TMI Blog2016 (9) TMI 1662X X X X Extracts X X X X X X X X Extracts X X X X ..... st income from bank deposits - As per AO even though the fixed deposits were frozen, interest was accruing to the assessee on those deposits and therefore, it will be liable to be taxed - HELD THAT:- There is a great element of uncertainty for realizing the interest as well as the bank deposits by the assessee. Even if she realizes the same, it would be after a period of number of years and probably at that time re-assessment may not be possible due to limitation and thus the assessee would not be able to claim refund of the tax paid if the deposits are forfeited. As interest income of the assessee can be recognized only when there is no uncertainty and a significant scope to receive the same. Therefore, accrued interest on the bank deposit frozen by the DVAC, wing of the Govt. of Tamilnadu cannot be treated as interest income of the assessee during the relevant assessment year - direct AO to delete the interest income while computing the total taxable income of the assessee. Revision u/s 263 - wealth tax assessment - Commissioner invoked his powers u/s 25 of the Wealth Tax Act by stating that the wealth tax assessment is found to be erroneous insofar as it is prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also filed by the assessee aggrieved by the order of the learned Commissioner of Wealth Tax (Central), Chennai dated 13.03.2002 in C. No. 1741(1)/2001-02/C.II passed under section 25(2) of the Wealth Tax Act, 1957. Since these two appeals pertain to the same assessee, they are clubbed, heard together and disposed off by this common order for the sake of convenience. ITA No. 1288/Mds/2008: (A.Y. 2000-01): 2. The assessee has raised several grounds in her appeal, however, the cruxes of the issues are as follows:- The learned Commissioner of Income Tax (Appeals) has erred in confirming the order of the learned Assessing Officer who had treated the agricultural income of Rs. 21,66,959 as income from other sources. ii) The learned Commissioner of Income Tax (Appeals) has erred in confirming the order of the learned Assessing Officer who has disallowed Rs.60,000/- being municipal tax while determining rental income. iii) The learned Commissioner of Income Tax (Appeals) has erred in confirming the order of the learned Assessing Officer who had assessed the accrued interest income of the assessee from bank deposit for Rs.36,10,000/- when those deposits were frozen by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs are not signed. vi) The details of the land holding are not evidenced by Adangal, certificate from the VAO. vii) Just because the CIT and the Tribunal for the assessment years 1987-88 to 1992-03 has held that during those years the assessee was earning agricultural income, it cannot be automatically and conclusively established that the agricultural operations continued to be earned by the assessee even during the relevant financial year 1999-2000. The principles of res judicata do not apply in the income-tax proceedings. 4.3 With the above observations, the learned Commissioner of Income Tax (Appeals) confirmed the order of the learned Assessing Officer by making addition of Rs. 21,66,959/- by treating the claim of the agricultural income of the assessee as income from other sources . 5. Before us, the learned Authorized Representative argued by stating that the assessee had submitted the details of her agricultural activities before the learned Commissioner of Income Tax (Appeals). The details of the submissions made before the learned Commissioner of Income Tax (Appeals) are reproduced herein below for reference:- During the assessment proceedings the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been accepted in earlier years by the Assessing Officer on local enquiry and personal verification. The CIT(A) in his consolidated appellate order for the earlier assessment years also accepted the appellant s agricultural income as genuine and the findings of the CIT(A) in this regard has been upheld by the Hon ble ITAT. Copies of the orders of the CIT(A) and the ITAT are also furnished herewith by way of evidence. In view of the above, the addition of Rs. 21,66,959/- deserves to be deleted. 5.1 The learned Authorized Representative further pointed out that in assessee s own case for the assessment year 1987-88 to 1992-93 the learned Commissioner of Income Tax (Appeals) in ITA No. 62 to 67 of 2001-02 vide order dated 31.01.2002 had accepted that the assessee owned agricultural land and was earning agricultural income, therefore there was no scope for making disallowance of the declared agricultural income. It was further submitted that the learned Commissioner of Income Tax (Appeals) in his order had elaborately analyzed the extent of agricultural land held by the assessee and the agricultural operations carried out by the assessee in her agricultural land. The learned Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural land during the relevant assessment year. He also could not deny the fact that even for the subsequent years the assessee had claimed to have earned agricultural income which was accepted by the Revenue. 7. On hearing both the sides and carefully perusing the records before us, we find that the existence of grape vines, coconut trees, and other plantations standing in the agricultural land owned by the assessee which survives for number of years is not in dispute. When the facts are so, it cannot be disputed that the assessee did not earn any agricultural income during the relevant assessment year. Therefore it is apparent that the findings of the learned Assessing Officer and learned Commissioner of Income Tax (Appeals) in the relevant assessment year are perverse. When the assessee had claimed agricultural income of Rs. 21,66,959/- and furnished some details regarding the same, the Revenue should have examined these facts and if cannot accept to the quantum of income declared by the assessee at least they should have estimated the agricultural income of the assessee, considering the earlier decisions and facts during the relevant assessment year. It is evident from the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural income of the assessee. While arriving at such conclusion, we have also perused the decisions cited by the Revenue, but we do not find the facts in the case of the assessee to be identical to those cases. Accordingly, this ground is decided in favour of the assessee. Ground No.3: Accrued interest income of Rs.36,10,000/from bank deposits. 8.1 During the course of assessment proceedings, it was observed by the learned Assessing Officer that the assessee had huge bank deposits and the assessee was not offering the accrued income on the same to tax because those deposits were frozen by the DVAC Wing of the Tamil Nadu Government. The learned Assessing Officer was of the view that even though the fixed deposits were frozen, interest was accruing to the assessee on those deposits and therefore, it will be liable to be taxed. Accordingly, the learned Assessing Officer computed the taxable interest at Rs. 36,10,000/- and brought it under the ambit of tax. 8.2 On appeal, the learned Commissioner of Income Tax (Appeals) endorsed the view of the learned Assessing Officer and confirmed his order by citing the following additional reasons:- i) The assessee had followed ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainty in ultimate collection of the revenue, then the revenue recognition is postponed and in such cases revenue should be recognized only when it becomes reasonably certain that ultimate collection will be made. It also applies to the revenue arising out of escalation of price; export incentive, interest, etc. 12. From the above, it is apparent that the interest income of the assessee can be recognized only when there is no uncertainty and a significant scope to receive the same. Therefore, in the case of the assessee the accrued interest on the bank deposit frozen by the DVAC, wing of the Govt. of Tamilnadu cannot be treated as interest income of the assessee during the relevant assessment year. Hence, we hereby direct the learned Assessing Officer to delete the interest income of Rs. 36,10,000/- while computing the total taxable income of the assessee. WTA No. 20/Mds/2008: (A.Y. 1997-98): 13. Brief facts of the case are that Wealth Tax assessment in the case of the assessee was completed for the assessment year 1997-98 on 27.03.2000 under section 16(5) r.w.s. 17 of the Wealth Tax Act determining the net wealth of Rs. 4,67,13,000/- . Thereafter based on the 263 ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner invoking his power under section 25(2) may be quashed. 15. The learned Authorized Representative also prayed that the enormous delay in filing of the appeal may be condoned and to justify the same he filed written submissions stating the reasons for the delay. He also relied on various decisions of the higher judiciary to support his stand. 16. The learned Departmental Representative though vehemently opposed to the submissions of the learned Authorized Representative could not controvert to the fact that the issues discussed in the 25(2) order of the Commissioner had arisen from the 263 order of the learned Commissioner of Income Tax under the provisions of the Income Tax Act which was considered by the Tribunal and quashed. However, the learned Departmental Representative vehemently argued that there was an inordinate delay in filing of the appeal, which cannot be condoned. 17.1 We have perused the written submission filed by the assessee and for reference the same is extracted herein below: The Appellant was CM of Tamil Nadu from 14.05.2001 to 21.09.2001. For a brief period 21.09.2001 to 02.03.2002 she was not the CM and from 02.03.2002 to 12.05.2006 she w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been passed. As soon as she came to realize that such order has been passed, certified copy was immediately for applied and obtained on 15.07.2008. Soon thereafter the appeal was filed in July, 2008. Whenever any order under the Income Tax has been brought to her notice she has been prompt in filing appeals within the time permitted. This was the only occasion where there has been delay in filing and that too because the order was not brought to her notice. As pointed above, the Appellant is not able to identify the person who has received the order. The order was not brought to her notice. She was full time engaged in performing her duties as the CM and defending plethora of cases against her. Therefore she could not investigate or find out about impugned order of the commissioner, whether it was issued or received. As soon it was brought to her notice, she had filed the appeal immediately. In the circumstances, the delay in filing the appeal occurred for the above reasons beyond' her control the Appellant not being aware of the service of the order and in view of the various activities occupied her attention during the interregnum. The delay was neither willful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was based on the order of the learned Commissioner of Income Tax under section 263 of the Income Tax Act which was subsequently quashed by the Tribunal. Therefore, we are of the view that when technicalities with respect to delay in filing the appeal is pitted against the merit of the case, then the merits of the case should supersede and has to be given utmost importance in the larger interest of the justice, more so when the assessee is endangered by the penal provisions of penalty and prosecution. We place strong reliance in the decision of the Hon ble Supreme Court in the case Collector, Land Acquisition vs. Mst. Katiji Ors., reported in 167 ITR 471 while arriving at this conclusion. In that case the Honab le Apex Court had held that When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay. Further the Hon'ble Supreme Court in case of Vedabhai v/s Santaram, 253 ITR 798 had observed that inordinate delay calls for cautions approach. This means there should be no malafide or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a subject matter of material used in the assessment proceedings and it is a strange material to the assessment. Under section 263, the commissioner is empowered to call for and examine the records of any proceedings under the I.T.Act and he can examine record relating to that income-tax proceedings and in our opinion, Sec.263 does not empower the CIT to examine the records relating to the proceedings of the any other Acts other than the Income Tax Act. We place reliance on judgment of Bombay High Court in the case of Ct T V5. Gabriel India Ltd. 203 ITR 108) The case law relied by the D.R. in the case of Manjunatheswar Packing Products cited supra is not applicable to the facts of the case. Further as rightly pointed out by the Ld Counsel for the assessee, reopening and revision of assessment stand on two different footing. One is not a substitute to the other. In our opinion, the CIT wants to re-open the concluded assessment through the proceedings u/s.263. What can be the subject matter of reassessment can be done only by reopening of the assessment and not by revision u/s.263. This is because there is no assessment regarding the item considered in the DVAC report. When there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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