AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (2) TMI 83
X X X X Extracts X X X X
X X X X Extracts X X X X
....venue has raised two substantive grounds on the issue of deletion of rebate on Hire purchase written off by the Commissioner of Income Tax (Appeals) and also deletion of addition on additional Finance charges on account of change in method of accounting from Mercantile basis to Cash basis. 3. The Brief facts of the case are that the assessee company is engaged in the business of Hire Purchase, leasing, factoring and real estate works. For the assessment year 2005-2006, the assessment u/s.143(3) of the Act was completed on 04.12.2007 determining total loss of ;17,73,71,490/- and subsequently under rectification u/s.154 of the Act dated 18.08.2008 the total loss was recomputed to ;19,39,20,047/- and assessee has filed an appeal aggrieved by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roduced ledger accounts of parties disclosing amount written off in books. Further, the Assessing Officer on perusal of profit and loss account found ;5,74,75,603/- income from operations comparatively less than earlier assessment year 2004-2005. On examining the Audited accounts and notes on accounts found additional financial charges on account of delayed or non remittance of installment dues pertaining to hire purchase and financial lease contracts are not recognized. The Assessing Officer issued notice and called for the explanations on disputed issue and the assessee filed written submissions and explained that due to change in method of accounting and also non-remittance of installments in earlier year, income is not recognized on acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the Assessing Officer and explained the provisions of Companies Act in respect of NPA and also filed written submissions alongwith judicial decisions and the ld.CIT(A) perused the directors report and also accounting policies in Annual report and found reduction in the finance charges compared to earlier years due to deep financial crisis owing to poor recoveries and interest, were the recoveries of principle component in majority of hire purchase transaction has become doubtful. In such circumstances, charging of additional finance charges on over due default payment of installment is not good business practice. The assessee company analyzed the various factors to change the accounting policy by not recognizing AFC on the overdue install....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome Tax (Appeals), the Revenue has filed an appeal before the Tribunal. 5. The ld. Departmental Representative on the issue of deletion of rebate on hire purchase written off has submitted that the assessee company has not complied with the provisions of Sec.37 and 36(1)(vii) of the Act and also the assessee has not produced any evidence of written off in the books of accounts in the assessment proceedings. The assessee has submitted ledger accounts of parties and details of major hire purchase transactions in appellate proceedings. The ld. Commissioner of Income Tax (Appeals) has not called for any comments or remand report from the Assessing Officer and similarly on the next issue of charging additional finance charges not recognized b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n. In the facts and circumstances of the case, we are of the opinion that under Rule 46A additional evidence was submitted before the Commissioner of Income Tax (Appeals) without providing an opportunity to the Assessing Officer to examine the issue and the next ground is connected to Hire purchase were the assessee company has not recognized additional finance charges on NPA and changed method of accounting from mercantile system to cash system. The ld. Authorised Representative explained the hardship and constrains of the company for recoveries, were majority of hire purchase transactions have defaulted and charging of additional finance charges on NPA will not be prudent practice for the company. The ld. Authorised Representative filed p....