TMI Blog2010 (1) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... and Kumar, for the Appellant S. Parthasarathi, for the Respondent JUDGMENT- D.V. Shylendra Kumar, J:- This appeal is by the Revenue under s. 260A of the IT Act against the order of the Tribunal, Bangalore Bench 'B' in ITA No. 273/Bang/1999 (asst. yr. 1997-98) in terms of Annex. 'D'. This appeal had been admitted to examine the following substantial questions of law : "(A) Whether the Tribunal was right in deleting the prima facie adjustment made by the AO pertaining to the interest of Rs.74.75 lakhs accrued on inter-corporate loans without realising that the AO had full powers to make an adjustment with reference to deductions claimed by the assessee which is at variance in the PandL a/c and balance sheet filed along with the return ? (B) Whether the AO is entitled to make a prima facie adjustment with regard to an item of income taken credit for in the PandL a/c by the assessee but excluded from the computation of income with a comment or note ?" 2. Brief facts leading to the appeal are that : The assessee is a public limited company listed on the Bangalore Stock Exchange amongst others. For the asst. yr. 1997-98, in the return filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d." 5. The Tribunal has reversed the order of the first appellate authority and the view taken by the assessing authority, therefore the Revenue is in appeal before us on the questions of law as indicated above. 6. We have heard Dr. Krishna, learned special Government advocate appearing for the Revenue and Sri Parthasarathi, learned counsel appearing for the assessee. 7. Dr. Krishna, learned counsel would point out that the order of the Tribunal suffers from the basic defect of not even indicating the reasons to record a finding "applying the same principles herein also the addition made by the AO and confirmed by the CIT(A) has to be deleted from the total income and the additional tax levied also needs to be deleted." 8. The statutory provisions of s. 143(l)(a) at the relevant point of time read as under : "143(l)(a). Where a return has been made under s. 139 or in response to a notice under sub-s. (1) of s. 142,- (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aying principal amount nor interest had taken a pragmatic and practical view of the matter in accepting the theory of no real income and thus allowed the appeal directing the assessing authority to accept the version of the assessee that a sum of Rs.74.75 lakhs cannot be treated as part of the total income for the assessment year. Therefore, question of adding this amount to the total income of the assessee and levying tax on that does riot arise. 12. The incidental question is the attraction of the provisions of s. 143(1)(A) of the Act, which reads as under : "143(1)(A). (a) Where as a result of the adjustments made under the first proviso to cl. (a) of sub-s. (1), (i) the income declared by any person in the return is increased; or (ii) the loss declared by such person in the return is reduced or is converted into income, the AO shall, (A) in a case where the increase in income under sub cl. (i) of this clause has increased the total income of such person, further increase the amount of tax payable under sub-s. (1) by an additional income-tax calculated at the rate of twenty per cent on the difference between the tax on the total income so increased and the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the interest amount i.e., Rs.74.75 lakhs, appeal is still pending before this Court. In so far as this appeal is concerned, the real consequence is only relating to 20 per cent additional tax liability in terms of s. 143(1)(a) of the Act. 16. The assessee is following the mercantile system of accounting and it is also a fact that the assessee in terms of an agreement had lent a sum of Rs.3.25 crores to another company with a stipulation that the borrower should repay the amount with simple interest at 21 per cent per annum. When these two informations are available even in terms of the return filed by the assessee, as the assessee is following the mercantile system of accounting, it automatically follows that the assessee has an income of Rs.74.75 lakhs which accrues the moment the year is over from the date of lending, whether or not the amount is realised in reality. 17. We find that the observation of the first appellate authority to the effect that the assessee could have claimed the amount as a bad debt in respect of the principal amount which in turn, could have avoided further accrual of interest etc., is appropriate in this regard. If the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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