Rayapati Venkata Koteswara Prasad, Guntur V. The Assistant Commissioner of Income Tax, Central Circle, Vijayawada

ITA 71/VIZ/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5543 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 12-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K S RAJENDRA KUMAR
• Keywords: Unexplained cash credit; Set aside
• Section: 72; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI N.K. CHOUDHRY, HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON'BLE ACCOUNTANT MEMBER I.T.A. NO S . 71 & 72 /VIZ/2020 (ASST. YEAR : 20 04 - 05 & 2005 - 06) RAYAPATI VENKATA KOTESWARA PRASAD, D.N O. 4 - 5 - 5/9, 2 ND LANE, NAVABHARATH NAGAR, RING ROAD, GUNTUR. VS. ACIT, CENTRAL CIRCLE, VIJAYAWADA. PAN NO. AFTPR 6672 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI, ADVOCATE. DEPARTMENT BY : SHRI K.S. RAJENDRA KUMAR, CIT DR DATE OF HEARING : 27 / 04/2021 . DATE OF PRONOUNCEMENT : 07 / 05/2021 . O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER THESE APPEAL S HA VE BEEN PREFERRED BY TH E ASSESSEE AGAINST THE SEPARATE ORDER S BOTH DATED 18 /11/2019 IMPUGNED HEREIN PASSED BY THE LD.COMMISSIONER OF INCOME TAX (APPEALS) - 3 [FOR SHORT , LD.COMMISSIONER] , VISAKHAPATNAM , U/SEC. 250(6) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'ACT') FOR THE A.Y. 20 04 - 05 & 2005 - 06 . SINCE FACTS AND ISSUES ARE COMMON, APPEALS ARE CLUBBED AND HEARD TOGETHER AND DISPOSED OF BY WAY OF 2 ITA NO. 71 & 72 / VIZ /2020 ( RAYAPATI VENKATA KOTESWARA PRASAD ) THIS CONSOLIDATED ORDER . FOR THE SAKE OF CONVENIENCE, FACTS ARE TAKEN FROM ITA NO. 71/VIZ/2020 FOR THE A.Y 2004 - 05 . 2. GROUND NOS. 1 & 3 ARE GENERAL IN NATURE, WHICH DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 2.1 GROUND NO.2 IS RELATED TO THE DISALLOWANCE OF INTEREST EXPENDITURE INCURRED BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE ASS ESSMENT YEAR UNDER CONSIDERATION . THE AO DISALLOWED THE INTEREST AMOUNT OF RS. 2,82,239/ - FOR THE A.Y. 2004 - 05 AND RS. 1,99,389/ - FOR THE A.Y. 2005 - 06 FOR THE REASON THAT THE ASSESSEE HAS TAKEN UNSECURED LOANS AND CLAIMED THE INTEREST OF RS. 1,87,239/ - AND THE SAID UNSECURED LOANS WERE TREATED AS UNEXPLAINED CREDITS DURING THE ASSESSMEN T YEARS AND ACCORDINGLY MADE THE ADDITION. 3 . IN APPEAL, LD.COMMISSIONER CONFIRMED THE ADDITION MADE BY THE AO SINCE , THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE DURING THE ASSESSMENT PROCEEDINGS. 4 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THE UNSECURED LO A NS WERE T R EATED AS UNEXPLAINED CREDITS AND MADE THE ADDITION BY THE AO IN THE ASSESSMENT ORDER . ON APPEAL THE ITAT DELETED THE ADDITION BY AN ORDER DATED 27/09/2017 IN ITA NO.566/VIZ/2014 PASSED U/S 153C IN ASSESSEES OWN CASE . THE LD.COMMISSIONER CONFIRMED THE ADDITION FOR THE SIMPLE REASON THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE FOR PAYM ENT OF INTEREST. A S SEEN FROM THE ASSESSMENT ORDER, THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND AS PER THE SYSTEM OF ACCOUNT FOLLOWED BY THE 3 ITA NO. 71 & 72 / VIZ /2020 ( RAYAPATI VENKATA KOTESWARA PRASAD ) ASSESSEE , THE ASSESSEE IS ENTITLED FOR CLAIMING THE DEDUCTING ON ACCRUAL BASIS. THERE IS NO DOUBT THAT THE INTEREST WAS ACCRUED ON UNSECURED LOANS ACCEPTED BY THE ASSESSEE . O N IDENTICAL FACTS THE LD.COMMISSIONER FOR THE A.Y. 2003 - 04 ALLOWED THE INTEREST ON ACCRUAL BASIS VIDE ORDER DATED 28/03/2018 WHICH WAS PLACED IN PAPER BOOK AT PAGE NOS. 58 TO 62 . I N PAGE NO. 61 PARA 5.3, THE LD.COMMISSIONER DELETED THE ADDITION OBSERVING AS UNDER: - 5.3 REGARDING THE INTEREST PAID ON BORROWED CAPITAL, I HAVE PERUSED THE BALANCE SHEET OF EARLIER YEARS AND FOUND THAT OUTSTANDING LOANS ARE EXISTING IN THIS CASE. THEREFORE INTEREST ON LOAN IS AN ALLOWABLE EXPENDITURE. THEREFORE, THE ADDITION OF RS.1,99,389/ - MADE BY THE ASSESSING OFFICER IS DELETED. IN THE YEAR UNDER CONSIDERATION, THERE IS NO DISPUTE THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNT ING AND THE INTEREST WAS ACCRUED . AS PER THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE THE INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT NEEDS TO BE ALLOWED. THEREFORE , WE SET ASIDE THE ORDER PASSED BY THE LD.COMMISSIONER AND DELETE THE ADDITION MADE BY THE AO FOR THE A.Y S . 2004 - 05 & 2005 - 06 . CONSEQUENTLY, APPEALS OF THE ASSESSEE ARE ALLOWED. 6 . IN THE RESULT, BOTH APPEAL S FILED BY THE ASSESSEE ARE ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON TH IS 0 7 T H DAY OF MAY , 2021 . S D / - S D / - (N.K. CHOUDHRY) (D.S. SUNDER SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 0 7 T H MAY , 20 2 1 . VR/ - 4 ITA NO. 71 & 72 / VIZ /2020 ( RAYAPATI VENKATA KOTESWARA PRASAD ) COPY TO: 1. THE ASSESSEE - RAYAPATI VENKATA KOTESWARA PRASAD, D.NO. 4 - 5 - 5/9, 2 ND LANE, NAVABHARATH NAGAR, RING ROAD, GUNTUR. 2. THE REVENUE ACIT, CENTRAL CIRCLE, VIJAYAWADA. 3. THE PR. CIT (CENTRAL) , VISAKHAPATNAM. 4. THE CIT(A) - 3 , VISAKHAPATNAM . 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.