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2023 (7) TMI 847
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....09.2012 that the assessee bank has understated its income by the same amount on accrual basis? 2. Whether on the facts and circumstance of the case and on the points of the law Ld.CIT(A) is justified in allowing relief to the assessee, while there is specific mention of Service Charge in the letter of Chhattisgarh Rajya Sahakari Vipnan Sangh Maryadit dated 18.01.2017, which has been adjusted against excess payments for procurement of paddy and/or amount receivable from cooperative societies? 3. Whether on the facts and circumstance of the case and on the points of the law Ld. CIT(A) is justified in allowing relief to the assessee, ignoring the fact that the assessee was entitled to receive service charges for procurement of paddy through cooperative societies as per agreement with the Government? The assessee bank did not receive the amount because the amount of Service Charge was adjusted with the loss caused by the assessee bank to the government. 4. Whether on the facts and circumstance of the case and on the points of the law Ld.CIT(A) was justified in deleting the addition of Rs.6,40,16,164/- made by the AO relying upon the decision in cases which ar....
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.... and directed him to frame a fresh assessment after affording a proper opportunity of being heard to the assessee. 4. The A.O complying with the directions given by the Pr. CIT vide his order passed u/s.263(1) dated 30.03.2017, therein, called upon the assessee to put forth an explanation as to why the service charges of Rs.640.16 lacs (supra) receivable from the State Government were not accounted for in its returned income. As the explanation tendered by the assessee did not find favour with the A.O, therefore, he made an addition of the aforesaid amount of Rs.640.16 lacs to the returned income of the assessee, observing as under: "10. The submissions of the assessee have been considered carefully and the following observations are made: a) The assessee's request to wait for the order of the Hon'ble ITAT is not acceded to, since almost seven months time has already been passed after order u/s 263(1)passed by the Ld. Principal Commissioner of Income Tax, Bilaspur. The effect of the Order u/s.263(1) should be given in timely manner. Moreover, the assessee could not furnish any documents in respect of whether any hearing took place in the Hon'ble ITA....
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....s certificate dated 21.09.2012 has stated the exact paddy procurement amount. As per submission, the figure finalized in December, 2012 is Rs. 160040.41 quintals. The Auditor, in his report dated 21.09.2012 has quoted the same figure. If the figure was not available before December, 2012, how the Auditor could report the said figure. The assessee is silent on the issue that from where Auditor came to know the final figure in September, 2012, if it was finalized in December, 2012. Therefore, the claim of the assessee bank on this issue is not accepted. e) The assessee has claimed that income has not been accrued by the assessee since the State Government itself is saying that nothing shall be payable to them. In support of such claim, the assessee has enclosed a letter of Chhattisgarh Rajya Sahkari Bipanan Sangh Maryadit dated 18.01.2017 in this regard. It is surprising that the assessee is submitting a letter dated 18.01.2017 to defend their case for F.Y. 2011-12 (A.Y. 2012-13). 13. However, the letter shows present status of claim of the assessee only. The relevant portions of the said letter are reproduced as under : In the said letter, amount of servic....
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....le ITAT, Hyderabad 'A' bench in the case of Dy.CIT,CIRCLE-1(1),Hyderabad vs. M/s. A.P. Tourism Development Corporation Ltd. Hyderabad in the ITA Nos. 361/Hyd/ 2015 & 1674/Hyd/2014. The assessee has claimed that similar type of issue is involved in the decision. However it is seen from the said decision that there was a dispute between two parties and the Hon'ble ITAT has -held that where there is a dispute, the income would accrue and would not crystallize till the dispute is settled and therefore, the same cannot be brought to tax even under mercantile system of accounting. However, in the instant case there was no dispute and the service charge payable to the assessee has already been recognized by the Bipanan Sangh, but it was adjusted with the less caused by the assessee bank. The assessee did not raise any dispute against such adjustment also. Therefore, it is not a similar case. Moreover, the decision has been delivered only on 27.09.2017 and it is not known whether the Department is preferring reference u/s 260A before the Hon'ble High Court against the said decision or not. h) Several opportunities have been provided but the assessee could not furni....
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....fore it cannot be said the service charge was not payable to the assessee as on 31.03.2012. m) The assessee has also admitted that they did not make any claim or initiated any legal action in respect of non-payment of service charge. This also suggests the fact that service charge was accrued in their case, which was adjusted with the loss caused by the bank. It is not a very practical situation that the assessee completed major portion of the job entrusted to them without receiving any income. It is seen from the study of the case that the assessee was entitled to receive only service charge for paddy procurement and they are not entitled to receive any income other than service charge for paddy procurement." Accordingly, the A.O vide his order passed u/s. 143(3) r.w.s. 263 of the Act dated 31.10.2017 determined the income of the assessee society at Rs.17.68 crore (approx.). 5. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals). The CIT(Appeals) observing that the assessee bank had not received commission on procurement of paddy during the year under reference, a fact which was evidenced from the confirmatory letter of the State government a....
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....in the month of December, 2012. Apart from that, the assessee by drawing support from a letter of Chhattisgarh Rajya Sahkari Bipanan Sangh, Maryadit dated 18.01.2017, had claimed that as no income had accrued to the assessee, therefore, nothing was payable to it. In sum and substance the assessee bank had come forth with two-fold submissions, viz. (i) that as the value of the paddy procured on behalf of various co-operative societies amounting to Rs.160,040.41 lacs on which it was entitled for service charges from the State Government @ 0.40% was finalized only in the month of December, 2012, therefore, in absence of availability of the said details at the time of audit the same could not have been recognized as its income; and (ii) that as evidenced by the letter issued by the Chhattisgarh Rajya Sahkari Bipanan Sangh, Maryadit dated 18.01.2017 as the services charges due to the assessee had been adjusted against the loss caused by the assessee bank, therefore, no amount was payable by the State Government to the assessee bank on 31.03.2012. 10. It was the claim of the Ld. AR on the basis of his aforesaid contentions that now when service charges of Rs.640.16 lacs (supra) receiv....
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....ice charges of Rs.640.16 lacs (supra) which the assessee had failed to recognize as its income for the year under consideration. As observed by us hereinabove, it is a matter of fact borne from record that the assessee's CA in his audit report dated 21.09.2012 had admitted about understatement of profit of Rs.640.16 lacs (supra) by the assessee bank i.e. service charges which were receivable by the latter from the State Government of Chhattisgarh for the services provided to various co-operative societies for procurement of 1,47,56,017.94 quintals of paddy valued at Rs.160,040.41 lacs during Kharif Season, 2012. Although it was the claim of the assessee bank before the lower authorities, as well as before us, that as the work of paddy procurement was finalized in December, 2012, therefore, there was no material available at the time of audit i.e. on 21.09.2012 on the basis of which service charges income that had yet not accrued to the assessee could have been recognized, but we are unable to find favour with the said contention. We, say so, for the reason that the assessee's CA in his audit report dated 21.09.2012 had categorically stated that the bank had understated its ....
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.... taxes can be levied on a hypothetical income, but we are unable to persuade ourselves to subscribe to the contention of the Ld. AR that the said theory would apply to the facts involved in the present case before us. We, say so, with all the conviction for the reason that there is no denying of the fact as had been reported by the assessee's CA in his audit report dated 21.09.2012 that income in the form of service charges amounting to Rs. 640.16 lacs, i.e. @0.40% of Rs.1,60,040.41 lacs (value of 1,47,56,017.94 quintals of paddy) had accrued to the assessee bank during the year under consideration for the services which were rendered by it to various co-operative societies for purchase of paddy. Now when the aforesaid income had accrued to the assessee in definite terms, therefore, there was no justification for it to have kept the recognizing of the same in abeyance. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. A. Gajapathy Naidu (1964) 53 ITR 114(SC). The Hon'ble Apex Court in its aforesaid order had observed as under: "The problem raised before us can only be answered on the true meaning of the express ....
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....ome into existence? That depends upon the terms of a particular contract. No other relevant provision of the Act has been brought to our notice-for there is none- which provides an exception that though an assessee does not acquire a right to receive an income under a contract in a particular accounting year, by some fiction the amount received by him in a subsequent year in connection with the contract, though not arising out of a right accrued to him in the earlier year, could be related back to the earlier year and made taxable along with the income of that year. But that legal position is sought to be reached by a process of reasoning found favour with English courts. It is said that on the basis of proper commercial accounting practice, if a transaction takes place in a particular year, all that has accrued in respect of it, irrespective of the year when it accrues, should belong to the year of transaction and for the purpose of reaching that result closed accounts could be reopened. Whether this principle is justified in the English law, it has no place under the Indian Income tax Act. When an Income-tax Officer proceeds to include a particular income in the assessment, he sh....
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....ropounded by the various Courts, but we are afraid that the facts involved in the present case do not fall within the scope and gamut of any such situation. We, say so, with all the conviction, for the reason that the letter dated 18.01.2017 of Chhattisgarh Rajya Sahkari Bipanan Sangh, Maryadit as had been pressed into service by the Ld. AR to support his aforesaid contention refers to an event much subsequent to the year under consideration. 14. On a careful perusal of the Clause 12.1 of the agreement dated 29.02.2012 between Chhattisgarh Rajya Sahkari Bipanan Sangh, Maryadit and the primary agriculture co-operative society (hereinafter referred to as "agent"), it transpires that while for the said agents were entitled to commission, viz. (i) payment towards administrative charges @ Rs. 5/- per quintal; and (ii) incidental charges @ Rs.4/- per quintal, while for the assessee bank i.e. Jila Sahakari Kendriya Bank Maryadit was entitled to service charges @ 0.4% of the value of paddy. Further, as per Clause 12.3 the agent societies were required to furnish details of paddy/Bardana latest by 15th March, 2012 and on verification of the same the aforesaid commission was to be paid to....
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.... neither of the cases had held that a loss which had sprang up in a subsequent year would justify non-accounting of the income by the assessee during the year in which the same had accrued. 17. We find on a perusal of the order of the CIT(Appeals) that he had simply gone by the claim of the assessee bank that as per the confirmatory letter of the Ministry of the State Government and the corrective statement of the auditor of the assessee bank it was not in receipt of any commission on procurement of paddy during the year under consideration, and had, thus, vacated the said addition. We are unable to concur with the basis on which the aforesaid addition had been vacated by the CIT(Appeals). In so far the corrective statement of the auditor of the assessee bank is concerned, we find that the same is in the context of the immediately succeeding year i.e. A.Y.2013-14, wherein the CA vide his letter dated 25.09.2017 in context of the said year, had stated that he was unable to comment as to how the responsibility of the bank was fixed and deductions were being made from the commissions receivable to the bank. For the sake of clarity, the letter dated 25.09.2017 of the assessee's ....