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TMI Blog2014 (3) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... t ] followed - the waiver of a loan, where deployed for the acquisition of a capital asset, would not amount to income u/s.41(1), is completely misplaced - The waiver, if at all, could only be by the assessee - there is in fact no waiver of any loan or liability - the debtor being rather required to pay the entire sum as outstanding in his books, which is inclusive of the three credits under reference, to the assessee - the credit to the assessee's account is itself an admission of the liability to the assessee - the debt to the assessee company being proved with reference to the decision by a court of law, the same stood confirmed as the assessee's income for the relevant year - the account not appearing in the assessee's books of account nor it furnishing any explanation, much less satisfactory, as to the nature and source of its relevant asset/s in the form of a debt/s due to it - Section 69/69A/69B would have application – thus, there is no merit in the assessee's case and uphold the addition, modifying the order to the extent it adverts to or draws on section 41(1) of the Act – Decided against Assessee. Addition made - Profits on security transaction – Held that:- The refle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e., in the first round. There is no question of it's interpretation, though the same may be required to be explained, and which would only be in its terms, on the basis of a holistic reading thereof. We shall proceed year-wise. Revenue's Appeals in quantum proceedings (for A.Ys. 1989-90 and 1990-91) 3.1 Both the appeals raise a common issue, projected by the Revenue per its ground no.1, which reads as under: 1. On the facts in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.16,75,86,084/- (*). [(*)Rs.27,08,000/- for A.Y. 1990-91) Both the additions pertain to the funds received by the assessee from, as alleged, undisclosed sources. The assessee's books reflected transactions in 'Bank of Karad Government securities sale and purchase a/c'. All the transactions were carried over and transferred to the loan account of Shri Abhay D. Narottam, who was being instructed by one, M/s. Champaklal Devidas, in collusion with whom the assessee was alleged to be conducting the business in securities, diverting bank funds for the purpose. The assessee's claim was that the bank as well as M/s. Champaklal Devidas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as argued by the assessee, this amount of addition is to be found part of the amount payable to Shri A. D. Narottam and accordingly the Assessing Officer has to delete the said amount from the computation of income. The matter is remitted back for the purpose of verification.' There being no change in the facts for the following year, i.e., A.Y. 1990-91 (in ITA No.2207/Mum/1996 dated 23.01.2007), the same decision was adopted therefor; its directions reading as under: '36. The first issue to be considered for the assessment year 1990-91 is the addition of Rs.27,08,000/- made by the Assessing authority as fund received from undisclosed source. The Assessing authority is directed to examine this issue in the light of the direction given for the assessment year 1989-90, in respect of the A/c with Shri A. D. Narottam. Further, the outstanding balance of sundry creditors at the end of the relevant previous year is very much higher than the earlier outstanding balance and the increase in the creditors itself is in the nature of an explained source and we do not find much force in the argument of the Revenue on this matter. This matter is anyhow remitted back to the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if the amount/s is subsequently repaid to the ostensible creditor, and the credit neutralized in the assessee's books of account, the same would not operate to remove the basis that led to the amount being deemed as his income u/s.68 and, thus, constitute a ground for its deletion. Merely because the amounts stand reflected in the loan account of Shri A. D. Narottam in the assessee's books would, therefore, be no reason for their deletion, as held by the ld. CIT(A). The said reflection is in fact not in dispute and forms the very basis for adding the amount/s under reference in the first instance, a fact of which the tribunal was well aware and did not lose sight of. No wonder, there is no reference to its order by the ld. CIT(A). At the same time, however, the assessee bringing to the notice of the tribunal that it has been directed to pay the amount outstanding in its accounts as on the cut off date (31.03.1992), and which forms the basis of the decretal amount in favour of the Custodian, representing Shri A. D. Narottam, the Respondent No. 2 before it by the Special Court, the tribunal came to the conclusion that it could, therefore, no longer consider the credits in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after allowing the assessee reasonable opportunity to present its case before him. We decide accordingly. Revenue's Appeals in the penalty proceedings (for A.Ys. 1989-90 and 1990-91) 5. The only amount on which the penalty u/s.271(1)(c) has been levied in these appeals is for which the addition had been made in the set aside proceedings, and qua which the Revenue is in appeal before us in the second round, i.e., in the quantum proceedings. We having restored the matter back to the file of the A.O. for necessary verification and adjudication afresh in the quantum proceedings, the penalty/s shall not survive. We, therefore, uphold the impugned order/s, though for reason/s different from that which prevailed with the ld. CIT(A). The A.O. shall be though at liberty to, where deemed fit, initiate penalty proceedings in the set aside proceedings. We decide accordingly. Assessee's Appeal (for A.Y. 1991-92) 6.1 The first and the sole ground of the assessee's appeal; it not pressing its second ground as raised before us (with the ld. AR making an endorsement to that effect on the appeal memo), is the confirmation of the addition to income in the sum of Rs.13,23,45,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord. The facts are admitted and not in dispute. The addition has been made with reference to the credits during the relevant year as appearing in the assessee's account in the books of account of another, and which have since found approval by the designated court, confirming him to be the assessee's debtor and, further, requiring him to discharge the debt by paying the assessee the amount outstanding per his books of account as on a particular date 24.12.1991 - the account continuing even after 31.03.1991. The credits being thus confirmed in the assessee's favour, i.e., as having been correctly recorded in his accounts by Shri H. K. Dalal, the assessee was required to explain the nature and source of the corresponding debt/s, representing an asset or funds, and which it failed to. The amount/s is not reflected in the assessee's books, who have never claimed the same as a trading liability. The question of it being remitted and, thus, invocation of section 41(1), does not arise in the undisputed facts of the case. Through the reference to the exclusion of the three credits to the assessee's account (as maintained by Sh. H.K. Dalal) by the ld. CIT(A), he has th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation, much less satisfactory, as to the nature and source of its relevant asset/s in the form of a debt/s due to it. Section 69/69A/69B, as the case may be, would have application in the facts of the case. We, accordingly, find no merit in the assessee's case and uphold the addition, modifying the impugned order to the extent it adverts to or draws on section 41(1) of the Act. We decide accordingly. Revenue's Appeal (for A.Y. 1991-92) 8. The Revenue's appeal raises three grounds, as under: 1. On the facts circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.17,69,64,610/-. 2. On the facts circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition o Rs.99,31,857/-. 3. On the facts circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.14,25,87,483/-. The same were the subject matter of adjudication by the tribunal in the first round; its directions in the matter being as under: '9.3 As a result of the above discussion the other issues raised in the other grounds of appeal are adjudicated as under:- Gr. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eflected in the loan account of Shri A. D. Narottam in its accounts, and, where so, no addition would be called for. The ld. CIT(A) has directed deletion on the basis of the said finding/s, with in fact the primary facts being not in dispute. His variance with the A.O. arises only on account of the latter's view of the amount/s being actually required to be shown to be a part of the decretal amount, a view which we have since discountenanced (refer para 4). No doubt, so has also been the view adopted by the ld. CIT(A); the reflection of the impugned amounts in the loan account of Shri A. D. Narottam being in fact the very basis for the addition u/s.68. So however, the directions by the tribunal for this year are as apparent at variance with that for the earlier years, and the ld. CIT(A) has only proceeded in terms thereof. The Revenue being unable to show any infirmity in the impugned order, being based on the factual findings in terms of the tribunal's order, with, rather, the primary facts being not in dispute, we have no hesitation in upholding the same. As observed earlier, we are conscious of the divergence in the treatment being accorded for the current year vis- - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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