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TMI Blog2016 (2) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... dger copies of hire purchase accounts, which the Assessing Officer could not verify the genuiness of the transaction. In the facts and circumstances of the case, we are of the opinion that under Rule 46A additional evidence was submitted before the Commissioner of Income Tax (Appeals) without providing an opportunity to the Assessing Officer to examine the issue and the next ground is connected to Hire purchase were the assessee company has not recognized additional finance charges on NPA and changed method of accounting from mercantile system to cash system. The ld. Authorised Representative explained the hardship and constrains of the company for recoveries, were majority of hire purchase transactions have defaulted and charging of additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on account of change in method of accounting from Mercantile basis to Cash basis. 3. The Brief facts of the case are that the assessee company is engaged in the business of Hire Purchase, leasing, factoring and real estate works. For the assessment year 2005-2006, the assessment u/s.143(3) of the Act was completed on 04.12.2007 determining total loss of ;17,73,71,490/- and subsequently under rectification u/s.154 of the Act dated 18.08.2008 the total loss was recomputed to ;19,39,20,047/- and assessee has filed an appeal aggrieved by the Assessing Officer order and partial relief was granted by Commissioner of Income Tax (Appeals) and subsequently, both assessee and department were in appeal before the Tribunal. The Tribunal vide orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss than earlier assessment year 2004-2005. On examining the Audited accounts and notes on accounts found additional financial charges on account of delayed or non remittance of installment dues pertaining to hire purchase and financial lease contracts are not recognized. The Assessing Officer issued notice and called for the explanations on disputed issue and the assessee filed written submissions and explained that due to change in method of accounting and also non-remittance of installments in earlier year, income is not recognized on accrual basis. Since the assessee has changed method of accounting from accrual system to cash system the ld. Assessing Officer without considering change in accounting system made an addition and completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also accounting policies in Annual report and found reduction in the finance charges compared to earlier years due to deep financial crisis owing to poor recoveries and interest, were the recoveries of principle component in majority of hire purchase transaction has become doubtful. In such circumstances, charging of additional finance charges on over due default payment of installment is not good business practice. The assessee company analyzed the various factors to change the accounting policy by not recognizing AFC on the overdue installment of recoveries and supported the case with Jurisdictional High Court decision in the case of CIT vs. Annamalai Finance Ltd (2010 (186 Taxman 296) (Mad) and ld. Commissioner of Income Tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the assessee company has not complied with the provisions of Sec.37 and 36(1)(vii) of the Act and also the assessee has not produced any evidence of written off in the books of accounts in the assessment proceedings. The assessee has submitted ledger accounts of parties and details of major hire purchase transactions in appellate proceedings. The ld. Commissioner of Income Tax (Appeals) has not called for any comments or remand report from the Assessing Officer and similarly on the next issue of charging additional finance charges not recognized by the assessee due to change in method of accounting from mercantile system to cash system. Further, the ld. Departmental Representative argued that the burden lies on the assessee to sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding an opportunity to the Assessing Officer to examine the issue and the next ground is connected to Hire purchase were the assessee company has not recognized additional finance charges on NPA and changed method of accounting from mercantile system to cash system. The ld. Authorised Representative explained the hardship and constrains of the company for recoveries, were majority of hire purchase transactions have defaulted and charging of additional finance charges on NPA will not be prudent practice for the company. The ld. Authorised Representative filed paper book and drew our attention to page no.17 were list of parties on which additional financial charges not recognized during the financial year 2004-2005. 8. We considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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