1994 (1) TMI 119

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....om cash system for recognising revenue." 2. The relevant facts and the basis on which the Assessing Officer made the addition are stated in the following portion of the assessment order as under : " On going through the notes to account attached with profit and loss account, it has been noticed that company has included interest of Rs. 2,24,868 into interest suspense account on liability side of the Balance Sheet. It has been explained in the notes that Rs. 2,24,868 is estimated to be the balance amount of interest receivable on accrual basis in respect of the earlier financial years ended up to 30-6-1988 after excluding therefrom the irrecoverable amount. In view of the company, the said sum has not been taken credit of in the P & L ....

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....sheet all the interest for so many years which is accounted on cash basis are accrued in the year ended on 31-3-1989. According to the above opinion the company had accounted Rs. 87,959.19 interest pertaining to earlier years accounted on cash basis in earlier year but received in the year ended on 31-3-1989 had accounted the same as the income of the year and offered the same to taxation. The balance of interest of Rs. 2,24,868 will be accounted in the year of receipt and will be offered to taxation in the year of receipt along with the interest which will accrue for that year." 2.1 The Assessing Officer formed the opinion that since now the assessee had taken the credit to suspense account, it could not be said that the interest income....

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....d not have been any grievance for the revenue. 5.1 The learned Departmental Representative relied upon three judicial pronouncements. In our opinion, they are not applicable to the facts of the case or rather the principle laid down therein is either not germane to the issue or support the case of the assessee. 5.2 In the case of CIT v. Confinance Ltd. [1973] 89 ITR 292 (Bom.), the facts were as follows: "The assessee was a limited company carrying on money-lending and banking business. It followed mercantile system of accounting. For the accounting year ending March 31, 1959, the company stated that no credit was taken in its balance sheet in respect of interest on several loans advanced by it as the interest payment had remained ....