCOUNTS AND CLEARLY FALLS UNDER THE HEAD INCO ME FROM OTHER SOURCES AND CAN IN NO WAY LINKED TO AGRICULTU RAL ACTIVITY. 5. BEING AGGRIEVED BY THIS ASSESSMENT ORDER THE AS SESEE IS IN APPEAL BEFORE US. 5.1 BEFORE US IT WAS CONTENDED THAT THE BANKERS HAV E DEDUCTED TDS IN THE YEAR OF MATURITY OF FD ON ENTIRE AMOUNT OF I NTEREST AND WHEREAS THE ASSESSEE WAS OFFERING THE INTEREST INCOME FROM FD O N ACCRUAL BASIS. THEREFORE, HE SUBMITTED THAT THE AO WAS NOT JUSTIF IED IN BRINGING TO TAX THE ENTIRE INTEREST INCOME IN ONE YEAR ONLY I.E IN THE YEAR OF MATURITY OF FD. 9 ITA NO.447 (B)/2015 5. ON THE OTHER, LEARNED SR.DR VEHEMENTLY OPPOSED T HE SUBMISSION OF THE LEANED AR OF THE ASSESSEE AND CONTENDED THAT THE ASSESSEE HAS NOT OFFERED THE INTEREST INCOME EVEN ON ACCRUAL BASIS A ND HE BROUGHT TO OUR NOTICE THE RETURN OF INCOME FOR THE AY: 201-11 WHER EIN ONLY INTEREST INCOME OF RS.51,727/- WAS OFFERED AND WHEREAS THE INTEREST INCOME ON FA WAS MUCH HIGHER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. EVEN ASSUMING THAT ASSESSEE IS OFFERING TH E INTEREST INCOME ON ACCRUAL BASIS, IT IS NOT CLEAR FROM THE MATERIAL ON RECORD WHETHER THE ASSESSEE IS FOLLOWING THE SAME METHOD IN DEPOSITS H ELD WITH CANARA BANK AND SYNDICATE BANK ETC. IN FACT, THE AO HAD GIVEN CATEGORICAL FINDING THAT THE ASSESSEE HAD NOT OFFERED ANY INCOME ON A FD HEL D WITH SYNDICATE BANK. THIS FINDINGS REMAINS UNCONTROVERTED. THEREFORE, WE ARE OF CONSIDERED OPINION THAT THE INTEREST OF JUSTICE WOULD BE MET I F THE MATTER IS RESTORED TO THE FILE OF THE AO WITH THE DIRECTION THAT IF THE A SSESSEE IS FOLLOWING REGULARLY THE ACCRUAL SYSTEM IN OFFERING INTEREST OF FD WITH THE BANKS TO TAX ONLY THE INTEREST INCOME ACCRUED DURING THE YE AR RELEVANT TO THE 10 ITA NO.447 (B)/2015 ASSESSMENT YEAR UNDER CONSIDERATION IN RESPECT OF T HE INCOME FROM ALL FDS. WE ORDER ACCORDINGLY. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH DECEMBER, 2015. SD/- (VIJAYPAL RAO) SD/- (INTURI RAMARAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE D A T E D : 11-12-2015 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR,ITAT, BANGALORE