Revenue appeal dismissed on NPA interest receivable; net claim adjustment matter remanded for fresh adjudication due to Rule 46-A non-compliance

ITAT Amritsar dismissed revenue's appeal regarding interest receivable on Non-Performing Assets, upholding CIT(A)'s decision based on RBI guidelines and AS-9 accounting standards. However, regarding net claim adjustments through Memorandum of Changes by statutory auditors, ITAT set aside CIT(A)'s order for failure to adjudicate properly due to assessee's non-compliance with Rule 46-A for additional evidence admission. Matter remanded to CIT(A) for fresh adjudication with proper enquiry, verification, and adequate hearing opportunity to assessee following natural justice principles.

---

---

Issues Involved:
1. Taxability of interest receivable on Non-Performing Assets (NPA).
2. Deduction claim for adjustments in income and expenditure through Memorandum of Changes (MOC).
3. Higher deduction for provision for bad and doubtful debts under section 36(1)(viia) of the Income Tax Act, 1961.
4. Admissibility of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963.

Summary:

Issue 1: Taxability of Interest Receivable on NPA
The revenue contended that the CIT(A) erred in allowing relief of Rs. 5,64,17,644/- related to interest receivable on NPAs, arguing that the assessee failed to establish that the interest was not taxable. The assessee maintained that as per RBI guidelines and Accounting Standard-9 (AS-9), interest on NPAs should be recognized on a receipt basis due to uncertainty in collection. The Tribunal upheld the CIT(A)'s decision, stating that the issue is well adjudicated by the CIT(A) and covered by RBI guidelines and AS-9. The appeal of the revenue on this ground was dismissed.

Issue 2: Deduction Claim for Adjustments in Income and Expenditure through MOC
The assessee claimed a net deduction of Rs. 85,11,141/- in the ITR for A.Y. 2014-15 based on adjustments made by the statutory auditors through MOC. The CIT(A) did not allow this claim, citing the absence of a formal application under Rule 46-A for admission of additional evidence. The Tribunal accepted the additional evidence under Rule 29 and remitted the matter back to the CIT(A) for fresh adjudication on merits, directing the CIT(A) to provide a detailed, reasoned, and speaking order after necessary enquiries and verifications.

Issue 3: Higher Deduction for Provision for Bad and Doubtful Debts
The assessee's claim for a higher deduction of Rs. 18,80,80,712/- under section 36(1)(viia) was not allowed by the CIT(A). During the hearing, the assessee withdrew this ground.

Issue 4: Admissibility of Additional Evidence
The Tribunal allowed the submission of additional evidence under Rule 29, noting that the assessee was prevented by sufficient cause from presenting it earlier. The CIT(A) was directed to admit and adjudicate the additional evidence on merits.

Conclusion:
The appeal of the revenue was dismissed, and the appeal of the assessee was allowed for statistical purposes, with directions for fresh adjudication by the CIT(A) on the issues of deduction for adjustments through MOC and the admissibility of additional evidence.

---