Law:

Section:

Section 4 of the Income-tax Act, 1961 - Income - Chargeable as - Whether in view of CBDT circular dated 6-10-1952, interest on doubtful loans of assessee-bank credited to interest suspense account would be assessable to tax - Held, No. Serction 147(a) of the Income-tax Act, 1961 - Reassessment - Non-disclosure of primary facts - Assessee, a bank, credited a certain amount to interest suspense account - It did not include such interest in its return but disclosed it in balance sheet filed with return and ITO completed assessment without bringing such interest to tax - Whether it could be said that there was failure on assessee's part to disclose fully and truly material necessary for assessment - Held, on facts, no Facts The assessee, a bank, did not show in its return a sum credited in 'interest suspense account', being the interest on loans which were considered by the assessee as bad and doubtful or unrecoverable. However, such sum was disclosed in the balance sheet and statements submitted along with the return for the relevant year. The ITO had accepted the return and excluded the impugned amount from taxation. Later, however, the ITO reopened the assessment and the impugned amount was subjected to tax on the ground that interest accrued and due on loans advanced by the assessee-bank was income of the bank and assessee had failed to disclose the income. The Commissioner upheld the ITO's order. On further appeal, the Tribunal held that reopening of assessment was not justified and that instructions as given in circular dated 6-10-1952 by the CBDT would govern the case. On reference : Held In view of CBDT Circular dated 6-10-1952, the impugned interest in respect of unrecoverable loans could not be included in taxable income of the asses-see. The Tribunal had also gone into the merits of the case and held that the recovery of the loan was practically impossible. Further, the assessee had not failed to disclose fully and truly all the material facts and statements filed with returns for the relevant year disclosed full details of the impugned amount. Accordingly, reassessment was not justified. K. Srinivasan and H. Raghavendra Rao for the Applicant. G.…

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