TMI Blog2014 (1) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... axed in the hands of the assessee, the interest for broken period paid by the assessee cannot be disallowed. A sound and convincing basis thus was given by the A.O. to justify the addition made on account of disallowance of broken period interest on protective basis - There was no error in the orders of the A.O. passed u/s 143(3) of the Act for both the years under consideration on this issue as alleged by the ld. CIT calling for any revision u/s 263 of the Act - orders of the CIT passed u/s 263 of the Act for assessment years 2008-09 and 2009-10 set aside and the matter restored to the AO passed u/s 143(3) of the Act – Decided in favour of Assessee. - ITA No.3834,3824/Mum/2012 - - - Dated:- 14-6-2013 - P M Jagtap and Amit Shukla, JJ. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of the assessee and the said addition was contested by the assessee. According to the ld. CIT, the broken period interest should have been added by the A.O. on substantive basis and not on protective basis and the order of the A.O. to this extent was erroneous as well as prejudicial to the interest of Revenue. Accordingly notice u/s 263 was issued by him requiring the assessee to show cause as to why the assessment made by the A.O. should not be revised by treating the protective addition of Rs. 909,59,38,265/- as substantive addition. In reply, the assessee, besides making detailed submission on the merit of the issue relating to allowability of broken period interest, raised some important arguments as under:- "(i) In v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue notwithstanding the other actions taken or contemplated. He held that the tool of protective assessment, however, could not be used to provide two alternative assessments within one assessment. He also held that for every protective addition made, there has to be a substantive addition. He therefore came to the conclusion that the addition on account of broken period interest ought to have been considered independently by the A.O. and there was a mistake in making such addition on protective basis. Accordingly the order of the A.O. in adding the amount of broken period interest on protective basis, was held to be erroneous and prejudicial to the interest of the Revenue by the ld. CIT and a direction was given by him to the A.O. to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed and added to the income of the assessee. However, in Para (4) of the order, the Interest accrued but not due to the extent of Rs. 3804,07,30,799/- (Para. 4.8 in specific) has been added. Once the accrued interest is brought to the tax, the broken period interest need not be allowed in view of decision of Hon ble Bombay High Court in the case of American Express Bank, the ratio of which has been confirmed by Hon ble Supreme Court in the case of Citi Bank. However, since the assessee has been contesting the addition made on account of interest accrued but not due, the broken period interest of Rs.2,150,1O,16,116/- is added to the income of assessee on protective basis". 5.9 In Para. 4.9 of the order, it was discussed that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oken period paid by the assessee cannot be disallowed. As noted by the A.O., the assessee, however, had offered income of Rs. 3032,40,24,979/- being interest accrued on due basis and addition of Rs. 3804,07,30,799/- on account of interest accrued but not due was contested by the assessee. The A.O. therefore considered the eventuality of assessee s plea of interest income to be taxed only on due basis being accepted and held that in such a situation, the addition would be required to be made to the income of the assessee on account of disallowance of broken period interest of Rs. 2,150,10,16,116/-. In order to protect the interest of the Revenue in case such a situation arises, he made the addition on account of broken period interest on pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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