M/s. Nutan Warehousing Co.Pvt.Ltd, Pune V. Assistant Commissioner of Income-tax, Circle - 2, Pune

ITA 471/PUN/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5480 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 13-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF DATED PASSED

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, B PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NO.471/PUN/2018 / ASSESSMENT YEARS : 2013-14 M/S. NUTAN WAREHOUSING CO. PVT. LTD., KRISHI BHAVAN, 1379, BHAVANI PETH, PUNE 411 042 PAN : AAACN7084L VS. ACIT, CIRCLE-2, PUNE APPELLANT RESPONDENT / ORDER PER R.S. SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER DATED 04-12-2017 PASSED BY THE CIT(A)-3, PUNE IN RELATION TO THE ASSESSMENT YEAR 2013-14. 2. THE ONLY ISSUE RAISED IN THE APPEAL IS AGAINST THE CONF IRMATION OF ADDITION OF RS.26,125/- ON ACCOUNT OF INTEREST FROM BA NK. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY ENGAGED IN THE BUSINESS OF WAREHOUSE RENTING. T HE RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME OF RS.66,41,800/- . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESS ING OFFICER (AO) OBSERVED FROM 26AS DATA THAT THE ASSESSEE HAD NOT S HOWN ASSESSEE BY NONE REVENUE BY SHRI VITTHAL BHOSALE DATE OF HEARING 11-05-2021 DATE OF PRONOUNCEMENT 11-05-2021 ITA NO.471/PUN/2018 M/S. NUTAN WAREHOUSING PVT. LTD., 2 INTEREST FROM BANK AMOUNTING TO RS.26,125/-. AN ADDITION WA S MADE ON THIS ACCOUNT, WHICH CAME TO BE SUSTAINED IN THE FIRS T APPEAL. 4. WE HAVE HEARD THE LD. DR THROUGH VIRTUAL COURT AND GON E THROUGH THE RELEVANT MATERIAL ON RECORD. THERE IS NO APP EARANCE FROM THE SIDE OF ASSESSEE DESPITE NOTICE. IT IS SEEN THAT THE 26AS DATA REVEALED THE ASSESSEE EARNING INTEREST INCOME OF RS.26 ,125/- FROM RUPEE CO-OP BANK LTD., THAT WAS NOT DISCLOSED. THE B ANK HAD BECOME DEFUNCT AND NO FINANCIAL TRANSACTIONS WERE ALLOWED. THE RBI, VIDE ITS DIRECTION DATED 21-02-2013, REFERRED TO ON P AGE 16 OF THE IMPUGNED ORDER, BANNED THE TRANSACTIONS OF THE BANK. DUE TO SUCH A BAN, EVEN THE PRINCIPAL AMOUNT DEPOSITED BY THE ASSE SSEE BECAME DOUBTFUL OF RECOVERY, MUCH LESS THE INTEREST IN QU ESTION THAT WAS NOT RECEIVED. NOT ONLY THAT, THE ASSESSEE STATE D BEFORE THE LD. CIT(A) DURING THE COURSE OF THE FIRST APPELLATE PROCEED INGS TAKING PLACE IN THE YEAR 2017 THAT THE INTEREST WAS NOT RECEIVED EVEN TILL THAT TIME. 5. THE LD. CIT(A) HAS GONE WITH THE ACCRUAL CONCEPT O F INCOME UNDER THE MERCANTILE SYSTEM OF ACCOUNTING AND HELD THAT THE INTEREST ONCE ACCRUED BECAME CHARGEABLE TO TAX NOTWITHSTANDING ITS N ON- RECEIPT. ITA NO.471/PUN/2018 M/S. NUTAN WAREHOUSING PVT. LTD., 3 6. THE CONCEPT OF `ACCRUAL OF INCOME NEEDS TO BE CO NSIDERED IN THE HUE OF THE REAL INCOME THEORY. WHERE ACCRUAL OF AN INCOME TAKES PLACE BUT ITS REALISATION BECOMES IMPOSSIBLE, SUCH HYPO THETICAL INCOME CANNOT BE CHARGED TO TAX. IN THE CASE OF MERCANTILE SYSTEM OF ACCOUNTING, AN ACCRUING INCOME CAN BE CHARGED TO TAX ONLY WHEN IT IS LIKELY TO BE RECEIVED UNDER THE GIVEN CIRCUMSTANCES. IN A CASE WHERE RECEIPT OF INCOME, AFTER ITS ACCRUAL, IS MARRED WITH C OMPLETE UNCERTAINTY AS TO ITS REALIZATION, SUCH AN ACCRUAL GETS DEFER RED TO THE POINT OF CLEARING OF THE CLOUDS OF UNCERTAINTY OVER IT. 7. ASSIMILATING THE ENTIRE FACTUAL SCENARIO PREVAILING IN THE INSTANT CASE, IT IS SEEN THAT EVEN THE PRINCIPAL AMOUNT OF DEPOSIT MAD E BY THE ASSESSEE BECAME IRRECOVERABLE. THESE FACTS INDICATE TH AT THE ASSESSEE DID NOT RECEIVE ANY SUCH INTEREST INCOME FROM RUP EE CO-OP BANK LTD. WHOSE FUNCTIONS WERE BANNED BY THE RBI. WHEN WE CONSIDER THE MERCANTILE SYSTEM OF ACCOUNTING IN JUXTAPOSITION TO REAL INCOME THEORY IN THE FACTS AND THE CIRCUMSTANCES OF T HE INSTANT CASE, THE INESCAPABLE CONCLUSION WHICH FOLLOWS IS THAT THE INTER EST INCOME OF RS.26,125/- CANNOT BE INCLUDED IN THE TOTAL INCOM E OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. SUCH AN INCOM E MAY BE APPROPRIATELY CHARGED TO TAX ON THE REGULARISATION OF THE OPE RATIONS OF THE BANK COUPLED WITH THE POSSIBILITY OF RECEIPT OF INCOME IN ITA NO.471/PUN/2018 M/S. NUTAN WAREHOUSING PVT. LTD., 4 FORESEEABLE FUTURE. INSOFAR AS THE INSTANT YEAR IS CONCER NED, WE HOLD THAT THE INTEREST CANNOT BE CHARGED TO TAX. THE IMPUGNED OR DER IS OVERTURNED AND THE ADDITION IS DELETED. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH MAY, 2021. SD/- SD/- ( S.S.VISWANETHRA RAVI ) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 11 TH MAY, 2021 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-3, PUNE 4. 5. 6. THE PCIT-2, PUNE DR, ITAT, B BENCH, PUNE / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE ITA NO.471/PUN/2018 M/S. NUTAN WAREHOUSING PVT. LTD., 5 DATE 1. DRAFT DICTATED ON 11-05-2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 11-05-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *