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TMI Blog2017 (8) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... anking Financial Company (NBFC) under the Reserve Bank of India Act. Originally, the assessment in this case was completed under section 143 (3) of the Income Tax Act, 1961 ("the Act") at a loss of Rs. 5,12,714/- as against the returned loss of Rs. 28,55,795/-. The assessee preferred an appeal before the 1st appellate authority who vide order dated 11/01/2005 allowed the appeal of the assessee wherein an addition of Rs. 19,57,000/- on account of accrued interest on non-performing assets was challenged. Aggrieved, the Department filed an appeal before the Income Tax Appellate Tribunal which was dismissed by the Tribunal vide Order dated 1st May 2008 in ITA No. 1722/DEL/2005. Still aggrieved, the Department preferred an appeal before the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrues the time. In such cases, interest is charged and debited to the account of the borrower as "income" is recognised under accrual system. However, it is not so recognised under the 1998 directions and thereof, in the matter of its presentation under the said directions, there would be an added back but not under the IT Act necessarily. It is important to note that collective ability is different from accrual. Hence, in each case, the assessee has to prove, as has happened in this case with regard to the sum of Rs. 20,34,605/- that interest is not recognised or taken into account due to uncertainty in collection of the income. It is for the assessing officer to accept the claim of the assessee under the IT Act or not to accept in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court, notice under section 143 (2) of the act was issued to the assessee along with the questionnaire. In reply, the assessee reiterated its stand as had been taken in the original assessment proceedings. The main thrust of the assessee was that it was a nonbanking financial Corporation duly approved by the RBI. It was contended that RBI had issued guidelines as to the treatment of accrued interest on non-performing assets in the case of non-banking financial companies. It was further contended that the power to issue these norms, known as prudential norms, is derived by the RBI from the RBI Act but the RBI was not empowered to issue any directions which would be binding on the AO. It was further submitted before the AO that the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has approached the ITAT against the said order and has raised the following grounds of appeal - "1. That on the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) has erred in not considering the application u/r 46A filed by the counsel of the assessee during the course of appeal and confirming the additions made by the A.O. of Rs. 19,57,000/-. 2. That the Honorable High Court of Delhi vide its order dated 5/10/2010 had set aside the orders of the authorities below and remanded back the matter to the A.O. to verify the recoverability of the interest not accounted for/ written off by the appellant during the year under assessment. 3. That the appellant craves the right to ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial from the Commercial Tax Department relating to the turnover of the assessee. Before the CIT (Appeals), the assessee produced Sales Tax assessment order for the 1st time who refused to look into the same on the pretext of additional evidence. Holding the action of the CIT appeals to be unjustified, the court observed - "The appellate authority should have accepted the material produced by the assessee as clarificatory in nature and considered the same to test the fairness and propriety of the estimate of income made by the income tax officer. Though it was about belated production of very relevant material, no prejudice (in its legal sense) would have resulted to the revenue by considering the material produced by the assessee. In ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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