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2017 (1) TMI 255 - AT - Income TaxRevision u/s 263 - debit on account of education fund and debit on account of contingency fund - Held that - We find that the learned CIT has observed that apparently expenditure appeared to be capital in nature. On assessee s not furnishing the necessary evidence of the expenditure being revenue in nature learned CIT has remitted the matter to the file of the AO and directed the assessee to give his submissions and evidences before him. In our considered opinion on the facts and circumstances of the issue there is no infirmity in the direction of learned CIT in this regard. Hence we uphold the order of learned CIT for the above issue. Debit in respect to interest capitalized on NPA account - Held that - It is the assessee s submission that the assessee has written off this amount of interest debited to the account of parties by writing off the same in profit and loss account and giving credit of same to the account of debtors. It has been submitted that the aforesaid claim is clearly allowable u/s 36(1)(vii) of I.T. Act. Learned counsel has further submitted that the issue is squarely covered in favour of the assessee by the decision of Hon ble Apex Court in the case of CIT vs. TRF Ltd. 2010 (2) TMI 211 - SUPREME COURT for the proposition that writing of the debt in the profit and loss account and the books of account is sufficient for allowance of bad debt. We find ourselves principally in agreement with this proposition. However this aspect needs factual verification of the books and hence we remit this issue to the file of the AO to examine the issue Disallowance of provision on account of overdue interest - Held that - No addition is required for overdue interest on NPA. Learned CIT has clearly erred in directing that the same be brought to tax. In our considered opinion learned CIT was not justified in exercising his power of revision qua this issue. Firstly the issue is covered in favour of the assessee by the decision as above. Secondly even if there were two views possible the AO has adopted one of the views which cannot be said to be malafide or non acceptable. In such situation exercise of jurisdiction by the learned CIT is not valid. This is supported by the Hon ble Apex Court exposition in the case of CIT vs. Max India Ltd. 2007 (11) TMI 12 - Supreme Court of India for the proposition that when two views are possible and the AO has taken one view with which the CIT does not agree it cannot be treated as erroneous order prejudicial to the interest of Revenue unless the view taken by the ITO is unsustainable in law.
Issues Involved:
1. Legality of the order passed under section 263 of the I.T. Act, 1961. 2. Erroneous and prejudicial nature of the assessment order passed u/s 143(3) of the I.T. Act, 1961. 3. Setting aside of specific issues by the Pr. Commissioner of Income Tax-I for fresh decision by the A.O. 4. Direction to the A.O. to make an addition of ?89,26,118/- on account of interest on NPA in the profit and loss account. 5. Justification of the addition of ?89,26,118/- out of interest on NPA. Detailed Analysis: 1. Legality of the Order Passed Under Section 263 of the I.T. Act, 1961: The appellant contended that the order passed under section 263 was illegal, invalid, and bad in law. The Tribunal found that the delay of 296 days in filing the appeal was due to a mistake at the office of the counsel of the assessee, which was supported by an affidavit. The Tribunal condoned the delay, stating that the interest of justice demanded it. 2. Erroneous and Prejudicial Nature of the Assessment Order Passed u/s 143(3) of the I.T. Act, 1961: The Pr. Commissioner of Income Tax-I held that the assessment order was erroneous and prejudicial to the interests of revenue due to errors in the assessment of specific issues. The Tribunal noted that the A.O. had made complete inquiries regarding the expenditure claimed and accepted the same in the assessment framed u/s 143(3). The Tribunal referred to the Supreme Court decision in CIT vs. Max India Ltd., which stated that if the A.O. has taken a possible view, it cannot be termed erroneous and prejudicial to the interest of revenue. 3. Setting Aside of Specific Issues by the Pr. Commissioner of Income Tax-I for Fresh Decision by the A.O.: The Pr. Commissioner set aside the following issues for fresh decision by the A.O.: - ?10,000/- on account of education fund. - ?2,58,127/- on account of contingency fund. - ?26,14,907/- on account of overdue interest provision. The Tribunal upheld the Pr. Commissioner's direction to the A.O. regarding the education fund and contingency fund, stating that the assessee had not furnished necessary evidence. However, the Tribunal found that the issue of overdue interest provision was covered in favor of the assessee by previous ITAT decisions, and no addition was required for overdue interest on NPA. 4. Direction to the A.O. to Make an Addition of ?89,26,118/- on Account of Interest on NPA in the Profit and Loss Account: The Pr. Commissioner directed the A.O. to make an addition of ?89,26,118/-, stating that the interest debited was not allowable as an expenditure u/s 37(1) of the I.T. Act, 1961. The Tribunal found that the assessee's claim was allowable u/s 36(1)(vii) of the I.T. Act, as it represented bad debt written off in the profit and loss account. The Tribunal remitted the issue to the A.O. for factual verification in light of the Supreme Court decision in CIT vs. TRF Ltd. 5. Justification of the Addition of ?89,26,118/- Out of Interest on NPA: The Tribunal found that the Pr. Commissioner erred in directing the addition of ?89,26,118/- for overdue interest on NPA. The Tribunal noted that the issue was covered in favor of the assessee by previous ITAT decisions and that the A.O. had adopted a sustainable view. The Tribunal quashed the Pr. Commissioner's order regarding this issue, stating that the assumption of jurisdiction was invalid. Conclusion: The Tribunal partly allowed the appeal, upholding the Pr. Commissioner's direction regarding the education fund and contingency fund but quashing the direction regarding the addition of ?89,26,118/- for overdue interest on NPA. The Tribunal remitted the issue of interest capitalized on NPA to the A.O. for factual verification. The order was pronounced in the Open Court on December 28, 2016.
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