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TMI Blog2018 (12) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... used to the assessee. In the case of Daniel Merchants Private Limited and others vs. ITO (2017 (12) TMI 409 - CALCUTTA HIGH COURT) wherein the Hon’ble Apex Court has expounded that the order directing the A.O. to carry through proper enquiry cannot be said to be liable to be set aside - Decided against assessee. - ITA No. 5210/Mum/2015 - - - Dated:- 27-12-2018 - Shri Shamim Yahya, AM And Shri Ram Lal Negi, JM For the Appellant : Shri Girish Dave Shri Tanzil R. Padvekar For the Respondent : Shri R. Manjunatha Swanuj ORDER PER SHAMIM YAHYA, A. M.: This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax, Mumbai ( ld.CIT for short) dated 04.03.2014 and pertains to the assessment year (A.Y.) 2009-10. 2. The grounds of appeal read as under: I. 1. The Learned Commissioner of Income Tax-6 ( CIT ) erred in invoking the provision of section 263 without having jurisdiction to do so rendering the order ab initio void, illegal and bad in law and as such the order passed u/s 263 is liable to be quashed. Without prejudice to above ground, II. 1. The Learned CIT erred in passing an order u/s 263 setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 261 ITR 501. The Hon'ble Mumbai High Court in the decision of Solid Containers Ltd. after elaborate discussion and considering the decision of Apex Court in CIT vs. Sundaram lyergar concluded that if the bank loan is taken by the assessee for trading activity and ultimately waived by the bank, and ultimately the amount was retained in the business, the same was taxable u/s 28(iv). It was contended by the assessee before the Court that against the decision of the Tribunal refusing to accept the argument of the assessee that amount waived was capital receipt and neither section 28(iv) nor sec. 41(1) was applicable in respect of waived amount. The H.C did not agree with this contention. 5. Thereafter he referred to the decision of Solid Containers Ltd. (supra). He further observed that it is relevant to mention here that the A.O. itself ought to have carried out relevant and meaningful inquiries as to a) what was the purpose of taking loan from IDBI Bank and Union Bank of India; b) what were the terms and conditions of waiver of loan and c) how the assessed dairn that the waiver was capita, receipt and how the ratio of the decision of Solid Containers Ltd was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aro Financial Solutions Limited 50,000,000 1. D.B.I. Term Loan - 24,050,000 I. D.B.I. Corporate Loan 1 - 32,508,615 1. D.B.I, Corporate Loan 2 - 50,000,000 I. D.B.I. Int. Funded Loan - 7,411,679 IDBI (STL) (6,945,000) 50,000,000 182,457,901 6. That the AO failed to carry out relevant and meaningful inquiries about reasons for which loans were taken and also about terms and conditions of one time settlement as a result of which there were no dues to the Financial Institution or Banks as on 31/03/2009. 9. Apart from the above, he noted that it is also observed that even the book profit u/s 115JB has been wrongly worked out. That the assessee had claimed set off of ₹ 4,81,17,4107- being lower of business loss (book loss) and unabsorbed depreciation (as per books). That the unabsorbed depreciation as per book w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of Revenue by the jurisdiction of Bombay High Court i.e. the decision of Solid Containers Ltd. 308 ITR 417 which follows the decision of Hon ble Apex Court in CIT vs. Sundaram Iyergar and Sons Ltd. 222 ITR 344 (SC). However, on going through the above two case laws, it is evidently clear that in both the cases, the above assessee s have taken Loan for Trading Activity and the said Loans were written back in the Books of Accounts. In both the cases, the respective High Court and Apex Court held that the Loan for Trading Activity would constitute Revenue Receipt and not capital Receipt. Vide the above Notice, your Honour has acknowledged the fact that the above two companies had taken Bank Loan for Trading Activity. The undersigned has to refer to the submissions made to you, wherein your Assessee has given details in respect of the Loans sanctioned as under :- Particulars Sanction Amount Remarks IDBI Project Finance Scheme 485.00 Setting up a Plant/Factory. Corporate Loan -1 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (I) Ltd., vs. DCIT (1998) 67 ITD (Bang.) 304 has held that the remission of loan by the bank could not be considered to constitute a revenue income in the hands of the Assessee. The decision of the Cochin Bench of the Tribunal in Accelerated Freez Drying Co.Ltd., vs. DCIT (2009) 31 SOT 442 (Cochin) for the proposition that the loan waived by the bank was not a revenue receipt and there was no scope of bringing it to taxation. Keeping in view, the above you are kindly requested not to pass any adverse orders in respect of the written back of the Loan amount of ₹ 9,86,50,379/~and kindly accept the recommendation of the Assessing Officer on the said matter. 2. Reduction of Share Capital :- As regards to the reduction of Share Capital, the Share Capital of your Assessee was reduced from ₹ 7 ,78,64,000!- to ₹ 4,67, 18,400/- as per the Order of the Bombay High Court. A copy of the said Order of the High Court is enclosed herewith. Hence, it may be seen that there is no impact in respect of Revenue in respect of the above reduction in the Share Capital which has been adjusted by reducing the Profit and Loss Account/Share Premium of your Assessee leading to a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd v CIT [2013] 33 Taxman.com.210(Delhi-Tr.), CIT v RKBK Fiscal Service(P) Ltd [2013] 32 Taxman.com.153(Cal.), M.I. Overseas Ltd v DIT(lnt.Tax)[2012] 28 Taxman.com. 279(Uttarakhand), Bharat Overseas Bank Ltd v CIT[2012] 26 Taxman.com 330(Chennai), CIT v Harsh J.Punjabi 345 ITR 451 (Del.), CIT v Infosys Techn.Ltd 17 Taxman.com 203 Sripan Land Dev.(P) Ltd v CIT[2011] Taxman.com 429(Mum ITAT), wherein it has been held that failure of carry out relevant and meaningful inquiries tantamount to passing of erroneous assessment which is also prejudicial to the interest of the revenue. I am of the considered view that A.O erred in passing assessment order on account of failure to carry out relevant and meaningful enquiry with regard to One Time Settlement (OTS) with the lending banks. Likewise, A.O also the light of the above discussions to be erroneous and prejudicial to the interest of the revenue and I, therefore, set aside the assessment order passed by the Assessing Officer. The AO is directed to frame fresh assessment order in accordance with provisions of law after giving reasonable opportunity of hearing to the assessee. The AO will examine all the issues raised above and take app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l consideration we note that in the assessment order passed in this regard, there is no mention of the loan of ₹ 98,65,379/- waived off by the banks being treated as capital receipt. The ld. Counsel of the assessee contended that audit query in this regard was raised subsequently. We note that in reply to the above audit query notice, the assessee never dealt with the Hon'ble jurisdictional High Court decision in the case of Solid Containers Ltd. (supra) and the decision of Hon ble Apex Court in the case of Sundaram Iyergar and Sons Ltd. (supra). Subsequently, the issue was taken by the ld. CIT u/s. 263 of the Act, wherein the ld. CIT indicated that loans which were taken for trading purposes, the waiver there off will form under the realm of revenue income. In reply, the assessee never categorically stated that all the loans were exclusively for trading activity and utilized as such. The language used in the reply is evident from the copy of the show cause notice submitted before us in paper book page no.68, the same reads as under: 17. From the above, it is evident that after printing the words working capital , the same has been cut and by hand it is menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon ble Apex Court has expounded that the order directing the A.O. to carry through proper enquiry cannot be said to be liable to be set aside. We may gainfully refer to the part of the said order as under: In all these cases, we find that the Commissioner of Income Tax had passed an order under Section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry. It is this order which is upheld by the High Court. We see no reason to interfere with the order of the High Court. The Special Leave Petitions are dismissed. In the background of the aforesaid discussion and precedent, in our considered opinion, there is no infirmity in the order of the ld. CIT. 19. As regards the other decisions relied upon by the ld. Counsel of the assessee, we find that the same are not applicable on the facts of the case. Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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