The Raipur bench of the Income Tax Appellate Tribunal held that a loss springing up in subsequent year wouldn’t justify non accounting of income during the year the same had accrued.
The assessee a co-operative society, engaged in the business of banking had filed its return of income for A.Y. 2012-13 on 29.09.2012, declaring an income of Rs.11,17,03,900/-. Original assessment was framed by the A.O vide his order passed under Section 143(3) of the Income Tax Act, 1961 dated 31.01.2015, determining the income of the assessee society at Rs.11,28,58,550/
The Commissioner of Income Tax (CIT) after culmination of the assessment proceedings called for the assessment records of the assessee society.
It was observed that the Chartered Accountant (CA) of the assessee society in his audit certificate dated 21.09.2012 had reported that the assessee society had not accounted for the service charges of Rs.640.16 lacs that was receivable from the State Government for the work of procurement of paddy carried out on behalf of various co-operative societies.
CIT on the basis of his aforesaid observation therein vide his order passed under Section 263(1) of Income Tax Act dated 30.03.2017 held the assessment order passed by the A.O under Section 143(3) of the Act dated 31.01.2015 as erroneous in so far it was prejudicial to the interest of the revenue and directed him to frame a fresh assessment after affording a proper opportunity of being heard to the assessee.
The A.O complying with the directions vide his order passed under Section 263(1) dated 30.03.2017, therein, called upon the assessee to put forth an explanation as to why the service charges of Rs.640.16 lacs receivable from the State Government were not accounted for.
As the explanation tendered by the assessee did not find favour with the A.O, therefore, he made an addition of the aforesaid amount of Rs.640.16 lacs to the returned income of the assessee.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) observing that the assessee bank had not received commission on procurement of paddy during the year under reference found favour with the claim of the assessee and vacated the addition of Rs.640.16 lacs made by the A.O. The revenue being aggrieved with the order carried the matter in appeal before the appellate tribunal.
The tribunal found that the AO had simply gone by the claim of the assessee bank that as per the confirmatory letter of the Ministry of the State Government and the corrective statement of the auditor of the assessee bank it was not in receipt of any commission on procurement of paddy during the year under consideration.
In so far the corrective statement of the auditor of the assessee bank was concerned, the tribunal found that the same was in the context of the immediately succeeding year i.e. A.Y.2013-14, wherein the CA vide his letter dated 25.09.2017 in context of the said year, had stated that he was unable to comment as to how the responsibility of the bank was fixed and deductions were being made from the commissions receivable to the bank.
The vague reporting by the assessee’s auditor in the immediately succeeding year i.e. A.Y.2013-14 did not not inspire any confidence. Apart from that, a careful perusal of the aforesaid observation of the auditor further fortifies the claim of the department that income in the form of service charges had actually accrued to the assessee bank during the year under consideration.
The two bench member consisting of Ravish Sood and Arun Khodpia were unable to persuade to subscribe to the view taken by the CIT(A), who had dislodged the well-reasoned order of the A.O and thus, set-aside his order and upheld the addition of Rs.640.16 lakhs. Thus, the Grounds of appeal raised by the department were allowed.
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