THE ITO-1, HARDA vs. M/S. ADIM JATI SEVA SAHKARI SAMITI MARYADIT, HARDA

Adim Jati Seva Sahkari Samiti Maryadit I.T.A.No.528/Ind/2016

आयकर अपील�य अ�धकरण, इंदौर �यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER

ITA No. 528 /Ind/2016 Assessment Year 2008-09

Income Tax Officer-I, Vs. Adim Jati Seva Sahkari Harda Samiti Maryadit, Village Alampur, Dist. Harda (M.P) (Appellant) (Respondent ) PAN No. AAAAA2836R Revenue by Shri Rajeev Jain, Sr. DR Assessee by Shri S.N. Agrawal, CA. Date of Hearing 26.11.2018 Date of Pronouncement 29.11.2018

O R D E R PER SHRI MANISH BORAD,AM

This appeal of Revenue pertaining to A.Y. 2008-09 is directed

against the order of Ld. Commissioner of Income Tax(Appeals)-2,

Bhopal (in short ‘CIT(A)’), dated 26.02.2016 which is arising out of

the order u/s 154 of the Income Tax Act 1961(hereinafter called as

the ‘Act’) framed on 18.02.2003 by ITO-1(2), Bhopal.

Adim Jati Seva Sahkari Samiti Maryadit I.T.A.No.528/Ind/2016 “1. Whether on the facts and circumstances of the case Ld.CIT(A) was justified in deleting the disallowance of Rs.21,64,474/- made by the AO on account of unpaid interest u/s 154 of the I.T.Act because the disallowance was made on the basis of entries made in the tax audit report by the assessee itself, which is a mistake apparent from the record. 2. Whether on the facts and circumstances of the case Ld.CIT(A) was justified in deleting the deleting the disallowance of Rs.21,64,474/- made by the AO without affording an opportunity to the assessee as required under Rule 46A of the IT Act. 3. Even though, tax effect involved in the case is below the monetary limit prescribed by the Board’s circular No.21/2015 dated 10.12.2015 for filing second appeal, appeal is being filed since the case falls in one of the exceptions in the said circular (RAP Objection).

assessee is a Co-operative society. The e-return of income was filed

on 30.09.2008 declaring loss at Rs.15,73,161/-. The case was

selected for scrutiny and the assessment u/s 143(3) was completed

on 31.12.2010 accepting the income declared by the society.

Subsequently Learned Assessing Officer (In short Ld.A.O) on

observing that assessee has claimed expenditure for unpaid interest

at Rs.21,64,474/- passed an order u/s 154 of the Act and assessed

the income at Rs.5,91,313/- after disallowing the alleged unpaid

interest of Rs.21,64,474/-.

Adim Jati Seva Sahkari Samiti Maryadit I.T.A.No.528/Ind/2016 4. Aggrieved assessee preferred appeal before Ld.CIT(A) and

succeeded.

supported the order of Ld.A.O and pleaded for quashing the

findings of Ld.CIT(A).

of Ld.CIT(A) in favour of the assessee and pleaded for sustaining the

same.

placed before us. Revenue is aggrieved with the finding of Ld.CIT(A)

deleting the disallowance of unpaid interest of Rs.21,64,474/-. The

alleged addition was made by the Ld.A.O when it revealed to him

that the assessee society which is alleged to be following cash

system of accounting has claimed unpaid interest expenditure

amounting to Rs.21,64,474/-. We find that the Ld.CIT(A) deleted

the impugned disallowance observing as follows;

“4.5 I have considered the written submissions of the appellant and the order u/s 154. It is seen that the 0 took into account column 11 (a) of the Tax Audit Report and made it the sole basis of the order u/s 154. If

Adim Jati Seva Sahkari Samiti Maryadit I.T.A.No.528/Ind/2016 so, it was equally relevant to take into account column 11 (b) of the Report where it was mentioned that there is no change in the method of accounting from the earlier year. In the income tax return, Part-A-Ol, Column 2, too it was mentioned that there was no change in the method of accounting.

There is also merit in the submission of Ld AR that Since it is regularly following the mercantile method of accounting, it has shown both income and expenditure on accrual basis in each assessment year including the assessment year under reference. While the AO has disallowed interest on accrual basis, the income shown on accrual has not been excluded from its income.

Further, such an addition was outside the purview of section 154 since the original assessment in this case stood completed U/S 143(3).

Upon consideration of the totality of facts, it is held that the AO was not justified to make the impugned assessment u/s 154. The addition made in the assessment order is deleted.

The ground of appeal is allowed.”

controverted by Ld. Departmental Representative. It is discernable

from the records that the assessee society is regularly following

mercantile system of accounting but due to inadvertence on the

part of the Auditor, in the tax audit report, cash system of

accounting was mentioned. The Ld. A.O failed to appreciate the

Adim Jati Seva Sahkari Samiti Maryadit I.T.A.No.528/Ind/2016 fact that in the immediately preceding financial year assessee has

shown to have followed mercantile system of accounting and in tax

audit report for the year under appeal in Clause No.11(b) of the Tax

Audit Report at Form No.3CD which requires the comments of the

Tax Auditor about the change in method of accounting the

comment mentioned is “no change”.

and in view of our discussions above are of the considered view that

no interference is called for in the findings of Ld.CIT(A). We uphold

the same and dismiss the revenue’s appeal.

The order pronounced in the open Court on 29.11.2018.

Sd/- Sd/- (KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 29.11.2018 /Dev Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By order Asstt. Registrar