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TMI Blog2017 (6) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... et aside and that of the Assessing Officer be restored. 2. The brief facts of the case are that the assessee had filed its return of income for the relevant assessment year 2008-09 on 24.9.2010 declaring income at NIL. The return of the assessee was processed u/s. 143(1) of the I.T. Act, 1961 at the returned income u/s. 115JB of the Act has been declared at Rs. 32,75,573/-. The revised return at NIL was filed on 16.2.2012 after the survey u/s. 133A of the Act. The case was selected for scrutiny under CASS. Notice u/s. 143(2) of the Act was issued on 25.8.2011 which was duly served upon the assessee. In response to the notice, the AR of the assessee attended the proceedings from time to time. The assessee company is engaged in the business of real estate development, building of housing project etc. AO observed that the company is developing group housing projects in Sector-89, Faridabad. The flats were sold to the buyers on the payment plan linked to the various stages of the construction. The allottees of the flats were not making the payments on the due dates as stipulated in the agreement. The assessee calculated the interest on the delayed payments and served the debits notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the construction. The allottee's of the flats were not making the payments on the due dates as stipulated in the agreement. The appellant calculated the interest on the delayed payments and served the debit notes to the allottee's for not making the payment in time as stipulated in the agreements. The appellant booked the income of Rs. 1,09,64,450/-on account of interest in the Financial Year 200'8-09 to be realised from the allottee's. The customers refused to pay the interest and threatened to cancel the bookings in the event the company charges the interest. The company cancelled the recovery of the interest in order to realise the principal amounts under the circumstances, the company had to reverse the income by debiting the profit and loss account in the Financial Year 2009-10. In CIT vs. Shoorji Vallabhdas & Co. reported in 46 ITR 144 (SC1 held as under:- " Income-tax is a levy on income. No doubt, the IT Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in bookke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax.-Bokaro Steel Ltd. vs. CIT (1988) 67 CTR (Pat) 281 : (1988) 170 ITR 545 (Pat) : TC 38R.1012 and CIT vs. Bokaro Steel Ltd. (1988) 67 CTR (Pat) 138 : (1988) 170 ITR 522 (Pat) : TC 38R.1011 affirmed; Godhra Electricity Co. Ltd. vs. CIT (1997) 139 CTR (sq 564 : (1997) 225 ITR 746 (SC) applied." The Income Tax Act takes into account two points of time at which the liability to tax is attracted, the accrual of income or its receipt, but the substance of the matter is the income. If the income does not result at all, there cannot be a tax, even though in accounts, an entry is made about the "hypothetical income" which does not materialise. Where income has, infact, been received and is subsequently given up, in such circumstances it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an, entry to that effect may, in certain circumstances, have been made in the books of accounts. In the instant easel the appellant raised the debit notes to the allottee's and booked the income in the books of accounts. The ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income different from what had been entered in the books of account. A mere book-keeping entry cannot be income, unless income has actually resulted, and in the present case, by the change of the terms the income which accrued and was received consisted of the lesser amounts and not the larger. This was not a gift by the assessee firm to the managed companies. The reduction was a part of the agreement entered into by the assessee firm to secure a long-term managing agency arrangement for the two companies which it had floated.-CIT vs. Shoorji Vallabhdas & Co.(1959) 36 ITR 25 (80m) : TC39R.740 affirmed; CIT vs. Chamanlal Mangaldas & Co.(1960) 39 ITR 8 (SC) : TC39R.745 applied." 7.2 We further note that the Hon'ble Supreme Court of India in the case of CIT vs Bokaro Steel Ltd. 2361TR 315 {SC} has held as under: "The assessee had shown in its books of accounts a sum of Rs. 7,39,232 as income from interest received from H. Ltd. for the eight locomotives supplied by the assessee-company to them. The entry was reversed in the next year since H Ltd. had replaced the eight locomotives lent by the assesseecompany to it by new ones. The entire nature of the transaction was changed bet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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