2014 (1) TMI 877

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.... Bank and filed return of income at nil. The assessee submitted the details and documents before the AO. The books of accounts were produced which were test checked by the AO. The assessee is an incorporated body under Regional Rural Bank Act, 1976. The share capital of the assessee was contributed by the Government of India, U.P. Co-operative Bank and Government of U.P.. The assessee has been carrying on the business of bank as defined in Banking Regulation Act, 1949, which includes granting of loans and advances. The AO found from the profit and loss account of the assessee that it has disclosed interest income on advance of Rs.12,48,03,000/-. The assessee was asked to give details of the interest received on various categories of advance....

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....ant's submission, my observations/conclusions are as under : I find that the entire addition of Rs.2,96,22,000/- has been made on the basis of mere conjectures and surmises. The kind of details A.O. asked for, was almost impossible for the assessee to furnish, while A.O. could well have called for the books of accounts and examined whether any interest chargeable was not charged or was wrongly charged. Rather, to go further, if there were so many compl9cations, the matter could have been referred to Special Audit also. The A.O. does not do anything which is required on his part, but rather makes a weird estimate on average basis, to infer that huge interest amount has been under charged. The AO has failed to appreciate that the books are....

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....ries Ltd., 242 ITR 22 held that there is no provision in IT Act empowering the ITO to include in the in the income of the assessee, interest which was not due or collected. In this case, it is not in dispute that the assessee produced books of account before the AO which have been examined by the AO. The assessee is a co-operative bank and incorporated under the Regional Rural Bank Act, 1976. The accounts of the assessee are audited as per Banking Regulation Act. The AO has not pointed out any specific defects in the maintenance of books of account or the audit report furnished by the assessee. According to the ld. counsel for the assessee, the assessee submitted all the details of earning of interest on advance as per Banking Regulation Ac....