ACIT CEN CIR 41, MUMBAI vs. SOLAR PACKAGING P.TLD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dated 24/02/2012, of the CIT (A)-38,Mumbai, the Assessing Officer (AO)has filed the present appeal.Assessee-company,engaged in the business of manufactur - ing of TW carbon,filed its return of income on 29/09/2008,declaring total income at Rs. 2.18 lakhs.The AO completed the assessment,under section 143 (3) of the Act,on 31/12/ 2010, determining the income of the assessee at Rs.30,22,378/-. 2.The solitary ground of appeal, raised by the AO, is about deleting the addition of interest income of Rs. 25.22 lakhs on the Inter Corporate Deposits (ICD). During the assessment proceedings,the AO found that in the notes on accounts of the audit report,the assessee had mentioned that ICD.s.,amounting to Rs.111. 07 lakhs had been given to certain bodies corporates,that they had failed to honour the checks on due dates, that the company had filed winding up petitions before the court,that interest thereon since 1997-98 onwards would be accounted for on receipt basis,that for the year under appeal amount in question was Rs. 25, 22,160/-.The AO observed that the assessee had not shown the said interest though it was following Mercantile system of accounting, that it had shown receipt of interest of Rs. 1.2 lakhs on ICD in schedule fee of the balance sheet, that income accrued on ICD of Rs. 25.22 lakhs had not been made part of it.Relying upon the decisions of Tamil Nadu Small Industries Development Corporation(242 ITR 122), State Bank of Travancore (158 ITR 102) and Kerala Financial Corporation(210ITR129),he held that interest amount of Rs. 25.22 1

3640/Mum/2012(08-09)Solarpackaging lakhs, accrued on ICD, had to be added to the income of the assessee. Invoking the provisions of section 145 (3) of the Act he held that books of accounts, maintained by the assessee, were not reliable.

3.Aggrieved by the order of the AO the assessee preferred an appeal before the First Appellate Authority (FAA). Before him, it was argued that ICD.s given to certain parties had become doubtful, that the parties to whom the deposits were given had failed to honour the cheques, that the assessee was not recognizing interest income on those deposits from 1997- 98 onwards,that similar addition on accrued interest was on ICD.s was made in the AY.s 1997-98, 1998-99 and 2002-03, that the FAA deleted the addition and the Tribunal upheld the order of the FAA for those years, that while completing the assessment orders u/s. 143(3) r.w.s.153(3) of the Act for the AY.2001-02 to 2007-08 the AO had once again made the similar additions,that the FAA following the orders of the Tribunal for the AY.s 1997-98 and other two assessment years deleted the addition, that the appeal filed by the department was dismissed by the Tribunal, that on 8.12.2011 the Hon'ble Bombay High Court had dismissed the appeal filed u/s. 260A against the order of the Tribunal.

3.1After considering the submission of the assessee and the assessment order the FAA held that it was a recurring issue which had been dealt with during the assessment proceedings during 143(3)as well as in the assessment proceedings u/s. 153A r.w.s. 143(3) of the Act in respect of AY.s 2001-02 to 2007-08, that the assessee had filed winding up petition before the Court, that in the notes on account year after year the assessee had mentioned that the interest receivable on ICD.s would be accounted for on receipt basis,that the AO had been ignoring the stand taken by the assessee, that the FAA and the Tribunal had deleted the additions made by the AO,that the Hon'ble High Court had dismissed the 260A application filed by the department. Finally,he allowed the appeal filed by the assessee.

4.Before us, the DR stated that the matter is to be decided on merits. As stated earlier none appeared for the assessee.

4.1We have heard the rival submissions and perused the material before us. We find that while deciding the appeal for the earlier years the Tribunal had decided the issue against the AO and the Hon'ble High Court had dismissed the 260A application filed by the department. Respectfully,following the judgment of Hon'ble Bombay High Court effective Ground of appeal is decided against the AO.

3640/Mum/2012(08-09)Solarpackaging