I T O Vs. HEMODHAR GOGAOI

JUDGEMENT

(1.) This appeal is preferred by the department against the order of the Commissioner (Appeals) in respect of the assessment year 1992-93. In spite of service of notice, the assessee has not appeared before this Tribunal at the time of hearing. However, the appeal is disposed of after hearing the Departmental Representative.

(2.) The first ground of appeal is regarding the direction of the Commissioner (Appeals) to take into account the interest income on maturity of FDRs. The assessing officer found that the accrued interest was shown at Rs. 9,000 only. However, according to the assessing officer, the interest was higher. According to the assessing officer normally on long-term deposit the bank allowed 10 per cent interest per annum. Accordingly the assessing officer added a sum of Rs. 22,000 towards interest income on estimate basis at the rate of 10 per cent per annum on the deposit of Rs. 2,20,000. The learned Departmental Representative, Mr. P. Sarma, submitted that the Commissioner (Appeals) has committed a mistake in directing the assessing officer to take into account the interest income on maturity of FDRs.

(3.) We have considered the arguments of learned Departmental Representative in the light of the materials available on record. There is no dispute regarding the deposits of Rs. 2,22,000 in the bank as FDR. Since the aforesaid amount was deposited in bank, the assessing officer could have verified the actual rate of interest which was offered by the bank at the relevant point of time. The assessing officer instead of making the verification and enquiry by invoking his power under section 131 of the Act, he simply estimated the interest @ 10 per cent per annum on the assumption that normally on long-term deposit the bank allowed 10 per cent interest. The assessee appears to have followed the mercantile system of accounting. So it is necessary to credit the interest on accrual basis every year. In view of the above, we are of the opinion that both the assessing officer as well as the Commissioner (Appeals) have committed a mistake in computing the total income in respect of interest. The assessing officer ought to have enquired the respective bank regarding the actual grant of interest on the aforesaid deposit. Moreover, the assessing officer may also call for the assessee to file the proof of rate of interest by getting the certificate from the respective bank itself. Without taking any recourse to find out a rate of interest, the assessing officer has simply estimated the same at 10 per cent, As already stated since the assessee is following the mercantile system of accounting the interest accrued on the FDRs ought to have been credited every year. In view of the above discussion, the orders of both the authorities below in respect of the interest is set aside and the matter is remanded back to the file of the assessing officer for making fresh enquiry, The assessing officer shall make a fresh enquiry on the interest income and find out the actual rate of interest which was offered by the bank at the relevant point of time and the same shall be included on accrual basis. The assessing officer shall give adequate opportunity to the assessee at the time of enquiry to establish his case. In view of the above, the appeal on this point is allowed and the order of the Commissioner (Appeals) is set aside and the matter is remanded back to the assessing officer as indicated above.