Income Tax Appellate Tribunal - Ahmedabad
Shri Sureshchandra M. Shah,, ... vs The Income Tax Officer, Ward-4,, ... on 22 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "B" BENCH
Before: Shri Rajpal Yadav, Judicial Member
And Shri Amarjit Singh, Accountant Member
ITA No. 2138/Ahd/2014
Assessment Year 2007-08
Shri Sureshchandra M. The ITO,
Shah, Plot No. 555/2, W ard-4,
Sector No. 21, Vs Gandhinagar
Gandhinagar-382021 (Respondent)
PAN: AFDPS5557E
(Appellant)
Revenue by: Shri M udit Nagpal, Sr. D.R.
Assessee by: Shri Manish J. Shah, A.R.
Date of hearing : 14-11-2017
Date of pronouncement : 22-11-2017
आदेश /ORDER
PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee's appeal for A.Y. 2007-08, arises from order of the CIT(A), Gandhinagar dated 17-05-2014, in proceedings under section 271(1)(c) of the Income Tax Act, 1961; in short "the Act".
I.T.A No. 2138/Ahd/2014 A.Y. 2007-08 Page No 2 Shri Sureshchandra M. Shah vs. ITO
2. The assessee has raised following grounds of appeal:-
"1. The C.I.T.(Appeals) erred in upholding the levy of penalty of Rs.21,77,147/- being 300% of the tax allegedly sought to be evaded.
2. The C.I.T.(Appeals) erred in not deleting the levy of penalty u/s.271(1)(c) as it was not a case of filing of inaccurate particulars nor was the case of concealment of particulars.
3. The order of the C.I.T.(Appeals) ought to have deleted the penalty in toto."
3. In this case, return of income declaring income of Rs. 7,23,630/- was filed on 27th October, 2007. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) on 15th September, 2008. During the course of assessment proceedings, the assessing officer noticed that assessee has shown Kishan Vikash Patra of Rs. 1 crore in the asset side of the balance sheet on which no income from interest accrual was shown. The assessing officer observed that assessee has been consistently following mercantile system of accounting, therefore, he was asked to explain why not accrued interest on Kishan Vikash Patra should be added to his income. In this respect, the assesee explained that Kishan Vikash Patra is a capital asset u/s. 2(14) of the act and income would be accounted after approval and indexation. The submission of the assessee was not accepted by the assessing officer on the ground that KVP is the interest bearing investment on which assessee is entitled to receive interest with specific rate after expiry of 2 & ½ years from the date of certificate. He further stated that as per KVP rule in the cases where certificate were purchased on or after 1st day of March 2003 those could be encashed at any time after expiry of 2 years and six months from the date of the certificate. He further I.T.A No. 2138/Ahd/2014 A.Y. 2007-08 Page No 3 Shri Sureshchandra M. Shah vs. ITO stated that as per circular no. 687 dated 9th August, 1994 interest of Kishan Vikash Patra has to be assessed to income on accrual basis. He further observed that it is a settled law that accrued income of the assessee can be taxed only if he has right to receive. Since, in the assessee's case the period of two years and six months from the date of certificate has already expired during the previous year relevant to the assessment year 2007-08, therefore, the assessee has right to encash the certificate along with the interest accrued with the prescribed rates. Accordingly, the assessing officer has computed interest at Rs. 21,09,121/- which was added to the total income of the assessee on which the assessing officer has also initiated penalty proceedings for furnishing inaccurate particulars of income. During the course of penalty proceedings, the assessee submitted that KVP of Rs. 1 crore is capital asset under 2(14) of the act income will be accounted for when approved after taking in to consideration indexation. He further stated that revenue has accepted his argument during scrutiny for the assessment year 2004- 05 and 2006-07. On the other hand, the assessing officer observed that interest on Kishan Vikash Patra has to be assessed to income tax on accrual basis as per circular no. 687 dated 19th August, 1994. The assessing officer has stated that appeal against the quantum addition of the assessee has been dismissed by the CIT(A) and the ITAT. Consequently, the assessing officer has levied 300% penalty in the case of the assessee of Rs. 21,77,147/-
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4. Aggrieved against the impugned order of the assessing officer, the assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) has sustained the penalty levied by the assessing officer by observing as under:
"6. I have gone through the facts of the case, assessment order, order passed by the Hon'ble ITAT against the quantum proceedings and the penalty order. The appellant has stated before me that the issue of "Taxability of interest accrued on the Kisan Vikas Patra " is pending before the CBDT since 10/03/2014. The submission made before me during the appellate proceedings is more of allegations than submission to defend his case. The appellant has contended before me that income from KVP is a capital asset and he is entitled to indexation benefit. He has further contended that since KVP is a capital asset as per section 2(14) of the Act, the income from capital asset is liable as capital gain and not as interest income. As such, the AO has erred in levying penalty u/s 271(1)(c) of the Act and argued to delete the penalty levied of Rs.21,77,247/-. I find that the contention of the appellant has already been considered by the AO, both during the assessment proceedings as well as during the penalty proceedings. Even the Hon'ble ITAT Bench in its orders dated 12/10/2012 and 26/4/2013 against Miscellaneous Application (reproduced in paras above), has considered all aspects of the case, before pronouncing its judgment relying in the case of Kantilal Sanghvi vs ACIT (2004) 89 ITD 282. No new evidences have been brought on record by the appellant to prove his case. From the assessment order, it is clear that appellant concealed his income by way of furnishing inaccurate particulars of his income in respect of income earned from investment in KVPs. In view thereof, it is held that the action of the AO in levying penalty of Rs.21,77,147/- u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income earned from KVPs is hereby upheld. The relevant ground of appeal is rejected."
5. During the course of appellate proceedings before us, the ld. counsel has submitted paper book containing information of audit report, assessment order, and copy of circular No. 687 etc. He has also placed reliance on the decision of Co-ordinate Bench of ITAT in the case of Piruz Areez Khambatta vs. ACIT (2015) 62 taxmann.com 236 (Ahmedabad-Trib) (TM). On the other hand, ld. departmental representative has supported the order of the ld. CIT(A).
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6. We have heard both the sides and perused the material on record carefully. We noticed that assessee has shown investment in the KVP of Rs. 1 crore in the balance sheet as on 31st March, 2007. We have also noticed from the copy of assessment order pertaining to assessment year 2006-07 and 2005-06 enclosed in the paper book wherein no addition on interest accrual on KVP was made in the case of the assessee. The assessee has explained that KVP of Rs. 1 crore was considered as capital asset under 2(14) of the act, therefore, income will be accounted for when approved after indexation. Under these circumstances , he has not offered the interest income on accrual basis because the KVP was not encashed. After considering all these facts, we observed that assessee has furnished the particulars pertaining to his income and it is not case of furnishing of inaccurate particular of income. In view of the facts elaborated as supra we are not inclined with the findings of ld. CIT(A), therefore, the penalty levied is deleted. Accordingly the appeal of the assessee is allowed.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 22-11-2017 Sd/- Sd/-
(RAJPAL YADAV) (AMARJIT SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad : Dated 22/11/2017
I.T.A No. 2138/Ahd/2014 A.Y. 2007-08 Page No 6
Shri Sureshchandra M. Shah vs. ITO
आदेश क त ल प अ े षत / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
By order/आदेश से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण,
अहमदाबाद