2004 (12) TMI 296 - AT - Income Tax

Summary

Issues:
1. Additional ground of appeal raised by Revenue regarding deletion of addition under s. 69 of the IT Act.
2. Justification of deleting the addition of Rs. 7,01,690 made on account of accrued interest on IVPs.

Analysis:

Issue 1: Additional Ground of Appeal
The Revenue raised an additional ground of appeal challenging the deletion of an addition of Rs. 7,01,690, part of the market value of seized IVPs, under s. 69 of the IT Act. The Departmental Representative argued that the addition should be brought to tax under s. 69. However, the assessee's counsel opposed this, stating that the AO did not make the addition under s. 69 during assessment. The AO believed that interest on IVPs accrued yearly, but the CIT(A) deleted the addition, ruling that interest did not accrue before maturity. The Tribunal cited precedents to support its decision that the Department cannot raise a ground that was not part of the original assessment. Thus, the additional ground raised by the Revenue was rejected.

Issue 2: Deletion of Addition of Accrued Interest
The main issue was whether the deletion of the addition of Rs. 7,01,690 on account of accrued interest on IVPs was justified. The Revenue argued that interest accrued yearly and should be included in the total income for the block period. In contrast, the assessee contended that interest on IVPs only accrues at maturity and, therefore, should not be included. The Tribunal agreed with the assessee, emphasizing that income accrues only when the right to receive it is acquired. Since IVPs could not be encashed before maturity, interest did not accrue yearly. Citing legal precedents and the nature of IVPs, the Tribunal upheld the CIT(A)'s decision to delete the addition. Consequently, the appeal filed by the Revenue was dismissed.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the Tribunal's reasoning behind its decision.