- (1.) This appeal under section 260A of the Income-tax Act, 1961 (for short "the Act"), has been filed by the Revenue against the order dated October 15, 2010, passed by the Income-tax Appellate Tribunal, Chandigarh Bench "A", Chandigarh (in short "the Tribunal") in I. T. A. No. 179/Chandi/2010, relating to the assessment year 2006-07.
(2.) The following substantial questions of law have been claimed for determination of this court : (i) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal has erred in deleting the addition of Rs. 2,06,23,367 made by the Assessing Officer by treating the deposits received by the assessee against settlement pending as income of the assessee despite the fact that the assessee is maintaining its accounts on cash basis. (ii) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal has erred in deleting the addition of Rs. 2,06,23,367 made by the Assessing Officer accepting the method of accounting followed by the assessee which results in postponement of its tax liability as per the discretion of the assessee, since the tax on interest received is neither being paid on accrual nor on cash basis.
(3.) The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee is an undertaking of the Government of Haryana which is engaged in the business of financing, merchant banking, leasing, etc. The assessee filed its return for the assessment year 2006-07 on October 9, 2006/November 21, 2006, declaring current income of Rs. 1,09,60,635. The assessee, after setting off the brought forward losses of the earlier years, declared the income at nil. Return was processed under section 143(1) on May 8, 2007. During the course of assessment proceedings, the Assessing Officer, vide order dated December 22, 2008, inter alia, made addition of an amount of Rs. 2,06,23,367 treating the deposits credited under the head "Current liabilities" in the balance-sheet, as income. The Assessing Officer observed that the assessee was maintaining its accounts on cash basis, and in the absence of any bifurcation of the principal amount and the interest, the entire amount was to be treated as having been received on account of interest.;