- (1.) Civil Appeal No. 235 of 1996 Civil Appeal No. 235 of 1996 pertains to the assessment of the income of the appellant, United Commercial Bank Ltd. , for the assessment year 1981-82. The assessee had credited a total sum of Rs. 49,15,435. 00 by way of interest to a suspense account since recovery of the said amount was doubtful and no recovery of the said amount or any part of it which was by way of interest on loans advanced by it, had been effected in the three previous years. The assessee excluded the said sum of Rs. 49,15,435. 00 while computing its total income.
(2.) The Income-tax department completed the assessment for assessment year 1981-82 on 28th of February, 1985, by following the Central Board of Direct Taxes Circular No. F. 201/21/84 TTA-II dated 9th of October, 1984 excluding from the total income of the assessee, the said sum of Rs. 49,15,435. 00 while computing the total income of the assessee. The Commissioner of Income-tax on examination of the assessment records considered the exclusion of the said sum of Rs. 49,15,435. 00 to be erroneous and prejudicial to the interest of the revenue. By his order dated 5th of March, 1987 he included the said amount in the total income of the assessee. On appeal, the Income-tax Appellate Tribunal, by its order dated 14-10-1988, allowed the appeal of the assessee. A reference was made to the High Court at the instance of the revenue under Section 256 (1) of the Income-tax Act. The following question was referred to the High Court: "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in cancelling the CIT's order under Section 263 of the Income-tax Act holding that when the assessment was completed, the only paper available was the Board's circular dated 9/10/1984 and, therefore it cannot be said that the IAC's order of assessment not taxing the interest in suspense of Rs. 49,15,435. 00 in view of that circular was erroneous and prejudicial to the interest of revenue. "
(3.) The High Court has answered the reference in favour of the revenue in view of the decision of this Court in State Bank of Travancore v. Commr. of Income-tax Kerala, (1986) 158 ITR 102 : (AIR 1986 SC 757 : 1986 Tax LR 521).;