TaxTMI 
TaxTMI 
TaxTMI 
2017 (9) TMI 1765
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....the Act?" D.B. Income Tax Appeal No.202/2009 admitted on 19.09.2011: "Whether Tribunal was justified in holding the additions made by the AO towards non-recoverable interest on NPA debts is inconformity with the requirement of Section 43D of the Act? 3. Counsel for the appellant contended that the AO has issued notice under Section 148 and proceedings under Section 147 of the I.T. Act were initiated against the appellant relying on the decision of the Supreme Court in the case of Madhya Pradesh Cooperative Bank Ltd. Vs. Addl. CIT reported in 218 ITR 483 (SC) and has re-opened the assessment which was done under Section 143(1). The notice was issued on 11.3.2003 and not only that, the issue of Section 80P(2) which was covered by the judgment in the case of Madhya Pradesh Co-operative Bank Ltd. Vs. Addl. CIT 218 ITR 438(SC) but it has also covered under Section 43D, the expenses which are deducted and the account which was write off on a back date which was accepted, was also re-opened. 4. He contended that these issues were raised before the ITO that the judgment of M.P. High Court has now been overruled by the Supreme Court in the case of CIT Vs. Karnataka State Cooperative B....
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.... Court, in Atlas Cycle Industries' case. 31. The result of the aforesaid discussion is, that the question framed, in the order dated 23.5.2006, is required to be, and is, answered in the manner, that the Tribunal was not justified in holding, that the proceedings for reassessment under Section 148/147 were initiated by the Assessing Officer, on nonexisting facts, because ultimately the assessee has been able to explain the income, which was believed to have been escaped assessment, was explainable. It is further held, that the Assessing Officer was justified in initiating the proceedings under Section 147/148, but then, once he came to the conclusion, that the income, with respect to which he had entertained "reason to believe" to have escaped assessment, was found to have been explained, his jurisdiction came to a stop at that, and he did not continue to possess jurisdiction, to put to tax, any other income, which subsequently came to his notice, in the course of the proceedings, which were found by him, to have escaped assessment." 6. He contended that the AO has seriously committed an error in issuing the notice under Section 147 of the Act. 7. He has relied on the decis....
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.... is in accordance with accounting practice. 6. For this same reason, and to aid proper determination of income, the Central Board of Direct Taxes had issued Circular No.41(V-6)D of 1952 dated 6th October, 1952. The circular, inter alia, stated that "interest accruing to a money lender on loans entered in the suspense account because of the extreme unlikelihood of their being recovered need not be included in the assessee's taxable income if the Income-tax Officer is satisfied that there is really little probability of the loans being repaid. It is considered desirable to extend this principle to banks which, instead of transferring the doubtful debts to a suspense account, credit the interest on such debts to that account provided the Income-tax Officer is satisfied that recovery is practically improbable." This circular was in force till 20th of June, 1978 when the Central Board of Direct Taxes issued a circular dated 20th of June, 1978 withdrawing with immediate effect the earlier circular of 6th of October, 1952. The reason for the withdrawal of the circular of 1952 is set out in the circular of 20th of June, 1978. The reason is stated thus: "the Board has been advised that ....
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.... circulars? Section 119(1) of the Income-tax Act, 1961 provides that, "The Central Board of Direct Taxes may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board. Provided that no such orders, instructions or directions shall be issued (a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate functions". Under sub-section (2) of Section 119, without prejudice to the generality of the Board's power set out in sub-section (1), a specific power is given to the Board for the purpose of proper and efficient management of the work of assessment and collection of revenue to issue from time to time general or special orders in respect of any class of incomes or class of cases setting forth directions or instructions, not bein....
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....9. The circular of 9th of October, 1984, therefore, provides a test for recognising whether a claim for interest can be treated as a doubtful claim unlikely to be recovered or not. The test provided by the said circular is to see whether, at the end of three years, the amount of interest has, in fact, been recovered by the bank or not. If it is not recovered for a period of three years, then in the fourth year and onwards the claim for interest has to be treated as a doubtful claim which need not be included in the income of the assessee until it is actually recovered." 8. He has also relied on the following judgments: 1. Commissioner of Income-tax Vs. Bangalore Distt. Cooperative Central Bank Ltd. :: (1998) 233 ITR 282 (SC) 2. Commissioner of Income Tax Vs. Karnataka State Cooperative Apex Bank: (2001) 251 ITR 194 (SC). 3. Mehsana District Central Co-operative Bank Ltd. Vs. Income-tax Officer, Gujarat State co-operative Bank Ltd. Vs. Commissioner of Income tax (2001) 251 ITR 0522 (SC). 4. Commissioner of Income Tax Vs. Punjab State Cooperative Bank Ltd. :: 304 ITR 0113 ( P & H). 5. Commissioner of Income Tax Vs. Baroda Peoples Cooperative Bank Ltd. 280 ITR 0282. 6. ....
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....e tribunal which reads as under:- "10. Considering the above submissions, we are not inclined to interfere with the first appellate order as the ld. CIT (A) has rightly observed that the assessee has not fulfilled the requirement shown in the CBDT Circular No.621 dated 19.12.91 as amended by Circular No.642 dated 11.12.92 and Circular No.698 dated 28.12.94. The new section 43D provide that interest on sticky loans shall be charged to tax only in the year in which the interest is actually received or is credited to the Profit & Loss account which ever is earlier. In the present case. However, the accrued interest of the past two years, on the advances which were not classified as NPA in those years, but has been classified as NPA during the year under consideration. It is that interest which accrued on advances in those past two years and was credited to the Profit & Loss account in those years and this entryof accrued interest of earlier years has now been reversed during the year under consideration on the basis that those advances have become NPA during the year. Since the debts which have become bad and doubtful during the year on the interest so accrued during the year has ....
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....into force w.e.f. 2009, the amendment which has been added w.e.f. 1.4.1889. However, it will not be out of place to mention here that the notice was issued on 11.3.2003. This explanation was not there at that time. In that view of the matter, we are not giving any comment whether the impugned jurisdictional judgment will apply or not and when the notice was issued, this explanation was not there. 16. In that view of the matter, in our considered opinion, the Assessing Officer has not only committed very serious error in issuing the notice on an overruled judgment but has also committed serious misconduct. Inasmuch as, in spite of the pointing out the judgment rendered by the Karnataka High Court came subsequently and has overruled the M.P. High Court judgment, the proceedings ought to have been closed. However, not only the Assessing Officer but the CIT(A) and the Tribunal have not taken into consideration this note. 17. In our considered opinion, the issue under Section 147 based on an overruled judgment is required to be answered in favour of the assessee. 18. On the other issue, counsel for the appellant has relied on the decision of the Supreme Court in the case of T.R.F. L....