Mineral Oriental Limited v. D.C. of Income-tax, Circle 5(1), Kol
[Citation -2016-LL-1019-185]

Citation 2016-LL-1019-185
Appellant Name Mineral Oriental Limited
Respondent Name D.C. of Income-tax, Circle 5(1), Kol
Court ITAT-Kolkata
Relevant Act Income-tax
Date of Order 19/10/2016
Assessment Year 2011-12
Judgment View Judgment
Keyword Tags mercantile system of accounting • reduction of interest • undisclosed income • security deposit • transfer of land • concealed income • double taxation • excess interest • interest income • tax effect • sale deed
Bot Summary: The assessees case was selected for scrutiny U/s 143(3) of the Act and the Assessing officer had completed the assessment U/s 143(3) by making following additions: In 26AS details, a payment of Rs.27,840/- has been found to be credited to the assessee company on which Rs.2,784/- has been deducted as tax. The AO observed that the payment has been received by the assessee company but failed to prove the same, hence interest is treated as income in the hand of the assessee company and added to the total income of the assessee. In the 26AS details, a payment of Rs. 4,57,769/- has been found to be credited to the assessee company on which Rs. 45,777/- has been deducted as Tax, but the assessee company has accounted for Rs. 1,99,705/- in its books as income with the claim of full TDS. The assessee explained that the interest received from M/s. Goldoleen Marbles Granites was calculated for wrong period in the preceding year for which rectification has been made in the current F.Y. The assessee has credited net interest in its books and claimed that the balance of Rs. 2,58,064/- has already been taxed in its hands. 2 ITA No.686 /Kol/2016 Mineral Oriental Ltd A.Y.2011-12In the 26AS details, a payment of Rs. 8,889/- has been found to be credited to the assessee company on which Rs. 889/- has been deducted as Tax, but the same amount has not been accounted in the books of the assessee company towards income. The assessee company accepted that the interest received from Assistant Engineer, Kherwara has not been credited in the books as the interest was not actually received by the assessee but the same was adjusted from a liability of the assessee. As per Mercantile system of accounting, the interest income is taxable in the hands of the assessee and hence treated as income and added to the total income of the assessee. M/s. Goldoleen Marbles and Granite had rectified the above interest credited in out account by a sum of Rs. 2,58,064/- by debiting the assessee's account for erroneous calculation of interest which was rectified by the assessee in theassessment year 2011-12 due to late information by the M/s. Goldoleen Marbles and Granite.


ITA No.686/Kol/2016 Mineral Oriental Ltd A.Y.2011-12 IN INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C , KOLKATA (Before Shri N.V.Vasudevan, J.M. & Dr.A.L.Saini, A.M.) ITA No. 686/Kol/2016 : Asstt. Year : 2011-12 Mineral Oriental Limited Vs D.C. of Income Tax, Circle 5(1) nd 2 Floor Birla Building, 9/1 RNP7 Chowringhee Square, Kol- Mukherjee Road, Kolkata- 69 700001 PAN:AABCM7490C (APPELLANT) (RESPONDENT) Appellant by: Shri K.M.Roy, FCA Respondent by:ShriA.K. Panda, Addl. CIT Date of Hearing : 22.09.2016 Date of Pronouncement :- 19/10/2016 ORDER Per Dr. A.L.Saini, A.M.: captioned appeal filed by Assessee pertaining to assessment year 2011-12, is directed against order passed by Ld. Commissioner of Income- Tax (A) -2, Kolkata,in appeal No.757/CIT(A)-2/Cir-5/14-15 dated 23/12/2015, which in turn arises out of order passed by Assessing Officer under section 143(3) of Income Tax Act, 1961 (in short, Act ), dated 14.11.2013. 2. facts of case are stated in brief. assessee is limited company and engaged in business of Mining, Trading & Processing of Marbles and Granites. assessee company has filed its return of income on 08-08-2011, declaring total income of Rs. 1 ITA No.686 /Kol/2016 Mineral Oriental Ltd A.Y.2011-12 34,37,304/-. assessee`s case was selected for scrutiny U/s 143(3) of Act and Assessing officer had completed assessment U/s 143(3) by making following additions: (a) In 26AS details, payment of Rs.27,840/- has been found to be credited to assessee company on which Rs.2,784/- has been deducted as tax. assessee company explained that amount has been paid by AVVNL as interest on deposits with electricity department. deposit with electricity department pertains to land and building, which has been transferred to M/s Nanak Marbles Pvt ltd, but name of consumer was not changed. AO observed that payment has been received by assessee company but failed to prove same, hence interest is treated as income in hand of assessee company and added to total income of assessee. (b)In 26AS details, payment of Rs. 4,57,769/- has been found to be credited to assessee company on which Rs. 45,777/- has been deducted as Tax, but assessee company has accounted for Rs. 1,99,705/- in its books as income with claim of full TDS. assessee explained that interest received from M/s. Goldoleen Marbles & Granites was calculated for wrong period in preceding year for which rectification has been made in current F.Y. assessee has credited net interest in its books and claimed that balance of Rs. 2,58,064/- has already been taxed in its hands. explanation offered by assessee company is not found to be satisfactory regarding balance interest not credited in Profit & Loss Account. As such, balance of interest income amounting to Rs. 2,58,064/- is treated as undisclosed income in hand of assessee and added to total income. 2 ITA No.686 /Kol/2016 Mineral Oriental Ltd A.Y.2011-12 (c)In 26AS details, payment of Rs. 8,889/- has been found to be credited to assessee company on which Rs. 889/- has been deducted as Tax, but same amount has not been accounted in books of assessee company towards income. assessee company accepted that interest received from Assistant Engineer, Kherwara has not been credited in books as interest was not actually received by assessee but same was adjusted from liability of assessee. As per Mercantile system of accounting, interest income is taxable in hands of assessee and hence treated as income and added to total income of assessee. 3. Aggrieved from order of AO, assesseehad filed appeal before ld. CIT(A), who has also confirmed action of AO by observing followings :- 2. Ground No. 1 of appeal relates to addition of Rs.27,840/- due to TDS mismatch. AO found from 26AS statement that assessee company had received interest of Rs.27,840/- from AVVNL for which tax of Rs.2,784/- was deducted at source, but said amount was not included.in total i ncome. Ld. AR in his written submission has stated as follows: " amount of Rs. 27,840/- is reflecting in 26AS as interest received from Ajmer VidyutVirtan Nigam Ltd. deposit pertains to land and building which has been transferred by appellant to Nanak Marbles Pvt. Ltd. But consumer's name was not rectified in records of electricity Department and TDS was deducted with PAN of assessee, hence interest shall not be treated as income in hand of appellant. land and building has been transferred as on 13.08 2010 and date of credit of interest as per 26AS was 01.09.2010 which was after date of transfer and accordingly interest income belongs ofNanak Marbles Pvt. Ltd. i.e. buyer. copy of sale deed has been enclosed herewith for transfer of Land and building to Nanak Marbles Pvt. Ltd." . 2.1. reason given by Ld. AR for non inclusion of interest income is not convincing. Had interest received from' AVVNL belonged to Nanak. Marbles Pvt. Ltd. with transfer of building, assessee should not have claimed credit of TDS made on such interest. Since assessee claimed 3 ITA No.686 /Kol/2016 Mineral Oriental Ltd A.Y.2011-12 credit of TDS ofRs.2,784/-, corresponding income ought to have been included in its income. addition of Rs.27,840/- is therefore, sustained. 3. Ground No. 2 of appeal relates to addition of Rs.2,58,064/- being suppression of interest income from M/s. Goldoleen Marbles & Granites to' that extent. AO found from 26AS statement that assessee had received interest of Rs.4,57,769/- against TDS of Rs.45,777/-. However, assessee accounted for only Rs.1,99,705/- in its books. AO, Therefore, added balance interest income of Rs.2,58,064/- after considering assessee's explanation. In matter, Ld. AO has contended as follows: " In assessment year 2010-11 M/s. Goldoleen Marbles and Granite has credited sum of Rs. 5,86,506/- in our account and TDS ofRs. 58,651/- was deducted which was duly recognised by assessee in that year. M/s. Goldoleen Marbles and Granite had rectified above interest credited in out account by sum of Rs. 2,58,064/- by debiting assessee's account for erroneous calculation of interest which was rectified by assessee in theassessment year 2011-12 due to late information by M/s. Goldoleen Marbles and Granite. It is to be noted that above error in recognizing income income in assessment year have no tax effect and income which was offer for tax in assessment year 2010-2011 cannot be tax twice. In support of above facts ledger confirmation of party and interest income party wise as recognised by assessee in assessment year 2010-2011 and 2011-2012 along with copy of Form No. 26AS is enclosed here with for your kind perusal and you are earnestly requested to consider undisputed facts. 3.1. I have duly considered submission of AR but not inclined to accept his version. He has precisely stated that since M/s. Goldoleen Marbles and Granite adjusted excess interest of Rs.2,58,064/- paid in last year with interest payable for current year, assessee company accounted for less interest in current year to that extent. argument put forward by Ld. AR has no legal sanctity as income of particular year is to be assessed in that year itself. For reduction of interest payments by M/s. Goldoleen Marbles and Granit e for previous assessment year, remedial action lied in A.Y. 2010-11. For this year, assessee received interest income of Rs.4,57,769/- against TDS of Rs.45, 777/- and same should have been accounted for. In view of such, addition ofRs.2,58,064/- is confirmed. 4. Ground No. 3 of appeal relates to addition of Rs.8,889/- being suppression of interest income from assistant engineer, Kherwara. AO again found from 26AS statement that assessee had received interest of Rs.8,889/- against TDS of Rs.889/-, but same was not accounted for. Ld. AR though stated that- 'interest on security deposit with Ajmer Bidyut Nigam Limited of Rs.8889/- has already been accounted by way of adjustment in corresponding expenses payable to same person', but failed to 4 ITA No.686 /Kol/2016 Mineral Oriental Ltd A.Y.2011-12 produce any evidence in this regard. addition of Rs.8,889/- is therefore, confirmed. 4. Not being satisfied with order of ld. CIT(A), assessee is in further appeal before us and has taken following grounds :- i) That CIT (A)-2 erred in law as well as on facts in sustaining addition of Rs.27,840/- without appreciating fact that there was no accrual of Income. ii) That CIT (A)- 2 was not justified in upholding addition of Rs.2.58,064/- as concealed income when it was clearly explained that such interest was already taxed in earlier year. iii) That addition of Rs 8889/- is not tenable because such income has been already accounted by way of deduction of Electricity expenditure. iv) That appellant reserves right to add to above grounds of appeal and/or to amend, delete any of them on or before date of hearing of appeal. Ground No.1 Additon of Rs.27,840/- 5. ld.AR for assessee has submitted that Income of Rs 27,840/- does not belong to appellant in view of transfer of assets and liabilities to M/s. Nanak Marbles Pvt. Ltd, Since appellant does not have right over Income, it can't be taxed on same. entire electricity deposit was transferred to M/s. Nanak Marbles Pvt. Ltd. However name transfer was not made by Board. transfer of Business has not been found to be ingenuine and has been acted upon. inadvertent mistake of deductor cannot foist any artificial liability on company. When interest was not received by assessee, there was no question of paying back to Nanak Marbles Pvt. Ltd. It is artificial income in hand of company. Further no entries were passed in 5 ITA No.686 /Kol/2016 Mineral Oriental Ltd A.Y.2011-12 book for interest. However since TDS has been claimed in return for Rs.2,784/, only same may be taxed u/s 199 for sake of natural justice. 6. On other hand, ld. DR for revenue has primarily reiterated stand taken by ld. AO and ld. CIT(A), which we havealready noted in our earlier para, and is not being repeated for sake of brevity. 7. Having heard rival submissions, perused materials available on record, we are of view that there is merit in submissions of ld. AR for assessee, as he pointed out that inadvertent mistake of deductor cannot foist any artificial liability on company. When interest was not received by assessee there was no question of paying back to M/s. Nanak Marbles Pvt. Ltd. It is artificial income in hands of company. However no entries were passed in book for interest. Therefore based on factual position we allow appeal filed by assessee on this ground. However, since TDS has been claimed in return for Rs.2784/- only same may be rectified and disallowed by AO 8. In result, appeal filed by assessee on this issue is allowed for statistical purposes. Next ground relates to addition of Rs.2,58,064/- 9. ld. AR for assessee has submitted that difference in income of Rs.2,58,064/- was already offered for taxation in earlier year. same income cannot be taxed twice. AO has simply brushed aside explanations without any cogent reason. Just because TDS was made in single year does not imply that entire income become taxable in assessment year 2011-12. There cannot be any double taxation of same income because such interest was already booked in A.Y 2010-11. 6 ITA No.686 /Kol/2016 Mineral Oriental Ltd A.Y.2011-12 10. On other hand, ld. DR for revenue has primarily reiterated stand taken by ld. AO and ld. CIT(A), which we havealready noted in our earlier para, and is not being repeated for sake of brevity. 11. Having heard rival submissions, perused materials available on record, we are of view that there is merit in submissions of ld. AR for assessee, as propositions canvassed by ld. AR for assessee are supported by facts cited above. amount of Rs.2,58,064/- has already suffered taxation in earlier year. Therefore said amount cannot be taxed twice. Therefore we delete said addition. 12. In result, appeal filed by assessee on this issue is allowed. next ground relates to addition of Rs.8,889/- on account of difference in interest : 13. ld. AR for assessee has submitted that difference in interest of Rs.8,889/- has already been accounted by way of adjustment in corresponding expense payable to same person. Hence, even by wildest stretch of imagination such income cannot again be brought under purview of tax because such income has already been accounted for by way of set off from expenditure. Such adjustment has been made suo motto by service provider in bill and amount as per bill was paid after deduction of net amount of Rs.8000/-Accordingly sum of Rs.889/- may be taxed & credit of TDS may also be allowed. 14. On other hand, ld. DR for revenue has primarily reiterated stand taken by ld. AO and ld. CIT(A), which we havealready noted in our earlier para, and is not being repeated for sake of brevity. 7 ITA No.686 /Kol/2016 Mineral Oriental Ltd A.Y.2011-12 15. Having heard rival submissions, perused materials available on record, we are of view that there is merit in submissions of ld. AR for assessee, as propositions canvassed by ld. AR for assessee are supported by facts cited above. As he has explained that said income cannot again be brought under purview of tax because such income has already been accounted for by way of set off from expenditure. Such adjustment has been made suo motto by service provider in bill and amount as per bill was paid after deduction of net amount of Rs.8000/-. However sum of Rs.889/- may be taxed and credit of TDS may also be allowed. Therefore, we direct AO to examine assessee s claim afresh after verifying relevant documents and allow him necessary relief. 16. In result, appeal filed by assessee on this ground is allowed for statistical purposes. 17. In result, appeal filed by asessee is partly allowed for statistical purposes. Order Pronounced in Open Court on 19.10.2016 Sd/- Sd/- (N.V.Vasudevan) (Dr. A.L.Saini) JudicialMember Accountant Member Dated: 19.102016 Copy of order forwarded to: 1. Revenue 2 Assessee 3. CIT-I, 4. CIT(A)-I, 5. DR, Kolkata Benches, Kolkata 8 ITA No.686 /Kol/2016 Mineral Oriental Ltd A.Y.2011-12 True Copy, By order, Asst. Registrar, ITAT, Kolkata Benches 9 Mineral Oriental Limited v. D.C. of Income-tax, Circle 5(1), Kol
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