Income tax on interest on accural basis

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 May 2012 sir,
I purchased capital gain bonds of REC in the month of Jan 2008, and interest on these bonds is given by REC directly into my account on 30th june of 2008. I filed IT return for 2008-09 in july 2009 incorporating interest income received on 30th june 2008. The AO has calculated interest income from Jan2008 to March 2008 on accrual basis and raised the demand of Tax on accrual basis. I am a salaried govt employee and do not keeps books of accounts and files return on receipt basis which AO is not accepting. Am I amenable to Income tax on capital gains bonds on accrual basis when I actually receives interest on 30th june. AO has also imposed penalty under Sec 271 for concealment of income on the face of the fact the investment in bonds have been declared in ITax return and some capital gain tax too have been paid. Kindly give your advice please.

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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10 May 2012 It depends on the accounting treatment regularly given by you. If it is the first year, the Assessing officeris is not, prime facie, right in compauting income on accrual basis.
You can show the income on cash basis.

Further, Even if he considers income in the current year, penalty imposed by assessing officer is absolutely bad in law.