9911796707
TMI Blog2004 (7) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... been held, the action of the debtors was unilateral, the same would not affect the right of the assessee to receive the amount. 2. On the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that really no income had become due to the assessee. 3. On the facts and in the circumstances of the case, the learned CIT(A) has erred in not appreciating that the attachment notices issued by the Department to the debtors had the effect of only attaching the income which accrued to the assessee, and thus such income was legally taxable as assessee s income." 3. The assessee is a company. In the course of assessment proceedings, the AO noticed that the company had advanced monies to three persons (a) Sh. P.C. Yada ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO that the IT Department attached the moneys payable by the aforesaid three persons and as to whether these amounts were paid to the Department by the debtors is again not known to the assessee. In the circumstances, it was pleaded that the borrowers must have treated the principal and the interest payable to the assessee as remitted. This argument was also rejected by the AO by observing that the money has not come to the IT Department also. The AO calculated the interest at 18 per cent and made an addition on account of interest at a sum of Rs. 4,83,340 as follows: Rs. Smt. Chanda Chaubey 1,12,500 Shri Salim Gauhar 1,20,840 Shri P.C. Yadav 2,50,000 4,83,340 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 237 ITR 889 (SC), he held that no addition on account of notional interest can be made in the hands of the assessee by taking note of the reality of the situation. 5. Aggrieved by the order of the CIT(A), the Revenue is in appeal before us. 6. We have heard the submissions of the learned Departmental Representative as well as the learned counsel for the assessee. The principal grievance of the Revenue in this case is that there was no basis for the CIT(A) to have given a finding that the principal amount payable by the debtors to the assessee got extinguished due to unilateral termination of agreement and specific denial by the debtors to pay any interest. According to her, the assessee was following mercantile system of accounting and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounts due to the assessee. From a perusal of the order of assessment it transpires that the assessee merely relied on the fact that IT Department had attached the monies payable by the debtors to the assessee and that the debtors must have remitted the money to the IT Department. As already observed by us, there is no material on record to show that the debtors refused to pay the monies to the assessee. A mere denial by the debtor to pay amounts to a creditor is not enough to come to a conclusion that there was a remission of liability. 8. We shall now examine the relevance of the decision of the Supreme Court in UCO Bank s case. The Supreme Court in the aforesaid case was concerned with interest payable on loans, which were considered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that income has not resulted or accrued to the assessee. After debiting the debtor s account and not reversing that entry but taking the interest merely in suspense account cannot be such evidence to show that no real income has accrued to the assessee or been treated as such by the assessee. (e) The concept of real income is certainly applicable in judging whether there has been income or not, but, in every case, it must be applied with care and within well recognised limits. The conduct of the assessee in showing the principal as still outstanding in its books of account would only show that the assessee still considers the principal as recoverable. There was no remission of debt or liability by the assessee. In ssuch circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and we find no relevance to those decisions to the present case. (c) For the proposition that Courts should look beyond the words mentioned in the statute, if the circumstances warrant so. CIT vs. National Taj Traders (1980) 14 CTR (SC) 348 : (1980) 121 ITR 535 (SC), K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC), etc. We are of the view that the propositions laid down in those cases are not applicable to the facts of the present case. In the present case, we are concerned with a factual issue as to whether there was remission of debt and as to whether there were facts and circumstances, which could suggest that the debtor had remitted debt payable to the assessee. We have already held that there was no evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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