ACIT, Pune v. Shri Bhavarilal Zumbarlal Kankaria, Pune

ITA 2247/PUN/2012 | 2007-2008
Pronouncement Date: 23-04-2014 | Result: Dismissed

Appeal Details

RSA Number 224724514 RSA 2012
Assessee PAN AFKPK7861E
Bench Pune
Appeal Number ITA 2247/PUN/2012
Duration Of Justice 1 year(s) 5 month(s) 14 day(s)
Appellant ACIT, Pune
Respondent Shri Bhavarilal Zumbarlal Kankaria, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 23-04-2014
Assessment Year 2007-2008
Appeal Filed On 09-11-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 2247/PN/2012 (ASSESSMENT YEAR 2007-08) ACIT CIRCLE-8 PUNE .. APPELLANT VS. SHRI BHAVARILAL ZUMBARLAL KANKARIA 64/21 D-II BLOCK MIDC CHINCHWAD PUNE .. RESPONDENT PAN NO. AFKPK7861E ASSESSEE BY : SHRI NIKHIL PATHAK & SHRI GOAWALA REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 10-04-2014 DATE OF PRONOUNCEMENT : 23-04-2014 ORDER PER R.K. PANDA AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 10-08-2012 OF THE CIT(A)-V PUNE RELATING TO ASSESSMENT YEAR 2007-08. 2. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UN DER : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN CONDONING THE DELAY OF 45 4 DAYS WHEN THE REASONS CITED BY THE ASSESSEE FOR DELAY IN FILING OF APP EAL PERTAINS TO THE PERIOD 2007 TO 2009; WHEREAS THE ASSESSEE WAS REQUIRED TO FILE APPEAL ON OR BEFORE 20 TH JAN 2010 AND ALSO THE DELAY HAS BEEN CONDONED WITHO UT ASSIGNING SPECIFIC REASONS 2.1 FACTS OF THE CASE IN BRIEF ARE THAT THERE WAS A DELAY OF 455 DAYS IN FILING OF THE APPEAL BEFORE THE CIT(A). THE ASSESS EE IN HIS SUBMISSION STATED THE FOLLOWING REASONS FOR CONDONING THE DELA Y : 2 1. THE ASSESSMENT ORDER IN THE PRESENT CASE WAS PASSED ON 17 TH DECEMBER 2009 AND SERVED ON 21 ST DECEMBER 2009. THE APPEAL AGAINST THE ORDER WAS REQUIRED TO BE FILED BEFORE 20 TH JANUARY 2010. HOWEVER THE APPELLANT COULD NOT FILE THE SAID APPEAL IN TIME DUE TO REASONABLE CAUSE AND THE CIRCUMSTANCES BEYOND CONTROL. 2. THE APPELLANT WAS ACTING AS A VICE CHAIRMAN IN THE COMPANY M/S. UMA PRECISION LTD. THE SAID COMPANY WAS GOING THROUGH A ROUGH WEATHER DURING THE PERIOD 2007 TO 2009. THE COMPANY HAD TO FACE ON STRINGENT ISSUES LIKE LABOUR UNREST. STRIKE AND LOCK OUT AT THE FACTORY PREMISES. FURTHER THE MAJOR CUSTOMER OF THE COMPANY I .E. M/S. BAJAJ AUTO LTD HAD ALSO SHIFTED ITS BASE FROM CHINCHWAD PUNE TO AURANGABAD/BHOSARI AND PANT NAGAR DUE TO WHICH THE BUSINESS OF THE COMPANY NOSEDIVED AND SUFFERED SUBSTANTIAL LOSSES. THE SAID ISSUES HAD ALSO LED TO CASH LOSSES AND LIQUIDITY CRUNCH. LACK OF B USINESS OPPORTUNITIES HAD ALSO CREATED UNCOMFORTS TO THE LABOU RERS AS WELL AS TO THE MANAGEMENT. 3. THE APPELLANT ALONG WITH OTHER DIRECTORS HAD T O HANDLE THE SITUATION IN EXTENSIVELY DELICATE MANNER. ON ONE HAND THEY HA D TO MANAGE THE AFFAIRS OF THE COMPANY LEADING TO CASH LOSSES DUE TO LAC K OF BUSINESS AND ON THE OTHER HAND THEY HAD TO ENSURE AND SATISFY THE W ORKERS TO SETTLE THE LABOUR UNREST. 4. AS IF THIS WAS NOT ENOUGH IN THE SAID PERIOD THE FOREIGN INVESTOR IN THE COMPANY HAD ALSO EXPRESSED HIS DESIRE TO EXIT THE CO MPANY LOOKING AT THE BAD FUTURE PROSPECTS AND CURRENT LABOUR UNREST. IT WAS DURING THIS TIME THERE WAS ALSO A TAKE OVER BID FOR THE COMPANY WHEREBY A NEW MANAGEMENT/GROUP OF PEOPLE DESIRED TO TAKE OVER THE SAID COMPANY. IN FACT THEY WERE A/SO SUCCESSFUL IN THEIR ATTEMPTS TO TAK E OVER THE COMPANY. 5. THE APPELLANT HAD TO MANAGE SUCH A TOUGH SITUATION MORE SO WHEN THE COMPANY HAS NEVER EXPERIENCE SUCH A SCENARIO IN THE PAST. SINCE THE APPELLANT WAS ACTIVITY ENGAGED IN AND RESP ONSIBLE FOR MANAGING THE SAID AFFAIRS OF THE COMPANY AND TACKLING WITH THE PROBLEMS FACED BY THEM THE APPELLANT COULD NOT LOOK AFTER THEIR OWN ASSESSMENT PROCEEDINGS. 6. FURTHER THE APPELLANT WAS ALSO SURRENDERED BY SEVE RAL OTHER CIRCUMSTANCES WHICH WERE BEYOND HIS CONTROL TO LOOK AF TER THEM IN PERSONAL CAPACITIES. IN FACT THE APPELLANT WAS FACING CERTAIN PROBLEMS ON PERSONAL LEVELS DUE TO WHICH HE COULD NOT CONCENTRAT E ON PERSONAL AFFAIRS LEADING TO THE DELAY IN FILING THE APPEAL. 7. THE APPELLANT SUBMITTED THAT THE SAID DELAY IN FIL ING THE APPEAL IS SOLELY DUE TO VARIOUS CIRCUMSTANCES BEYOND CONTROL SOME OF WHICH ARE EXPLAINED ABOVE RESULTING INTO A DELAY OF 454 DAYS I N FILING THE APPEAL. THE DETAILED PETITION ALONG WITH THE NECESSARY EVIDEN CES SUPPORTING THE ABOVE CLAIM WILL BE FILED AT THE TIME OF HEARING. 2.2 RELYING ON VARIOUS DECISIONS INCLUDING THE DECI SIONS OF HONBLE SUPREME COURT IN THE CASE OF COLLECTOR LAND ACQUIS ITION VS. MST KATIJI & OTHERS REPORTED IN 167 ITR 471 AND IN THE CASE OF N. BALAKRISHNAN VS. 3 M. KRISHNAMOORTHY REPORTED IN AIR 1998 SC 3222 IT W AS ARGUED THAT THE DELAY IN FILING OF THE APPEAL SHOULD BE CONDONED. 2.3 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND CONSIDERING THE DECISIONS CITED BEFORE HIM THE LD.CIT(A) CONDON ED THE DELAY OF 454 DAYS. WHILE DOING SO HE OBSERVED THAT ALTHOUGH TH E DELAY IN FILING OF THE APPEAL IS SUBSTANTIAL HOWEVER THE CIRCUMSTANCE S LEADING TO DELAY IN FILING OF THE APPEAL AS WELL AS IN THE INTEREST OF JUSTICE THE DELAY SHOULD BE CONDONED. 2.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 3. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY OPP OSED THE DELAY CONDONED BY THE CIT(A). HE SUBMITTED THAT THE ASSE SSEE HAS CITED THE REASONS SUCH AS THE COMPANY WAS GOING THROUGH A ROU GH WEATHER DURING THE PERIOD 2007 TO 2009 WHEREAS THE ASSESSEE WAS RE QUIRED TO FILE THE APPEAL ON OR BEFORE 20-01-2010. THEREFORE THE REA SONS CITED BY THE ASSESSEE FOR CONDONING THE DELAY PERTAINS TO THE PE RIOD PRIOR TO WHEN THE ASSESSEE WAS REQUIRED TO FILE THE APPEAL AND THEREF ORE THE DECISION OF THE CIT(A) IN CONDONING THE DELAY IS NOT JUSTIFIED. HE SUBMITTED THAT THE CIT(A) HAS MERELY CONDONED THE DELAY IN FILING OF A PPEAL WITHOUT ELABORATING UPON THE REASONS GIVEN BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS. HE ALSO REFERRED TO THE FOLLOWING DEC ISIONS : I. VIJAY PROTEIN LTD. VS. COLLECTOR OF CUSTOMS REPO RTED IN 175 ITR 540 II. GOPAL FILMS VS. DCIT & OTHERS REPORTED IN 237 I TR 685 4 HE ACCORDINGLY SUBMITTED THAT THE CIT(A) WAS NOT JU STIFIED IN CONDONING THE DELAY AND THEREFORE THE APPEAL SHOULD BE DISMIS SED FOR BEING FILED BEYOND TIME. 4. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HEAVILY SUPPORTED THE ORDER OF THE CIT(A). HE SUBMITTED TH AT THE ASSESSEE HAS EXPLAINED THE REASONS FOR DELAY IN FILING OF THE AP PEAL. REFERRING TO THE FOLLOWING SEQUENCE OF EVENTS HE SUBMITTED THAT THER E WAS A REASONABLE CAUSE ON THE PART OF THE ASSESSEE FOR FILING OF THE APPEAL BEYOND THE DUE DATE : DATE PARTICULARS 30 TH APRIL 2007 RETURN OF INCOME FOR A.Y. 2007-08 WAS FI LED BY THE APPELLANT 18 TH SEPTEMBER 2008 ASSESSMENT PROCEEDINGS WERE COMMENCED BY THE ASSESSING OFFICER 25 TH JULY 2009 LABOUR UNREST & STRIKES BEGAN IN THE APPEL LANTS COMPANY 17 TH DECEMBER 2009 ASSESSMENT ORDER WAS PASSED BY ASST. COMMISSIONER OF INCOME TAX. DECEMBER 2009 TO MARCH 2011 LABOUR UNREST & STRIKES CONTINUED AND IN THE PROCESS TH E COMPANY WAS ALSO TAKEN OVER 19 TH APRIL 2011 APPEAL WAS FILED AGAINST THE ASSESSMENT ORDER BY THE APPELLANT. 4.1 RELYING ON VARIOUS PAPER CUTTINGS PLACED AT PAP ER BOOK PAGES 13 TO 35 HE DREW THE ATTENTION OF THE BENCH TO THE NEW S ITEMS APPEARING IN VARIOUS NEWSPAPERS REGARDING THE LABOUR UNREST QUE STIONS IN ASSEMBLY ETC. HE ACCORDINGLY SUBMITTED THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE CIT(A) IN CONDONING THE DELAY IS FULLY JUSTIFIED AND DOES NOT CALL FOR ANY INTERFERENCE. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE 5 VARIOUS DECISIONS CITED BEFORE US. WE FIND THE HON BLE SUPREME COURT IN THE CASE OF COLLECTOR LAND ACQUISITION VS. MST K ATIJI AND OTHERS (SUPRA) HAS OBSERVED AS UNDER : THE LEGISLATURE HAS CONFERRED THE POWER TO CONDONE D ELAY BY ENACTING SECTION 51 OF THE LIMITATION ACT OF 1963 IN ORDER TO ENABLE THE COURTS TO DO SUBSTANTIAL JUSTICE TO PARTIES BY DISPOSING OF MATTERS ON DE MERITS '. THE EXPRESSION ' SUFFICIENT CAUSE ' EMPLOYED BY THE LEG ISLATURE IS ADEQUATELY ELASTIC TO ENABLE THE COURTS TO APPLY THE LAW IN A MEANINGFUL MANNER WHICH SUB-SERVES THE ENDS OF JUSTICE THAT BEING THE LIFE PURPOSE OF THE EXISTENCE OF THE INSTITUTION OF COURTS. IT IS CO MMON KNOWLEDGE THAT THIS COURT HAS BEEN MAKING A JUSTIFIABLY LIBERAL APPRO ACH IN MATTERS INSTITUTED IN THIS COURT. BUT THE MESSAGE DOES NOT APPE AR TO HAVE PERCOLATED DOWN TO ALL THE OTHER COURTS IN THE HIERA RCHY. AND SUCH A LIBERAL APPROACH IS ADOPTED ON PRINCIPLE AS IT IS REALIZED THAT : 1. ORDINARILY A LITIGANT DOES NOT STAND TO BENEFIT BY LODGING AN APPEAL LATE. 2. REFUSING TO CONDONE DELAY CAN RESULT IN A MERITORI OUS MATTER BEING THROWN OUT AT THE VERY THRESHOLD AND CAUSE OF JUSTICE BEING DEFEATED. AS AGAINST THIS WHEN DELAY IS CONDONED THE HIGHEST THAT CAN HAPPEN IS THAT A CAUSE WOULD BE DECIDED ON MERITS AFTER HEARING THE PARTIES. 3. ' EVERY DAY'S DELAY MUST BE EXPLAINED ' DOES NOT ME AN THAT PEDANTIC APPROACH SHOULD BE MADE. WHY NOT EVERY HOUR'S DELAY EVERY SECOND'S DELAY? THE DOCTRINE MUST BE APPLIED IN A RATIONAL C OMMON SENSE AND PRAGMATIC MANNER. 4. WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATION S ARE PITTED AGAINST EACH OTHER THE CAUSE OF SUBSTANTIAL JUSTICE DESE RVES TO BE PREFERRED FOR THE OTHER SIDE CANNOT CLAIM TO HAVE V ESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF A NON DELIBERATE DELAY. 5. THERE IS NO PRESUMPTION THAT DELAY IS OCCASIONED DE LIBERATELY OR ON ACCOUNT OF CULPABLE NEGLIGENCE OR ON ACCOUNT OF MA LA FIDES. A LITIGANT DOES NOT STAND TO BENEFIT BY RESORTING TO DELAY. IN FA CT HE RUNS SERIOUS RISK. 6. IT MUST BE GRASPED THAT THE JUDICIARY IS RESPECTED N OT ON ACCOUNT OF ITS POWER TO LEGALIZE INJUSTICE ON TECHNICAL GROUNDS BUT BECAUSE IT IS CAPABLE OF REMOVING INJUSTICE AND IS EXPECTED TO DO SO. 5.1 WE FIND THE HONBLE SUPREME COURT IN THE CASE O F N. BALAKRISHKRISHNAN VS. M. KRISHNAMOORTHY (SUPRA) HAS OBSERVED AS UNDER : RULES OF LIMITATION ARE NOT MEANT TO DESTROY THE RIG HT OF PARTIES. THEY ARE MEANT TO SEE THAT PARTIES DO NOT RESORT TO DILATOR Y TACTICS BUT SEEK THEIR REMEDY PROMPTLY. THE OBJECT OF PROVIDING LEG AL REMEDY IS TO REPAIR THE DAMAGE CAUSED BY REASON OF LEGAL INJURY. LAW OF LIMITATION FIXES A LIFE SPAN FOR SUCH LEGAL REMEDY FOR THE REDRESS OF THE LEGAL INJURY SO SUFFERED. 6 TIME IS PRECIOUS AND THE WASTED TIME WOULD NEVER REVISI T. DURING EFFLUX OF TIME NEWER CAUSE WOULD SPROUT UP NECESSITATING NEWER PERSONS TO SEEK LEGAL REMEDY BY APPROACHING THE COURTS. 5.2 SINCE THE LD.CIT(A) WHILE CONDONING THE DELAY H AS CONSIDERED THE SUBMISSIONS OF THE ASSESSEE WHO HAS CITED THE ABOVE DECISIONS AND CONSIDERING THE VARIOUS PAPER CUTTINGS QUESTIONS I N THE ASSEMBLY ETC. (COPIES OF WHICH ARE FILED IN THE PAPER BOOK) WE A RE OF CONSIDERED OPINION THAT THE LD.CIT(A) HAS APPLIED HIS MIND IN CONDONING THE DELAY WHICH IN OUR OPINION IS JUSTIFIED UNDER THE FACTS A ND CIRCUMSTANCES OF THE CASE. WE THEREFORE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. ACCORDINGLY THE SAME IS UPHELD AND TH E GROUND RAISED BY THE REVENUE IS DISMISSED. 6. GROUNDS OF APPEAL NO.2A AND 2B BY THE REVENUE RE ADS AS UNDER : 2A. WHETHER ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF R S. 8 25 000/- ON ACCOUNT OF INTEREST ON KVP IGNORING CBDT'S CIRCULAR NO. 687 DATED 19.08.1994 WHEREIN IT HAS BEEN STATED THAT INTEREST O N KVP HAS TO BE ASSESSED TO INCOME TAX ON ACCRUAL BASIS. 2B. WHETHER ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW THE CIT(A) HAS ERRED IN NOT APPLYING THE RATIO OF HON'BL E SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS L TD REPORTED IN 227 ITR 172 WHEREIN IT HAS BEEN HELD THAT WHETHER A REC EIPT OF MONEY IS TAXABLE OR NOT HAS TO BE DECIDED ACCORDING TO THE P RINCIPLES OF LAW AND NOT IN ACCORDANCE WITH THE ACCOUNTANCY PRACTICE. 6.1 FACTS OF THE CASE IN BRIEF ARE THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AS CLAIMED LOSS OF RS.8 04 966/- UNDER THE HEAD OTHER SOURCES. HE F URTHER OBSERVED THAT THE SAID LOSS WAS ON ACCOUNT OF PAYMENT OF INTEREST OF RS.9 78 057/- ON LOAN TAKEN FROM ICICI BANK AND DEUTSCH BANK ON PURC HASE OF KISAN VIKAS PATRA OF RS.1 CRORE. THE INVESTMENT WAS MADE ON 15-03-2005 AND WAS TO MATURE ON 23-10-2012. ON BEING QUESTIONED B Y THE AO IT WAS 7 SUBMITTED THAT THE ENTIRE INTEREST INCOME ON KVP WA S PLANNED TO BE OFFERED IN THE YEAR OF RECEIPT OF MATURITY AS THE A SSESSEE WAS FOLLOWING THE CASH SYSTEM OF ACCOUNTING. HOWEVER DUE TO PRE MATURE CLOSURE OF THIS INVESTMENT THE ENTIRE INTEREST INCOME OF RS.17 67 260/- WAS OFFERED FOR TAXATION IN A.Y. 2008-09. 6.2 HOWEVER THE AO WAS NOT SATISFIED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE ON THE GROUND THAT THE INTEREST ON KVP IS TO BE TAXED ON MERCANTILE BASIS AS INTEREST WAS CLAIMED AS DEDUCTI ON U/S.57 ON BORROWINGS MADE FOR THE PURPOSE OF INVESTMENT. FUR THER INTEREST ON KVP WAS ALSO REQUIRED TO BE TAXED ON MATCHING PRINC IPLES. HE ACCORDINGLY MADE ADDITION OF RS.8 25 000/- TO THE T OTAL INCOME OF THE ASSESSEE BEING INTEREST ON KVP ON ESTIMATE BASIS FO R THE IMPUGNED ASSESSMENT YEAR. 7. BEFORE THE CIT(A) IT WAS SUBMITTED THAT AS PER P ROVISIONS OF SECTION 145 OF THE I.T. ACT. 1961 INCOME FROM OTHER SOURCES SHALL BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTI LE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THE ASSESSEE HAS ALREADY PAID INTEREST OF RS.8 20 608/- WHICH IS NOT IN DISPUTE. SINCE THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING HE IS ELIGIBLE FOR DEDUCTION OF THE WHOLE AMOUNT OF INTEREST PAID UNDE R THE PROVISIONS OF SECTION 145 OF THE I.T. ACT. 8. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 8 10. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AS WELL AS REPLY OF THE APPELLANT. IT IS SEEN FROM THE PERUSAL OF ORDERSHEE T NOTING DATED 07.12.2009 THAT SHRI. AJIT DARANDALE ACCOUNTANT OF THE APPELLANT OFFERED FOR TAXATION INTEREST INCOME OF RS.8 25 000/- PERTAIN ING TO K.V.P ON MERCANTILE BASIS. SINCE THE ABOVE INTEREST WAS ALREAD Y SHOWN IN A.Y. 2008-09 A REVISED RETURN WAS FILED ON 31.03.2010 FOR A.Y. 2008-09 IN WHICH AMOUNT OF RS.8 25 000/- WAS REDUCED. THUS FROM THE FACTS NARRATED ABOVE IT IS CLEAR THAT THE ACCOUNTANT OF T HE APPELLANT NOT ONLY AGREED TO OFFER THE INTEREST INCOME ON K.V.P. ON MER CANTILE BASIS IN A.Y. 2007-08 BUT THE APPELLANT TOO FOLLOWED UP THE MAT TER BY WAY OF REVISING THE RETURN IN A.Y. 2008-09 IN WHICH THE AMOUNT OF R S.8 25 000/- OFFERS FOR A.Y. 2007-08 WAS REDUCED. 11. DURING THE COURSE OF THE APPELLATE PROCEEDINGS TH E APPELLANT HAS FILED AFFIDAVIT OF SHRI. AJIT DARANDALE WHEREIN IT HAS BEEN STATED THAT HE WAS NOT VERY CONVERSANT WITH INCOME-TAX LAW AND HE CO ULD NOT REFUTE THE ASSERTION OF THE ASSESSING OFFICER THAT INTEREST INCOME ON K.V.P. IS TO BE TAXED ON MERCANTILE BASIS AND THEREFORE HE UNKNOWING LY ACCEPTED THE ERRONEOUS CONTENTION OF THE ASSESSING OFFICER. THE APPEL LANT HAS ALSO FILED A LETTER ON 30.07.2012 ADDRESSED TO THE ASSESSING O FFICER REQUESTING FOR WITHDRAWAL OF REVISED RETURN FILED FOR A.Y. 2008 -09 ON 31.03.2010 STATING THE FACTS OF THE CASE NARRATED ABOVE. 12. COMING TO THE MERIT OF THE CASE IT IS SEEN THAT T HE APPELLANT IS FOLLOWING CASH SYSTEM OF ACCOUNTING. THOUGH IN THE FR ONT PAGE OF THE ASSESSMENT ORDER METHOD OF ACCOUNTING HAS BEEN MENTIONED AS 'MERCANTILE' WHICH APPEARS TO BE MISTAKE FROM THE REA DING OF THE ASSESSMENT ORDER AS A WHOLE AND PARTICULARLY PARA 3.3 OF THE ASSESSMENT ORDER WHEREIN THE ASSESSING OFFICER STATES THAT THE APPE LLANT WAS INFORMED THAT HE WAS NOT ALLOWED TO ACCOUNT INTERES T ON K.V.P INVESTMENT IN CASH SYSTEM. THEREFORE THERE IS NO DISPUTE REGARDING THE METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT WHICH IS 'CASH SYSTEM'. THE APPELLANT'S ACCOUNTANT HAS ACCEPTED TO OFFER THE SAME ON THE BASIS OF MERCANTILE SYSTEM DURING THE COURSE OF ASSESSMENT PROCEED INGS BUT THAT IS DEARLY ERRONEOUS AS THAT WILL AMOUNT OF HYBRID SYSTEM WHICH IS NOT PERMITTED IN THE ACT. THE ASSESSING OFFICER TOO CANNOT TAX THE SAME ON THE BASIS OF MERCANTILE SYSTEM UNLESS HE REJECTS THE BOOK S OF ACCOUNTS U/S. 145 INCOME-TAX ACT WHICH HAS NOT BEEN DONE IN T HIS CASE. THEREFORE IT IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.8 25 000/- BEING INTEREST ON K.V.P ON MERCANTIL E BASIS WHEN THE APPELLANT WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. SINC E THE AMOUNT IN QUESTION I.E. RS. 8 25 000/- WAS REDUCED FROM A.Y. 200 8-09 BY WAY OF FILING REVISED RETURN THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.8 25 000/- SUBJECT TO THE CONDITION TH AT REVISED RETURN FOR A.Y. 2008-09 FILED ON 31.03.2010 IS NOT PROCESSED AS RE QUESTED BY THE APPELLANT'S REPRESENTATIVE IN LETTER DATED 30.07.2012 . ACCORDINGLY THE GROUND IS ALLOWED WITH THE ABOVE CONDITIONS. 8.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 9. THE LD. DEPARTMENTAL REPRESENTATIVE OPPOSED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE AO IN HIS ORDER HAS CLEARLY BROUGHT ON RECORD THAT THE ASSESSEE HAD CLAIMED EXPENSES WITHO UT OFFERING THE 9 CORRESPONDING INCOME DURING THE YEAR. ON MATCHING PRINCIPLES OF ACCOUNTING THE INCOME WAS REQUIRED TO BE OFFERED TO TAX DURING THE YEAR UNDER REFERENCE. FURTHER THE ASSESSEE ALSO ACCEPT ED THE PRINCIPLE AND AGREED FOR THE ADDITION AND NO APPEAL CAN BE FILED AGAINST AN ORDER IN AGREED BASIS. FOR THIS PROPOSITION HE ALSO RELIED ON THE FOLLOWING 2 DECISIONS : I. JIVATLAL PURTAPSHI VS. CIT REPORTED IN 65 ITR 261 (BOM) II. KANSHI RAM WADHWA VS. CIT REPORTED IN 138 ITR 830 (P&H) 9.1 REFERRING TO CBDT CIRCULAR NO.687 DATED 19-08-1 994 ON THE ISSUE OF TAXABILITY OF INTEREST ACCRUED ON KVP HE S UBMITTED THAT INTEREST OF KVP HAS TO BE ASSED TO INCOME-TAX ON ACCRUAL BAS IS. HE ALSO REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF TUTICORIN ALKALI CHEMICALS & FERTILIZERA LTD. VS. CIT (SC) REPORTED IN 227 ITR 172 AND DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING OB SERVATIONS : IT IS TRUE THAT THIS COURT HAS VERY OFTEN REFERRED TO ACCOUNTING PRACTICE FOR ASCERTAINMENT OF PROFIT MADE BY A COMPANY OR VAL UE OF THE ASSETS OF A COMPANY. BUT WHEN THE QUESTION IS WHETHER A RECEIPT OF MONEY IS TAXABLE OR NOT OR WHETHER CERTAIN DEDUCTION FROM TH AT RECEIPT ARE PERMISSIBLE IN LAW OR NOT THE QUESTION HAS TOB E DECID ED ACCORDING TO THE PRINCIPLES OF LAW AND NOT IN ACCORDANCE WITH SECTION 56 OR ANY OTHER PROVISION OF THE ACT. AS WAS POINTED BY LORD RUSSEL IN THE CASE OF B.S.C. FOOTWEAR LTD. THE INCOME-TAX LAW DOES NOT MARCH STEP BY STEP IN THE FOOTPRINTS OF THE ACCOUNTANCY PROFESSION 10. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING WHICH IS NOT IN DISPUTE. HE SUBMITTED THAT FOR THE A.Y. 2006-07 THE AO HAS NOT MADE ANY ADDITION O N ACCOUNT OF ACCRUED INTEREST ON KVP AND THE ORDER U/S.143(3) WA S PASSED ON 03-10- 2008. HE SUBMITTED THAT ALTHOUGH THE ORDER FOR THE IMPUGNED ASSESSMENT YEAR WAS PASSED ON 17-12-2009 NO ACTION EITHER U/S. 263 OR 148 HAS BEEN 10 INITIATED. EVEN FOR A.Y. 2005-06 ALSO THERE IS NO ADDITION ON ACCOUNT OF ACCRUED INTEREST ON KVP. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE LD.CIT(A) BEING IN CONFORMITY WITH THE SYSTEM OF AC COUNTING FOLLOWED BY THE ASSESSEE WHICH IS CASH SYSTEM THE SAME SHO ULD BE UPHELD. 10.1 SO FAR AS THE SUBMISSION OF THE LD. DEPARTMENT AL REPRESENTATIVE THAT ONCE THE ASSESSEE HAS ACCEPTED THE PRINCIPLE A ND AGREED FOR ADDITION NO APPEAL CAN BE FILED AGAINST AN ORDER IN AGREED B ASIS HE SUBMITTED THAT APPEAL AGAINST ASSESSMENT ON CONCESSION IS MAINTAIN ABLE IF IT TRANSPIRES LATER THAT CONCESSION WAS GIVEN ON A MISTAKEN IMPRE SSION OF TRUE LEGAL POSITION. 10.2 REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BAMBINO INVESTMENT AND TRADING CO. LTD. VS. DCIT REPORTED IN (2004) 2 SOT 585 (MUMBAI) HE SUBMITTED THAT THE TRIBUNAL AFTER CONSIDERING THE DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF RAMCHANDRA & CO. VS. CIT REPORTED IN 168 ITR 275 H AS OBSERVED THAT THE AO DERIVES THE POWER TO ASSESS A RECEIPT AS INC OME ONLY FROM THE PROVISIONS OF THE TAXING ENACTMENT AND NOT FROM THE CONCESSION MADE BY THE ASSESSEE THAT THE SAME IS TAXABLE UNDER THE ENA CTMENT. SUCH A CONCESSION ON A PURE QUESTION OF LAW SUCH AS THE A SSESSABILITY OF THE RECEIPT AS INTEREST ON LOANS AND ADVANCES UNDER THE PROVISIONS OF SECTION 2(7) OF THE INTEREST TAX ACT DOES NOT RELIEVE THE AO OF HIS DUTY TO EXAMINE WHETHER THE RECEIPT IS PROPERLY SO ASSESSAB LE. HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT A C ONCESSION WHICH IS OF LEGAL IN NATURE DOES NOT BIND THE ASSESSEE. IF IT TRANSPIRES LATER THAT THE CONCESSION WAS GIVEN UNDER THE MISTAKEN IMPRESSION OF THE TRUE LEGAL 11 POSITION THE ASSESSEE COULD FILE AN APPEAL AND CHA LLENGE THE ASSESSMENT. HE ACCORDINGLY SUBMITTED THAT THE DECISION RELIED O N BY THE LD. DEPARTMENTAL REPRESENTATIVE IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DIS PUTE TO THE FACT THAT THE ASSESSEE IN ITS COMPUTATION STATEMENT HAS SHOWN T O HAVE FOLLOWED CASH SYSTEM OF ACCOUNTING. ALTHOUGH THE ASSESSING OFFIC ER IN THE ASSESSMENT ORDER HAS MENTIONED THAT SYSTEM OF ACCOUNTING FOLLO WED IS MERCANTILE HE HAS NOT PASSED ANY COMMENTS ON THE CASH SYSTEM O F ACCOUNTING FOLLOWED BY THE ASSESSEE WHICH HAS BEEN MENTIONED I N THE VERY COMPUTATION STATEMENT. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS NOT RECEIVED ANY INTEREST ON KVP. WE FIND ALTHOUGH AN ORDER U/S.143(3) WAS PASSED FOR A.Y. 2006-07 (A C OPY OF WHICH IS PLACED IN THE PAPER BOOK PAGES 49 AND 50) THERE IS NO ADDITION ON ACCOUNT OF ACCRUED INTEREST AND THE ASSESSING OFFIC ER HAS ALLOWED THE DEDUCTION OF INTEREST ON ICICI BANK LOAN AMOUNTING TO RS.6 22 162/- U/S.57 OF THE I.T. ACT. AS PER PROVISIONS OF SECTI ON 145 OF THE I.T. ACT AN ASSESSEE CAN FOLLOW EITHER CASH SYSTEM OF ACCOUN TING OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY HIM. TH E ASSESSEE IN THE INSTANT CASE IS FOLLOWING CASH SYSTEM OF ACCOUNTING REGULARLY. THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A) DELETING THE ADDITION ON ACCOUNT OF ACCRUED INTEREST ON KVP. 12 11.1 SO FAR AS THE ARGUMENT OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSEE HAVING ACCEPTED THE ADDITION OF A CCRUED INTEREST NO APPEAL SHOULD HAVE BEEN FILED WE FIND THE MUMBAI B ENCH OF THE TRIBUNAL IN THE CASE OF BAMBINO INVESTMENT AND TRAD ING CO. LTD. (SUPRA) HAS OBSERVED AS UNDER : 6. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE RIVAL CONTENTIONS. THE QUESTION WHETHER THE INTEREST ON DEBENTURES CAN BE CONSIDERED TO BE INTEREST FROM LOANS AND ADVANCES WITHIN THE MEANING OF S. 2(7) OF THE INTEREST-TAX ACT IS A QUESTION OF LAW AND NOT A MERE Q UESTION OF FACT. THE JUDGMENTS OF THE HIGH COURTS AND THE ORDERS OF THE TR IBUNAL CITED ON BEHALF OF THE ASSESSEE (SUPRA) BEAR OUT THIS POSITION. THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF RAMESH CHANDRA & CO. (SUPRA) CITED ON BEHALF OF THE DEPARTMENT IS A CASE OF A STATEMENT MADE OF A FACT. CERTAIN DISCREPANCIES IN THE SARKI ACCOUNT WERE FOUND BY THE I TO AND THE ASSESSEE WAS ASKED TO RECONCILE THE SAME. THE ASSESSEE EXPRESS ED HIS INABILITY TO DO SO AND AGREED THAT THE AMOUNT MAY BE ADDED TO THE INCOME. THE ITO RECORDED THE SAME IN THE ORDER SHEET WHICH WAS ALSO SIGNED BY THE PARTNER OF THE ASSESSEE-FIRM. IT WAS ON THE SE FACTS THAT THE HIGH COURT HELD THAT THE APPEAL TO THE AAC WAS NOT M AINTAINABLE SINCE THE ASSESSEE HAD CONCEDED BEFORE THE AO THAT THE DISCREP ANCIES COULD NOT BE RECONCILED AND THAT THE AMOUNT MAY BE ADDED TO THE INCOME. THIS FACTUAL POSITION WAS NOT RESILED FROM BY THE ASSESSEE AT ANY TIME THEREAFTER BEFORE THE ITO. THE HIGH COURT THEREFOR E HELD THAT SO LONG AS THE ASSESSEE'S STATEMENT STOOD IT COULD NOT HAVE A GRIEVA NCE IN THAT BEHALF AND WAS NOT ENTITLED TO APPEAL AGAINST THE SAME . IN OUR HUMBLE OPINION THE JUDGMENT IS NOT APPLICABLE WHERE AN ADM ISSION OR CONCESSION IS MADE BY THE ASSESSEE ON A PURE QUESTION OF LA W. NO TAX CAN BE IMPOSED OR COLLECTED WITHOUT THE AUTHORITY OF LAW AND MERELY BECAUSE THE ASSESSEE ADMITS OR CONCEDES BEFORE THE AO THAT A PART ICULAR AMOUNT IS TAXABLE IN LAW THERE BEING NO DISPUTE REGARDING T HE FACTS IT CANNOT BE BROUGHT TO TAX. IF STILL AO HAS BROUGHT THE SAME TO TA X BASED MERELY ON CONCESSION MADE BY THE ASSESSEE IT CANNOT BE EQUATED TO A CONCESSION AS REGARDS FACTS AND IT CANNOT BE SAID THAT THE ASSESSEE CA N HAVE NO RIGHT OF APPEAL WHEN HE IS LATER ADVISED OR INFORMED OF THE CO RRECT POSITION IN LAW. THE AO DERIVES THE POWER TO ASSESS A RECEIPT AS INCO ME ONLY FROM THE PROVISIONS OF THE TAXING ENACTMENT AND NOT FROM T HE CONCESSION MADE BY THE ASSESSEE THAT THE SAME IS TAXABLE UNDER THE ENACTM ENT. SUCH A CONCESSION ON A PURE QUESTION OF LAW SUCH AS THE ASSESSAB ILITY OF A RECEIPT AS 'INTEREST ON LOANS AND ADVANCES' UNDER THE P ROVISIONS OF S. 2(7) OF THE INTEREST-TAX ACT DOES NOT RELIEVE THE AO OF HIS DUTY TO EXAMINE WHETHER THE RECEIPT IS PROPERLY SO ASSESSABLE. I N THE JUDGMENT CITED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE (SUP RA) THE ASSESSEE ADMITTED BEFORE THE AO THAT HE HAD NO EVIDENCE TO SU PPORT HIS CLAIM. THERE WAS NO DISPUTE THAT IF THERE IS NO EVIDENCE TO RECONCILE THE DISCREPANCIES DETECTED BY THE AO THE AMOUNT INVOLVED COULD BE BROUGHT TO TAX. WE ARE NOT CONCERNED WITH A CASE WHERE THE A SSESSEE AGREED TO AN ADDITION ON GROUNDS OF LACK OF EVIDENCE. WE ARE CONC ERNED WITH A CASE WHERE THE ASSESSEE CONCEDED THAT IN LAW INTEREST FROM DE BENTURES COULD BE ASSESSED AS INTEREST ON 'LOANS AND ADVANCES'. THIS CONCESSI ON IS OF A LEGAL POSITION WHICH DOES NOT BIND THE ASSESSEE. IF IT LA TER TRANSPIRES THAT THE CONCESSION WAS GIVEN UNDER A MISTAKEN IMPRESSION OF T HE TRUE LEGAL POSITION THE ASSESSEE COULD FILE AN APPEAL AND CHALLENG E THE ASSESSMENT. 11.2 SO FAR AS THE DECISION IN THE CASE OF JIVATLAL PURTAPSHI VS. CIT (SUPRA) IS CONCERNED WE FIND THE SAID DECISION IS D ISTINGUISHABLE AND NOT 13 APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE D ECISION IN THE CASE OF KANSHI RAM WADHWA VS. CIT IS ALSO DISTINGUISHABLE A ND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THAT CASE THE INCOME WAS TAKEN AT A PARTICULAR FIGURE AFTER CONSIDERING THE DEPRECIATIO N. IT WAS HELD THAT THE ASSESSEE HAVING DERIVED THE BENEFIT OF AN AGREED OR DER OF ASSESSMENT CANNOT SUBSEQUENTLY CONTEND THAT DEPRECIATION WAS NOT ACT UALLY ALLOWED. HOWEVER THE FACTS IN THE PRESENT CASE ARE DIFFEREN T. IT IS A QUESTION OF LAW WHICH HAS ALREADY BEEN DISCUSSED IN THE PRECEDI NG PARAGRAPHS. THEREFORE THE SAME IN OUR OPINION IS NOT APPLICABL E TO THE FACTS OF THE PRESENT CASE. IN THIS VIEW OF THE MATTER AND IN VI EW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) WE FIND NO INFIRMI TY IN HIS ORDER ON THIS ISSUE. ACCORDINGLY THE SAME IS UPHELD AND TH E GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 12. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS U NDER : 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF R S. 1 45 031/- CLAIMED U/S. 57 OF THE IT. ACT WHEN THE ASSESSEE HAD NOT USED THE BORROWINGS FOR HIS OWN USE BUT TO ADVANCE LOANS FOR WHI CH MEAGER INTEREST HAS BEEN RECEIVED AND THE AFFAIRS OF THE ASSESSE E APPEARS TO BE ARRANGED WITH AN INTENTION TO AVOID PAYMENT OF TAX? 12.1 FACTS OF THE CASE IN BRIEF ARE THAT THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AS CLAIMED EXPENDITURE OF RS.9 78 057/- U/S.57 OF THE I.T. ACT OUT OF WHICH INTEREST AMOUNTING TO RS.1 48 092/- REPRESENTED INTEREST ON LOAN TAKEN FROM HDFC BANK. THE AO FURTHER OBSERVED THAT THIS LOAN WAS ADVANCED TO M/S. KONTAK COMFORTS PVT. LTD. ON WHICH INTEREST OF RS.3 061/- ONLY WAS RECEIVED. ACCORDINGLY THE AO RESTRICTED THE DEDUC TION OF RS.1 48 092/- TO RS.3 061/- AND MADE DISALLOWANCE OF RS.1 45 031/ -. 14 13. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT H E HAS RECEIVED INTEREST OF RS.3 061/- ONLY DURING THE YEAR AND THE REMAINING INTEREST HAS BEEN ACCRUED AND HAS BEEN RECEIVED IN SUBSEQUENT YE AR. SINCE THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING WHA TEVER AMOUNT RECEIVED WAS ACCOUNTED FOR DURING THE YEAR AND THER EFORE THE AO WAS NOT JUSTIFIED IN DISALLOWING THE INTEREST AMOUNTING TO RS.1 45 031/-. 14. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION. WHILE DOING SO HE HELD THAT SINCE THE ASSESSEE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING THEREFORE PRINCIPLES OF MATCHING CANNOT BE APPLIED IN THIS CASE. HE ACCORD INGLY HELD THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE INTEREST OF RS.1 45 031/-. 14.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 15. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY OP POSED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE AO HAS DISALLO WED THE INTEREST BECAUSE THE ASSESSEE HAS NOT USED THE BORROWINGS FO R HIS OWN USE BUT HAS ADVANCED THE LOAN FOR WHICH HE HAD RECEIVED INTERES T OF RS.3 061/- ONLY. HE SUBMITTED THAT THE ASSESSEE HAS ARRANGED HIS AFF AIRS IN SUCH A MANNER AS NOT TO ATTRACT TAX AND WITHOUT DOING ALL THE TRA NSACTIONS ON AN EQUAL LEVEL PLAYING FIELD. SUCH A TAX PLANNING WHICH IS INTENDED TO AND RESULTS IN AVOIDANCE OF TAX SHOULD BE DISCOURAGED. FURTHER THE ASSESSEE HAS NOT USED THE LOAN TAKEN FOR HIS OWN PURPOSES BUT FOR TH E PURPOSE OF GIVING LOAN TO M/S. KONTAK COMFORTS PVT. LTD. ON WHICH MEA GER INTEREST WAS 15 RECEIVED. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE ORDER OF THE AO BE RESTORE D. 16. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT WHEN THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING THEREFORE WHA TEVER HAS BEEN RECEIVED AND WHATEVER AMOUNT HAS BEEN PAID HAS BEEN CONSIDERED BY THE ASSESSEE THEREFORE MATCHING PRINCIPLE IS NOT APPL ICABLE TO THE FACTS OF THE PRESENT CASE. HE ACCORDINGLY SUBMITTED THAT TH E ORDER OF THE CIT(A) BE UPHELD. 17. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THER E IS NO DISPUTE TO THE FACT THAT THE INTEREST AMOUNTING TO RS.1 48 092/- H AS BEEN PAID TO HDFC BANK. THERE IS ALSO NO DISPUTE TO THE FACT THAT TH E ASSESSEE HAS ADVANCED LOAN TO M/S. KONTAK COMFORTS PVT. LTD. ALTHOUGH T HE COMPANY HAS ACCOUNTED FOR THE INTEREST ON MERCANTILE SYSTEM HOW EVER IT HAS PAID INTEREST OF ONLY RS.3 061/- TO THE ASSESSEE DURING THE YEAR AND THE BALANCE AMOUNT WAS STATED TO HAVE BEEN SHOWN AS PAYABLE. 17.1 IT IS THE CASE OF THE ASSESSEE THAT HE IS FOLL OWING CASH SYSTEM OF ACCOUNTING AND THEREFORE WHATEVER HE HAS RECEIVED HAS BEEN OFFERED TO TAX AND THE BALANCE AMOUNT HAS BEEN OFFERED TO TAX IN SUBSEQUENT YEAR UPON RECEIPT OF THE SAME. SINCE THE ASSESSEE HAS M ENTIONED IN THE COMPUTATION STATEMENT THAT HE IS FOLLOWING CASH SYS TEM OF ACCOUNTING AND AS PER THE INCOME TAX ACT ASSESSEE CAN EITHER F OLLOW MERCANTILE SYSTEM OF ACCOUNTING OR CASH SYSTEM OF ACCOUNTING W HICH IS REGULARLY EMPLOYED BY HIM THEREFORE WE ARE OF THE CONSIDERE D OPINION THAT THE 16 ASSESSEE IN THE INSTANT CASE IS CORRECT IN OFFERING THE INTEREST RECEIVED DURING THE YEAR ONLY TO TAX SINCE HE IS FOLLOWING C ASH SYSTEM OF ACCOUNTING. SO FAR AS THE ALLEGATION OF THE REVENU E THAT THE ASSESSEE IS PLANNING HIS AFFAIRS IN SUCH A WAY THAT HE IS NOT L IABLE TO TAX IN OUR OPINION THE SAME IS WITHOUT ANY BASIS SINCE THE VER Y ACT ITSELF PERMITS THE ASSESSEE TO FOLLOW THE SYSTEM OF ACCOUNTING I. E. EITHER CASH SYSTEM OR MERCANTILE SYSTEM. SINCE THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING REGULARLY HE CANNOT BE FAULTED WITH THE CONSEQUENCES I.E. PAYMENT OF LESS TAX OR NO TAX FOR THE IMPUGNED ASSE SSMENT YEAR. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED REAS ONING GIVEN BY THE LD.CIT(A) ON THIS ISSUE WE FIND NO INFIRMITY IN TH E ORDER OF THE CIT(A). ACCORDINGLY THE SAME IS UPHELD AND THE GROUND RAIS ED BY THE REVENUE IS DISMISSED. 18. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED PRONOUNCED IN THE OPEN COURT ON 23-04-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAN DA) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 23 RD APRIL 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-V PUNE 4 CIT-V PUNE 5. THE D.R A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT PUNE BENCHES PUNE