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TMI Blog2021 (2) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoking provisions of section 263 of the Income Tax Act, 1961 though original assessment was carried out after carrying out thorough scrutiny. 4. The fact in brief is that return of income of Rs. 8,83,700/- was filed on 29th Sep, 2011. The case was subject to scrutiny and assessment u/s. 143(3) of the Act was finalized on 13 Feb, 2014 accepting the return of income of Rs. 8,83,700/-. Subsequently, on verification of case record, the Pr. CIT Central Ahmedabad noticed that as per point no. 4 of Schedule 20 (notes forming part of accounts) of auditor's report, City Civil Court Ahmedabad vide its order 13th April, 2007 had dismissed the Civil Suit filed by M/s. Mukut Pipes Ltd. against the company and passed decree order for Rs. 4,53,64,640/- with 12% interest. The assessee company according to the terms of decree had recognized interest of Rs. 2,40,86,640/- on the decretal amount for the period from date of suit till 31st March, 2009, however, the company has not shown any interest on decretal amount from F.Y. 2009-10 and onward. It was also observed that neither the assessee had shown interest income @ 12% on Rs. 4,53,64,640/- in the computation income nor the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the ld. Pr. CIT observed that Assessing Officer has not made detailed and specific inquiries with respect to interest income not offered to tax in the light of the finding of the City Civil Court Ahmedabad. After placing reliance on the decision of Malabar Industrial Co. Ltd. vs. CIT (SC) 243 ITR 83, the ld. CIT central held that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of revenue and directed the Assessing Officer to make fresh assessment. ITA No. 1000/Ahd/2018 5. The solitary ground of appeal of the assessee is filed against the decision of ld. CIT(A) in confirming the addition of Rs. 54,45,757/- made by the Assessing Officer in respect of so called accrued interest on decree amount for the reason that the assessee was following mercantile system of accounting. 6. During the course of assessment u/s. 143(3) r.w.s. 263 of the Act, the Assessing Officer has asked the assessee for not showing interest income accrued in the return of income for F.Y. 2009-10 pertaining to assessment year 2010-11 as per the decree order passed in favour of the assessee. The assessee replied that it has recognized interest income of Rs. 2,40,86,760/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) of the Act on 13.02.2014 accepting the return income of Rs. 8,83,700/-. Subsequently, on verification of the case records, the ld. Pr. CIT noticed that as per point no. 4 of schedule 20 (Notes forming part of the Account) of Auditor Report, City Civil Court, Ahmedabad vide order dated 30-04-2007 has dismissed Civil Suit filed by M/s. Mukut Pipes Ltd. against the company and passed decree order for Rs. 4,53,64,640/- with 12% interest. The assessee company, in terms of decree recognized interest of Rs. 2,40,86,640/- on the decretal amount for the period from date of suit till 31.03.2009 however the company has not charged interest on decretal amount from F.Y. 2009-10 (A.Y. 2010-11) and onwards. In response to notice u/s. 263, the assessee has explained vide letter dated 13.01.2015 that in spite of the order of the court it has not received anything from Mukut Pipes Ltd. i.e. Rs. 4,53,64,640/- as well as interest thereof Rs. 2,40,86,760/-. It is also explained that the Assessing Officer had passed order u/s. 143(3) of the Act after considering details and evidences filed by the assessee and the issue taken by the Pr. CIT were enquired and adjudicated by the A.O. The ld. Pr. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uditor has mentioned/in amount of Rs. 6,94,51,399/- due from Mukut Pipes Ltd. is considered good and recoverable by the management and an amount of Rs. 2,67,66,831/- due from Karnataka Power Corporation Ltd. is also considered recoverable by the management. Accordingly, you have asked us to explain why interest has not been charged on the aforesaid amount. In this regard, we would like to clarify that as a result of Civil Suit filed by us against Mukut Pipes Ltd., the court has passed decree order for Rs. 4,53,64,640/- with 12% interest and accordingly we recognized interest income at Rs. 2,40,86,760/- on decretal amount for the period from the date of suit till 31.03.2009. It is submitted that inspite of having Court decree, we have not received anything towards the principal or interest from Mukut Pipes Ltd. and there is no certainty of receiving the same, and therefore, the question of charging interest thereon does not arise. Similarly, amount of Rs. 2,67,66,831/- due from Karnataka Power Corporation Ltd., it is submitted that the same is on account of encashment of bank guarantee given by the company to Karnataka Power Corporation Ltd. The company has filed a suit in the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of judicial pronouncements mentioned in para 3 of its submission pointing out that there was uncertainty of realization of income therefore same was not recognized in the books of accounts. It is also submitted on this issue before the Assessing Officer that only real income can be brought to tax and no notional income can be added. The ld. counsel has also placed reliance on the case of CIT vs. Reliance Communication Ltd. (2016) 76 taxmann.com 226 (SC) wherein the Hon'ble Supreme Court sustained the finding of the Tribunal that Assessing Officer has made detailed enquiries and mere fact that he did not make any reference to said issue in assessment order, could not make said order erroneous and prejudicial to interest of revenue. Reliance was also placed in the case of CIT vs. Arvind Jewellers (2002) 124 taxman 615 (Guj) wherein Hon'ble High Court of Gujarat held that since material was there on record and said material was considered by ITO and a particular view was taken mere fact that different view could be taken, should not have been basis for an action under section 263 of the Act. After perusal of the material on record and copies of letter issued by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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