Income Tax Appellate Tribunal - Chandigarh
H.P. State Indl. Dev. Corporation Ltd. vs Joint Commissioner Of Income-Tax on 11 September, 2001
Equivalent citations: [2001]80ITD639(CHD)
ORDER
Vimal Gandhi, Vice-President
1. These two appeals by the assessee for assessment years 1992-93 and 1993-94 under the Interest-tax Act are directed against the common order of the CIT(A) dated 10-2-2001 upholding the assessments made in the hands of the assessee.
2. The facts of the case are that the assessee-corporation (hereinafter called the credit institution), filed return for the assessment year 1992-93 on 29-11-1994 declaring interest income of Rs. 2,33,23,994. The Assessing Officer passed order accepting the return under Section 8(2) of the Interest-tax Act on 14-3-1995. For the assessment year 1993-94, return was filed on 31-12-1993 declaring interest income at Rs. 6,04,08,248. The said return was also accepted under Section 8(2) of the Act vide order dated 10-3-1994.
3. Subsequently, the Assessing Officer on the belief that interest chargeable to tax had escaped assessment, issued notice under Section 10 dated 4th December, 1995 to the assessee after recording the following reasons:-
Section 5 of Interest-tax Act defines the scope of chargeable interest as under:-
Scope of chargeable interest.
Subject to the provisions of this Act, the chargeable interest of any previous year of a credit institution shall be the total amount of interest (other than interest on loans and advances made to other credit institutions) accruing or arising to the credit institution in that previous year.
The above provisions of Interest-tax Act explains clearly that the Interest-tax Act shall be charged in respect of any chargeable interest accruing or arising at the end of each accounting year but in this case the assessee has computed interest on actual receipt basis which is neither in conformity with the provisions of Sections 4 and 5 of Interest-tax Act nor with the system of accounting regularly employed by the assessee i.e. mercantile system of accounting. Further the return of chargeable interest filed on 29-11-1994 is to be regularised and tax to be charged correctly.
Similar notice was issued in assessment year 1993-94 except that no reference was made to the return filed for that year and proceedings were reopened on the basis of statutory provisions.
4. During the course of reassessment proceedings, the assessee submitted that the system of accounting regularly employed by the assessee regarding the interest income was cash and, therefore, original returns submitted by the assessee were correct and complete. The assessments were made as per regular system of accounting followed by the assessee in terms of Section 145 of the Income-tax Act, read with Section 21(2) of the Interest-tax Act. The Assessing Officer held that as per the statutory provisions of Section 5 of the Interest-tax Act, the interest was to be charged on accrual basis on account of amendment introduced in the Interest-tax Act w.e.f 1-10-1991. The charging section of Interest-tax Act could not be altered on account of provisions of Section 145 of the I.T. Act. He accordingly rejected the contention of the assessee that interest was to be taxed on receipt basis. The Assessing Officer computed interest income "accruing or arising" from 1-10-1991 to 31-3-1992 at Rs. 5,12,39,000 and from 1-4-1992 to 31-3-1993 at Rs. 11,62,76,000 and 396 of above amount was charged to tax. The Assessing Officer also charged interest under Sections 12A and 12B of the Income-tax Act.
5. The assessee impugned the above reassessments in appeal before the CIT(A) and submitted that reassessment proceedings taken by the Assessing Officer were invalid and without jurisdiction. Reopening of assessments was based merely on change of opinion regarding interpretation of the charging section. All the material facts relating to assessments were available to the Assessing Officer. On merits, it was submitted that chargeable interest was to be brought to tax as per regular system of accounting followed by the assessee which in the present case was cash. This system was followed and accepted by the Revenue in earlier assessment years. In this connection, it was brought to the notice of the ld. CIT(A) the provisions of Section 21 of the Interest-tax Act and amendment w.e.f. 1-10-1991 providing that provisions of Section 145 of the Income-tax Act would also be applicable to the proceedings under the Interest-tax Act.
6. The ld. CIT(A) after considering the amendment made in the Interest-tax Act w.e.f. 1-10-1991, circulars of the CBDT Nos. 159 dated 31-12-1974 and 621 dated 10-12-1991 under which the explanatory notes on the two Acts were explained given as also the charging section, held as under:--
(i) That the credit institution was liable to return interest chargeable to tax subject to certain exceptions as "accruing or arising" to the credit of the institution in the previous year whereas the assessee showed interest on receipt basis. The assessee-appellant, therefore, had failed to disclose fully and truly all material facts necessary for its assessment. There was no change of opinion on the part of the Assessing Officer as facts were not before him. The assessments have rightly been reopened under Section 10 of the Interest-tax Act, 1974.
(it) The interest under Section 5 of the Interest-tax Act w.e.f. 1-10-1991 was to be charged on accrual basis as it was arising on credit balances subject to few exceptions. Section 21 of the Interest-tax Act or Section 145 of the Income-tax Act relating to computation of profits and gains of business had no application in this case.
(iii) The assessee was liable to pay interest under Sections 12A and 12B of the Interest-tax Act on the analogy of Sections 234A and 234B of the Income-tax Act. Interest was held to be rightly charged.
7. Pertinent observations of the ld. CIT(A) upholding the action of the Assessing Officer are to the following effect:--
The ld. counsel of the appellant could not show any background papers or explanatory notes under which such an inference could be drawn out of small amendment made to Section 21 of Interest-tax Act. I have myself looked into the background papers as well as explanatory notes on the provisions relating to Income-tax Act introduced by Finance Act (2) of 1991, and I find it difficult to agree with the interpretation taken by the ld. counsel of the appellant. I find that under Section 145 of Income-tax Act profits and gains of business or profession have to be computed in accordance with the method of accounting regularly employed by the assessee but where Assessing Officer is not satisfied either with the correctness of the method employed or with the correctness and completeness of books of account, he can frame an assessment in the manner provided under Section 144. When this section is imported in the provisions of Interest-tax Act, it would only mean that if the method of accounting employed by the appellant is rejected or the a/c books are rejected, then best judgment assessment can be framed under Section 8(3) of Interest-tax Act No further meaning can be attached to it and the charging section of Interest-tax Act cannot be altered with mere incorporation of Section 145 of Income-tax Act in the list of Sections given under Section 21 of Interest-tax Act. After all under Interest-tax Act we don't bring to tax either profits and gains of business or profession or income from other sources, the chargeable interest is gross interest and this gross interest would be calculated on accrual basis as has been specifically prescribed under the Interest-tax Act. Further, I also find that appellant was maintaining one set of a/c books on cash system of accounting and in accordance with this set of accounts returns of income were being filed. The appellant was also maintaining another set of books of a/c, known as shadow accounts, on mercantile system of accounting and from these a/c books copies of accounts were being given to various debtors. The figure of chargeable interest which was calculated on accrual basis was clearly available with the appellant and was correctly calculated by the Assessing Officer. Therefore, I uphold the order passed by the Assessing Officer.
8. The assessee is aggrieved and has brought the issue in appeal before the Tribunal. Shri P.C. Jain, ld. Counsel for the assessee, strongly assailed the findings of the ld. CIT(A) both on reopening of the assessments as also on merits. He argued that reopening was bad in law as earlier Assessing Officer passing orders dated 4-3-1995 and 10-3-1995 was fully aware of statutory provisions of the Interest-tax Act. After considering the statutory provisions, the returns submitted by the assessee were accepted. Nothing had changed since then except the opinion of the Assessing Officer. On review of the opinion, the Assessing Officer issued notice under Section 10 of the Interest-tax Act on 4-12-1995. The notice issued merely on change of opinion, were bad in law. Shri Jain further submitted that appeals in the case of H.P. Financial Corporation for assessment years 1993-94 and 1992-93 were decided by the CIT(A) Shimla on 28-8-1995 wherein she had held that assessment of the assessee whereby chargeable interest on receipt basis was accepted was incorrect order and that remedy lies in correcting the said order. In the light of above order, the Assessing Officer received directions and initiated proceedings for reassessment without application of mind. This was bad in law. In this connection, Shri Jain drew our attention to the decision of the Hon'ble Supreme Court in the case of CITv. Tarajan Tea Co. (P.) Ltd. [1999] 236 ITR 477 and several other decisions including that of the Hon'ble Supreme Court in the case of Indian & Eastern Newspaper Society v. CIT[1979] 119 ITR 9962, Andhra Bank Ltd. v. GT [1997] 225 ITR 4473 and several other decisions given at page 2 of the written submissions before the CIT(A).
9. It was further contended that notice issued by the Assessing Officer was bad in law as it was not stated whether proceedings were being reopened under Clause (a) or (b) of Section 10 of the Interest-tax Act. He further submitted that the Assessing Officer and the ld. CIT(A) were wrong in treating Section 5 of the Act as a "charging section". The said section related to scope of chargeable interest. It related to application or computation of chargeable interest. It was not the charging section but the Revenue authorities wrongly treated the section as the charging section. Further they failed to consider the provisions of Section 21 of the Interest-tax Act under which Section 145 of the Income-tax Act was also made applicable under the Interest-tax Act meaning thereby that income was to be computed as per system of accounting regularly employed by the assessee which in the present case was cash. The Revenue authorities had no power to change the method of accounting regularly employed by the assessee. Thus Section 21 of the Interest-tax Act was required to be read harmoniously with Sections 4, 5 and other section of Interest-tax Act to give the proper meaning to statutory provisions but the Revenue authorities treated Section 21 as nugatory and otiose. Shri Jain further submitted that reopening of assessments on substitution by one regular method of account by another regular method of accounting was bad in law. It was merely change of opinion. For the aforesaid proposition, he relied on the decisions in the following cases:--
(i) Andhra Bank Ltd. 's case (supra).
(ii) CGTv. Nalini Srinivasan [1999] 238 ITR 592 (Mad.).
(iii) CITv. Simon Carves Ltd. [1976] 105 ITR 212 (SC).
(iv) Garden Silk Mills Ltd. v. Dy. CIT[1996] 222 ITR 681 (Guj.).
(v) Tarajan Tea Co. (P.) Ltd. 's case (supra).
Shri Jain further submitted that from the speech of the Finance Minister made at the time of introduction of Bill relating to Interest-tax Act reported in 95 ITR 76 (St.) explaining in exclutory notes accompanying the bill reported in 96 ITR 31 (St.) and similar exclutory notes accompanying the amendment made as reported in 190 ITR 317 (St.), the words used were "interest received" in connection with chargeable interest. This clearly showed that interest was to be charged on receipt basis and not on accrual basis. Shri Jain further submitted that the assessee was being financed by IDBI, ICICI and other institutions and was acting as a conduit pipe for giving loans to various parties. The repayment of loans was remitted to the IDBI and other institutions. In other words, the borrowings were being made from IDBI and the assessee was getting only 1 1/2% as commission of total interest receipts. Therefore, interest assessed in the name of the assessee was in fact the income of IDBI and other institutions, having passed to them through an overriding title. Such interest could not be assessed in the hands of the assessee. Shri Jain conceded that the aforesaid plea was being raised for the first time before the Tribunal. But such a plea could be raised having regarding to the pronouncement of law made by different High Courts. In this connection he drew our attention to the decisions of Kerala High Court in the case of CITv. State Bank of Travancore [1997] 228 ITR 402 of Madras High Court in the case of CITv. Karur Vysya Bank Ltd. [2000] 242 ITR 734 and of Karnataka High Court in the case of CITv. Canara Bank [1989] 175 ITR 601.3
10. The ld. D.R., on the other hand, supported the impugned order of the CIT(A).
11. We have given careful thought to the rival submissions of the parties. In order to decide the contentions raised by the learned representatives of the parties, we deem it necessary to reproduce certain provisions of Interest-tax Act, 1971 as amended by Finance (No. 2) Act, 1991, w.e.f. 1-10-1991 and as were applicable in the relevant assessment years before us. The provisions of Sections 4, 5, 6, 7 and 10 are reproduced below:--
Charge of tax
4. (1) Subject to the provisions of this Act, there shall be charged on every scheduled bank for every assessment year commencing on or after the 1st day of April, 1975, a tax in this Act referred to as interest-tax in respect of its chargeable interest of the previous year at the rate of seven per cent of such chargeable interest:
Provided that the rate at which interest-tax shall be charged in respect of any chargeable interest accruing or arising after the 31st day of March, 1983 shall be three and a half per cent of such chargeable interest.
(2) Notwithstanding anything contained in Sub-section (1) but subject to the other provisions of this Act, there shall be charged on every credit institution for every assessment year commencing on and from the 1st day of April, 1992, interest-tax in respect of its chargeable interest of the previous year at the rate of three per cent of such chargeable interest:
Provided that the rate at which interest-tax shall be charged in respect of any chargeable interest accruing or arising after the 31st day of March, 1997 shall be two per cent of such chargeable interest.
(3) Notwithstanding anything contained in Sub-sections (1) and (2), no interest-tax shall be charged in respect of any chargeable interest accruing or arising after the 31st day of March, 2000.
Scope of chargeable interest.
5. Subject to the provisions of this Act, the chargeable interest of any previous year of a credit institution shall be the total amount of interest (other than interest on loans and advances made to other credit institutions or to any co-operative society engaged in carrying on the business of banking, accruing or arising to the credit institution in that previous year:
Provided that any interest in relation to categories of bad or doubtful debts referred to in Section 43D of the Income-tax Act shall be deemed to accrue or arise to the credit institution in the previous year in which it is credited by the credit institution to its profit and loss account for that year or, as the case may be, in which it is actually received by the credit institution, whichever is earlier.
Computation of chargeable interest.
6. (1) Subject to the provisions of Sub-section (2) in computing the chargeable interest of a previous year, there shall be allowed from the total amount of interest (other than interest on loans and advances made to credit institutions) accruing or arising to the assessee in the previous year, a deduction in respect of the amount of interest which is established to have become a bad debt during the previous year:
Provided that such interest has been taken into account in computing the chargeable interest of the assessee of an earlier previous year and the amount has been written off as irrecoverable in the accounts of the assessee for the previous year during which it is established to have become a bad debt.
Explanation - For the removal of doubts, it is hereby declared that in computing the chargeable interest of a previous year, no deduction other than the deduction specified in this sub-section shall be allowed from the total amount of interest accruing or arising to the assessee.
(2) In computing the chargeable interest of a previous year, the amount of interest which accrues or arises to the assessee before the 1st day of August, 1974 or during the period commencing on the 1st day of March, 1978 and ending with the 30th day of June, 1980, or during the period commencing on the 1st day of April, 1985 and ending with the 30th day of September, 1991, shall not be taken into account.
Return of chargeable interest.
7. (1) In the case of every credit institution, its principal officer, or where in the case of a non-resident credit institution any person has been treated as its agent under Section 163 of the Income-tax Act, such person, shall furnish a return of the chargeable interest of the credit institution of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, before the 31st day of December, of the assessment year.
(2) Without prejudice to the provisions of Sub-section (1), the Assessing Officer may, before the end of the relevant assessment year, serve a notice upon the principal officer of any credit institution, or where in the case of a non-resident credit institution any person has been treated as its agent under Section 163 of the Income-tax Act, upon such person, requiring him to furnish within thirty days from the day of service of the notice a return of the chargeable interest of the credit institution of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.
(3) Any assessee who has not furnished a return within the time allowed under Sub-section (1) or Sub-section (2), or having furnished a return under Sub-section (1) or Sub-section (2), discovers any omission or wrong statement therein, may furnish a return or a revised return, as the case may be, at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
Interest escaping assessment.
10. If--
(a) the Assessing Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return under Section 7 for any assessment year or to disclose fully and truly all material facts necessary for his assessment for any assessment year, chargeable interest for that year has escaped assessment or has been under-assessed or has been made the subject or excessive relief under this Act, or (b) notwithstanding that there has been no omission or failure as mentioned in Clause (a) on the part of the assessee, the Assessing Officer has, in consequence of information in his possession, reason to believe that chargeable interest assessable for any assessment year has escaped assessment or has been under-assessed or has been the subject of excessive relief under this Act, he may, in cases falling under Clause (a) at any time, and in cases falling under Clause (b), at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Section 7, and may proceed to assess or reassess the amount chargeable to interest-tax and the provisions of this Act shall, so far as may be, apply as if the notice were a notice issued under that section.
12. Certain provisions of Income-tax Act are made applicable with necessary modification, the said provisions and rules referred to Interest-tax Act instead of the Income-tax Act. This is provided in Section 21 of the Interest-tax Act and one of the Sections made applicable is Section 145 of the Income-tax Act.
13. In the case before us, there is no dispute that the assessee is a credit institution and is liable to be charged under Sub-section (2) of Section 4 of the Interest-tax Act. The main contention advanced on behalf of the assessee was that the chargeable interest is to be computed as per Section 6 of the Act in accordance with regular system of accounting followed by the assessee which in the present case, was cash system. There is nothing in the Interest-tax Act authorising the Assessing Officer to change the system of accounting from cash to mercantile and assess the interest on accrual basis. On careful consideration of rival submissions, in the light of material available on record, we find it difficult to accept this contention.
14. In the case of CITv. British Paints India Ltd. [1991] 188 ITR 44 (SC) their Lordships of Supreme Court observed as under:--
The question to be determined by the Assessing Officer in exercise of his power under Section 145 is whether or not income can properly be deducted from the accounts maintained by the assessee, even if the accounts are correct and complete to the satisfaction of the Officer and the income has been computed in accordance with the method regularly employed by the assessee. What is to be determined by the Officer is a question of fact, i.e., whether or not income chargeable under the Act can properly be deducted from the books of account, and he must decide the question with reference to the relevant material and in accordance with the correct principles. It is not only the right, but the duty of the Assessing Officer to consider whether or not the books disclose the true state of accounts and the correct income can be deducted therefrom. It is incorrect to say that the officer is bound to accept the system of accounting regularly employed by the assessee the correctness of which had not been questioned in the past. There is no estoppel in these matters and the officer is not bound by the method followed in the earlier years.
15. It is clear from the above that the Assessing Officer has ultimately to consider whether or not the income chargeable under the Act can properly be deducted from the accounts and this question has to be decided with reference to relevant material and in accordance with the correct principles.
Their Lordships further observed that the Assessing Officer is not duty bound to accept the system of accounting regularly employed by the assessee, correctness of which has not been questioned in the past, if under such system correct income cannot be determined. In our opinion, aforesaid observations of their Lordships of the Supreme Court squarely meet all objections raised on behalf of the assessee regarding the cash system of accounting regularly followed by the assessee.
16. Under the Interest-tax Act, every credit institution has to pay interest-tax on chargeable interest of the previous year. The chargeable interest is defined under Section 5 of the Interest-tax Act which has already been reproduced above. As per the said section, chargeable interest shall be the "total amount of interest accruing or arising to the credit institution in the previous year." The provisions of Section 5 are unambiguous and leave no amount of doubt as to what is "chargeable interest". Shri Jain had submitted that Section 5 of the Interest-tax Act is not the charging section. We are unable to accept this contention as Section 5 explains the scope of charging section and, therefore, both Sections 4 and 5 are to be read together in a harmonious manner to see what is "chargeable interest". The provisions of Section 5 further emphasise that chargeable interest is to be taken as accruing or arising to the credit institution. The interest on bad and doubtful debts referred to in Section 43D of Income-tax Act is deemed to accrue or arise only in the year in which such interest is actually received by the credit institution. Thus, in special cases as mentioned in the proviso which is an exception to the general provisions, the actual interest received is "deemed to accrue or arise" in the previous year in which it is actually received. Thus, by a legal fiction the interest "actually received" is also deemed to accrue or arise under the proviso and is brought to tax. This proviso leaves no doubt that interest is to be charged to tax as accruing or arising and system of accounting followed is made irrelevant. Section 6 of the Act provides for computation of chargeable interest. Under Section 7 of the Act every credit institution is obliged to "furnish a return of chargeable interest of the credit institution of the previous year" in the prescribed form before 31st December of the assessment year. Such return can be revised in terms of Sub-section (3) of Section 7 before expiry of one year from the end of the relevant assessment year. It is clear from the above discussion that an assessee under the Interest-tax Act is obliged and is duty bound to submit a return of the chargeable interest by the date mentioned above. The chargeable interest means "amount of interest accruing or arising" to the credit institution in the previous year. We have already referred to the decision of the British Paints India Ltd. 's case (supra) to show that the Assessing Officer is duty-bound to tax the correct chargeable income as per law irrespective of the system of accounting followed by the assessee. If the system of accounting cannot give correct figure of chargeable interest under the Act, such system is to be rejected and correct interest income is to be brought to tax. We fail to understand how figure of correct chargeable interest "accruing or arising in the previous year" could be determined under cash system of accounting. We, therefore, have no hesitation in holding that chargeable interest cannot be computed on the basis of cash system of accounting as was followed by the assessee in the past. Even if, such system was wrongly accepted by the Revenue in the past, there is no estoppel in these matters and the officer is not duty-bound by the method adopted in the earlier assessment years [as per the decision of British Paints India Ltd.'s case (supra)]. Having regard to clear and unambiguous provisions relating to assessable interest as accruing or arising, not much discussion is necessary to reject the contention of the assessee that return of cash system of accounting was correct. For the above reasons, there is no need to rely on any external aid like speech of the Finance Minister or explanatory notes on the relevant bill to interpret and understand the meaning of "chargeable interest" under the Interest-tax Act, although these external aids also do not support the claim of the assessee.
17. From the above discussion, the following results follow as a matter of necessary a corollary:--
(i) That in the assessment year 1992-93, the return filed by the assessee on 29-11-1994 was an invalid return as it was filed beyond the time, prescribed under the statute. Being a non est return, no proceedings on the basis of such a return could be taken by the Assessing Officer and if any taken, those were illegal and without jurisdiction. The assessment based upon such return is also void ab initio and could not effect the power of the Assessing Officer to issue notice under Section 10 of the Interest-tax Act. Again, there were omission and failure on the part of the assessee to make the return under Section 7 for the assessment year 1992-93 and on account of above failure, the Assessing Officer could initiate proceedings under Section 10(a) of the Interest-tax Act. This is specifically provided in Section 10. Therefore, notice of reassessment issued by the Assessing Officer for assessment year 1992-93 is valid under Section 10(a) of the Income-tax Act.
(ii) Sh. Jain had contended that order passed by the Assessing Officer on 14-3-1995 was valid unless it was cancelled by a competent authority in an appropriate proceeding. We do not agree with the above submissions. On an invalid and non est return, no assessment can be made, if made such assessment is bad in law. Our above view is supported by the decisions of Calcutta High Court in the case of CIT v. Bissessar Lal Gupta [1976] 105 ITR 685 and also by the decision of Allahabad High Court in the case of CED v. Bhola Dutt [1981] 130 ITR 468.
(iii) There was complete failure on the part of the assessee to disclose material particulars necessary for its assessment. The statutory provisions noted above oblige a credit institution to disclose total "chargeable interest" accruing or arising in the previous year. The assessee did not disclose this and showed interest on receipt basis. The Assessing Officer and ld. CIT(A) had recorded that chargeable interest as accruing or arising was not disclosed in the original return submitted by the assessee in both the assessment years under appeal. The aforesaid finding was not challenged by the assessee during the course of hearing. On the contrary, it has been the claim of the assessee that the "chargeable interest" is to be disclosed on the basis of cash system of accounting regularly followed by the assessee in the past. This contention of the assessee has already been rejected. We accordingly, hold that the assessee failed to disclose material facts truly, correctly and fully as enjoined under the statute and on account of above failure, the Assessing Officer was justified in initiating reassessment proceedings under Section 10(fl) of the Interest-tax Act in both the assessment years.
(iv) That even on merit the interest is liable to be taxed as accruing or arising in the previous year. The assessee during the course of hearing of appeal did not point out any amount which was wrongly charged by the Assessing Officer and which in fact, had not accrued or arisen on credits maintained by the assessee.
(v) That the ld. counsel for the assessee had vehemently contended that reassessment proceedings were initiated merely on change of the opinion of the Assessing Officer regarding interpretation of Sections 4 and 5 of the Interest-tax Act. We do not find any substance in the above submission. It is clear from the assessment order dated 14-3-1995 for assessment year 1992-93 and assessment order dated 10-3-1995 for the assessment year 1993-94 that the Assessing Officer did not consider the question whether the chargeable interest was to be taken on accrual basis or on receipt basis as disclosed by the assessee in the return. The Assessing Officer also did not consider or apply mind to provisions of Sections 4 and 5 of the Interest-tax Act. Obviously, there was no opinion formed in regard to the basis of the taxability of chargeable interest and consequently there would not arise any question of a mere change of opinion. In cases where the Assessing Officer had overlooked something at the first assessment, there can, in our opinion, no question of any change of opinion with income which was chargeable to tax as actually taxed as it ought to have been under the law but was not done, due to an error committed at the first assessment. We, therefore, hold that arguments that the proceedings are based on change of opinion are without any merit.
18. The contention of the assessee that in several other cases, the Revenue had made assessment under the Interest-tax Act on several financial institutions on receipt basis and not an accrual basis. In this connection, our attention was drawn to copies of order passed in the case of Haryana Financial Corporation, Punjab Financial Corporation, Gujarat Indl. Dev. Corporation, Delhi Financial Corporation. Copies of assessment order are available on pages 19 to 28 of the Paper Book of the assessee. It is not clear from the documents placed before us as to on what basis interest was returned by the above institutions and assessed by the Revenue. We further do not know the circumstances under which assessments were made. At any rate, we have arrived at our conclusion on objective consideration of relevant statutory provisions. Therefore, assessment made by the Revenue, cannot materially effect our above conclusion particularly when the matter has been considered in the light of statutory provisions. We reiterate that chargeable interest in the two years under appeal, was required to be disclosed by the credit institution as accrued or arisen and not on receipt basis.
19. Sh. Jain had further contended that if two reasonable views of the matter are possible. We must adopt the view favourable to the assessee. There is no doubt or dispute on this legal proposition advanced before us, but as observed earlier the statutory provision is clear that the total "chargeable interest" is to be returned or assessed as "accruing or arising" to the credit institution in the previous year. There is no scope to give any benefit of doubt to the assessee. Therefore, this contention of assessee is also required to be rejected. It was also contended by Sh. Jain that the Assessing Officer initiated reassessment proceedings and passed re-assessment order making addition in both the years on the basis of direction given by the CIT(A), dated 28-8-1995 in the case of Himachal Pradesh Financial Corporation. The action taken and order passed at the behest of some other authority is totally illegal and without jurisdiction. We are of view that every quasi-judicial action of the Assessing Officer must reflect application of his mind and should not be shown to be based on the directions of his superiors. In the present case, on consideration of reasons recorded and other material/ we are unable to accept that the proceedings were initiated not by the Assessing Officer but on the direction of some superior authority. The assessee has not brought any material on record to substantiate its objection. It may be true that the Assessing Officer became aware of correct legal position after order dated 28-8-1995 of the CIT(A) and thereafter considered things in the right perspective and took action. However, his belief that chargeable interest had escaped assessment on account of failure of the assessee to return interest as accruing or arising and, therefore, action for reassessment was necessary, is not shown to have followed any superior directions. We, therefore, do not see any error in the approach of the Assessing Officer which would render the entire proceedings vitiated, illegal and without jurisdiction. It is clearly seen that the Assessing Officer initiated reassessment proceedings after recording his reasons to believe and after application of his mind. We, therefore, do not find any merit in the objection raised on behalf of the assessee.
20. Sh. Jain also contended that interest on loans received from HDFC, UTI, ICICI, etc. was not income of the assessee as the said interest was to be given to these institutions on account of "overriding title". The assessee was only to receive commission on these amounts. The ld. counsel for the assessee did not give us any material which would show that part of the interest received by the assessee was to be diverted through the overriding title. No detail is available on record as to how much of interest belonged to other public institutions and was wrongly assessed in the hands of the assessee. In the absence of such a detail we are unable to allow any relief to the assessee on this ground.
21. Shri Jain also made some submissions in the alternative as per the letter available on record under the title "submission for adjudication in respect of quantum of chargeable interest". It has been contended that under the above caption that interests received in the accounting periods which pertained to earlier period or interest accruing on bad and doubtful debts have also been included in the "chargeable interest". The Assessing Officer could assess interest accruing or arising in the previous year relevant to the two assessment years under consideration. The above inclusion of interest on receipt basis is bad in law. We accept this contention. The Assessing Officer could bring to charge interest accruing or arising from 1st April, 1991 to 31st March, 1992 in the assessment year 1992-93 and similar interest accruing or arising from 1-4-1992 to 31-3-1993 in the assessment year 1993-94. He was also liable to deduct amount of interest not likely to be received because of the debts having become doubtful as per the statutory provision. Accordingly we deem it fair and reasonable to deduct and delete any interest of above nature included in the "chargeable interest" in the hands of the assessee. For the above purpose, the assessee is allowed three months' time from the receipt of this letter to furnish detail of interest which according to the assessee did not accrue or arise in the relevant period to the Assessing Officer for verification. In case such information is furnished by the assessee the Assessing Officer would examine and verify it and allow appropriate relief to the assessee. Subject to the above directions, we do not find any merit in these appeals and dismiss the same.
22. In the result, both the appeals are dismissed.