TMI Blog2017 (9) TMI 1765X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, the amendment which has been added w.e.f. 1.4.1889. However, it will not be out of place to mention here that the notice was issued on 11.3.2003. This explanation was not there at that time. In that view of the matter, we are not giving any comment whether the impugned jurisdictional judgment will apply or not and when the notice was issued, this explanation was not there. Assessing Officer has not only committed very serious error in issuing the notice on an overruled judgment but has also committed serious misconduct. Inasmuch as, in spite of the pointing out the judgment rendered by the Karnataka High Court came subsequently and has overruled the M.P. High Court judgment, the proceedings ought to have been closed. However, not only the Assessing Officer but the CIT(A) and the Tribunal have not taken into consideration this note. The issue under Section 147 based on an overruled judgment is required to be answered in favour of the assessee. Additions towards non-recoverable interest on NPA debts u/s 43D - Held that:- As relying on the decision of the Supreme Court in the case of T.R.F. Ltd. Vs. Commissioner of Income Tax reported in (2010 (2) TMI 211 - SUPREME COURT) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly that, the issue of Section 80P(2) which was covered by the judgment in the case of Madhya Pradesh Co-operative Bank Ltd. Vs. Addl. CIT 218 ITR 438(SC) but it has also covered under Section 43D, the expenses which are deducted and the account which was write off on a back date which was accepted, was also re-opened. 4. He contended that these issues were raised before the ITO that the judgment of M.P. High Court has now been overruled by the Supreme Court in the case of CIT Vs. Karnataka State Cooperative Bank reported in 251 ITR 194 (SC) dated 22.8.2001 on the date on which the notice was issued, and therefore, the notice was issued on an overruled judgment. In spite of that, the Assessing Officer has added income and reassessed against which the appeal was carried out and tribunal has confirmed the order. 5. Counsel for the appellant has relied on the judgment of this Court in the case of C.I.T. Bikaner Vs. Shri Ram Singh :: 2009(1) WLC 136 wherein it has been observed as under:- 27. If considered on that principle, leaving apart for the moment, the aspect of interpretation of the word and as or , the existence of the word also is of a great significance, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, that the income, with respect to which he had entertained reason to believe to have escaped assessment, was found to have been explained, his jurisdiction came to a stop at that, and he did not continue to possess jurisdiction, to put to tax, any other income, which subsequently came to his notice, in the course of the proceedings, which were found by him, to have escaped assessment. 6. He contended that the AO has seriously committed an error in issuing the notice under Section 147 of the Act. 7. He has relied on the decision of the Supreme Court in the case of UCO Bank Vs. Commissioner of Income Tax reported in (1999) 237 ITR 0889 wherein it has been held as under:- The method of accounting which is followed by the assessee-bank is mercantile system of accounting. However, the assessee considers income by way of interest pertaining to doubtful loans as not real income in the year in which it accrues, but only when it is realised. A mixed method of accounting is thus followed by the assessee-bank. This method of accounting adopted by the assessee is in accordance with accounting practice. In Spicer and Pegler's Practical Auditing the relevant passage o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferring the doubtful debts to a suspense account, credit the interest on such debts to that account provided the Income-tax Officer is satisfied that recovery is practically improbable. This circular was in force till 20th of June, 1978 when the Central Board of Direct Taxes issued a circular dated 20th of June, 1978 withdrawing with immediate effect the earlier circular of 6th of October, 1952. The reason for the withdrawal of the circular of 1952 is set out in the circular of 20th of June, 1978. The reason is stated thus: the Board has been advised that where accounts are kept on mercantile basis, interest thereon is taxable irrespective of whether the interest is credited to suspense account or to interest account. The Kerala High Court has also expressed the same view in the case of State Bank of Travancore v. Commissioner of Income-tax, Kerala [110 ITR 336]. The amount of such interest is, therefore, includible in the taxable income. The withdrawal of the circular of 6th of October, 1952 which had been in force for thirty six years was on account of the decision of the Kerala High Court in State Bank of Travancore v. Commissioner of Income-tax, Kerala ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular case in a particular manner; or (b) so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate functions . Under sub-section (2) of Section 119 , without prejudice to the generality of the Board's power set out in sub-section (1), a specific power is given to the Board for the purpose of proper and efficient management of the work of assessment and collection of revenue to issue from time to time general or special orders in respect of any class of incomes or class of cases setting forth directions or instructions, not being prejudicial to assessees, as the guidelines, principles or procedures to be followed in the work relating to assessment. Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under Section 119 of the Income-tax Act which are binding on the authorities in the administration of the Act. Under Section 119(2)(a) , however, the circulars as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y recovered. 8. He has also relied on the following judgments: 1. Commissioner of Income-tax Vs. Bangalore Distt. Cooperative Central Bank Ltd. :: (1998) 233 ITR 282 (SC) 2. Commissioner of Income Tax Vs. Karnataka State Cooperative Apex Bank: (2001) 251 ITR 194 (SC). 3. Mehsana District Central Co-operative Bank Ltd. Vs. Income-tax Officer, Gujarat State co-operative Bank Ltd. Vs. Commissioner of Income tax (2001) 251 ITR 0522 (SC). 4. Commissioner of Income Tax Vs. Punjab State Cooperative Bank Ltd. :: 304 ITR 0113 ( P H). 5. Commissioner of Income Tax Vs. Baroda Peoples Cooperative Bank Ltd. 280 ITR 0282. 6. Commissioner of Income tax Vs. Grain Merchants Cooperative Bank Ltd. :: 267 ITR 742 (Kar). 7. Bihar State cooperative Bank Ltd. Vs. CIT :: (1960) 39 ITR 114 (SC). 8. CIT V. Shri Ram Sahakari Bank Limited:: (2004) 266 ITR 632 (Kar.). 9. Income-tax Officer Vs. Karnataka Central Cooperative Bank Ltd. :: 266 ITR 635 (Kar.). 10. Bihar State Housing Cooperative Federation Ltd. Vs. Commissioner of Income tax :: (2009) 315 0286 (Pat.) 11. Commissioner of Income-tax Vs. Ramanathapuram Distt. Co-op. Central Bank Ltd. (2002) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or is credited to the Profit Loss account which ever is earlier. In the present case. However, the accrued interest of the past two years, on the advances which were not classified as NPA in those years, but has been classified as NPA during the year under consideration. It is that interest which accrued on advances in those past two years and was credited to the Profit Loss account in those years and this entryof accrued interest of earlier years has now been reversed during the year under consideration on the basis that those advances have become NPA during the year. Since the debts which have become bad and doubtful during the year on the interest so accrued during the year has not been a matter of controversy, in fact same has not been credited to Profit Loss account by the assessee and, therefore, same will be charged to tax in the year in which it is actually received. The controversy, as rightly observed by the ld. CIT(A) is that on these debts, which have now become doubtful during the year, the appellant in the past two years had already credited the interest in the Profit Loss account of those respective two years and it is during the year under consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has not only committed very serious error in issuing the notice on an overruled judgment but has also committed serious misconduct. Inasmuch as, in spite of the pointing out the judgment rendered by the Karnataka High Court came subsequently and has overruled the M.P. High Court judgment, the proceedings ought to have been closed. However, not only the Assessing Officer but the CIT(A) and the Tribunal have not taken into consideration this note. 17. In our considered opinion, the issue under Section 147 based on an overruled judgment is required to be answered in favour of the assessee. 18. On the other issue, counsel for the appellant has relied on the decision of the Supreme Court in the case of T.R.F. Ltd. Vs. Commissioner of Income Tax:: reported in (2010) 323 ITR 397 wherein it has been held as under:- This position in law is well-settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee.However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written ..... X X X X Extracts X X X X X X X X Extracts X X X X
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