The Tax PublishersITA Nos. 775/Ahd/2016 & 1000/Ahd/2018
2021 TaxPub(DT) 0870 (Ahd-Trib)INCOME TAX ACT, 1961
Section 263
AO had made specific inquires with respect to the issue of accrual of interest income in pursuance of order of the Civil Court and assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Assessee had categorically explained that as a result of decree order, it had recognized interest income at Rs. 2,40,86,760 on the decretal amount for the period from the date of suit till 31-3-2009. But, in spite of having court decree it had not received anything toward the principal or interest from Mukut Pipes Ltd. and there was no certainty of receiving the same and as there was uncertainty of realization of income, therefore, same was not recognized in the books of account because only real income could be brought to tax and no notional income could be added. Therefore, Pr. CIT was not justified in holding that AO had not made specific enquiries with regard to interest income. Accordingly, order passed under section 263 was set aside.
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Revision under section 263 - Erroneous and prejudicial order - No lack of enquiry on AO's part -
Pr. CIT on verification of the case records, 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 30-4-2007 had dismissed Civil Suit filed by Mukut Pipes Ltd. against the company and passed decree order for had dismissed Civil Suit filed by 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 31-3-2009 however the company had not charged interest on decretal amount from financial year 2009-10 (assessment year 2010-11) and onwards. Accordingly, Pr. CIT treated order passed by AO as erroneous and prejudicial to the interest of revenue on the ground that AO had not made detailed and specific inquiries with regard to interest income not offered to tax. Held: After perusal of material on record and copies of letter issued by AO and relied by assessee during the course of assessment proceedings under section 143(3), it was evident that AO had made specific inquires with respect to the issue of accrual of interest income in pursuance of order of the Civil Court and assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Assessee had categorically explained that as a result of decree order it had recognized interest income at Rs. 2,40,86,760 on the decretal amount for the period from the date of suit till 31-3-2009. But, in spite of having court decree it had not received anything toward the principal or interest from Mukut Pipes Ltd. and there was no certainty of receiving the same and as there was uncertainty of realization of income, therefore, same was not recognized in the books of account because only real income could be brought to tax and no notional income could be added. Therefore, Pr. CIT was not justified in holding that AO had not made specific enquiries with regard to interest income. Accordingly, order passed under section 263 was set aside.
Distinguished:Malabar IndustricaL Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxPub(DT) 1227 (SC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2011-12
IN THE ITAT, AHMEDABAD BENCH
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