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TMI Blog2020 (3) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... al, stating his reasons for the decision, as such. 3. That on the facts and circumstances of the case the order passed by the Learned Commissioner of Income tax (Appeals) is bad both in the eyes of law and on facts. 4. That on facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred on facts and in law and not justified in upholding an addition of Rs. 2,01,02,470/- to the business income of the assessee by considering the same as trade payables. 5. That on facts and circumstances of the case, the charging interest u/s 234A,B,C is illegal, arbitrary and against the settled law on the subject. 6. That the appellant craves to reserve to itself the right to add, alter, amend, substitute and vary any ground of appeal at and before the time of hearing. It is, therefore, prayed that the additions/disallowances made as above be deleted. The interest as charged be cancelled and the appeal be allowed. 2. Briefly stated facts of the case are that the assessee company was engaged in the real estate business and for the year under consideration filed return of income on 30/03/2012, declaring loss of Rs. 1,25,440/-. The case was selected for scru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as returned back un-served. However, a letter was filed seeking time to file written submissions and power of attorney. On 05.02.2016 yet another notice was issued to the appellant fixing the hearing on 22.02.2016. On this date, power of attorney alongwith request for adjournment was filed and the case was re-fixed for 02.03.2016. Since hearing could not be conducted on this date, request for adjournment was filed on 04.03.2016 and the appeal was re-fixed for 18.03.2016. None attended on this date and yet again a letter was filed on 29.03.2016 requesting for adjournment and the case was re-fixed for 05.04 2016. The AR vide letter dated 13.04.2016 filed some written submission stating the same to be additional evidence and sought adjournment which was allowed and appeal was re-fixed for 26.04.2016. None attended on this date On 17.05.2016, a letter was filed by one Rajiv Saxena & Co. stating that they had been engaged by the appellant to represent the appeal and therefore, the matter may be adjourned. A fresh notice was issued on 18 07.2016 scheduling the hearing date on 02.08.2016. On this date neither anyone attended nor any request for adjournment was received. Notice was again i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es' resulting into net increase of Rs. 2,02,27,914/- to the general reserve. The Assessing Officer called upon the assessee to show-cause, as to why this amount may not be treated as income in terms of section 41(1) of the Act. 6.2 The Authorized Representative of the assessee submitted that the assessee company had taken unsecured loan during previous year 2002-03 from 'M/s Omax' and same has been transferred to general reserve. But the assessee was not aware of treatment of the same in the books of accounts of M/s Omax and no confirmation was filed by the assessee from M/s Omax. 6.3 The Assessing Officer issued notice under section 133(6) of the Act to M/s Omaxe. The said company vide letter, which was received by the Assessing Officer on 06/03/2014, stated that the company had dealt with the assessee company during assessment year 2001-02 to assessment year 2005-06 and whatever the amount was due written off well before the assessment year 2005-06. 6.4 In view of the reply from M/s Omaxe, the learned Assessing Officer rejected the contention of the assessee that the amount was outstanding against the loan borrowed from M/s Omaxe and held that the assessee company had made cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has repaid amount of Rs. 2,60,65,685/- leaving a closing balance of Rs. 3,22,87,265/-. 6.9 The Ld Counsel referred to balance sheets for other years ending and also ledger accounts of M/s Omaxe appearing in books of the assessee, copies of which have been filed at pages 60 to 67 of the paper-book. The learned counsel submitted that assessee has repaid the loan amount back to M/s. Omaxe in various years leaving a balance of Rs. 2,47,27,914/- as on 31/3/2009. He submitted that said balance of unsecured loan amount has been transferred to the general reserved account in the year under consideration but the accountant has by mistake given the narration as trade payables transferred. 6.10 The learned Counsel, further in support of his claim that waiver of loan does not amount to cessation of trading liability so as to apply section 41(1) of the Act, relied on the decision of Coordinate Bench of the Tribunal in the case of Wasan Exports P Ltd, reported in (2019) 106 taxmann.com 21 (Delhi-Trib.). He also relied on following decisions: 1. Commissioner Vs. Mahindra And Mahindra Ltd., [2018] 93 taxmann.com 32 (SC); 2. Principal Commissioner of Income-tax -1 Vs. Babul Product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year the asessee has obtained whether in cash or any other manner any amount in respect of such loss or expenditure or benefit in respect of such trading liability by way of remission or cession, then such amount obtained or the value of the benefit accruing to him is deemed to be profit and gains of the business or profession. 6.13 Before us, the lower authorities has on the basis of books of account/financial statements along with notice thereon has held that the amount of Rs. 2,47,27,914/- was trade payables and remission thereof is an income under Section 41(1) of the Act. Though the assessee contended that the liability was an interest free unsecured loan received from M/s. Omax, however, could not file any confirmation from the said party. The Assessing Officer issued notice under Section 133(6) of the Act to the said party and found that such liability was in respect of trading transactions and whatever balance amount payable to that party was already written off by the said party prior to the financial year 2005-06. Before the learned CIT(A), the assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ender constitute taxable income of the respondent or not ?. The Hon'ble Supreme Court after considering the issue in detail held that "in such circumstances, Section 28(iv) of the Income Tax Act is not applicable." The Ld. CIT(A) also in the present case held that "Section 28(iv) is not attracted in the present case". The Hon'ble Supreme Court in the case of Mahindra and Mahindra Ltd., (supra) also held that "Section 41(1) of the Income Tax Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter on record that the respondent has not claimed any deduction under section 36(1)(iii) of the Income Tax Act qua the payment of interest in any previous year". In the present case, the authorities below have not given any finding of fact whether the whole amount of loan had been utilised either for the purpose of acquiring a capital asset or for the purpose of business activity or trading activity. There is also no finding of fact whether assessee had claimed any deduction in respect of interest on loan in earlier years. This matter requires finding of fact in the light of Judgment of Hon'ble Supreme Court in the case of Mahindra and Mahindr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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