AJIT K.SENGUPTA,J. - (1.) IN this reference under S. 256(1) of the IT Act, 1961, for the asst. yrs. 1962-63, 1973-74 and 1974-75 the following common question of law has been referred to this Court : "Whether, on the facts and in the circumstances of the case, and in view of the Circular dt. 6th Oct., 1952 of the CBDT r/w the subsequent Circular dt. 9th Oct., 1984 issued by the same authority, the Tribunal was right in confirming the taxing of the interest on the sticky advances as the income of the assessee even though they were credited to a suspensea account and not to the Profit and Loss Account ?"
(2.) SHORTLY stated the facts are that the assessee is a nationalised bank deriving income from business in banking activities. The ITO made additions of Rs. 2,38,739 Rs. 12,97,506, and Rs. 18,84,752 to the disclosed income of the assessee respectively during the three years under consideration. These amounts represented interest on sticky advances which were debited to the debtors' accounts but not credited to the Profit and Loss Accounts. Instead, these were credited to a suspense account on the ground that the realisation of the principal amounts themselves was in jeopardy. The case of the ITO was that the amounts themselves were taxable under the mercantile system of accounting followed by the assessee even though they were not credited to the Profit & Loss Accounts.
(3.) THE assessee appealed to the CIT(A) but without success.;