TMI Blog2023 (7) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO s sec.143(3) regular assessment as an erroneous one causing prejudice to interest of the Revenue - Decided in favour of assessee. - ITA. No. 413/PUN./2022 - - - Dated:- 15-5-2023 - SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI GD PADMAHSHALI, ACCOUNTANT MEMBER For the Assessee : Mr. Percy Pardiwalla Ms. Vasanti B. Patel For the Revenue : Shri B. Koteswara Rao ORDER PER SATBEER SINGH GODARA, J.M.: This assessee s appeal for assessment year 2017- 2018, arises against the PCIT, Pune-3, Pune s Din and Order No. ITBA/REV/F/REV5/2021-22/1042100179(1), dated 30.03.2022, involving proceedings u/s. 143(3) of the Income Tax Act, 1961 (in short the Act ). Heard both the parties. Case file perused. 2. The assessee pleads the following substantive ground in the instant appeal : 1. Ground I: Challenging the validity of revision proceedings under section 263 of the Act 1.1. The learned PCIT failed to appreciate that the assessment order passed by the Assistant Commissioner of Income Tax, Circle 8, Pune (hereinafter referred to as learned AO) under section 143(3) of the Act was neither erroneous nor prejudicial to the interest of the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein the Department has accepted that interest on NPA cannot be taxed basis the well-established principles of real income theory, even after introduction of ICDS IV. 2.6. Without prejudice to the above, if the interest on NPA is held to be taxable, the learned PCIT erred in not directing the learned AO to correspondingly allow deduction for the interest so taxed as bad debts under the proviso to section 36(1)(vii) in accordance with the amendments brought in light of ICDS-IV in the said provision. 3. Ground 3: Challenging re-verification of claim of deduction under section 36(1)(viii) 3.1. The learned PCIT erred in directing the learned AO to reverify the claim of deduction under section 36(1)(viii) in relation to long-term infrastructure finance without appreciating that the learned AO specifically inquired into such claim and sought the basis as well as computation for arriving at the amount of deduction under the said provision. 3.2. The learned PCIT ought to have appreciated that the learned AO enhanced the amount of deduction under section 36(1)(viii) in the original assessment order in light of the income assessed at a higher amount and hence, the question of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue to challenge the judgment of the Income Tax Appellate Tribunal ( the Tribunal for short) raising following questions for our consideration:- (i) Whether on the facts and circumstances of the case and in law, the Tribunal was correct in disregarding the judgment of the Hon'ble Supreme Court given in the case of Southern Technologies Ltd Vs. JCIT 320 ITR 577 (SC) which says that provisions of RBI Act cannot override the provision of Section 145 of the Income Tax Act, 1961, since both the Acts operate in different fields and therefore, assessee cannot recognize interest income on NPA and yet not offer it in Profit and Loss account? (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in deleting the disallowance of Rs.71,13,261/- made by AO u/s. 14A r/w Rule 8D after treating the disallowance of Rs.57,600/- offered by assessee as insufficient on the ground that the AO has not recorded the error in the offer of the assessee before invoking Rule 8D, without any such explicit requirement of law? 3. Question No. (i) arose in following background:- 3.1 Respondent assessee is a Non Banking Finance Company ( NBFC f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The assessee had credited only an amount of Rs.38,57,933/- as interest on loans. The Assessing Officer was of the view that the interest accrued on the entire loans should have been shown as income. The details as to how the interest income on accrual basis should have been disclosed are, therefore, referred to by the Tribunal. The Tribunal held that the said income was not realized. It held that the assessee follows the mercantile system of accounting. The Tribunal held that the loan advanced by the assessee which was in NBFC had become non-performing asset. That is how following judgments rendered by the Hon'ble Supreme Court and the Delhi High Court, the Tribunal has eventually held that once there is no dispute that the interest considered as accrued was a non-performing asset as per Reserve Bank of India guidelines, then, the income from this interest did not accrue to the assessee. It is in such circumstances, that this income in question was not and cannot be assessed on accrual basis. 9. We do not find that the Tribunal has either misdirected itself in law or its order can be termed as perverse warranting interference in our appellate jurisdiction. We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be, in the assessment year under consideration. Faced with this situation, we adopt judicial consistency to affirm the CIT(A) s detailed discussion relating to the impugned sole disallowance of accrued interest income on NPAs. Ordered accordingly. This Revenue s cross appeal ITA No.1722/PUN./2018 fails therefore. 6. Learned DR is fair enough in not disputing all the foregoing intervening developments. He has strongly supported the PCIT s above extracted revision directions on two counts i.e., the Assessing Officer had failed to carry-out detailed enquiries for the purpose of assessing the assessee s interest income on NPAs on accrual basis in light of the recently introduced Income Computation and Disclosure Standards [in short ICDS ] applicable from the impugned assessment year onwards. He quoted sec.263 Explanation-2 (a) and (b) inserted in the Act vide Finance Act 2015 w.e.f. 01.06.2015 that the Assessing Officer s impugned failure indeed attracts the prescribed authority(ies) exercise of sec.263 revision jurisdiction as are the facts in the instant case. He placed strong reliance on Malabar Industrial Co. Ltd. vs. CIT [2000] 243 ITR 83 (SC) and PCIT vs. Paville Projec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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