S.R. Rajasekhara Murthy, J.
1. The Income-tax Appellate Tribunal, Bangalore Bench, has referred the following questions under section 256(1) of the Income-tax Act, 1961, for the opinion of this court :
'1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the provisions of section 147(a) are not attracted
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the interest of Rs. 54,485 taken directly to interest suspense account is not assessable to income-tax ?'
2. The assessee is a banking company. The assessment for the year ending December 31, 1968, was completed on October 4, 1969. Later, the assessment was reopened under section 147(a) of the Income-tax Act, 1961 (shortly called 'the Act'), to bring to tax a sum of Rs. 54,485 in respect of 'interest suspense account'. This represented, according to the assessee, sums of interest on loans, the recovery of which was considered doubtful. The assessee had disclosed this sum of Rs. 54,485 in the balance-sheet as unrealised amount of interest along with the return filed by it and the Income-tax Officer had accepted the return and had excluded that amount from taxation in the assessment order completed on October 4, 1969. In pursuance of the notice issued under section 147(a) of the Act, the assessment was reopened and this sum of Rs. 54,485 was subjected to tax on the ground that the interest accrued and due on the loans advanced by the bank was the income of the bank for the relevant assessment year and the assessee had failed to disclose this income in the return filed by it earlier. The assessee preferred an appeal against the reassessment order to the Commissioner of Income-tax (Appeals) who upheld the action of the Income-tax Officer and, on further appeal, the Tribunal, however, reversed the view of the Commissioner of Income-tax (Appeals) and held that the instructions of the Central Board of Direct Taxes contained in Circular dated October 6, 1952, would govern the case and the reopening of the assessment was, therefore, not justified.
3. So far as the second question is concerned, it does not detain us any longer in view of the Circular dated October 6, 1952, issued by the Central Board of Direct Taxes, which reads thus :
'Sub : Bad and doubtful debts - Irrecoverable loans - Banks - Interest on doubtful loans - Suspense account maintained for the purpose of - Treatment of, for income-tax purposes.
In its Circular No. 37/54 dated the 25th August, 1924 (reproduced in section 4(1) as item I on page 239 of volume (l), the Board held, as a result of the conclusion reached at the conference of the Income-tax Commissioners, that interest accruing to a money-lender on loans entered in a suspense account because of the extreme unlikelihood of their being recovered need not be included in the assessee's taxable income if the Income-tax Officer is satisfied that there is really little possibility of the loans being repaid. It is considered desirable to extend this principle to banks which, instead of transferring the doubtful debts to a suspense account, credit the interest on such debts to that account provided the Income-tax Officer is satisfied that recovery is practically impossible.
In this connection, the Board desires that a record of such loans and interest thereon should be kept in a permanent file to act as an aide memoire both for allowing deductions and for charging tax on recoveries in subsequent assessments. The whole idea underlying the maintenance of this record is to avoid being very meticulous so long as there is no doubt about the bona fides of the write-off and also to avoid losing sight of recoveries.'
4. Having regard to this Circular, the Tribunal was justified in holding that the said interest of Rs. 54,485 was not assessable to tax during the relevant year. The interest credited to the suspense account by the assessee was the interest on the loans, the recovery of which was considered to be doubtful. It cannot, therefore, be any income liable to be taxed. The Tribunal has also gone into the merits of the case and was satisfied that the recovery of the loan was practically impossible. That is a finding of fact which is not shown to be perverse. We entirely agree with the view taken by the Tribunal on this aspect of the matter.
5. Turning now to the first question, viz., whether the Tribunal was right in law in holding that the provisions of section 147(a) of the Act are not attracted, the Tribunal has found that there was no failure on the part of the assessee in furnishing the particulars about this sum as not recoverable for the relevant accounting year. The Tribunal has observed in para. 12 of its order that the statements filed along with the original returns disclosed the full details of the aforesaid account. There was, therefore, no failure on the part of the assessee to disclose fully and truly the material facts necessary for its assessment for the respective years.
6. The view taken by the Tribunal is perfectly justified. From the balance-sheet, it is clear that there was no failure on the part of the assessee to disclose the said amount. The provisions of section 147(a) of the Act are, therefore, not attracted to the case.
7. In the result, we answer both the questions in the affirmative and in favour of the assessee.