2011 (4) TMI 1522 - AT - Income Tax

Summary

Issues Involved:
1. Method of Accounting (Cash vs. Mercantile)
2. Addition of Accrued Interest on REC Bonds
3. Addition of Income from House Property

Summary:

Issue 1 & 2: Method of Accounting and Accrued Interest on REC Bonds
The Revenue challenged the CIT(A)'s decision to accept the assessee's cash method of accounting instead of the mercantile method and the deletion of additions for accrued interest on REC Bonds. The AO had added Rs. 25,86,569/- for Shri Rakesh Karsanbhai Patel and Rs. 87,47,522/- for Shri Karsanbhai Khodidas Patel based on the mercantile method. The CIT(A) deleted these additions, referencing previous ITAT decisions which upheld the assessee's consistent use of the cash method since AY 1999-2000. The ITAT, following its earlier decisions, upheld the CIT(A)'s findings, confirming that the assessee was following the cash system of accounting. Thus, the additions made by the AO were deleted, and ground nos. 1 and 2 in the appeals were dismissed.

Issue 3: Addition of Income from House Property
The AO added Rs. 4,55,000/- as income from house property for both assessees, arguing that the properties were not legally transferred and remained in the assessee's possession. The CIT(A) deleted these additions, accepting the assessee's claim of property transfer. However, the ITAT found that the CIT(A) did not provide specific findings or evidence to support this conclusion. The ITAT noted the absence of proper documentation and compliance with legal formalities for property transfer. Consequently, the ITAT set aside the CIT(A)'s order on this issue and remanded it for reconsideration, directing the CIT(A) to pass a speaking order in compliance with sec. 250(6) of the Act.

General Grounds:
Ground nos. 4 and 5, being general in nature, were dismissed without separate adjudication.

Conclusion:
The appeals were partly allowed for statistical purposes, with the order pronounced on 8-04-2011.