Tca/830/2018 Of Shri Sirish Kumar Bafna v. The Assistnat Commissioner Of Income Tax

In the High Court of Judicature at Madras The Honourable Mr.Justice T.S.SIVAGNANAMand The Honourable Mr.Justice N.SATHISH KUMARTax Case (Appeal) Nos.830 & 831 of 2018 Shri Sirish Kumar Bafna The Assistant Commissioner of Income TaxBusiness Circle-XIIChennai-600 006. ...Respondent in the above T.C.AsAPPEALS under Section 260-A of the Income Tax Act, 1961against the order dated 28.07.2017 passed by the Income TaxAppellate Tribunal, Madras “B” Bench in I.T.A.No.1034/MDS/2016for the assessment year 2010-11 and the order passed by theTribunal dated 16.02.2018 in M.P.No.330/Chny/2017 which wasfiled by the assessee to recall the order dated 28.07.2017 asagainst the order of the Commissioner of Income Tax Appeals 6,Chennai vide order I.T.A.No.297/CIT(A)-5/2013-2014 dated25.02.2016 as against the order of the Assistant Commissioner ofIncome Tax, Business Circle XII, Chennai for the Assessment year2010-2011 dated 26.03.2013 Common Judgment was delivered by T.S.SIVAGNANAM,J These appeals by the assessee are filed under Section 260-Aof the Income Tax Act, 1961 against the order dated 28.07.2017passed by the Income Tax Appellate Tribunal, Madras “B” Bench inI.T.A.No.1034/MDS/2016 for the assessment year 2010-11 and theorder passed by the Tribunal dated 16.02.2019 inM.P.No.330/Chny/2017 which was filed by the assessee to recallthe order dated 28.07.2017. https://hcservices.ecourts.gov.in/hcservices/ 2. Heard Mr.A.S.Sriraman, learned counsel for the appellantand Ms.R.Hemlatha, learned Senior Standing Counsel for therespondent/Revenue. 3. The assessee filed the appeal before the Tribunalchallenging the assessement of interest income based on the taxdeduced at source (TDS) effected for the broken period, namely,up to the end of the financial year relating to the assessmentyear under consideration. 4. The assessee's case is that the Assessing Officer as wellas the Commissioner of Income Tax Appeals overlooked the termsand conditions of the deposits especially fixed deposits withthe banks read with the accepted/consistent method of accountingfollowed by the assessee in reckoning revenue for tax purpose. 5. It is further stated by the assesse that the term depositenvisaged the right to receive interest on the principal amountonly at the time of maturity/expiry of the term and the conceptof reckoning income both in cash system of accounting andaccrual system of accounting should be noted as different fromthe liability to deduct tax at source. 6. It is the case of the assessee that the liability todeduct tax at source should be created statutorily at the timeof making the payment of interest or crediting the account ofthe recipient including the suspense account as per Section 194Aof the Act and accordingly, the banker deducted the tax atsource in the assessee's case and duly reflected in form No.26AS. 7. The Tribunal by the impugned order dated 28.07.2017rejected the stand taken by the assessee. After the order waspassed, the assessee filed Miscellaneous Petition before theTribunal reiterating the stand that the assessee has offered TDSdeducted on the income in the previous year relating to theassessment year under consideration and claimed the TDS paid astax paid on his behalf. 8. The assessee further contended that in the system ofaccounting regularly maintained by the assessee, namely cashsystem of accounting, the interest under dispute even thoughcredited to the suspense account by the banker, the reckoning ofincome is wrongly confirmed overlooking the terms and conditionof the term deposits. Further, the assessee contended that theright to receive interest would get crystallized at the expiryof the term of the deposit and even in the accrual system ofaccounting there is no right to receive such interest justbecause the interest amount is credited to the account of theassessee/suspense account. There is no right to withdraw suchamount during the term/period of the deposits. 8. The assessee further contended that in the system ofaccounting regularly maintained by the assessee, namely cashsystem of accounting, the interest under dispute even thoughcredited to the suspense account by the banker, the reckoning ofincome is wrongly confirmed overlooking the terms and conditionof the term deposits. Further, the assessee contended that theright to receive interest would get crystallized at the expiryof the term of the deposit and even in the accrual system ofaccounting there is no right to receive such interest justbecause the interest amount is credited to the account of theassessee/suspense account. There is no right to withdraw suchamount during the term/period of the deposits. https://hcservices.ecourts.gov.in/hcservices/ 9. Further the assessee pointed out that the crediting ofinterest in the assessee's suspense account could not be equatedto constructive receipt and the constructive receipt theoryshould be presumed only based on the terms of the time deposit.Further the right to receive/withdraw amount at the end of theterm as per the contracted terms and conditions of the termdeposit, the right to receive the interest would get postponedto the date of maturity and in such circumstances, the reckoningof income both under cash system of accounting and accrualsystem of accounting should ordinarily get postponed to the dateof maturity. 10. Therefore, the assessee contended that as per the termsand conditions of the term deposit, the right to receive theinterest and the principal would get crystallized at the end ofthe term of the respective deposits and the assessee has offeredthe interest income of the respective deposits on thematurity/end of the term of such deposits which happened to bethe subsequent assessment year. Before us, the assessee hasplaced reconciliation statement which is as follows: 1. STATE BANK OF INDIAOpening balance of cumulative deposits 01.04.2009 58,00,000 Additional cumulative deposits made in FY 2009-10 30,00,000 ___________ Total 88,00,000 Deposits matured during FY 2009-10 24,00,000____________ 64,000 4,00,000 Matured on 20.09.2011 with interest ____________Rs.112054 offered for AY 2012-13 30,00,000 Matured on 19.12.2011with interest Rs.694794 offered forAY 2012-13 Assessment Year 2010-11 Interest received on deposits matured during the year 2,00,000TDS deducted by bank 433 TDS on Rs.5,69,830, accrued but not due interest 56,983 ________ 2,57,801Less interest charged by the bank 3,663________ Interest income offered in return of income Rs.2,54,138_________ 2. Dena Banks Opening balance of cumulative deposits 01.04.2009 15,10,000Additional cumulative deposits made in FY 2009-10 9,00,000 _________ Total 24,10,000Deposits matured during FY 2009-100___________ Balance 24,10,000 15,00,000 Matured on 05.02.2011 withinterest Rs.251998 offered for AY 2011-129,00,000 Matured on 29.03.2011 withinterest Rs.132671 offered for AY2011-12Assessment Year 2010-11Interest received during the year on matured deposits 994TDS deducted 0TDS on Rs.2,06,136, accrued but not due interest 20,913_______Interest income offered in return of income Rs. 21,907 11. In our considered view the matter requires freshexamination, in the light of the fact that the amount which havebeen matured along with interest had been offered to tax duringdifferent period for the assessment years 2012-13 and 2011-12.Though this aspect was pointed out to the Tribunal by way of theMiscellaneous Petition, the Tribunal pointed out that thismistake pointed out by the assessee is not apparent on therecord to revise the order of the Tribunal by following thedecision of this Court in the case of Express Newspapers Ltd.Vs. DCIT [reported in (2010) 320 ITR 12 Madras]. https://hcservices.ecourts.gov.in/hcservices/ 11. In our considered view the matter requires freshexamination, in the light of the fact that the amount which havebeen matured along with interest had been offered to tax duringdifferent period for the assessment years 2012-13 and 2011-12.Though this aspect was pointed out to the Tribunal by way of theMiscellaneous Petition, the Tribunal pointed out that thismistake pointed out by the assessee is not apparent on therecord to revise the order of the Tribunal by following thedecision of this Court in the case of Express Newspapers Ltd.Vs. DCIT [reported in (2010) 320 ITR 12 Madras]. https://hcservices.ecourts.gov.in/hcservices/ 12. The above reconciliation given by the assessee, in ourconsidered view, needs to be looked into because the maturedamount along with interest has been offered to tax during therelevant assessment year. Thus for the above reason we areinclined to remand the matter to the Assessing Officer forfresh decision. 13. Accordingly, the appeal of the assessee is allowed andthe matter is remanded back to the Assessing Officer for freshdecision, after affording an opportunity to the assessee. TheAssessing Officer shall consider the reconciliation offered bythe assessee and take a fresh decision on merits and inaccordance with law. Consequently, the Substantial Questions ofLaw are left open. s/d- Assistant Registrar(CO) True Copy Sub-Assistant Registrar To,1. The Assistnat Commissioner of Income TaxBusiness Circle-XIIChennai-600 006 2. The Commissioner of Income Tax Appeals 5, Chennai. 3. The Assistant of Income Tax Business Circle XII, Chennai. +1 CC to Mr.T. Ravikumar, Advocate sr 88631.+1 CC to Mr.S. Sridhar, Advocate sr 88036. Tax Case (Appeal) Nos.830 & 831 of 2018 CNR(CO)SP(31/01/2019)