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TMI Blog2012 (3) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... le. 3. The appellant craves leave to add, or amend the grounds before the appeal is heard and disposed off. 2. At the outset, we find that none appeared on behalf of the assessee nor any request for adjournment was received. Considering the nature of issue, the Bench decided to dispose of the appeal after hearing the ld. DR 3. Adverting now to ground nos. 1 2 in the appeal, facts, in brief, as per relevant orders are that the return declaring loss of 3,39,70,055/- filed on 31.10.2006 by the assessee, a primary Co-operative Agriculture Rural Development Bank, after being processed on 29.12.2006 u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act), was selected for scrutiny with the service of a notice issued u/s 143(2) of the Act. Subsequently, the assessment was completed u/s 143(3) of the Act on returned loss, vide order dated 06.11.2008. Later, on perusal of assessment records, the Assessing Officer (A.O. in short) noticed that an amount of 2,28,72,642/- was shown as liability in the balance sheet under the head Suspense Interest . The AO was of the opinion that interest being revenue receipt should have been credited to profit and loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1984. It is, therefore, held by the apex Court that interest on sticky loans cannot be brought to tax. In view of the above, the addition made by the Assessing Officer is deleted and the grounds of appeal are allowed. 5. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR while referring us to circular No.491 (F.No.201/60/867-IT)A-II), dated 30.06.1987 issued by the CBDT supported the findings of the AO. She further contended that the assessee, following mercantile system of accounting was required to reflect interest income on accrual basis. 6. We have heard the ld. DR and gone through the facts of the case. Indisputably, the AO accepted the returned income while completing the assessment u/s 143(3) of the Act. Thereafter, in proceedings u/s 154 of the Act, the AO brought to tax the disputed amount of interest on sticky loans credited in suspense account while relying upon the decision in State Bank of Travancore Vs. CIT (1977) 110 ITR 336 (Ker), subsequently affirmed by the Hon ble Apex Court in their decision reported in State Bank of Travancore vs. CIT,158 ITR 102 (SC). On appeal, the ld.CIT(A) while following the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of the beneficent circulars of the CBDT. But the CIT invoked the revisionary power u/s 263 and included the said amount in the income of the assessee. Hon ble Apex Court concluded that the accounting policy of crediting interest on doubtful debts to suspense account and not recognising this as income before actual realisation conformed to the generally accepted accounting practice and since the issue arose before different AOs, exercising jurisdiction over various banks, the CBDT was within its powers u/s 119 of the Act to issue beneficent circular. While analysing various decisions and the impact of the beneficent circulars, the Hon ble Apex Court observed that in State Bank of Travancore s case(supra), the decision of the constitution Bench of the court in Navnit Lal C Jhaveri (supra) and KP Varghese(supra) as also CBDT circular dated 9 th October 1984 had not been brought to the notice of the Hon ble Apex Court. Their Lordships, while dealing with the case of UCO Bank, respectfully disagreed with the judgment in the case of Kerala Financial Corporation(supra) and observed as under: the question is not whether a circular can override or detract from the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accepted the returned income. In proceedings u/s 154 of the Act, AO brought to tax the interest on sticky loans credited in suspense account while relying upon the decision in State Bank of Travancore(supra) even when the said decision had been overruled by the Hon ble Apex Court in a later decision in UCO Bank(supra). The ld. DR appearing before us did not explain as to why the AO chose to follow a decision which had already been overruled. Though the ld. DR referred us to CBDT circular no. 491 dated 30.6.1987 in the context of change in method accounting by certain State Financial Corporations , as already observed by us ,she did not elaborate as to whether or not circular No 201/21 of 1984 ITA-II dated 9 th October 1984 relied upon in the decision in UCO Bank(supra),followed by the ld. CIT(A), had been withdrawn .In any case, we are of the opinion that these disputed issues in relation to accrual of interest on sticky advances or taxation thereof and whether or not decision in State Bank of Travancore(supra) or UCO Bank(supra) is applicable in the context of facts of the case under consideration, cannot be adjudicated in proceedings u/s 154 of the Act. The true scope of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sidhramappa Andannappa Manvi v. Commissioner of Income-tax. The power of the officers mentioned in section 154 of the Income-tax Act, 1961 to correct any mistake apparent from the record is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an error apparent on the face of the record. 6.4. Following the dictum laid down in T.S. Balaram, ITO's case [1971] 82 ITR 50 (SC) the Hon ble Calcutta High Court in Vijay Mallya v. Asstt. CIT [2003] 263 ITR 41 held as under: 'Section 154 can be invoked for rectification of a mistake apparent from the record. The mistake contemplated under section 154 must be a mistake apparent on the face of the records. It must be obvious, clear and patent. It must not be a mistake, to establish which a long and elaborate reasoning and arguments is required on points on which there may conceivably be two opinions. It must not be a debatable point of law. It must be a patent and apparent mistake in the assessment. It must not be a question with regard to which two different views may be possible or with regard to which two different opinions can be formed. It must be a glaring, obvious ..... X X X X Extracts X X X X X X X X Extracts X X X X
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