Dy.CIT, Cir.-8, Pune, Pune V. Alfa Laval Financial Services Ltd., Pune

ITA 138/PUN/2006

• Counselvise Citation: 13824514 RSA 2006
• Duration Of Justice: 5 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-08-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 03-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEERA PATHAK
• Keywords: Opportunity of being heard; Deemed to accrue or arise in india; Bad and doubtful debts
• Section: 143(3); 115JB; 37(1); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 138/PN/06 (ASSTT. YEAR: 2001-02) DY. COMMISSIONER OF I.T, .. APPELLANT CIR. 8, PUNE VS. ALFA LAVAL FINANCIAL SERVICES LTD., .. R ESPONDENT /O ALFA LAVAL PREMISES, MUMBAI PUNE ROAD, DAPODI, PUNE APPELLANT BY: SMT NEERA PATHAK RESPONDENT BY: SHRI NIKHIL PATHAK ORDER PER G.S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, PUNE DATED 20 .10.2005,WHICH IN TURN HAS ARISEN FROM THE ORDER OF THE ASSESSING OFFICER DATED 27.2.2004 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT TH E ACT), PERTAINING TO THE ASSESSMENT YEAR 2001-02. 2. IN THIS APPEAL OF THE REVENUE, THE SOLITARY ISSUE RA ISED IS AGAINST THE ACTION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IN DE LETING THE ADDITION OF RS 19,95,596/- MADE BY THE ASSESSING OFFICER. 2 3. IN BRIEF THE FACTS RELEVANT TO ADJUDICATE THE CONTR OVERSY ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF T HE COMPANIES ACT, 1956 INTER ALIA ENGAGED IN THE BUSINESS OF EQUIPMENT LEASING, HIRE PURCHASE FINANCING AND ALLIED SERVICES. IT FILED ITS RETURN OF INCO ME FOR THE ASSESSMENT YEAR 2001-02 DECLARING AN INCOME OF RS 1,00,03,850/-, WHICH WAS TAKEN UP FOR SCRUTINY ASSESSMENT. IN THE ASSESSMENT FINALIZED UNDER SECTIO N 143(3) OF THE ACT, THE TOTAL INCOME WAS DETERMINED AT RS 1,21,87,770/-. THE INCOME SO FINALLY DETERMINED WAS HIGHER OF THE INCOME COMPUTED AS PER SECTION 115JB OF THE ACT AT RS 1,21,25,267/-. IN FINALIZING THE ASSESSMENT AT THE INCOME OF RS 1,21,87,770/- BEING INCOME AS PER THE REGULAR PROVISIO NS OF THE ACT, THE ASSESSING OFFICER, INTER ALIA, MADE AN ADDITION OF RS 19 ,95,596/- AS PROVISION FOR DOUBTFUL DEBTS, WHICH IS THE SUBJECT MATTER OF DISPUTE BEFORE US. THE RELEVANT DISCUSSION IN THE ASSESSMENT ORDER IS CONTAINED IN PARA 6 WH ICH READS AS UNDER: 6. THE ASSESSEE COMPANY HAS MADE PROVISION FOR DOU BTFUL DEBTS OF RS 19,95,596/- WHICH HAS NOT BEEN ADDED BACK IN THE STATEMENT OF T OTAL INCOME. THE SAME IS HEREBY ADDED BACK WHILE COMPUTING TOTAL INCOME AS PER REGU LAR PROVISIONS OF INCOME TAX ACT, 1961 AS WELL AS INCOME AS PER PROVISIONS OF SECTION 115JB. 4. IN APPEAL, THE ASSESSEE ASSAILED THE ADDITION ON VAR IOUS COUNTS. FIRSTLY, AS PER THE ASSESSEE THE IMPUGNED PROVISION FOR DOUBTFUL DO UBT WAS NOT ROUTED THROUGH THE PROFIT & LOSS ACCOUNT AND HENCE NOT DISALLOW ABLE. SECONDLY, IT WAS CONTENDED THAT THE ASSESSING OFFICER ERRED IN NOT APPRECI ATING THAT THE SAID PROVISION REPRESENTED UNEARNED FINANCE CHARGES/LEASE RE NTALS IN RESPECT OF ASSETS UNDER THE HIRE PURCHASE/LEASE AGREEMENTS THAT HAV E BEEN CLASSIFIED AS NON-PERFORMING ASSETS, WHICH WERE NOT CONSIDERED AS INCO ME AS PER THE PRUDENTIAL NORMS AND OTHER GUIDELINES ISSUED BY THE RE SERVE BANK OF INDIA AND MADE APPLICABLE TO THE NON-BANKING FINANCIAL COMPANIE S (IN SHORT NBFC). IT WAS ALSO EMPHASIZED BEFORE THE COMMISSIONER OF INCOME-TA X (APPEALS) THAT IN TERMS OF THE INCOME RECOGNITION NORMS PRESCRIBED BY THE RESERVE BANK OF INDIA (IN SHORT RBI), THE ASSESSEE WAS JUSTIFIED IN NOT TAKING FINANCIAL CHARGES TO THE EXTENT OF RS 19,99,596/- AS ITS INCOME OF THE YEAR UN DER CONSIDERATION AND 3 INSTEAD IN OPTING TO OFFER THE SAID INCOME AS AND WHE N ACTUALLY REALIZED. IT WAS CANVASSED THAT THE CBDT ITSELF HAS RECOGNIZED THE NORMS O F PRUDENCE FOR THE PURPOSE OF SECTION 145(2) OF THE ACT, AS WOULD BE EVIDE NT FROM THE ACCOUNTING STANDARDS-I NOTIFIED BY THE CBDT. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS OF THE TRIBUNAL: (I) TEDCO INVESTMENT & FINANCIAL SERVICES (P) LTD V. DC IT 87 ITD 297 (DEL); (II) TCI FINANCE LTD. V. ACIT 92 TTJ 238 (HYD) THE COMMISSIONER OF INCOME-TAX (APPEALS) CONSIDERED THE CONTENTIONS RAISED BY THE ASSESSEE AND UPHELD THE PROPOSITION THAT THE INCOME IN RESPECT OF NON- PERFORMING ASSETS DID NOT ACCRUE FOLLOWING THE PRUDENTIA L NORMS PRESCRIBED BY THE RBI EVEN WHILE KEEPING THE ACCOUNTS AS PER THE MERCA NTILE SYSTEM OF ACCOUNTING. AS PER THE COMMISSIONER OF INCOME-TAX (APPEA LS), SUCH NORMS WERE NOT INCONSISTENT WITH THE ACCOUNTING STANDARD-1 NOTIFIED BY THE CBDT VIDE NOTIFICATION NO S.O. 69(E) DATED 25.1.1996. IN CONCLU SION, THE COMMISSIONER OF INCOME-TAX (APPEALS) DELETED THE ADDITION IN THE FOLL OWING WORDS CONTAINED IN PARA 6.2.1 OF THE IMPUGNED ORDER: IN VIEW OF THE ABOVE DECISIONS OF THE INCOME-TAX A PPELLATE TRIBUNAL WHICH ARE RESPECTFULLY FOLLOWED HERE, I HAVE TO HOLD THAT THE APPELLANT WAS JUSTIFIED IN NOT OFFERING THE INTEREST OF RS 19,99,596/- AS ITS INCOME FOR THIS A SSESSMENT YEAR. FOR THE SAME REASON AND ALSO AS THE INCREMENTAL PROVISION OF RS 19,99,5 96/- MADE DURING THE RELEVANT PREVIOUS YEAR HAD NOT BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT, I HAVE TO HOLD THAT THE AO WAS NOT JUSTIFIED IN ADDING THE SAID PROVISION T O THE APPELLANTS INCOME. ACCORDINGLY THE ADDITION OF RS 19,99,596/- IS HEREBY DELETED. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE , APPEARING FOR THE REVENUE, HAS RELIED UPON THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD V. JCIT 320 ITR 527 (SC) FOR THE PROPOSITION THAT THE RBI DIRECTIONS IN THE CONTEXT OF PROVISIONING FOR N ON-PERFORMING ASSETS IN THE BALANCE SHEET OF A NBFC HAS NOTHING TO DO WITH THE CO MPUTATION OF TAXABLE INCOME OR ACCOUNTING CONCEPTS AND, THEREFORE, THE COMMISSIO NER OF INCOME-TAX 4 (APPEALS) WAS NOT JUSTIFIED IN DELETING THE ADDITION. RELIANCE HAS ALSO BEEN PLACED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIB UNAL IN THE CASE OF NEW INDIA INDUSTRIES LTD. 112 TTJ (DEL) 917 TO THE EFFECT T HAT BAD DEBTS REPRESENTING PROVISION FOR NON-PERFORMING ASSETS PER THE PRUDENTIAL NORMS ISSUED BY RBI FOR NBFCS IS NOT ALLOWABLE DEDUCTION UNDER SECTION 36(1)(VI I) OF THE ACT. ON THE BASIS OF THE AFORESAID, AS PER THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE ADDITION MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBTS WAS JUSTIFIED. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASS ESSEE VEHEMENTLY SUBMITTED AND REFERRED TO THE FINDING OF THE COMMISSIO NER OF INCOME-TAX (APPEALS) THAT PROVISION OF RS 19,19,596/- HAS NOT BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT AND THAT IT IS A CASE WHERE THE INCOME WITH REFERENCE TO A NON- PERFORMING ASSET HAS NOT BEEN TAKEN INTO CONSIDERATION, BECAUSE IT HAD NOT ACCRUED TO THE ASSESSEE. IT IS SOUGHT TO BE MADE OUT THAT FACTUALLY THE ISSUE IN QUESTION IS DIFFERENT FROM THAT CONSIDERED BY THE HONB LE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) AND BY THE S PECIAL BENCH OF THE TRIBUNAL IN THE CASE OF NEW INDIA INDUSTRIES LTD (SUPR A). ON THE CONTRARY, IT IS SUBMITTED THAT THE ISSUE IS COVERED BY THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V VASISTH CHAY VYAPAR LTD. 33 0 ITR 440 (DEL), WHICH HAS EXPLAINED AND APPLIED THE JUDGMENT OF THE HONBL E SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) AND DECIDED T HE ISSUE IN FAVOUR OF THE ASSESSEE. RELIANCE HAS ALSO BEEN PLACED ON THE FOLLOW ING DECISIONS: I) CIT V ELGI FINANCE LTD. 293 ITR 357 (MAD); II) CIT V. COIMBATORE LAKSHMI INV. & FINANCE CO. LT D. 331 118 (MAD); III) TEDCO INVESTMENT & FINANCIAL SERVICES P . LTD 87 ITD 298 (DEL); AND, IV) ITA NO 1646, 1647 & 1648/MAD/10 IN THE CASE OF AC IT V M/S SAKTHI FINANCE LTD., COIMBATORE DT 16.12.2010. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. I N THIS CASE, THE ASSESSEE BEFORE US IS ENGAGED IN THE BUSINESS OF EQUIPMENT LEASING, HIRE 5 PURCHASE FINANCING, AND ALLIED SERVICES. THE CASE SET-UP BY THE ASSESSEE IS THAT IT IS AN NBFC WHICH IS GOVERNED BY THE PRUDENTIAL NORM S AND OTHER GUIDELINES ISSUED BY THE RBI FROM TIME TO TIME. THE ASSESSING OFFICE R HAS, IN A CRYPTIC ORDER, DISALLOWED A SUM OF RS 19,19,596/- IDENTIFYING IT AS PROVISION FOR DOUBTFUL DEBTS. THIS IS SOUGHT TO BE JUSTIFIED BY THE REVENUE BEFORE US ON THE BASIS OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF SOU THERN TECHNOLOGIES LTD. (SUPRA). IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SU PRA) THE ISSUE BEFORE THE HONBLE COURT WAS THE ALLOWABILITY OF A PROVISION FOR DOUBTFUL DEBT IN TERMS OF SECTION 36(1)(VII) OR UNDER SECTION 37(1) OF THE ACT, A ND OF-COURSE, THE ASSESSEE BEFORE THE HONBLE SUPREME COURT WAS ALSO A NBFC GOVE RNED BY THE PRUDENTIAL NORMS ISSUED BY THE RBI. THE HONBLE SUPREME COURT NE GATED THE CLAIM OF THE ASSESSEE BECAUSE THE PROVISION FOR DOUBTFUL DEBT WAS EXPR ESSLY NOT DEDUCTIBLE UNDER SECTION 36(1)(VII) OF THE ACT AND IT ALSO COULD NO T BE ALLOWED AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT EVEN ON THE BASIS OF REA L INCOME THEORY. ACCORDINGLY, THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 36(1)(VII) OR 37(1) OF THE ACT WAS NEGATED. 8. ON THE CONTRARY, THE JUDGMENT OF THE HONBLE DELH I HIGH COURT IN THE CASE OF VASISTH CHAY VYAPAR LTD (SUPRA), WHICH IS SUBSEQUENT TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNO LOGIES LTD. (SUPRA) AND HAS CONSIDERED THE SAID DECISION, THE FACTS WERE THAT TH E ASSESSEE THEREIN WHO WAS A NBFC HAD LENT CERTAIN MONIES AND SUCH LENDING HAD BECOME A NON PERFORMING ASSET AS PER THE PRUDENTIAL NORMS ISSUED BY T HE RBI AND INTEREST INCOME ON SUCH NON PERFORMING ASSETS WAS NOT RECEIVED BY THE ASSESSEE AND, THEREFORE, IT DID NOT RECOGNIZE INTEREST INCOME ON SUCH NON PERFORMING ASSETS HAVING REGARD TO ITS ACCOUNTING POLICY. THE ISSUE BEFOR E THE HONBLE HIGH COURT WAS AS TO WHETHER IN THE GIVEN CIRCUMSTANCES, INTEREST INC OME COULD BE SAID TO HAVE ACCRUED TO THE ASSESSEE IN THE LIGHT OF THE PROVISION S OF INCOME-TAX ACT, 1961 WHERE THE LOAN IN QUESTION HAD BECOME A NON PERF ORMING ASSET IN ACCORDANCE WITH THE PRUDENTIAL NORMS OF THE RBI. THE HO NBLE HIGH COURT HELD 6 THAT IN SUCH A CASE INTEREST INCOME CANNOT BE SAID TO HA VE ACCRUED TO THE ASSESSEE HAVING REGARD TO THE PRUDENTIAL NORMS ISSUED BY THE RBI IN EXERCISE OF ITS STATUTORY POWERS. FOR THE AFORESAID REASONING, IT WA S HELD THAT EVEN UNDER THE INCOME-TAX ACT, 1961 INTEREST INCOME CANNOT BE SAID TO HAVE ACCRUED IN THE HANDS OF THE ASSESSEE. IN COMING TO SUCH CONCLUSION, THE HON BLE HIGH COURT EXPLAINED AND APPLIED THE JUDGMENT OF THE HONBLE S UPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA). THE HONBLE HIGH C OURT IN PARA 18 OF THE ORDER HAS POINTED OUT THAT THE DISPUTE BEFORE THE HON BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) CENTERED AROU ND THE DEDUCTIBILITY OF THE PROVISION FOR A NON PERFORMING ASSET IN TERMS OF SEC TION 36(1)(VII) OR 37(1) OF THE ACT AND THAT IT WAS IN THIS CONTEXT THE HONBLE SUP REME COURT OBSERVED THAT THE PRUDENTIAL NORMS DO NOT OVERRIDE THE PROVISIONS OF THE ACT. THE HONBLE HIGH COURT FURTHER NOTED THAT THE HONBLE SUPREME COURT HAS MADE A DISTINCTION WITH REGARD TO THE INCOME RECOGNITION AND HELD THAT INCOME HAD TO BE RECOGNIZED IN TERMS OF THE PRUDENTIAL NORMS EVEN THOUGH THE SAME DEV IATED FROM THE MERCANTILE SYSTEM OF ACCOUNTING AND/OR SECTION 145 OF THE ACT. THEREFORE, IT CLEARLY EMERGES THAT THE JUDGMENT OF THE HONBLE SUPR EME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) STANDS ON A DIFFEREN T FOOTING THAN THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF VASISTH CHAY VYAPAR LTD (SUPRA). THE AFORESAID TWO DECISIONS OPERATE IN DIFFEREN T FIELDS INASMUCH AS THE DECISION IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPR A) RELATES TO DEDUCTIBILITY OF A PROVISION FOR DOUBTFUL DEBTS UNDER SECTION 36(1)(V II) OR 37(1) OF THE ACT, WHEREAS THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF VASISTH CHAY VYAPAR LTD (SUPRA) DEALS WITH ACCRUAL OF INCOME IN RELATION TO AN ASSET WHICH HAS BEEN CLASSIFIED AS A NON PERFORMING ASSET IN TERM S OF THE PRUDENTIAL NORMS ISSUED BY THE RBI. 9. THEREFORE, IT IS IN KEEPING WITH THE AFORESAID DISCUSS ION THAT THE DISPUTE IN THE PRESENT CASE HAS TO BE DECIDED. FACTUALLY, IT HAS TO BE ASCERTAINED AS TO WHETHER THE CLAIM OF THE ASSESSEE FOR RS 19,95596/- REPR ESENTING PROVISION FOR 7 DOUBTFUL DEBTS WAS UNDER SECTION 36(1)(VII) OR UNDER SECT ION 37(1) OF THE ACT. THE DISCUSSION BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, W HICH WE HAVE REPRODUCED IN THE EARLIER PART OF THIS ORDER, IS COMPL ETELY SILENT ON THIS ASPECT. ON THE CONTRARY, THE CLAIM OF THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) AS MANIFESTED IN I TS GROUNDS OF APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS ON T HE FOLLOWING LINES:- 3.2 HE ERRED IN NOT APPRECIATING THAT THE ABOVE PR OVISION FOR DOUBTFUL DEBTS WAS NOT ROUTED THROUGH THE PROFIT 7 LOSS ACCOUNT AND HENCE WAS NOT DISALLOWABLE. 3.3 HE ERRED IN NOT APPRECIATING THAT THE ABOVE PRO VISION REPRESENTED UNEARNED FINANCE CHARGES/LEASE RENTALS IN RESPECT OF ASSETS UNDER THE HIRE PURCHASE/LEASE AGREEMENTS THAT HAVE BEEN CLASSIFIED AS NON-PERFORMING ASSETS, WHICH WERE NOT CONSIDERED AS INCOME AS PER THE PRUD ENTIAL NORMS & OTHER GUIDELINES ISSUED BY RBI AND MADE APPLICABLE TO NBF CS. WHICH WAS TO THE EFFECT WAS THAT THE ASSESSEE HAS NOT RECOG NIZED ITS INCOME TO THE EXTENT OF RS 19,99,596 WITH RESPECT OF NON-PERFORM ING ASSETS IN TERMS OF THE PRUDENTIAL NORMS ISSUED BY THE RBI. IN FACT, THE FINDI NG OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IN PARA 6.2.1.2 AND WHICH HAS BEEN REPRODUCED BY US IN EARLIER PART OF THIS ORDER, ALSO SUPPORTS THE ASSERTION OF THE ASSESSEE INASMUCH AS IT HAS BEEN ASSERTED BY THE COMMISSIONER OF INCOME-TA X (APPEALS) THAT THE ASSESSEE WAS JUSTIFIED IN NOT OFFERING THE INTEREST OF RS 19,99 ,596/- AS ITS INCOME FOR THIS ASSESSMENT YEAR . THE FURTHER ASSERTION OF THE COMMISSIONER OF INCOME- TAX (APPEALS) ALSO SUPPORTS THE AFORESAID WHICH IS TO TH E EFFECT THAT THE INCREMENTAL PROVISION OF RS 19,95,596/- MADE DURING THE RELEVANT PREVIOUS YEAR HAD NOT BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT. 10. OSTENSIBLY, THE ABOVE FINDINGS OF THE COMMISSIONER O F INCOME-TAX (APPEALS) WOULD HAVE CLINCHED THE ISSUE IN SUPPORT OF TH E ASSERTION BY THE ASSESSEE THAT THE INSTANT IS A CASE WHERE THE ASSESSEE HAS NOT RECOGNIZED INTEREST INCOME ON AN ASSET WHICH HAS BEEN CLASSIFIED AS A N ON PERFORMING ASSETS IN TERMS OF THE NORMS OF THE RBI AND THUS WAS NO T COVERED BY THE DECISION OF THE HONBLE SUPERME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) BUT WAS GOVERNED IN TERMS OF THE SUBSEQUENT DECISION OF THE HONBLE DELHI HIGH 8 COURT IN THE CASE OF VASISTH CHAY VYAPAR LTD. (SUPRA). H OWEVER, WE ARE UNABLE TO DO SO BECAUSE THE OBSERVATIONS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) CONTAINED IN A SUBSEQUENT PARA IN 6.2.2, THOUGH IT IS IN CONTEXT OF AN ADJUSTMENT UNDER SECTION 115JB PERTAINING TO THE SAME PROVISION AMO UNT OF RS 19,95,596/-. THE OBSERVATIONS OF THE COMMISSIONER OF INCOME-TAX (APP EALS) IN PARA 6.2.2, WHICH WE ARE TEMPTED TO REPRODUCE, CREATES AN AMBIVALEN T SITUATION AS IT PORTRAYS THAT THE ASSESSEE HAS MADE A PROVISION BY WAY OF AN EN TRY IN THE PROFIT & LOSS ACCOUNT. IF CONSIDERED IN ITS PERSPECTIVE, THIS WOULD RUN CONTRARY TO HIS CONCLUSIONS IN PARA 6.2.1 OF THE IMPUGNED ORDER. PARA 6.2.2 IS REPRODUCED HEREIN: 6.2.2 IT HAS BEEN ALREADY NOTED THAT THE AO ALSO T OOK THE PROVISION AMOUNT OF RS 19,99,596/- FOR MAKING ADJUSTMENT UNDER SECTION 115 JB. THE APPELLANT HAS CONTESTED THE SAID ADJUSTMENT TOO. BUT HERE, THE APPELLANTS GROU ND CANNOT BE SUSTAINED. THE IMPUGNED PROVISION MADE BY THE APPELLANT IS IN NO WAY DIFFER ENT FROM A PROVISION FOR DOUBTFUL DEBTS. FURTHER, AS THE DOUBTFUL DEBTS HAD BEEN QUANTIFIED AS PER THE STANDARDS PRESCRIBED BY THE RESERVE BANK OF INDIA AND NOT AFTER ASCERTAINING TH EIR IRRECOVERABILITY, THE SAME HAD BEEN CORRECTLY ADJUSTED BY THE AO AS PER CLAUSE (C) OF S UB-SECTION (1) OF SECTION 115JB. IN DECIDING AS ABOVE, THE DECISION OF THE HONBLE MADR AS HIGH COURT IN THE CASE OF DCIT V. BEARD SELL LTD., 244 ITR 256, IS FOLLOWED. CONSEQUE NTLY, EVEN WHILE THE ADDITION OF RS 19,99,596/- MADE IN THE ASSESSMENT AS PER THE REGUL AR PROVISIONS IS DELETED, THE ADJUSTMENT OF THE SAID AMOUNT FOR COMPUTING DEEMED INCOME UNDER SECTION 115JB IS CONFIRMED. AS A RESULT, THE GROUND RAISED BY THE AP PELLANT ON THIS SCORE IS DISMISSED. 9. IN THE FACE OF THE AFORESAID AMBIVALENT SITUATION A ND FINDING THAT THE ORDER OF THE ASSESSING OFFICER IS SILENT ON THIS ASPECT, WE THERE FORE FIND IT APPROPRIATE TO REMIT THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR A LIMITED PURPOSE. THE ASSESSEE SHALL SATISFY THE ASSESSING OFFICER THAT IT IS A CASE W HERE THE AMOUNT OF RS 19,95,596/- REPRESENTS UNRECOGNIZED INCOME ON A NON- PERFORMING ASSET CLASSIFIED IN TERMS OF PRUDENTIAL NORMS OF RBI AND IT IS NOT A CASE WHERE A PROVISION OF EQUIVALENT AMOUNT HAS BEEN DEBITED IN T HE PROFIT & LOSS ACCOUNT AND CLAIMED AS DEDUCTION UNDER SECTION 36(1)(VII) OR 37(1) O F THE ACT. IN CASE THE ASSESSEE SUCCEEDS IN DEMONSTRATING THE FORMER SITUATION, THEN NO ADDITION WOULD BE WARRANTED IN TERMS OF THE JUDGMENT OF THE HONBL E DELHI HIGH COURT IN THE CASE OF VASISTH CHAY VYAPAR LTD (SUPRA) AND IN OTHER CASE , THE ASSESSING OFFICER SHALL TAKE APPROPRIATE DECISION IN ACCORDANCE WITH OUR A FORESAID DISCUSSION AND IN LAW. IN CARRYING OUT THE AFORESAID EXERCISE, THE A SSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 9 10. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED I N PART. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2011. SD/- SD/- (I C SUDHIR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED: 30 TH SEPTEMBER, 2011 B COPY TO:- 1) APPELLANT 2) RESPONDENT 3) THE CIT (A) III PUNE 4) CIT-V, PUNE 5) DR, B BENCH, ITAT, PUNE. 6) GUARD FILE BY ORDER TRUE COPY ASST. REGISTRAR, I.T.A.T., PUNE