Appeal details
Counselvise Citation
[2011] 100 COUNSELVISE.COM (IT) 2674 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
10 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-03-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
17-03-2011
Assessment Year
2005-2006
Appeal Filed On
21-05-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER] I.T.A.NO.791/MDS/2010 ASSESSMENT YEAR : 2005-06 SHRIRAM INVESTMENTS LTD (SINCE AMALGAMATED WITH SHRIRAM TRANSPORT FINANCE CO. LTD) NO.123 ANGAPPA NAICKEN STREET CHENNAI 600 001 VS THE ADDL. CIT CHENNAI III CHENNAI - 34 [PAN AAECS4041G ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.D. GOPAL RESPONDENT BY : SHRI TAPAS KUMAR DUTTA O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE, FOR ASSESS MENT YEAR 2005-06, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT, CHENNAI- III, DATED 24.3.2010, PASSED U/S 263 OF THE INCOME-TAX ACT, 1961 (HEREINA FTER REFERRED TO AS 'THE ACT' FOR SHORT). 2. THE FACTS LEADING TO THIS APPEAL ARE THAT THE LD . CIT, CHENNAI- III, INVOKED THE PROVISIONS OF SECTION 263 OF THE A CT IN RESPECT OF ASSESSMENT ORDER DATED 31.12.2007 PASSED FOR THE AS SESSMENT YEAR 2005-06. A SHOW CAUSE NOTICE WAS ISSUED U/S 263 OF THE ACT DATED ITA 791/2010 :- 2 -: 2.3.2010 TO THE ASSESSEE. THE TEXT OF THE SHOW CAU SE NOTICE IS BEING EXTRACTED HEREIN BELOW FROM THE ORDER OF THE LD. CI T: ON A PERUSAL OF THE ASSESSMENT ORDER DT.31.12.07 P ASSED U/S 143(3) OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2005-06 AND THE RECORDS CONNECTED THERETO, IT IS SE EN THAT THE SAID ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJ UDICIAL TO THE INTERESTS OF REVENUE FOR THE FOLLOWING REASONS : THE REGULAR ASSESSMENT FOR THE A. Y. 2005-06 WAS COMPLETED U/S 143(3) ON 31.12.2007 DETERMINING A TO TAL INCOME OF ` 60,55,98,506/- IT IS OBSERVED THAT THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND ALSO THE PRUDENTIAL NORMS FOR INCOME RECOGNITION PRESCRIBED BY THE RESERVE BANK O F INDIA FOR NON-BANKING FINANCIAL COMPANIES. AS PER T HE R.B.I CIRCULAR NO.BFC(CVC)/93-94 DATED 13.6.94, INCOME F ROM NON PERFORMING ASSETS MAY NOT BE RECOGNIZED MERELY ON THE BASIS OF ACCRUAL AND THE POLICY OF INCOME RECOG NITION SHOULD BE BASED ON THE RECORD OF RECOVERY. FROM THI S IT IS CLEAR THAT THE ASSESSEE COMPANY HAD NOT RECOGNIZED INCOME ON NON PERFORMING ASSETS BOTH IN ITS STATUTO RY BOOKS OF ACCOUNT AND IN ITS INCOME TAX BOOKS OF ACC OUNT. IN THE LIGHT OF THE ABOVE/ THE ASSESSING OFFICER OU GHT TO HAVE EXAMINED WHETHER IN RESPECT OF ANY ITEM OTHER THAN ADDITIONAL FINANCE CHARGES! THE ASSESSEE HAD OMITTE D TO RECOGNIZE INCOME BY FOLLOWING THE RBI'S DIRECTIONS EVEN IN ITS STATUTORY BOOKS. IF SO, THE RELEVANT INCOME THU S NOT RECOGNISED WOULD HAVE TO BE BROUGHT TO ASSESSMENT, IN AS MUCH AS THE RBI'S DIRECTIONS ARE NOT BINDING ON THE INCOME TAX DEPARTMENT. IT IS SEEN FROM RECORDS THAT THE A.O HAD NOT EXAMINED THE ABOVE ASPECT OF THE CASE AT ALL. ISSUE NO.2 : IT IS FURTHER SEEN THAT THE ASSESSEE HAD DEDUCTED FROM THE TOTAL INCOME A SUM OF ` 183.16 LAKHS. THIS DEDUCTION WAS CLAIMED BY THE ASSESSEE REPORTED LY ON ACCOUNT OF A MISTAKE IN THE COMPUTATION OF TOTAL IN COME. AS PER THE JUDGEMENT OF THE SUPREME COURT IN THE CA SE OF M/S GOETZE INDIA LTD. VS. CIT (284 ITR 323), ANY CL AIM FOR RELIEF/DEDUCTION HAS TO BE MADE ONLY BY FILING A RE VISED RETURN OF INCOME. AS IN THIS CASE, NO REVISED RETUR N OF INCOME HAS BEEN FILED, THE ASSESSEE'S CLAIM FOR DED UCTION OF ` 183.16 LAKHS IS NOT ADMISSIBLE. ITA 791/2010 :- 3 -: IT IS SEEN THAT WHILE COMPLETING THE ASSESSMENT THE A. O. HAD NOT TAKEN INTO ACCOUNT THE RATIO OF THE J UDGEMENT OF THE APEX COURT REFERRED TO ABOVE. INSTEAD THE DE DUCTION OF ` 183.16 LAKHS IN COMPUTING THE TOTAL INCOME WAS FULL Y ALLOWED. THE ABOVE ISSUES HAVE RENDERED THE ASSESSMENT ORDER DATED 31.12.2007 ERRONEOUS AND ALSO SIMULTANE OUSLY PREJUDICIAL TO THE INTERESTS OF REVENUE. YOU ARE TH EREFORE REQUESTED TO SHOW CAUSE WHY THE SAID ASSESSMENT SH OULD NOT BE REVISED U/S 263 OF THE INCOME TAX ACT, 1961 ON THE ISSUES UNDER CONSIDERATION. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS EXPLA INED BY THE ASSESSEE THAT ON BOTH THE ISSUES, THE ASSESSING OFF ICER HAS MADE DETAILED ENQUIRIES/INVESTIGATIONS AND THERE IS NO L OSS TO THE REVENUE BECAUSE THE CLAIM OF DEDUCTION MADE ARE ACCORDING T O LAW, THEREFORE, REQUESTED TO DROP THE PROCEEDINGS U/S 263 SO MADE. ON MERITS, IT WAS ARGUED REGARDING THE FIRST ISSUE THAT IN EARLIER YE AR SIMILAR ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE LD. CIT(A) IN FA VOUR OF THE ASSESSEE. REGARDING THE SECOND ISSUE, THE CASE OF THE ASSESSEE IS THAT THE INCOME FROM SECURITIZATION HAD BEEN WRONGLY OFF ERED TO TAX IN THE YEAR UNDER CONSIDERATION. ON THE ADVICE OF THE STA TUTORY AUDITORS, THE SAID INCOME WAS SPREAD OVER TO VARIOUS ASSESSMENT Y EARS WHICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER. IT WAS STA TED THAT THIS IS NOT AN ISSUE RELATING TO REVISION OF RETURN BY THE ASS ESSEE. IT WAS STATED THAT THE RATIO OF THE DECISION OF HON'BLE SUPREME C OURT RENDERED IN THE CASE OF M/S GOETZE INDIA LTD , 284 ITR 323, WILL NO T APPLY TO THE FACTS ITA 791/2010 :- 4 -: OF THIS CASE BECAUSE THIS IS A CASE IN WHICH LETTER S HAVE BEEN SUBMITTED ALONGWITH DETAILS OF CORRECT TAXABLE INCOME FROM SE CURITIZATION TRANSACTIONS WHICH HAS BEEN ACCEPTED BY THE ASSESSI NG OFFICER. WITH THESE SUBMISSIONS, IT WAS REQUESTED THAT PROCEEDING S INITIATED U/S 263 IN ASSESSEES CASE SHOULD BE DROPPED BEING NOT LEGA LLY VALID. THE LD. CIT HEARD THE ARGUMENTS AS ADVANCED FROM BOTH SIDES AND HAS SET ASIDE THE ASSESSMENT ON THE FOLLOWING ISSUES: (I) VERIFICATION TO BE MADE REGARDING THE EXTENT OF INCOME ARISING TO THE ASSESSEE IN RESPECT OF NPAS; AND (II) CLAIM FOR DEDUCTION OF ` 1,83,16,468/- ON ACCOUNT OF SECURITIZATION INCOME MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALLOWED BY THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE G IVEN OUR ANXIOUS THOUGHT TO THE ISSUE OF REVISION ON THE BAS IS OF THE MISTAKES IN THE ASSESSMENT ORDER AS POINTED OUT BY THE LD. CIT. IT IS TRITE THAT AN ORDER CAN BE REVISED ONLY AND ONLY IF TWIN CONDITIO NS OF ERROR IN THE ORDER AND PREJUDICE CAUSED TO THE REVENUE CO-EXI ST. 5. THE SUBJECT OF REVISION UNDER SECTION 263 HAS BEE N VASTLY EXAMINED AND ANALYSED BY VARIOUS COURTS INCLUDING T HAT OF HONBLE APEX COURT. THE REVISIONAL POWER CONFERRED ON THE CIT VIDE SECTION 263 IS OF VIDE AMPLITUDE. IT ENABLES THE CIT TO CA LL FOR AND EXAMINE ITA 791/2010 :- 5 -: THE RECORDS OF ANY PROCEEDING UNDER THE ACT. IT EM POWERS THE CIT TO MAKE OR CAUSE TO BE MADE SUCH AN ENQUIRY AS HE DEEM S NECESSARY IN ORDER TO FIND OUT IF ANY ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE ONLY LIMITATION ON HIS POWERS IS THAT HE MUST HAVE SOME MATERIAL(S) WHICH WOULD ENABLE HIM TO FORM A PRIMA FACIE OPINION THAT THE ORDER PASSED BY THE OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJ UDICIAL TO THE INTEREST OF THE REVENUE. ONCE HE COMES TO THE ABOVE CONCLUSION S ON THE BASIS OF THE MATERIAL THAT THE ORDER OF THE ASSESSING OFFI CER IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE, T HE CIT IS EMPOWERED TO PASS AN ORDER AS THE CIRCUMSTANCES OF THE CASE M AY WARRANT. HE MAY PASS AN ORDER ENHANCING THE ASSESSMENT OR HE MA Y MODIFY THE ASSESSMENT. HE IS ALSO EMPOWERED TO CANCEL THE ASS ESSMENT AND DIRECT TO FRAME A FRESH ASSESSMENT. HE IS EMPOWERE D TO TAKE RECOURSE TO ANY OF THE THREE COURSES INDICATED IN SECTION 26 3. SO, IT IS CLEAR THAT THE CIT DOES NOT HAVE UNFETTERED AND UNCHEQURED DIS CRETION TO REVISE AN ORDER. THE CIT IS REQUIRED TO EXERCISE REVISION AL POWER WITHIN THE BOUNDS OF THE LAW AND HAS TO SATISFY THE NEED OF FA IRNESS IN ADMINISTRATIVE ACTION AND FAIR PLAY WITH DUE RESPEC T TO THE PRINCIPLE OF AUDI ALTERAM PARTEM AS ENVISAGED IN THE CONSTITUTIO N OF INDIA AS WELL IN SECTION 263. AS ORDER CAN BE TREATED AS ERRONE OUS IF IT WAS PASSED ITA 791/2010 :- 6 -: IN UTTER IGNORANCE OR IN VIOLATION OF ANY LAW; OR P ASSED WITHOUT TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS OR BY TAK ING INTO CONSIDERATION IRRELEVANT FACTS. THE PREJUDICE THAT IT CONTEMPL ATED UNDER SECTION 263 IS THE PREJUDICE TO THE INCOME TAX ADMINISTRATION A S A WHOLE. THE REVISION HAS TO BE DONE FOR THE PURPOSE OF SETTING RIGHT DISTORTIONS AND PREJUDICES CAUSED TO THE REVENUE IN THE ABOVE CONTE XT. THE FUNDAMENTAL PRINCIPLES WHICH EMERGE FROM THE SEVERA L CASES REGARDING THE POWERS OF THE CIT UNDER SECTION 263 MAY BE SUMM ARIZED BELOW: (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. BOTH THE CONDITIONS MUS T BE FULFILLED. (II) SECTION 263 CANNOT BE INVOKED TO CORRECT EAC H AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS, THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORR ECT APPLICATION OF LAW WILL SUFFICE FOR THE REQUIREME NT OR ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORD ER. ITA 791/2010 :- 7 -: (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE ASSESSING OF FICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LA W OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW UNDER WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOU S ORDER, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFIC ER IS UNSUSTAINABLE UNDER THE LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE ASSE SSING OFFICER EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME, THE CIT, WHILE EXERCISING HI S POWER UNDER SECTION 263, IS NOT PERMITTED TO SUBSTI TUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIM ATED BY THE ASSESSING OFFICER. (VII) THE ASSESSING OFFICER EXERCISE QUASI-JUDICIA L POWER VESTED IN HIM AND IF HE EXERCISE SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVES AS A CONCLUSION, SU CH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER SECTION 263, MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. ITA 791/2010 :- 8 -: (IX) IF THE ASSESSING OFFICER HAS MADE ENQU IRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANAT ION BE A LETTER IN WRITING AND THE ASSESSING OFFICER AL LOWED THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION O F THE ASSESSEE, THE DECISION OF THE ASSESSING OFFICER CAN NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGAR D. 6. ADVERTING TO THE FACTS OF THE CASE, THE FIRST IS SUE IS REGARDING NON PERFORMING ASSETS(NPAS). THE CASE OF THE ASSES SEE AS PUT THROUGH ITS LD.AR IS THAT THE LD. CIT HAS ERRED IN HOLDING THAT AS A VERIFICATION IS REQUIRED TO BE MADE IN CONNECTION W ITH THE EXTENT OF INCOME ARISING TO THE ASSESSEE ON NPAS, THE ASSESSI NG OFFICER HAS BEEN DIRECTED TO GIVE FRESH OPPORTUNITY TO THE ASSE SSEE AND EXAMINE THE ISSUE IN THE LIGHT OF THE JUDICIAL PRONOUNCEME NTS AND MAKE A FRESH ASSESSMENT . IT WAS ARGUED THAT THIS ISSUE HAS BEE N EXAMINED AND VERIFIED BY THE ASSESSING OFFICER AND THAT NO INCOM E CAN ARISE OUT OF NPAS. REGARDING THE SECOND ISSUE PERTAINING TO CLA IM OF DEDUCTION OF ` 1,83,16,468/- ALLOWED BY THE ASSESSING OFFICER, IT WAS ARGUED THAT THE ASSESSING OFFICER WAS NOT RIGHT IN ALLOWING THE ASSESSEES CLAIM OF THIS AMOUNT ON ACCOUNT OF REDUCTION IN SECURITIZATI ON FROM THE RETURNED INCOME AND RELIANCE HAS BEEN PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF M/S GOETZE IND IA LTD (SUPRA). ITA 791/2010 :- 9 -: 7. AFTER HEARING BOTH SIDES, WE ARE CONVINCED THAT THE CASE OF REVISION HAS NOT BEEN MADE OUT IN THIS CASE BECAUSE THE ASSESSING OFFICER HAS VERILY EXAMINED BOTH THESE TWO ISSUES. IN RESPECT OF THE ISSUE REGARDING ACCRUAL OF INCOME OF NON-BANKING FI NANCE COMPANY, IN SO FAR AS INTEREST ON NPAS IS CONCERNED, IT HAS TO BE CONSIDERED ONLY AFTER RECOGNIZING INCOME FROM SUCH ASSETS. INTERE ST COMPUTED AS TAXABLE INCOME HAS TO BE DELETED AS HELD BY THE HON 'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS ELGI FINANCE LTD, 293 ITR 357 (MAD). A COPY OF THIS DECISION HAS BEEN PLACED FOR OUR PERUS AL. IN THIS CASE IT HAS BEEN HELD AS UNDER: THE ASSESSEE-COMPANY WAS ENGAGED IN THE BUSINESS O F LEASING, FINANCE AND HIRE PURCHASE. ON THE GROUND T HAT IN' THE PROFIT AND LOSS ACCOUNT OF THE PREVIOUS YEAR AN D IN THE MEMO OF THE TOTAL INCOME PREPARED FOR INCOME-TAX PURPOSES FOR THE YEAR IN QUESTION THE ASSESSEE HAD NOT ADMITTED THE INTEREST ACCRUED ON TRANSACTIONS IN RE SPECT OF HIRE PURCHASE, LEASING, BILL DISCOUNTING, SHORT-TER M LOAN ETC., THE ASSESSING OFFICER PROPOSED TO BRING THE A CCRUED INTEREST ON THOSE ITEMS TO TAX AS INCOME OF THE ASS ESSEE RELATING TO THAT ASSESSMENT YEAR. THE ASSESSEE'S EXPLANATION THAT TREATING INTEREST ACCRUED ON THOSE ITEMS AS INCOME WAS NOT JUSTIFIED BECAUSE ACCORDING TO THE CLASSIFICATION SUGGESTED BY THE RESERVE BANK, THOSE ASSETS WERE TO BE TREATED AS NON-PERFORMING ASSETS, AND AS IT WAS A NON-BANKING FINANCIAL COMPANY IT WAS BOUND TO FOL LOW THE MANDATORY GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA REGARDING THE CLASSIFICATION OF ASSETS, RECOGNITION OF INCOME AND NORMS FOR MAKING PROVISIONS AND THAT AS PER THE GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA, THE INCOME PERTAINING TO NON-PERFORMING ASSETS WAS NOT TO BE C ON- SIDERED AS INCOME, WAS NOT ACCEPTED BY THE ASSESSIN G OFFICER. THE ASSESSING OFFICER FOUND THAT THE ASSES SEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND ITA 791/2010 :- 10 - : THEREFORE, BOTH THE INCOME AS WELL AS THE EXPENDIT URE SHOULD BE ACCOUNTED ON ACCRUAL BASIS. FURTHER THE ASSESSING OFFICER WAS OF THE OPINION THAT THE GUIDE LINES ISSUED BY THE RESERVE BANK OF INDIA WERE FOR THE PU RPOSE OF FINANCIAL DISCIPLINE AND INVESTOR PROTECTION AND NOT FOR ANY CHANGE TO BE BROUGHT IN THE METHOD OF ACCOUNTIN G. FINALLY, THE ASSESSING OFFICER REJECTED THE CONTENT ION AND COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF TH E ACT AND DETERMINED THE TOTAL INCOME AT ` 2,78,83,950. T HE APPEAL FILED BY THE ASSESSEE WAS DISMISSED BY THE COMMISSIONER (APPEALS) CONFIRMING THE ORDER OF THE 4SSESSING OFFICER. ON FURTHER APPEAL BY THE ASSESSE E THE TRIBUNAL CONSIDERED THAT IN THE CASE OF NON-PERFORM ING ASSETS IN THE LIGHT OF THE NOTIFICATION ISSUED BY T HE RESERVE BANK ON CLASSIFICATION OF ASSETS AND ACCOUNTING STA NDARD 9 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (LCAL) IN THE MATTER OF RECOGNISING INCOME AND ALSO IN THE LIGHT OF THE VARIOUS CIRCULARS ISSUED BY THE CENTRA L BOARD OF DIRECT TAXES, THE QUESTION OF ACCRUAL COULD BE CONS IDERED ONLY AFTER RECOGNISING INCOME FROM SUCH ASSETS. IF NO INCOME WAS RECOGNISED AT ALL FROM SUCH ASSETS, THER E WAS NO QUESTION OF APPLYING THE PRINCIPLE OF ACCRUAL. T HE PRINCIPLE OF ACCRUAL COMES INTO PLAY WHEN INCOME W AS RECOGNISED. IN THE PRESENT CASE, THE ASSESSEE HAD CLASSIFIED ITS ASSETS ON THE BASIS OF THE NOTIFICAT ION ISSUED BY THE RBI AND FOUND THAT CERTAIN ASSETS CAME UNDER THE CATEGORY OF NON-PERFORMING ASSETS. FROM SUCH NON- PERFORMING ASSETS, THE ASSESSEE HAD NOT RECOGNISED ANY INCOME IN CONSONANCE WITH THE NOTIFICATION ISSUED B Y THE RBI AND AS 9 ISSUED BY THE ICAL. THEREFORE, THE ASS ESSEE WAS JUSTIFIED IN NOT RECOGNISING THE INCOME AS SUCH . ONCE THAT WAS THE CASE, THERE WAS NO OCCASION TO CONSIDE R WHETHER THE PRINCIPLE OF ACCRUAL WOULD ARISE OR NO T. IN VIEW OF THE MATTER, THE TRIBUNAL WAS OF THE VIEW THAT TH E LOWER AUTHORITIES HAD ERRED IN TREATING THE INTEREST ON N ON- PERFORMING ASSETS AS INCOME OF THE ASSESSEE AND DIR ECTED THE ASSESSING OFFICER TO DELETE THE SAID INTEREST FROM THE COMPUTATION OF TAXABLE INCOME. THE INTEREST FROM SU CH NON-PERFORMING ASSETS WOULD BE TAXED IN THE APPROP RIATE ASSESSMENT YEARS ON THE BASIS OF ACTUAL RECEIPT. O N APPEAL BY THE REVENUE: ITA 791/2010 :- 11 - : HELD, DISMISSING THE APPEAL, THAT THE TRIBUNAL HAD GIVEN A FACTUAL FINDING AND ITS ORDER WAS IN CONFORMITY WIT H LAW NOT WARRANTING INTERFERENCE. 8. THIS DECISION WAS CHALLENGED BY THE REVENUE BEFO RE THE HON'BLE APEX COURT THROUGH SLP WHICH NOW STANDS DIS MISSED. WE ARE IN AGREEMENT WITH THE LD.AR THAT THIS JUDGMENT OF H ON'BLE MADRAS HIGH COURT DATED 4.6.2007 WAS AVAILABLE BEFORE THE ASS ESSING OFFICER WHEN HE PASSED HIS ORDER ON 31.12.2007. THE ASSESS ING OFFICER HAS DECIDED THIS ISSUE AFTER DETAILED EXAMINATION. ON THE OTHER HAND, THE LD.DR HAS SUPPORTED THE ORDER OF THE REVISION AND H AS FURTHER SUBMITTED THAT THERE IS NO FALLACY IN THE FINDINGS OF THE LD. CIT AND THE SAME HAVE TO BE CONFIRMED. 9. IN THE LIGHT OF THE ABOVE LEGAL POSITION AS WELL AS THE ARGUMENTS OF THE PARTIES, WE ARE OF THE CONSIDERED OPINION TH AT WHEN THE DECISION OF HON'BLE MADRAS HIGH COURT WAS AVAILABLE WHEN THE ASSESSMENT ORDER WAS PASSED AND WHICH SUPPORTED THE CASE OF TH E ASSESSEE, THERE CANNOT BE SAID TO BE ANY ERROR WHICH MAY BE TREATED AS CREPT INTO THE ASSESSMENT ORDER. HENCE, THERE BEING NO CASE OF CO -EXISTENT OF TWIN CONDITIONS MENTIONED ABOVE AND VERIFICATION HAVING BEEN MADE BY THE ASSESSING OFFICER IN THE SUBJECT MATTER OF THIS ISS UE, THE ORDER CANNOT BE REVISED U/S 263 OF THE ACT. THEREFORE, THE DIRE CTION GIVEN BY THE LD. CIT TO VERIFY THE EXTENT OF INCOME ARISING TO THE A SSESSEE IN RESPECT OF ITA 791/2010 :- 12 - : NPAS DOES NOT HAVE LEGS TO STAND. WE DO NOT APPROV E THIS FINDING OF THE LD. CIT AND SET ASIDE THE SAME BY SIMULTANEOUSL Y REVISING THE ORDER OF THE ASSESSING OFFICER PASSED IN THIS REGARD. 10. REGARDING THE SECOND ISSUE RELATING TO CLAIM OF DED UCTION OF ` 1,83,16,468/- FOR DEDUCTION IN SECURITIZATION INCOM E FROM THE RETURNED INCOME IN VIEW OF THE FACT THAT THE ASSESSEE DID NO T FILE A REVISED RETURN, IN OUR CONSIDERED OPINION, THE CASE OF M/S GOETZE INDIA LTD VS CIT (SUPRA) AS MENTIONED IN THE GROUNDS, IS NOT APP LICABLE ON THE FACTS OF THE ASSESSEES CASE. IT IS THE DUTY OF THE ASS ESSING OFFICER AS PER THE ACT TO ASSESS THE CORRECT INCOME FROM THE GIVEN TRANSACTION. THE ABOVE DECISION CANNOT ADVISE THE ASSESSING OFFICER TO DEVIATE FROM HIS DUTY OF TAXING A CORRECT INCOME. THE ASSESSING OFF ICER HAS CONSIDERED THE DECISION IN THE CASE OF M/S GOETZE INDIA LTD VS CIT(SUPRA) AND HIS DUTY IS TO ASSESS THE CORRECT INCOME. HE HAS COME TO THE CONCLUSION THAT IN THE ASSESSEES CASE, THERE IS NO NEW ITEM O F INCOME OR EXPENDITURE AND CORRECT COMPUTATION OF INCOME FROM THE SET OF TRANSACTION CAN BE DONE IN TWO WAYS, AGAIN, WHEN T WO VIEWS ARE POSSIBLE ON A SUBJECT AND THE ASSESSING OFFICER HAS ADOPTED ONE OF THE VIEWS AND AFTER DELIBERATING ON THE FACTS, THE LD. CIT CANNOT IMPOSE HIS VIEWS AND DIRECT ACTION U/S 263 OF THE ACT. WE, THEREFORE, QUASH THE ITA 791/2010 :- 13 - : REVISIONAL ORDER PASSED BY THE LD. CIT AND RESTORE THE ASSESSMENT ORDER. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS A LLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30.3.2011. SD/- SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 30 TH MARCH, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR
