GOLDEN TEMPLE PHARMA LLP,MUMBAI vs. ITO - 21(1)(4), MUMBAI

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ITA 1866/MUM/2019Status: DisposedITAT Mumbai11 December 2020AY 2014-152 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that since the assessee did not receive the interest and their books were maintained on a cash system, they cannot be compelled to account for it. However, the Tribunal directed the AO to examine the TDS claim related to this un-accounted income.

What were the facts?

The Assessing Officer added Rs. 15,60,720/- as interest income, believing it accrued to the assessee following a mercantile system. The assessee claimed to follow a cash system and stated the interest was not received.

What were the issues?

Whether interest income accrued under a mercantile system can be added when the assessee claims to follow a cash system and has not received the interest.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC-III” BENCH, MUMBAI

Before: SHRI SHAMIM YAHYA, AM

For Respondent: Shri Kailash Gaikwad
Hearing: 13.10.2020Pronounced: 11.12.2020

O R D E R Per Shamim Yahya, A. M.:

This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-48, Mumbai (‘ld.CIT(A) for short) dated 13.02.2019 and pertains to the assessment year (A.Y.) 2014-15.

2.

The issue raised is that ld. CIT(A) erred in sustaining the addition of Rs.15,60,720/- as interest income.

3.

Brief facts of the case are that the Assessing Officer (A.O. for short) in this case made addition of Rs.15,60,720/- holding that the same was interest accrued and the assessee has not accounted for the same, despite the assessee following mercantile system of accounting.

4.

Before the ld.CIT(A), the assessee submitted that the assessee is following cash system and the ssessee also produced a certificate from the party, in which it was duly stated that the said interest has not been paid during the assessment year. However, the ld. CIT(A) was not convinced. He accepted the A.O.’s observation that since the assessee

(A.Y. 14-15) M/s. Golden Temple Pharma LLP vs. ITO had been following mercantile system of accounting earlier, for this year he cannot change the same to cash system. Though, in this regard, the A.O. has duly noted that in assessee’s books of account, for the present assessment year it was duly mentioned that the assessee is following cash system of accounting.

5.

Against the above order, the assessee is in appeal before the ITAT.

6.

I have heard the ld. Departmental Representative (ld. DR for short) and perused the records. I note that assessee has not received the interest during the year. This aspect has been duly certified by the creditor. In this view of the matter, when the assessee has not received the interest, the assessee cannot be forced to account for the same when the assessee’s books of accounts are being maintained on cash system. Hence, I set aside the orders of authorities below and delete the addition. However, I note that when the income is not being accounted for, the assessee also cannot claim the TDS in this regard. Hence, the A.O. shall examine this aspect and give effect to the observation.

7.

In the result, the appeal filed by the assessee stands party allowed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board on 11.12.2020

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