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TMI Blog2014 (6) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... elief to the Assessee. Aggrieved by the aforesaid order of CIT(A), the Revenue is now in appeal before us and the Assessee has filed a CO. 4. The grounds raised by the Revenue reads as under: 1. The Ld. Commissioner of Income tax (A) has erred in law and on facts in allowing use of Cash System instead of Mercantile system as method of accounting. 2. The Ld. Commissioner of Income tax (A) has erred in law and on facts in deleting the addition made on account of disallowance of Long term Capital losses of Rs. 34,03,192/-. 3. The Ld. Commissioner of Income tax (A) has erred in law and on facts in deleting the addition made on account of accrued interest on bonds of REC Ltd. amounting to Rs. 49,17,994/-. 4. The Ld. Commissioner of Income tax (A) has erred in law and on facts in treating Short-term Capital Gain of Rs. 23,80,028/- on transfer of DDEs of Nirma Ltd. as Long-term Capital Gain of Rs. 1,88,79;125/- as offered in the return of income . 5. The Ld. Commissioner of Income tax (A) has erred in law and on facts in deletion of addition of Rs. 4,52,667/- made under the head Income from House Property. 1st ground is with respect to method of accounting followed by the Assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we feel it proper that we should decide this aspect of the matter in the facts of the present case. We, therefore, proceed to decide this issue after examining the computation of income and the audited accounts made available before us. In the computation of income, it is specifically stated by the assessee as per note that assessee is following cash method of accounting. This was submitted by the assessee before the A.O. as per the submissions dated 08.11.2005 also as has been reproduced by the A.O. in para 5.1 on page 3 of the assessment order. Thereafter, in para 5.13 of the assessment order, it is stated by the A.O. that the method of accounting in respect of DDEs has been defined by CBDT u/s 145(2) of the Income tax Act, 1961 and as per the provisions of Section 145(2) read with Circular No.2 of 2002, the assessee is not allowed to return the income from DDBs/NCD on cash basis. Hence, as per this finding of the A.O. in para 5.13 of the assessment order, it is seen that this is not a case of the A.O. that assessee is not following cash system of accounting and is following mercantile method of account but the case of the A.O. is this that in respect of declaring income from D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, remaining grounds No.2, 3 & 4 are also to be allowed because the income of the assessee cannot be assessed on the basis of hybrid method of accounting by following mercantile method for assessing income in respect of DDBs/NCD and the remaining income on the basis of cash method of accounting. Hence, grounds No.2, 3 & 4 are also allowed 9. Since undisputedly the facts of the case in the year under appeal are identical to that of A.Y. 03-04 and since no contrary material has been brought before us, we respectfully following the order of Co-ordinate Bench dismiss this ground of Revenue. 2nd ground is with respect to disallowance of long term capital loss of Rs. 34,03,192/-. 10. During the course of assessment proceedings, Assessing Officer noticed that Assessee has incurred long term capital loss of Rs. 34,03,192/- which had been adjusted against the long term capital gains. He also noticed that the loss was on account of sale of Makarba land. The Assessee was asked to submit the details of the land sold. In the absence of any details. Assessing Officer was of the view that the buyer and seller of Makarba land are brothers and the entire set of transaction was nothing but artifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Term Capital Gain of Rs. 1,33,09,111/- arrived at after excluding the Long Term Capital loss of Rs.54,76,171/- incurred on the sale of Makarba land. The AO asked the assessee to submit the following details. (i) Detailed location of the land on which LTCL has been computed. (ii) Name, address and PAN of the party from whom the land had been acquired in 1993-94 along with copy of purchase land. (iii) Name, address and PAN of the party to whom the said land had been sold along with copy of sale deed. (iv) Market value of the said land as on 31.03.2003 along with copy of the Valuation report. (v) You are also required to reflect the above transaction in your bank statement and the use to which the same consideration has been put to. Similar details were asked for during the course of assessment proceedings of Shri H K Patel, assessee's brother relating to the similar issue. The AO also noted that the copy of the sale deed was filed and the land was sold by the assessee to Shri H K Patel and in both the transactions the party of the one side and the party of the second side had been either the assessee or the assessee's brother Shri H K Patel. All the complete details to verify th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in deleting the addition. Thus, this ground stands dismissed." 15. Before us, it has been submitted that the facts of the case are identical of that of case of Shri Rakeshbhai Patel. However, we find that in case of Shri Rakeshbhai Patel, the Assessee had submitted that the land was sold by him to his brother Shri Hirenbhai Patel i.e. the present assessee. However in the present case, the Assessing Officer has noted that the capital gain is on account of sale of land by Assessee. Thus it can be seen that in case of Shri Rakesh Patel (the brother of Assessee), the sale of land was to brother (i.e. Shri Hiren Patel, the present Assessee) but in the present case, the sale of land by Assessee was stated to be to his brother Shri Rakesh Patel. We therefore find that the facts of the case are not identical to that of Shri Rakeshbhai Patel. Further no details are available on record with respect to the land like date of purchase its purchase price, its sale price and other relevant details required for the purpose of computation of capital gain. Further there is no finding on these aspects either by A.O. or CIT(A) . We therefore feel that in the interest of justice, the matter needs be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 02/11/07 in ITA No. 1850/Ahd/2007 in the case of Kisan Discretionary Family Trust for A.Y. 2003-04. Similarly in the case of appellant's brother Shri Rakeshbhai K. Patel for A.Y. 2004-05, vide para 6.1.3 of the order dtd. 13/03/2008 in appeal No. CIT(A)-XI/262/06-07, my predecessor allowed identical ground of appeal. Further, in view of the finding that the method of accounting followed by the appellant is Cash method, no addition is warranted on the basis of accrual of interest. Accordingly, the addition is deleted. This ground of appeal is allowed. 17. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 18. Before us, the ld. D.R. relied on the order of A.O. on the other hand the ld. A.R. submitted that on identical issue the matter has been decided by the Tribunal in Assessee's favour in A.Y. 03-04. He placed on record the copy of the order consolidated order in ITA No. 1082/A/2010 ( A.Y. 03- 04) & ITA NO. 3133/A/2003(for A.Y. 03-04) dated 21.06.2013. He therefore submitted that since the facts of the case under appeal are identical to that of earlier year, similar view be taken and the issue be decided in Assessee's favour. 19. We have heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that under these facts, this issue should be decided on the basis of computation of income, audited P & L account and balance sheet of the present year. He also submitted that if it is held and decided that the assessee is following cash system of accounting then, grounds 2, 3 & 4 are to be allowed in favour of the assessee because these additions were made by the A.O. on the basis that the assessee is following mercantile method of accounting and if it is accepted that the assessee is following cash method of accounting then these additions cannot be made. Ld. D.R. supported the orders of authorities below. 4.2.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. Admittedly, this issue was raised by the assessee before Ld. CIT(A) that the assessee is following cash method of accounting and the A.O. is not correct in holding that the assessee is following mercantile system of account. This issue was not decided by Ld. CIT(A). Under these facts, generally, we restore back the issue to the file of Ld. CIT(A) for a decision on such undecided ground but considering these facts that the relevant mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the assessee along with the return of income, copies of which are made available to us also, we find that the method of accounting being followed by the assessee is cash and not mercantile. As per sub-section (1) of Section 145, the assessee can follow either cash or mercantile system of accounting regularly in respect of determination of income chargeable under the head 'profits & gains of the business and profession' or 'income from other sources' and, therefore, the assessee can very much follow cash method of accounting for the purpose of declaring income in respect of DDBs/NCD if the assessee is regularly following cash method of accounting. No Board's circular can override the provisions of the Act and since the Board's circular is not an accounting standard notified by the Central Government in the official gazette as required u/s 145(2) of the Income tax Act, 1961 to make out an exception in respect of Section 145(1), we do not find any merit in this contention of the A.O. that even if the assessee is following cash method of accounting, the assessee is bound to follow mercantile method of accounting for the purpose of declaring income from DDBs/NCD. Hence, we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected to accept the long term capital gain returned by the appellant of Rs. 1,88,79,125/-delete the short term capital gain assessed of Rs. 23,80,028/-. 22. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 23. Before us, the learned D.R. relied on the order of A.O. On the other hand the learned A.R. submitted that on identical facts in the assessee's own case for A.Y. 02-03, the issue has been decided in favour of Assessee by Hon. Tribunal. He therefore submitted that similar view be considered in the present case also. 24. We have heard the rival submissions and perused the material on record. We find that in the assessee's own case for A.Y. 02-03 in ITA No. 1252/Ahd/2006 on identical issue, the issue has been decided in favour of Assessee by the Co-ordinate Bench of Tribunal by holding as under:- 8. Treating of LTCD of Rs. 3,01,35,849/- on sales of 1391 DDB of Nirma Limited as STCG and Not-allowing of deduction u/s 54EC on LTCG of Rs. 3.01 crores (Ground nos. 5 and 6): The facts relating to these grounds are that the assessee sold the balance 1391 DDBs on 19.03.2002 at a consideration of Rs. 6,98,95,209/- @ 1,12,139/- per bond. The learned A.O. conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground nos. 2 and 3 raised in favour of the assessee by following the findings of the earlier Bench of this Tribunal in the case of karsanbhai Khodidas Patel (HUF) supra. Since the facts and circumstances of the case and the issues involved in these grounds being identical, the A.O. is directed to treat the income of the assessee arising out of sale of 1391 DDBs by the assessee as LTCG and, consequently, to allow the assessee's claim of deduction of Rs. 4,20,20,000/- u/s. 54EC of the Act. It is ordered accordingly. 25. Since the issue has already been decided in favour of the Assessee by the Co-ordinate Bench of Tribunal in earlier years and since the Revenue could not bring any material on record in its support or could controvert the submission of A.R., we following the decision of the Co-ordinate Bench of Tribunal decide the issue in favour of the Assessee. Thus this ground of Revenue is dismissed. Addition of Rs. 4,52,667/- under the head "Income from house property". 26. On perusing the details filed by the Assessee, Assessing Officer noticed that Assessee was owning immovable properties namely Nirma House, Nima House and Farm House . The Assessee was asked to furnish its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue is now in appeal before us. 28. Before us the ld. D.R. submitted that in the absence of any details submitted by the Assessee, the A.O. was left with no other options but to determine the income from house property on the basis of material on record. He thus supported the order of A.O. 29. The ld. A.R. on the other hand submitted that on identical facts in the case of Rakeshbhai Patel, the brother of Assessee, the Hon. ITAT vide its order dated 03.10.2008 for A.Y. 04-05, had set aside the issue to the file of CIT(A) for verification. He further submitted that CIT(A) after verification of the details has deleted the addition and further submitted that Department has not filed appeal before Hon. ITAT challenging the order of CIT(A). He therefore submitted that since the facts of the case are identical to that of Rakeshbhai Patel, similar view be taken in the case of Assessee and the addition made by the A.O. be deleted. 30. We have heard the rival submissions and perused the material on record. We find that CIT(A) vide order dated 20.10.2010 for A.Y. 04-05 in the case of Rakeshbhai Patel, the brother of the Assessee had decided the issue by following the order in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal income and decide this issue accordingly. 11. After hearing both the parties and carefully considering the submissions made by them, we are of the view that no interference is called for in the order of the CIT(A) as neither of the parties has produced any substantive evidence showing the correct rental income earned by the assessee. Under these circumstances we do not have any alternative except to confirm the order of the CIT(A). We accordingly confirm the order of the CIT(A) on this issue. Thus, this ground stands dismissed. 32. From the above order of Co-ordinate Bench it is seen that in the case of Rakeshbhai Patel, ld. CIT(A) had followed the order in the case of the present Assessee for A.Y. 04-05. The present appeal of the Assessee before us is with respect to A.Y. 04-05. Before us, thus it cannot be said that issue is covered in assessee's favour by the decision of Tribunal in the case of Rakeshbhai Patel. We further find that during the course of assessment proceedings before A.O. the necessary details with respect to the impugned house property was not furnished by the Assessee and therefore the A.O. proceeded to decide the matter on the basis of material availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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