9911796707
TMI Blog2011 (3) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is seen that the said order is erroneous insofar as it is prejudicial to the interests of revenue for the following reasons : The regular assessment for the assessment year 2005-06 was completed under section 143(3) on 31-12-2007 determining a total income of Rs. 60,55,98,506. It is observed that the assessee follows mercantile system of accounting and also the prudential norms for income recognition prescribed by the Reserve Bank of India for non-banking financial companies. As per the RBI Circular No. BFC(CVC)/93-94 dated 13-6-1994, income from Non-Performing Assets may not be recognized merely on the basis of accrual and the policy of income recognition should be based on the record of recovery. From this it is clear that the assessee company had not recognized income on Non-Performing Assets both in its statutory books of account and in its Income-tax books of account. In the light of the above/the Assessing Officer ought to have examined whether in respect of any item other than Additional Finance Charges! the assessee had omitted to recognize income by following the RBI's directions even in its Statutory books. If so, the relevant income thus not recognised would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of this case because this is a case in which letters have been submitted along with details of correct taxable income from securitization transactions which has been accepted by the Assessing Officer. With these submissions, it was requested that proceedings initiated under section 263 in assessee's case should be dropped being not legally valid. The ld. CIT heard the arguments as advanced from both sides and has set aside the assessment on the following issues : (i) Verification to be made regarding the extent of income arising to the assessee in respect of NPAs; and (ii) Claim for deduction of Rs. 1,83,16,468 on account of securitization income made during the course of assessment proceedings and allowed by the Assessing Officer. 4. We have considered the rival submissions and have given our anxious thought to the issue of revision on the basis of the mistakes in the assessment order as pointed out by the ld. CIT. It is trite that an order can be revised only and only if twin conditions of 'error in the order' and 'prejudice caused to the Revenue' co-exist. 5. The subject of 'revision under section 263' has been vastly examined and analysed by various C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement or order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view under with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under the law. (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A copy of this decision has been placed for our perusal. In this case it has been held as under : "The assessee-company was engaged in the business of leasing, finance and hire purchase. On the ground that in the profit and loss account of the previous year and in the memo of the total income prepared for income-tax purposes for the year in question the assessee had not admitted the interest accrued on transactions in respect of hire purchase, leasing, bill discounting, short-term loan etc., the Assessing Officer proposed to bring the accrued interest on those items to tax as income of the assessee relating to that assessment year. The assessee's explanation that treating interest accrued on those items as income was not justified because according to the classification suggested by the Reserve Bank, those assets were to be treated as non-performing assets, and as it was a non-banking financial company it was bound to follow the mandatory guidelines issued by the Reserve Bank of India regarding the classification of assets, recognition of income and norms for making provisions and that as per the guidelines issued by the Reserve Bank of India, the income pertaining to non-perfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of actual receipt. On appeal by the revenue: Held, dismissing the appeal, that the Tribunal had given a factual finding and its order was in conformity with law not warranting interference." 8. This decision was challenged by the Revenue before the Hon'ble Apex Court through SLP which now stands dismissed. We are in agreement with the ld.AR that this judgment of Hon'ble Madras High Court dated 4-6-2007 was available before the Assessing Officer when he passed his order on 31-12-2007. The Assessing Officer has decided this issue after detailed examination. On the other hand, the ld.DR has supported the order of the revision and has further submitted that there is no fallacy in the findings of the ld. CIT and the same have to be confirmed. 9. In the light of the above legal position as well as the arguments of the parties, we are of the considered opinion that when the decision of Hon'ble Madras High Court was available when the assessment order was passed and which supported the case of the assessee, there cannot be said to be any error which may be treated as crept into the assessment order. Hence, there being no case of co-existent of twin conditions mentioned above ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
