- (1.) IN the present appeal filed under Section 260A of the Income -tax Act, 1961 (hereinafter referred to as 'the Act'), the Commissioner of Income -tax -II, Kanpur, has raised the following substantial questions of law: Whether on the facts and in the circumstances of the case, the hon'ble Income -tax Appellate Tribunal was legally justified in granting relief from out of addition made by the Assessing Officer under Section 68 of the Income -tax Act, treating the deposits as genuine without properly appreciating the facts, and reasons for addition, as mentioned by the Assessing Officer in his order ? Whether on the facts and in the circumstances of the case, the hon'ble Income -tax Appellate Tribunal was justified in law in deleting the additions made by the Assessing Officer on account of hire charges and lease rentals without appreciating the fact that it was incumbent upon the assessee to account for the entire income on mercantile basis only and the assessee cannot be permitted to exclude any part of the accrued income (even if relating to NPAs) under the mercantile system which is to be strictly adopted under the amended provisions of Section 145 of the Income -tax Act ?
(2.) THE aforementioned substantial questions of law is said to be arising in the order of the Income -tax Appellate Tribunal dated June 14, 2005. The present appeal relates to the assessment year 1997 -98. The respondent -assessee is a public limited company incorporated under the provisions of the Companies Act, 1956. It is a non -banking financial company registered with the Reserve Bank of India (RBI) and derives income from hire purchase business and leasing of transport vehicles and machinery. During the course of assessment proceedings for the assessment year 1997 -98, the Assessing Officer noticed deposits of Rs. 1,75,000 from one Smt. Sheela Rani and Anr. of Rs. 13,00,012, relating to security deposit from one Sri Jagar Singh. The aforesaid amounts were added by the Assessing Officer under Section 68 of the Act. The assessing authority has also noticed that the respondent -assessee had not charged lease rental on non -performing assets, which he calculated at Rs. 43,47,117 and had also excluded the hire charges relating to the non -performing assets which were added as income. The Commissioner of Income -tax (Appeals) deleted both the additions, which order has been confirmed by the Tribunal.
(3.) WE have heard Sri A. N. Mahajan, learned standing counsel for the Revenue and Sri S. D. Singh, learned Counsel for the respondent -assessee.;