1994 (11) TMI 151

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....om the year 1976 to 1983 was written back as credit to P&L account. This amount according to CIT, was assessable as income for the year 1985-86 in accordance with the provisions of s. 41(1) of the Act, and since this was not done by the Assessing Officer while completing the original assessment on 25th Dec., 1987, he (CIT) issued a notice demanding explanation/cause from the assessee as to why the assessment framed originally be not revised under s. 263 of the Act. The assessee filed a reply dt. 26th March, 1990 which reads as under: "To invoke the provisions of s. 263 of the IT Act, 1961, the order passed by the Assessing Officer must be erroneous insofar as it is prejudicial to the interest of Revenue. We respectfully submit that the o....

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....wards interest to the lenders since the year 1976 to 1983 and the sum of Rs. 22,59,075 merely represented provision made by the assessee company year after year from 1976 to 1983 on the loans so obtained by it from Shri M. Hindocha and his family members as has been recorded by us elsewhere above. When asked, the assessee's authorised representative submitted that even till to day no amount has been paid by the company to the lenders nor any claim has been made or laid by the said lenders against the company towards interest on the loans borrowed by the assessee company. Now, this conduct of the lender in not claiming any interest since the year 1976 till date (that is to say for 18 long years) appears to be highly strange and very abnormal....

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....heet and other connected documents of the previous year relevant to the year under appeal have not been placed before us for our perusal we are unable to find out the fate and treatment of the written back amount of Rs. 22,59,957. Be that as it may, one thing very clearly and transparently emerges from the facts of this case is that the assessee's liability by its own conduct ceased and it was no longer obliged to pay any amount as and towards interest to the lenders. Since the year 1985 till to day, the assessee has not paid a single paisa towards interest nor the lenders have made any claim in this behalf. 5. When the assessee has credited to the P&L account the interest amount no longer required as liability, then this act and conduct....