TMI Blog2008 (9) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... sive about determination of the income and that if a liability has been incurred but not entered in the books, the same has to be allowed if the assessee follows mercantile system of accounting. It is also seen that following the aforesaid principle, the AO has brought to tax interest income although this income was not provided in the books of account. Therefore, the action of the AO is contradictory in nature in this behalf. The ld CIT(A) has examined the matter in correct legal perspective and on the basis of decision of Hon'ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT[ 1971 (8) TMI 10 - SUPREME COURT] . In view thereof, we do not find any such error in the order of the ld CIT(A), which requires correction from us. Thus, this ground is dismissed. Computation of income u/s 115JB - deduction of accrued liability of interest - HELD THAT:- We are of the view that the AO cannot reopen the accounts of a company, which have been audited and certified by the statutory auditor, passed by the members of the company in general body meeting, filed before the RoC, and to which he has not taken any objection under that Act. The impugned amount was not enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e auditors in notes on accounts and it was mentioned that the interest-expenditure of Rs. 2.10 crore and interest income of Rs. 1,19,07,474 for the period 1st April, 2000 to 31st March, 2001 were not provided in the books of account. It was further mentioned that the Pearless had filed a suit against the assessee under s. 138 of the Negotiable Instrument Act. This suit is pending in a Court at Calcutta and the amount of liability is yet to be fixed by the Court. Since the liability is to be fixed by the Court, it cannot be ascertained. It is further mentioned that the loan agreement expired on 8th April, 1997. It was also mentioned that the assessee was maintaining its accounts on mercantile basis. The case of the AO was that as per the statement of accounts filed with the return of income and tile remarks of the auditors, the assessee adopted a policy of not providing for the liability of interest after the date of expiry of the loan. Therefore, the liability was not allowed. 2.2 Aggrieved by this order, the assessee moved an appeal before the CIT(A)-XIII, New Delhi. It was explained that the assessee had not made provision for the interest expenditure of Rs. 2.10 crores. Simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the liability and the income. He also referred to p. 2 of the paper book, which furnishes the computation of interest liability in terms of the order of the Court passed during the year under consideration. The liability from 1st April, 1999 to 19th Dec., 2000, contracted @ 21 per cent p.a. was worked out at Rs. 1,51,31,507, while the liability from 20th Dec., 2000 to 31st March, 2001 @ 10 per cent p.a., as per order of the Court, was worked out at Rs. 27,94,521. Thus. the total liability amounted to Rs. 1,79,26,028. This liability was an ascertained liability, allowed in favour of the Pearless by the Court. Therefore, it was agitated that the assessee was entitled to deduct the impugned liability in computing the income. 2.4 We have considered the facts of the case and rival submissions. We find that the assessee had taken loan from the Pearless and there was some dispute pending in respect thereof in the Court. The dispute came to an end in this year. The Court directed the assessee to pay interest @ 21 per cent p.a. till the date of the order of the Court and @ 10 per cent p.a. thereafter. In these circumstances, it cannot be said that the liability was not an ascertaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. The AO has to accept the authenticity of accounts with reference to the provisions of the Companies Act, which obliged a company to maintain accounts in a manner provided under that Act. These accounts are to be scrutinized and certified by the statutory auditor and approved by the company in general meeting. Thereafter, the accounts are to be filed before the RoC who has an obligation under the statute to examine the accounts and satisfy himself that the same have been maintained in accordance with the requirements of that Act. Thus, his case was that the accrued interest also could not have been taken into account under s. 115JB if the assessee was to be denied the deduction of accrued interest liability in favour of the Pearless. We may mention here that ground No. 2 of the cross-objection deals with the interest income not credited in the accounts. 3.2 We have considered the facts of the case and rival submissions. Having considered the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd., we are of the view that the AO cannot reopen the accounts of a company, which have been audited and certified by the statutory auditor, passed by the members of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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