The Mehsana Urban Co.Op. Bank Ltd., Mehsana V. The ACIT, Mehsana Circle, Mehsana

ITA 1967/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6245 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 03-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEENAKSHI DOHRI JOINT
• Assessee Lawyers: S N SOPARKAR
• Section: 145; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 1967/AHD/2015 (ASSESSMENT YEAR: 2012-13) THE MEHSANA URBAN CO.OP. BANK LTD. MEHSANA URBAN BANK ROAD, HIGHWAY, MEHSANA- 384002 V/S ACIT, MEHSANA CIRCLE, MEHSANA (APPELLANT) (RESPONDENT) PAN: AAAAT2500R APPELLANT BY : SHRI S. N. SOPARKAR, AR RESPONDENT BY : SMT. MEENAKSHI DOHRI, JOINT CIT ( )/ ORDER DATE OF HEARING : 18 -01-201 8 DATE OF PRONOUNCEMENT : 19 -01-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A), GANDHINAGAR, AHMEDABAD DATED 08.05.2015 PERTAINING TO A.Y. 2012-13. ITA NO1967/A HD/2015 . A.Y. 2012--1 3 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSES SEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING ADDITION MADE BY A.O. OF RS. 1. 02 CRORES BEING INTEREST ON NPA ACCOUNTS U/S. 43D OF THE ACT. 3. IN OUR CONSIDERED OPINION, THIS ISSUE IS NOW WELL S ETTLED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF SHRI MAHILA SE WA SAHKARI BANK LTD. 395 ITR 324 AND THE RELEVANT FINDINGS READ AS UNDER:- 23. IN THE LIGHT OF THE ABOVE DISCUSSION WHAT EMER GES IS THAT WHILE DETERMINING THE TAX LIABILITY OF AN ASSESSEE, TWO F ACTORS WOULD COME INTO PLAY. FIRSTLY, THE RECOGNITION OF INCOME IN TERMS O F THE RECOGNISED ACCOUNTING PRINCIPLES AND AFTER SUCH INCOME IS RECO GNISED, THE COMPUTATION THEREOF, IN TERMS OF THE PROVISIONS OF THE INCOME TAX ACT, 1961. INSOFAR AS THE COMPUTATION OF TAXABILITY IS C ONCERNED, THE SAME IS SOLELY GOVERNED BY THE PROVISIONS OF THE INCOME TAX ACT AND THE ACCOUNTING PRINCIPLES HAVE NO ROLE TO PLAY. HOWEVER , RECOGNITION OF INCOME STANDS ON A DIFFERENT FOOTING. INSOFAR AS INCOME RE COGNITION IS CONCERNED, IT WOULD BE THE RBI DIRECTIONS WHICH WOULD PREVAIL IN VIEW OF THE PROVISIONS OF SECTION 45Q OF THE RBI ACT AND SECTION 145 WOULD HAVE NO ROLE TO PLAY. HENCE, THE ASSESSING OFFICER HAS TO FOLLOW THE RBI DIRECTIONS. 24. THE DELHI HIGH COURT IN COMMISSIONER OF INCOME-TAX V. VASISTH CHAY VYAPAR LTD. , (2011) 330 ITR 440 (DELHI), HAS IN THE CONTEXT OF A SIMILAR ISSUE ARISING IN THE CASE OF A NON-BANKING FINANCIAL COMPANY HAS HELD THUS: 17. IN THIS SCENARIO, WE HAVE TO EXAMINE THE STREN GTH IN THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE THAT WHETHER IT CAN STILL BE HELD THAT INCOME IN THE FORM OF INTEREST THOUGH NOT RECEIVED HAD STILL ACCRUED TO THE ASSESSEE UNDER THE PROVISIONS OF INCOME TAX ACT AND WAS, THEREFORE, EXIGIBLE TO TAX. OUR ANSWER IS IN THE NEGATIVE AND WE GIVE THE FOLLOWING REASONS IN SUPPORT:- (1) FIRST OF ALL WE WOULD DISCUSS THE MATTER IN TH E LIGHT OF THE PROVISIONS OF INCOME TAX ACT AND TO EXAMINE AS TO WHETHER IN T HE GIVEN CIRCUMSTANCES, INTEREST INCOME HAS ACCRUED TO THE A SSESSEE. IT IS STATED AT THE COST OF REPETITION THAT ADMITTED POSITION IS TH AT THE ASSESSEE HAD NOT RECEIVED ANY INTEREST ON THE SAID ICD PLACED WITH S HAW WALLACE SINCE THE ASSESSMENT YEAR 1996-97 AS IT HAD BECOME NPAS IN AC CORDANCE WITH THE PRUDENTIAL NORMS WHICH WAS ENTERED IN THE BOOKS OF ACCOUNTS AS ITA 139/2008,ITA 466/2008, ITA 537/2008,ITA 408/2003 WE LL. THE ASSESSEE ITA NO1967/A HD/2015 . A.Y. 2012--1 3 3 HAS FURTHER SUCCESSFULLY DEMONSTRATED THAT EVEN IN THE SUCCEEDING ASSESSMENT YEARS, NO INTEREST WAS RECEIVED AND THE POSITION REMAINED THE SAME UNTIL THE ASSESSMENT YEARS 2006-07. REASON WAS ADVERSE FINANCIAL CIRCUMSTANCES AND THE FINANCIAL CRUNCH FACED BY SHA W WALLACE. SO MUCH SO, IT WAS FACING WINDING UP PETITIONS WHICH WERE F ILED BY MANY CREDITORS. THESE CIRCUMSTANCES, LED TO AN UNCERTAINTY IN SO FA R AS RECOVERY OF INTEREST WAS CONCERNED, AS A RESULT OF THE AFORESAID PRECARI OUS FINANCIAL POSITION OF SHAW WALLACE. WHAT TO TALK OF INTEREST, EVEN THE PR INCIPAL AMOUNT ITSELF HAD BECOME DOUBTFUL TO RECOVER. IN THIS SCENARIO IT WAS LEGITIMATE MOVE TO INFER THAT INTEREST INCOME THEREUPON HAS NOT 'ACCRU ED'. WE ARE IN AGREEMENT WITH THE SUBMISSION OF MR. VOHRA ON THIS COUNT, SUPPORTED BY VARIOUS DECISIONS OF DIFFERENT HIGH COURTS INCLUDIN G THIS COURT WHICH HAS ALREADY BEEN REFERRED TO ABOVE. (2) IN THE INSTANT CASE, THE ASSESSEE COMPANY BEIN G NBFC IS GOVERNED BY THE PROVISIONS OF RBI ACT. IN SUCH A CASE, INTEREST INCOME CANNOT BE SAID TO H AVE ACCRUED TO THE ASSESSEE HAVING REGARD TO THE PROVISIONS OF SECTION 45Q OF THE RBI AND PRUDENTIAL NORMS ISSUED BY THE RBI IN EXERCISE OF I TS STATUTORY POWERS. AS PER THESE NORMS, THE ICD HAD BECOME NPA AND ON SUCH NPA WHERE THE INTEREST WAS NOT RECEIVED AND POSSIBILITY OF RECOVE RY WAS ALMOST NIL, IT COULD NOT BE TREATED TO HAVE BEEN ACCRUED IN FAVOUR OF THE ASSESSEE. NO DOUBT, IN FIRST BLUSH, READING OF THE JUDGMENT G IVES AN INDICATION THAT THE COURT HAS HELD THAT RBI ACT DOES NOT OVERRIDE T HE PROVISIONS OF THE INCOME TAX ACT. HOWEVER, WHEN WE EXAMINE THE ISSUE INVOLVED THEREIN MINUTELY AND DEEPLY IN THE CONTEXT IN WHICH THAT HA D ARISEN AND CERTAIN OBSERVATIONS OF THE APEX COURT CONTAINED IN THAT VE RY JUDGMENT, WE FIND THAT THE PROPOSITION ADVANCED BY MR. SABHARWAL MAY NOT BE ENTIRELY CORRECT. IN THE CASE BEFORE THE SUPREME COURT, THE ASSESSEE A NBFC DEBITED RS.81,68,516 AS PROVISION AGAINST NPA IN TH E PROFIT AND LOSS ACCOUNT, WHICH WAS CLAIMED AS DEDUCTION IN TERMS OF SECTION 36 (1) (VII) OF THE ACT. THE ASSESSING OFFICER DID NOT ALLOW THE DE DUCTION CLAIMED AS AFORESAID ON THE GROUND THAT THE PROVISION OF NPA W AS NOT IN THE NATURE OF EXPENDITURE OR LOSS BUT MORE IN THE NATURE OF A RES ERVE, AND THUS NOT DEDUCTIBLE UNDER SECTION 36(I) (VII) OF THE ACT. TH E ASSESSING OFFICER, HOWEVER, DID NOT BRING TO TAX RS.20,34,605 AS INCOM E (BEING INCOME ACCRUED UNDER THE MERCANTILE SYSTEM OF ACCOUNTING). THE DISPUTE BEFORE THE APEX COURT CENTERED AROUND DEDUCTIBILITY OF PRO VISION FOR NPA. AFTER ANALYZING THE PROVISIONS OF THE RBI ACT, THEIR LORD SHIPS OF THE APEX COURT OBSERVED THAT IN SO FAR AS THE PERMISSIBLE DEDUCTIO NS OR EXCLUSIONS UNDER THE ACT ARE CONCERNED, THE SAME ARE ADMISSIBLE ONLY IF SUCH DEDUCTIONS/EXCLUSIONS SATISFY THE RELEVANT CONDITIONS STIPULATED THEREFOR UNDER T HE ACT. TO THAT EXTENT, IT WAS OBSERVED THAT THE PRUDENTIAL NORMS DO NOT OVERR IDE THE PROVISIONS OF ITA NO1967/A HD/2015 . A.Y. 2012--1 3 4 THE ACT. HOWEVER, THE APEX COURT MADE A DISTINCTION WITH REGARD TO 'INCOME RECOGNITION' AND HELD THAT INCOME HAD TO BE RECOGNIZED IN TERMS OF THE PRUDENTIAL NORMS, EVEN THOUGH THE SAME DEVIA TED FROM MERCANTILE SYSTEM OF ACCOUNTING AND/OR SECTION 145 OF THE INCO ME TAX ACT. IT CAN BE SAID, THEREFORE, THAT THE APEX COURT APPROVED THE REAL INCOME THEORY WHICH IS ENGRAINED IN THE PRUDENTIAL NORMS FOR RECO GNITION OF REVENUE BY NBFC. 25. THE DISTINCTION DRAWN BY THE DELHI HIGH COURT I S THAT WHILE THE ACCOUNTING POLICIES OF ADOPTED BY THE NBFC CANNOT D ETERMINE THE TAXABLE INCOME. HOWEVER, INSOFAR AS INCOME RECOGNITION IS C ONCERNED, THE ASSESSING OFFICER HAS TO FOLLOW THE RBI DIRECTIONS, 1998 IN VIEW OF SECTION 45Q OF THE RBI ACT. THAT INSOFAR AS INCOME RECOGNI TION IS CONCERNED, SECTION 145 OF THE INCOME-TAX ACT, 1961 HAS NOT ROL E TO PLAY. 26. IN COMMISSIONER OF INCOME-TAX V. SAKTHI FINANCE LIMITE D , (SUPRA), THE MADRAS HIGH COURT WAS DEALING WITH A S IMILAR ISSUE IN RELATION TO A NONBANKING FINANCIAL INSTITUTION. THE COURT DID NOT AGREE WITH THE VIEW ADOPTED BY THE DELHI HIGH COURT IN COMMISSIONER OF INCOME-TAX V. VASISTH CHAY VYAPAR (SUPRA) AND HELD THUS: 16. IN PARAGRAPHS 31 AND 34, THE HON'BLE SUPREME COURT IN NO UNCERTAIN TERMS HELD THAT THE COLLECTABILITY OF INT EREST IS DIFFERENT FROM ACCRUAL AND IN EACH AND EVERY CASE, THE ASSESSEE HA S TO PROVE THAT THE INCOME INTEREST IS NOT RECOGNISED OR NOT TAKEN INTO ACCOUNT DUE TO UNCERTAINTY IN COLLECTION OF THE INCOME. IT IS F OR THE ASSESSING OFFICER TO ACCEPT THE CLAIM OF THE ASSESSEE UNDER T HE INCOME-TAX ACT OR NOT TO ACCEPT. IN CASE OF SOUTHERN TECHNOLOGIES LIMITED, (2010) 320 ITR 577, THE ASSESSING OFFICER ACCEPTED THE ASS ESSEE'S CASE TOWARDS NON-RECOGNITION OF INTEREST FOR RS.20.34 LA KHS AS WOULD BE APPARENT FROM A READING OF PARAGRAPH NO.31 OF THE J UDGMENT OF THE HON'BLE SUPREME COURT IN CASE OF SOUTHERN TECHNOLOG IES LIMITED, (2010) 320 ITR 577. BY A CAREFUL READING OF THE CAS E OF SOUTHERN TECHNOLOGIES LIMITED, (2010) 320 ITR 577, WE ARE OF THE VIEW THAT THE ASSESSEE HAS TO PROVE IN EACH CASE THAT INTERES T NOT RECOGNISED OR NOT TAKEN INTO ACCOUNT WAS IN FACT DUE TO UNCERT AINTY IN COLLECTION OF INTEREST AND IT IS FOR THE ASSESSING OFFICER TO EXAMINE FACTS OF EACH INDIVIDUAL CASE. 18. MERE CHARACTERISATION OF AN ACCOUNT AS A NPA WO ULD NOT BY ITSELF BE SUFFICIENT TO SAY THAT THERE IS UNCERTAINTY AS R EGARDS REALIZABILITY OF INCOME OR INTEREST INCOME THEREON. ACCRUAL OF INTER EST IS A MATTER OF FACT TO BE DECIDED SEPARATELY FOR EACH CASE ON THE BASIS OF EXAMINATION OF THE FACTS AND CIRCUMSTANCES. THE SAM E WOULD REQUIRE ITA NO1967/A HD/2015 . A.Y. 2012--1 3 5 AN ASSESSMENT OF THE RELEVANT FACTS AND CIRCUMSTANC ES OF EACH CASE. ONLY BY ASSESSMENT OF FACTS AND CIRCUMSTANCES , THE AUTHORITY COULD ARRIVE AT A DECISION WHETHER THERE IS UNCERTA INITY OF THE INTEREST ACCRUED ON NPA. ONLY WHEN THERE IS UNCERTAINITY OF REALIZABILITY OF INCOME OR INTEREST INCOME THEN IT IS NOT CHARGEABLE TO TAX. THE SYSTEM OF ACCOUNTING FOLLOWED ONLY RECOGNISES IT BR INGING THE INCOME TO BOOKS. THE ADOPTED ACCOUNTING POLICY I.E., RECOG NISING INCOME ON NPA ACCOUNTS ONLY SUBJECT TO REALISATION DOES NOT S ERVE AS A STANDARD CATEGORY. 27. FOR THE REASONS STATED HEREINABOVE, THIS COURT IS IN AGREEMENT WITH THE VIEW TAKEN BY THE DELHI HIGH COURT. 28. IN THE LIGHT OF THE VIEW ADOPTED BY THE COURT, IT IS NOT NECESSARY TO ENTER INTO ANY DETAILED DISCUSSION AS REGARDS THE A PPLICABILITY OR OTHERWISE OF THE CBDT CIRCULAR TO THE FACTS OF THE PRESENT CASE. THE SUPREME COURT IN UCO BANK, CALCUTTA V. CIT (SUPRA) HAS HELD THAT SUCH CIRCULARS ARE NOT MEANT FOR CONTRADICTING OR N ULLIFYING ANY PROVISION OF THE STATUTE. THEY ARE MEANT FOR PROPER ADMINISTRATION OF THE STATUTE, THEY ARE DESIGNED TO MITIGATE THE RIGO URS OF THE APPLICATION OF A PARTICULAR PROVISION OF THE STATUT E IN CERTAIN SITUATIONS BY APPLYING A BENEFICIAL INTERPRETATION TO THE PROV ISION IN QUESTION SO AS TO BENEFIT THE ASSESSEE AND MAKE THE APPLICATION OF THE FISCAL PROVISION, IN THAT CASE, IN CONSONANCE WITH THE CON CEPT OF INCOME AND IN PARTICULAR, NOTIONAL INCOME AS ALSO THE TREA TMENT OF SUCH NOTIONAL INCOME UNDER THE ACCOUNTING PRACTICE. THE COURT, ACCORDINGLY, DID NOT FIND ANY INCONSISTENCY OR CONT RADICTION BETWEEN THE CIRCULAR SO ISSUED AND SECTION 145 OF THE INCOM E TAX ACT. IN THE AFORESAID PREMISES, UNTIL THE CIRCULAR IS REVOKED, THE SAME CONTINUES TO BE IN FORCE AND THE SAME HAVING BEEN ISSUED TO M ITIGATE THE HARDSHIPS CAUSED TO THE CLASS OF ASSESSEES COVERED BY THE CIRCULAR, SUCH ASSESSEES WOULD BE ENTITLED TO THE BENEFIT THE REOF. MERELY BECAUSE BY VIRTUE OF THE PROVISIONS OF SECTION 43D OF THE ACT, A CERTAIN CLASS OF ASSESSEES IS GIVEN BENEFIT UNDER T HE PROVISIONS OF THE ACT WOULD NOT MEAN THAT THE SAME WOULD OVERRIDE THE CIRCULAR. 29. ON BEHALF OF THE APPELLANT IT HAS BEEN CONTENDE D THAT SECTION 43D OF THE ACT ITSELF RECOGNISES RECOGNITION OF TAX ABILITY OF SUCH INTEREST AND THAT WHEN A SPECIFIC PROVISION IN THE NATURE OF SECTION 43D OF THE ACT HAS BEEN MADE, AND ENTITIES LIKE THE ASSESSEE ARE EXCLUDED FROM THE PURVIEW THEREOF, THE ASSESSEE CAN NOT INDIRECTLY CLAIM BENEFIT WHICH WOULD AMOUNT TO A BENEFIT SIMIL AR TO THAT UNDER SECTION 43D OF THE ACT. IN THIS REGARD, IT MAY BE N OTED THAT THE ITA NO1967/A HD/2015 . A.Y. 2012--1 3 6 BENEFIT CLAIMED BY THE ASSESSEE IS NOT UNDER ANY PR OVISION OF THE INCOME TAX ACT, 1961. THE ASSESSEE BEING BOUND BY T HE RBI GUIDELINES WHICH ARE ISSUED UNDER THE PROVISIONS OF THE RBI ACT HAS NOT SHOWN THE INTEREST ON NPA AS INCOME. BY VIRTUE OF THE PROVISIONS OF SECTION 45Q OF THE RBI ACT, THE PROVISIONS OF CH APTER IIIB THEREOF HAVE AN OVERRIDING EFFECT OVER OTHER LAWS INCLUDING THE INCOME TAX ACT, 1961. THEREFORE, NOTWITHSTANDING THE PROVISION S OF SECTION 43D OF THE ACT, SINCE THE PROVISIONS OF SECTION 45Q OF THE RBI ACT HAVE AN OVERRIDING EFFECT VIS--VIS INCOME RECOGNITION P RINCIPLES IN THE COMPANIES ACT, THE ASSESSING OFFICER IS BOUND TO FO LLOW THE RBI DIRECTIONS SO FAR AS INCOME RECOGNITION IS CONCERNE D. THE CONTENTION THAT THE ASSESSEE CANNOT INDIRECTLY CLAIM THE BENEF IT WHICH WOULD AMOUNT TO A BENEFIT SIMILAR TO THAT UNDER SECTION 4 3D OF THE ACT, THEREFORE, DOES NOT MERIT ACCEPTANCE. 30. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, BEFOR E THE ASSESSING OFFICER THE ASSESSEE HAD INTER ALIA SUBMI TTED THAT INTEREST ON NPA WAS NOT CHARGED AS MANDATORILY STIPULATED UN DER INCOME RECOGNITION AND ASSET CLASSIFICATION NORMS OF THE R ESERVE BANK OF INDIA. IT HAS ALSO BEEN SUBMITTED THAT THE CBDT CIR CULAR BEARING F.NO.201/21/84-ITA-II DATED 9.10.1984 ISSUED UNDER SECTION 119 OF THE ACT FOR ALL BANKING AND NON BANKING FINANCIAL C OMPANIES STATING THAT IF THE INTEREST HAS NOT BEEN RECEIVED FOR THRE E YEARS, THE SAME WILL NOT BE TAXED AS AN INCOME EVEN ON ACCRUAL BASI S EVEN IF INTEREST HAS BEEN CREDITED TO INTEREST SUSPENSE ACCOUNT WO ULD BE APPLICABLE IN ITS CASE. THE ASSESSING OFFICER BRUSH ED ASIDE THE SUBMISSION BASED UPON THE CIRCULAR OF 1984, ON THE GROUND THAT THE SAME IS APPLICABLE ONLY TO BANKING COMPANIES AND NO T TO COOPERATIVE BANKS, ON A MISCONCEPTION OF LAW THAT A COOPERATIVE BANK IS NOT A BANKING COMPANY. IN THIS REGARD IT MA Y BE NOTED THAT THE EXPRESSION BANKING COMPANY HAS BEEN DEFINED U NDER SECTION 5(C) OF THE BANKING REGULATION ACT, 1949 TO MEAN AN Y COMPANY WHICH TRANSACTS THE BUSINESS OF BANKING IN INDIA. P ART V OF THE BANKING REGULATION ACT BEARS THE HEADING APPLICATI ON OF THE ACT TO CO-OPERATIVE SOCIETIES. SECTION 56 THEREOF PROVIDE S THAT THE PROVISIONS OF THE ACT, AS IN FORCE FOR THE TIME BEI NG, SHALL APPLY TO, OR IN RELATION TO CO-OPERATIVE SOCIETIES AS THEY APPLY TO, OR IN RELATION TO BANKING COMPANIES SUBJECT TO THE MODIFICATIONS STAT ED THEREUNDER. CLAUSE (A) OF SECTION 56, TO THE EXTENT THE SAME IS RELEVANT FOR THE PRESENT PURPOSE, PROVIDES THAT THROUGHOUT THE ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, - (I) REFERENCES TO A BANKING COMPANY OR THE COMPANY OR SUCH COMPANY SHALL BE CONSTRU ED AS REFERENCES TO A CO-OPERATIVE BANK. SECTION 2(I) OF THE RBI ACT PROVIDES THAT CO-OPERATIVE BANK, CO-OPERATIVE CR EDIT SOCIETY, ITA NO1967/A HD/2015 . A.Y. 2012--1 3 7 DIRECTOR, PRIMARY AGRICULTURAL CREDIT SOCIETY, PRIMARY CO-OPERATIVE SOCIETY AND PRIMARY CREDIT SOCIETY SHALL HAVE TH E MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANK ING REGULATION ACT, 1949. EVIDENTLY THEREFORE, THE EXPRESSION BAN KING COMPANY WOULD TAKE WITHIN ITS SWEEP A CO-OPERATIVE BANK. TH E ASSESSING OFFICER HAS THEREAFTER ENTERED INTO A DISCUSSION ON THE PROVISIONS OF THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002, WHICH P ROVIDES FOR ENFORCEMENT OF SECURITY INTEREST OF BANKS AND FINAN CIAL INSTITUTIONS AND HAS OBSERVED THAT IN THE INSTANT CASE, NO MATER IAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO PROVE ITS EFFO RTS MADE IN A BID TO RECOVER SUCH DEBTS WHICH ARE CLASSIFIED AS NPA A ND OTHER CATEGORIES. THE ASSESSING OFFICER HAS ALSO ENTERED INTO A DISCUSSION AS REGARDS THE QUALITY OF MANAGEMENT, ETC., WITHOUT EVEN EXAMINING AS TO WHETHER OR NOT THERE WAS ANY PROBABILITY OF I NTEREST BEING RECEIVED ON THE NPAS. THE COMMISSIONER (APPEALS) HA S PLACED RELIANCE UPON THE DECISION OF THE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LIMITED (SUPRA) AND HELD THAT THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT UNDER COMMERCIAL ACCOUNTING, INTEREST ON NPAS CANNOT BE CHARGED. ON THE QUESTION OF APPLICABILITY OF THE CBDT CIRCULAR DATED 9.10.1984, THE COMMISSIONER (APPEALS) HELD THAT THE SAME WOULD NOT BE APPLICABLE FOR THE REASON THAT THE PROVISIONS OF SECTION 43D O F THE ACT ARE CLEAR AND CANNOT BE OVERRIDDEN THROUGH DELEGATED LEGISLAT ION VIZ. CIRCULARS AND NOTIFICATIONS. THE COMMISSIONER (APPEALS) WAS F URTHER OF THE OPINION THAT THE STATUTORY PROVISIONS WERE BROUGHT ON THE ACT MUCH LATER THAN THE SAID CIRCULAR (WHICH WAS ISSUED IN 1 984) AND THEREFORE THE SAID CIRCULAR WOULD NOT HAVE ANY EFFECT OR BIND ING FORCE UPON THE ASSESSING OFFICER. THE VIEW ADOPTED BY THE ASSESSIN G OFFICER AND THE COMMISSIONER (APPEALS) IS CLEARLY CONTRARY TO T HE VIEW EXPRESSED BY THIS COURT HEREINABOVE. THE TRIBUNAL W AS THEREFORE, WHOLLY JUSTIFIED IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER (APPEALS) CONFIRMING THE ASSESSMENT OR DER. 4. THE AFORESAID JUDGMENT OF THE HONBLE JURISDICTIONA L HIGH COURT WAS FOLLOWED BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN A.Y. 2011-12 IN ITA NO. 2729/AHD/2014. WE FIND THAT THE FIRST APPELLATE AUT HORITY CONFIRMED THE ASSESSMENT FOLLOWING THE FINDINGS GIVEN BY HIS PRED ECESSOR FOR A.Y. 2011-12. SINCE THE FINDINGS OF THE FIRST APPELLATE AUTHORITY IN A.Y. 2011-12 HAVE BEEN ITA NO1967/A HD/2015 . A.Y. 2012--1 3 8 REVERSED BY THE CO-ORDINATE BENCH BY ITS ORDER DATE D 30.11.2017 IN ITA NO. 2729/AHD/2014 (SUPRA), RESPECTFULLY FOLLOWING THE S AME, WE DIRECT THE A.O. TO DELETE THE IMPUGNED ADDITIONS. 5. APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 19- 01- 20 18 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 19 /01/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD