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TMI Blog2022 (3) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... as diverted to the lender by overriding title and in such circumstances, no capital gains accrued to the assessee. In case, the claim of the AO is correct that the assessee himself has sold the property and received sale consideration from the purchaser and thereafter discharged the debt payable by three companies to banks and get released the mortgaged property and thereafter executed the Sale Deed in favour of the purchaser, then the case of the assessee is not covered by the decision of the Hon ble Kerala High Court in the case of CIT v. Smt.Thressiamma Abraham (supra). Since, there are contradicting arguments from both the sides, we are of the considered view that the issue needs to be re-examined by the AO in light of the arguments of the assessee that the bank has took possession of the property under SARFAESI Act, 2002, sold the property directly to the buyers and buyers have directly paid the consideration to the banks against loans repayable by three companies in light of decision of the Hon ble Kerala High Court in the case of CIT v. Smt.Thressiamma Abraham (supra) to ascertain the correct facts to compute capital gains. As per the additional grounds filed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire loan amount written off in the books of account of the Assessee as Bad-debts as under: a. MPS Steel Castings P. Ltd. ₹ 71,85,000/- b. SMM Steel Rolling Mills P. Ltd. ₹ 97,15,000/- Totaling to ₹ 1,69,00,000/- 2) The Ld. CIT(A) ought to appreciate that the purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an Assessee in accordance with law, as was held by the H'ble Apex Court in [1998] 229 ITR 383 (SC) National Thermal Power Co. Ltd., and allowed the claim, if not under Capital Gains as claimed by the Assessee, but under the head Business as Bad debts. 3) The Ld. CIT(A) ought to have followed the Circular No. 14(XL-35) dated 11-04-1955 which reads: Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the authorities below. The petition filed by the assessee taking additional grounds of appeal in light of observations of the Ld.CIT(A) in Para No.4 of his order, though, purely not a legal ground, but facts relating to said issue was already on record before the AO at the time of appellate proceedings and further, there is no need for the AO to go into new evidences to ascertain the facts with regard to claim of the assessee by way of additional grounds. Therefore, we are of the considered view that additional grounds filed by the assessee deserve to be admitted and hence, we admit additional grounds filed by the assessee for adjudication. 3. The assessee has, more or less raised the common grounds of appeal, therefore, for the sake of brevity, grounds of appeal filed for the assessment year 2013-14 are re-produced as under: 1. The order of the Ld. CIT(A) is against the principles of law, justice and equity. 2. The Ld. CIT(A) failed to appreciate that to attract Sec.45 r.w.s.48 of the Income-tax Act, 1961 there should be some gain for the assessee. a. Here in this case, the Assessee did NOT receive a Single Paisa on the transfer. The Assessee as a result of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the collateral properties and they had executed all the Sale Deeds on behalf of the assessee and appropriated sale consideration against loans payable by the borrowers. The assessment has been subsequently reopened on the basis of information available, as per which, income chargeable to tax had been escaped assessment within the meaning of Sec.147 of the Act and thus, notice u/s.148 of the Act dated 06.09.2016 was issued and served on the assessee. In response to the notice, the assessee had filed return of income on 12.09.2016 declaring total income of ₹ 9,51,140/-. 5. The case was taken up for scrutiny and during the course of assessment proceedings, it was noticed that the assessee stood as a guarantor for loans availed by three companies viz., M/s.Paragon Steels Pvt. Ltd., M/s.MPS Steel Castings Pvt. Ltd. and M/s.SMM Steel Re-rolling Mills Pvt. Ltd, from City Union Bank and State Bank of India. The Borrower has defaulted in repayment of loans availed from banks and thus, the banks have insisted on the assessee as a guarantor and has mortgaged the property for repayment of loans. The assessee has sold the properties and paid the entire sale consideration towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee submitted that the Ld.CIT(A) has erred in not appreciating the fact that to attract provisions of Sec.45 r.w.s.48 of the Act, there should be some gain for the assessee to compute capital gains, whereas, in the present case, the assessee did not receive a penny from the sale of assets, because the assets mortgaged to the bank, have been sold by the banks and the sale consideration has been appropriated towards loans payable by the borrowers. The Ld.AR further referring to the decision of the Hon ble Kerala High Court in the case of CIT v. Smt.Thressiamma Abraham (supra) and also the decision of the Hon ble Supreme Court in the case of V.S.M.R.Jagadishchandran v. CIT (supra) submitted that the facts of the present case are squarely covered by the decision of the Hon ble Kerala High Court in the case of CIT v. Smt.Thressiamma Abraham (supra) but distinguishable from the facts of the case before the Hon ble Supreme Court in the case of V.S.M.R.Jagadishchandran v. CIT (supra), wherein, the assessee himself mortgaged the properties to banks towards loan borrowed in his name and when re-payment was not made, the banks have sold the property and appropriated sale consideration towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on record and gone through orders of the authorities below. The factual matrix of the impugned dispute is that the assessee being one of the directors of three companies viz., M/s.Paragon Steels Pvt. Ltd., M/s.MPS Steel Castings Pvt. Ltd. and M/s.SMM Steel Re-rolling Mills Pvt. Ltd, stood as a guarantor to the banks and mortgaged his properties against loan availed by the three companies from City Union Bank and State Bank of India. Further, when the three companies failed to repay the loans availed from banks, the banks have insisted upon the guarantor to sale his properties and repay the loan. The assessee had sold the properties and discharged the debts of three companies and also released the mortgaged property before executing the Sale Deed in favour of the buyer. The assessee claims that since, the banks have sold the property and appropriated the consideration towards loans repayable by three companies, he has not liable to compute capital gains and pay taxes, because he did not receive any consideration for transfer of property. In this regard, he relied upon the decision of the Hon ble Kerala High Court in the case of CIT v. Smt.Thressiamma Abraham (supra). 11. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee, the Ld.CIT(A) having accepted the fact that once assessee become creditor in the books of accounts of three companies, and the assessee has written off loans and advances given to three companies in his books of accounts as irrecoverable bad debts, the Ld.CIT(A) ought to have examined the claim of the assessee in light of provisions of Sec.36(1)(vii) r.w.s.36(2) of the Act. Because, when the assessee had mortgaged his property in favour of the banks against loans availed by three companies, then loan repaid by the assessee to banks becomes loans and advances given to three companies in the books of accounts of the assessee. If assessee written off those loans and advances given to three companies as irrecoverable bad debts, then the assessee can claim the benefit of deduction towards bad debts, if conditions prescribed u/s.36(1)(vii) r.w.s.36(2) of the Act are satisfied. Since, the assessee has taken arguments for the first time before the Tribunal, we are of the considered view that the issue needs to go back to the file of the AO for verification of the facts on this count also. 13. In this view of the matter and considering the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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