TMI Blog2021 (9) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1993. These cheques were never encashed from the bank a finding qua which has been given in the remand report by the AO after carrying out verification from then UCO bank - addition can not be made merely because it was not explained by the assessee by overlooking the facts on records which testified that the difference between the books of account of the assessee and bank statement of UCO bank are attributed to cheques/advices issued but not encashed and presented in the bank - we direct the AO to delete the disallowance - Decided in favour of assessee. Assessment of interest income - whether to be assessed as cash system of accounting instead of mercantile system of accounting - CIT(A) deleted the addition - HELD THAT:- CIT(A) allowed the appeal of the assessee by following the decision of the co-ordinate Bench of the Tribunal in the case of Sudheer Mehta A.Y. 2009-10 to 2011-12 [ 2017 (12) TMI 1668 - ITAT MUMBAI] . Accordingly, we do not find any infirmity in the order of Ld. CIT(A) and same is upheld by dismissing the appeal of the Revenue. Penalty us 271(1)(c) - whether notice barred by limitation? - HELD THAT:- As per the provisions of section 275 of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Bureau of Investigation on 04.06.1992 and some documents/records were seized by them also. The assessment u/s 143(3) r.w.s. 145(2) of the Act was completed by the AO on 26.03.1993 at an assessed income of ₹ 1,90,67,99,460/- after rejecting the books of accounts of the assessee. The various additions/disallowances made by the AO inter alia included (i) addition of ₹ 5,60,33,309/- being the difference as on 31.03.1990 in the balance in its account with UCO Bank, Hamam Street Branch as per books of the assessee and the balance as per the bank statement of the Bank and (ii) interests accrued of ₹ 13,11,232/-and ₹ 34,92,079/-, aggregating to ₹ 48,03,311/- which were not offered by the assessee on the ground that he was following cash system of accounting. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A). On the addition of ₹ 5,60,33,309/- in respect of the issue related to the difference as on 31.03.1990 as per books of the assessee in UCO Bank and the balance as per the bank statement of the said account, the Ld.CIT(A) after duly considering the remand report of the AO qua the reconciliation statement subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payments claimed to have been made to SBI for an aggregate amount of ₹ 5,51,63,286/-. However, other than submitting the client's constituent ledger account from his own books, the assessee has not submitted any other evidence. It is pertinent to point out that this client constituent ledger account cannot be fully relied upon since, the books of the assessee have been rejected by the AO and this action has also been upheld by the Hon'ble ITAT. Therefore, it was imperative for the assessee to submit third party supporting evidences which he has failed to do. Moreover, other than making a bland assertion, the assessee has not submitted any evidences in respect of the alleged transaction of sale of securities for SBI and its subsequent cancellation. It is also pertinent to note that the various discrepancies noted by the AO after examination of the books of the assessee in respect of the reconciliation statement, were neither explained in course of the proceedings in the first round before my Id. predecessor or even in the current proceedings. Moreover, though the assessee was specifically asked to submit its bank statement for the months of March and April, 1990 vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry carried out from UCO Bank which revealed that the said cheques have not been debited in the account of the assessee and this fact is now not being disputed by the assessee. 4.8 In view of the aforesaid discussion, the following observations are made in respect of the reconciliation submitted by the assessee to explain the difference between the balance as on 31.03.1990 in its bank account as per books and the balance as per the bank statement. (i) In the first round of proceedings before my Ld, Predecessor, it was submitted that the accounts of the assessee will be rectified for the subsequent year and no plea was taken that the said payments were made on 27.03.1990 on account of proposed sale of certain securities undertaken for SBI which got cancelled. This plea was also spot taken up in the proceedings before the Hon'ble ITAT. The assessee in the present proceedings, for the first time, took up the plea that the said payments were made on 27.03.1990 on account of proposed sale of certain securities undertaken for SBI which got cancelled and the entries were reversed. Since, this plea was not taken earlier, the onus was on the assessee to substantiate this new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Accordingly, an amount of ₹ 5,51,63,286/- is considered for addition to the total income of the assessee for the relevant year. Accordingly, the said addition made by the AO of ₹ 5,60,33,309/- is restricted to an amount of ₹ 5,51,63,286/-. 5. After hearing both the parties and perusing the material on record, we find that undisputedly the addition as confirmed by the Ld. CIT(A) in the second round of appeal is on account of difference between books of accounts of the assessee and statement of UCO Bank, Harnam Street Branch. We note that the assessee has filed a reconciliation statement before the ld CIT(A) which is extracted as under for the sake of ready reference: Amount (Rs.) Amount (Rs,) Balance as per our bank book as on 31.03.1990 565671.55 Add: Cheque issued but not presented till month end. Date Cheque No. In favour of 01.03.90 226196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of the assessee even in the subsequent year. We have also seen the books of accounts of the assessee and found that on 27.03.1990 the assessee has made payments of ₹ 5,51,59,650/- and ₹ 3,636/- against the purchase of 40.95 lakh units 1964 scheme and 2.70 hundred units, 1964 scheme. The extract of the account of SBICA which stands for SBI Capital Market Ltd. are extracted below for the month of March 1990 and April 1990 as under: 7. We have also examined the books of accounts of the assessee in respect of subsequent year and found that in the month of April these entries were reversed by the assessee in his books of accounts. The Ld. CIT(A) confirmed the addition on the ground that assessee has failed to produce the bank statements to corroborate these entries by overlooking the fact that AO has given a finding in the remand report that these cheques were never encashed and presented in the bank. Therefore, we are not in concurrence with the views of the Ld. CIT(A) on this issue. In fact, the bank statement relates to the year 1993 and therefore we find merit in the contention of the Ld. A.R. that it is rather impossible to produce the statement bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest from the same source which is trading in securities for which the assessee is following mercantile system of accounting. Accordingly, the AO held that when the assessee is following mercantile system of accounting in respect of trading in securities it would be not be correct on the part of the assessee to follow cash system of accounting in respect of interest income of ₹ 34,92,079 which is from the same source. The AO also added ₹ 13,11,332/- as accrued interest on NLC bonds which was again not offered by the assessee on the ground that assessee is following cash system of accounting. In the set aside proceedings, the Ld. CIT(A) deleted the addition by observing and holding as under: 4.12 The Hon'ble ITAT has directed that this issue be adjudicated in line with its decision in the case of the assessee himself for A.Y. 1989-90. From the order of the Hon'ble ITAT for A.Y. 1989-90, it is observed that the Hon'ble ITAT noted that for the preceding year i.e. A.Y. 1988-89, the assessee had not maintained his books of accounts and therefore, the issue was decided against the assessee. It was further noted by the Hon'ble ITAT that its decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... large scale manipulation of transactions of securities on the stock exchange. The assessee filed the return of income on 30.11.1990 declaring an income of ₹ 34,90,090/- but the same was not accompanied with the balance sheet and P L account and therefore was treated as invalid. Therefore, the assessee filed the revised return of income declaring an income of ₹ 31,94,650/-. The assessment was completed under section 143(3) read with section 145(2) of the Act vide order dated 26.03.1993 determining the total income of the assessee at ₹ 190,66,99,460/- which was challenged before the first appellate authority. The Ld. CIT(A) vide order dated 28.10.1994 allowed partial relief to the assessee. While the additions deleted by the Ld. CIT(A) were accepted by the department and no second appeal was filed, the appellant challenged the said order before Hon'ble Tribunal in ITA No. 8025/Mom/1994. The Tribunal vide its order dated 25.09.2008 disposed off the appeal partly deleting the additions made by the A.O. as well as partly confirming the same. Further, some of the issues were set aside by Hon'ble Tribunal to the file of Ld. A.O. as well as to the file of Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal by the Hon'ble Tribunal on 25.09.2008. The ld AR submitted that admittedly the A.O. chose option of passing the penalty order after the disposal of the appeal by the Ld. CIT(A) without waiting for the disposal of the appeal by Tribunal. The ld. AR submitted that the due date for passing of the penalty order in accordance with s. 275 of the Act are as follows: Sr. No. Events Date 1. Due Date as per the first limb of section 275 (l)(a) of the Act 31.03.1993 2. Due Date as per the second limb of section 275 (l)(a) of the Act (presuming that the order of the Ld. CIT(A) was served in November 1994) 31.05.1995 17. In light of the above, the A.O. ought to have passed the penalty order u/s. 271(l)(c) of the Act on or before 31.05.1995. Since the penalty order has been passed on 28.04.2006, the same was beyond the limitation period and hence void ab initio. The ld AR defense of his arguments relied on the followings decisions: ACIT v. Jasbir Singh [124 Taxman 124 (Mag.)] J. Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was passed by the A.O. on 28.04.2006 whereas the assessment was framed u/s 143(3) r.w.s. 145(2) of the Act on 26.03.1993 and the appellate order was passed by the ld CIT(A) on 28.10.1994. The quantum appeal of the assesse was still pending with the tribunal on the date of passing the penalty order. The contention of the assessee s counsel is that the penalty is barred by limitation in terms of provisions of section 275 of the Act. For the purpose of better understanding of the issues let us understand the provisions of section 275 of the Act which are extracted below: 275(1) No order imposing a penalty under this Chapter shall be passed (a) in a case where the relevant assessment or other order is the subject matter of an appeal to the Deputy Commissioner (Appeals) or the Commissioner (Appeals) under section 246 or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) or. as the case may be, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the receipt of the order of the Tribunal. On the other hand, it was found that quantum income of the assessee had become final when the first appellate authority passed an order on 11-5-1992. So the passing of the penalty order by the Assessing Officer on 15-10-1993 was certainly beyond the period of limitation of six months prescribed under section 275 (l)(a). Hence, the Commissioner (Appeals) had rightly held that the penalty order passed by the Assessing Officer was barred by the period of limitation. As per section 275(l)(a)(ii), penalty in such a case could be imposed within six months from the date of receipt of order of the Commissioner (Appeals). Though the Assessing Officer could have waited till the receipt of the order of the Tribunal, but once this course had not been adopted, the order must have been passed within six months from the date of receipt of the order of the first appellate authority. Accordingly, the penalty order was barred by limitation. b) Identical view was also rendered in the case of J. Srinivasan v. ACIT [404 ITR 51 (Mad.)] Considering the facts of the instant case in the light of provisions of section 275 of the Act and decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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