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2017 (5) TMI 198 - AT - Income TaxDisallowance of bad debts -Held that:- As the assessee demonstrated in writing that the assessee follows project completion method. Regarding interest receipts, it is the submission of the assessee that the interest received from the debtors was reduced from the total expenses and balance is considered as WIP thereby the said interest receipts are assessed to tax under the head “profits and gains from business or profession”. On examining the WIP accounts of the assessee for various years, we find the claim of the assessee is proper and the assessee entitled to relief on this part of the bad debts too. We direct the AO grant relief as per the law - Decided in favour of assessee Adjustment to the WIP account - DR opposed the admittance of the additional ground and the papers filed before us - Held that:- We are of the view that it is in the interest of justice the assessee must not be put to difficulty for no mistake of him. In our view it is the duty of the AO to make proper assessment. AO should have examined the past assessments for the details of the altered WIP figures before he complete the current assessment. Considering the above, we are of the view that the AO must remove the mistakes in the assessment and adopt the correct WIP considering the changes made in the past to the said account. In the remand proceedings, AO shall grant reasonable opportunity of being heard to the assessee. Accordingly, relevant grounds and additional grounds are allowed, in principle, for statistical purpose. Taxation of the exempt Share Income - Held that:- In the computation of income, there is mistake and the said income is not claimed as exempt. Such income is exempt as per the provisions of section 10(2A) of the Act. In the assessment the AO charged such exempt income tax ignoring the said provisions. In this back ground of these facts, the assessee raised the said additional ground. On hearing both the parties, we find that the assessment order of the AO is not sustainable on merits. Who can AO subject such exempt income to tax? No failure from assessee side shall justify such decision of the AO. AO is under statutory obligation to make proper assessment granting all eligible deductions and exemptions as the case may be. Admitting the additional ground considering the principles of natural justice, we direct to AO to examine the claim on this share income amend the assessment if the same is improper
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