Ltd., Hisar. PAN/GIR NO. AABCD0033C (Appellant ) ( Respondent ) Department by : Shri Krishna CIT DR Assessee by : Dr. Rakesh Gupta Adv. ORDER PER R.P. TOLANI, J.M : This is Revenue's appeal against CIT(A)'s order dated 6112009 relating to A.Y. 200607. Sole ground raised is as under: "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,25,18,23,535/ made by the AO on account of nonrealization of provision of surcharge." 2. Brief facts, are that the assessee is a Haryana Govt. undertaking incorporated on 1531999; the objects, inter alia, include distribution of electricity in ten districts of Southern Haryana. Assessee maintains a/c books on mercantile system. In the bills assessee has a practice of levy of sur charge for delayed payment of electricity bills by consumers after the due date. Assessee's method of accounting, raising of electricity bills remain same as in earlier years. ITA no. 250/Del/10 2 DCIT Vs. Dakshin Haryana Bijli Vitran Nigam 2.1. As a practice, regularly followed, a sum of Rs. 13.86 crores actually realized as surcharge by the assessee has been offered for assessment as against the surcharge raised amounting to Rs.239.76 Crores (transferred under GH 62.240 to 270 in Schedule 19 as Surcharge). Further, assessee waived a sum of Rs.0.72 Crores out of the bills and the balance amount of Rs.225.18 Crores has been transferred to Account Head "GH 23.934"called as "for Surcharge not realized". The account statements contain Schedule30 which is captioned in notes in accounts. Under Serial No.20 therein, it is stated that since this amount has not been charged to the Profit & loss Account for the year under consideration, therefore, it is not added to the taxable income while computing tax liability for the subject year. 2.2. The Assessing Officer during the course of the assessment proceedings made various inquiries on this issue, to which assessee replied that accounting was done on realization/collection basis as per the prudential norms since last two years. Accordingly, Surcharge collected at Rs.36.86 Crores during the Financial Year 200506 has been reported as income and one as raised through bills at Rs.239.76 Crores (gross) has been retained in the books in the Balance Sheet. There was no change in method of accounting and this practice was regularly followed since A.Y. 200405. AO, however, asked the appellant to explain why income from Surcharge of Rs.239.76 Crores should not be taken as income of the assessee company since it is following the Mercantile System of Accounting, as mentioned in ITA no. 250/Del/10 3 DCIT Vs. Dakshin Haryana Bijli Vitran Nigam 7th Annual Report and the notes thereto. 2.3. Assessee submitted that Incometax is a levy on real income and in case real income does not result, there cannot be a tax even though entries in the books may suggest a hypothetical income. Where no income can be said to have resulted, an entry simpliciter in the books of accounts cannot make the income taxable. Reliance was placed on Apex court decision in CIT Vs. Shoorji Vallabh Ds & Co. 46 ITR 144 (SC) and Delhi High Court decision in CIT v. Modi Rubber Ltd. 230 ITR 817. 2.4. It was contended that even interest on sticky loans though provided for in the books of the bank were still not taxable to income tax in terms of the Board circular No.F.201l21184TTA dated 9th October, 1984 and the Apex Court decision in 237 ITR 889 in the case of UCO Bank v. CIT. Further reliance was placed on the case of Godhra Electricity company v. CIT , decided by Hon'ble Supreme Court in 225 ITR 746, where the enhanced tariff was disputed and the question of recognizing income on accrual arose. It was held that the increased tariff having been stayed only the real income was exigible to tax. Assessee further relied on the decision of the Apex Court in Poona Electricity Supply Co. Ltd. v. CIT 57 ITR 521 for the proposition that rebate to customers could not be considered as part