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TMI Blog2023 (1) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the clause (c) of Explanation 2 of section 139(1) of the Act. We note that the assessee is not required to audit its books as per the Income Tax Act or under any other law and therefore clause (a)(ii) of section 139(1) of the Act is not attracted to the assessee s case. Therefore, the action of the Ld.CIT(A) in confirming the action of CPC/AO cannot be faulted. So we confirm the action of the Ld.CIT(A) on this issue. Alternative contention is whether the principal portion of loan waived by the lender would be liable to be taxed u/s 41(1) of the Act or not ? - A perusal of Profit and Loss account would show that the assessee has credited the P L account with the waiver of interest portion and waiver of principle portion of loan. A perusal of the computation of total income would show that the assessee has not excluded principal portion of loan waived from the Net profit shown in the Profit and Loss account. Hence all facts relating to this issue is available on record. Thus the principal portion of amount waived by the lender credited to the Profit and Loss account is not liable to taxation under the Income tax Act. Accordingly, we direct the assessing officer to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat write back of loan is not cessation of liability and not chargeable to tax u/s 41, Hence, the Appellant is not liable to pay any tax on the same. 7. On the facts and in the circumstances of the case and in law the learned Assessing Officer -- CPC erred in charging interest U/s. 234B and 234C of the Income Tax Act, 1961. 8. The Appellant craves leave to add, amend, delete, alter, modify or substitute any or all the above ground(s) of appeals. 3. The main grievance of the assessee against the action of the Ld.CIT(A) in confirming the action of the AO/CPC not allowing set--off of brought forward business losses against current year business income. 4. In the alternative, the assessee has raised a contention in ground no.6 that the write back of loan is not a cessation of trading liability and hence not chargeable to tax u/s 41(1)of the Act.Accordingly it is contended that the amount of loan written back and credited to the Profit and Loss account should be excluded from the total income. 5. Brief facts of the appeal is that the assessee trust is private trust and during the year under consideration (AY 2018--19) it had filed return of income on 31st August 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 2013-14 05--08-2013 27--09--2013 5 2014-15 31.07.2014 27--08--2014 6 2015-16 07--09-2015 30--09--2015 7 2016-17 05--08-2016 29--09--2016 8 2017-18 05--08-2017 12.08.2017 7. Before Ld CIT(A), the assessee contended that it is a private trust and as per the clauses of trust deed, its accounts are required to be audited. Since the accounts are required to be audited, the due date should be taken as 30th September or extended period, as per sub--clause (ii) of clause (a) of Explanation 2 to sec.139(1)of the Act. Accordingly, it was contended that the CPC/AO has erroneously adopted 31st July as the due date of filling of return of income as envisaged under clause (c) of Explanation 2 to section 139(1) of the Act. Therefore the disallowance of the brought forwarded business loss was wrong. 8. The above said contentions of the was not accepted by the Ld.CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of filing the return 1 2010--11 04.08.2010 08.03.2011 2 2011--12 01.08.2011 19.03.2012 3 2012--13 01.08.2012 31.08.2012 4 2013--14 05.08.2013 27.09.2013 5 2014--15 31.07.2014 27.08.2014 6 2015--16 07.09.2015 30.09.2015 7 2016--17 05.08.2016 29.09.2016 8 2017--18 05.08.2017 12.08.2017 11. During the appellate proceedings, the assessee contended that the ADIT (CPC) has wrongly considered the due date of filing the return of income applicable to non--audit cases, for coming to the conclusion that the returns of income were not filed within the due date for the relevant assessment years. The assessee contended that the case of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement in the relevant law for auditing the books of account. Thus, it is seen that there is no legal requirement to get the books of account audited either under the Income Tax Act or the Indian Trust Act in the case of the assessee for any of the relevant assessment years. In the circumstances, it is held that the case of the assessee does not fall under the ambit of clause (a) of Explanation 2 to section 139(1) and that the due date of filing the return of income specified therein for audit cases is not applicable to the assessee. 14. In view of the above, the due date of filing the return applicable to non--audit cases as specified in clause (c) of the Explanation 2 to section 139{1) is applicable to the assessee, as considered by the ADIT (CPC) in the Intimation u/s 143(1). Since the assessee failed to file the returns of income for the relevant assessment years 2010--11 to 2017--18 within the due date applicable to non--audit cases, the assessee is not eligible for carry forward and set--off of the business loss of the said assessment years as per the provisions of section 139(3) r.w.s 80 of the IT Act The claim of the assessee for set--off of such losses against the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27,923 2013--14 20,19,694 17,797 Total 70,77,892 74,878 17. As can be seen from the above, the brought forward business losses were overstated by the assessee in the return of income for the instant assessment year by an amount of Rs.70,03,014/-- (Rs.70,77,892/-- less Rs.74,878/--). On bringing the said discrepancy to the notice of the assessee with a request to explain the reasons for the same, the assessee merely stated that the business loss declared in the returns of income filed for A.Y 2010--11 to 2013--14 was erroneous and requested that the correct amount of such losses now shown in the return of income for AY 2018--19 may be adopted. The said request of the assessee cannot be accepted under the provisions of law. The loss declared in the returns of income cannot be modified unless the same is revised by the assessee under the provisions of the Act by ftting a revised return, in the absence of such furnishing of revised returns as per the provisions of Iaw7 the loss declared in the return cannot be subjected to any mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the turnover/total sales/gross receipts of the assessee is NIL for each of the said years and the case of the assessee does not fall within the scope of tax audit under the provisions of section 44AB of the Income Tax Act. 13. Further, on perusal of the provisions of Indian Trust Act, 1882, it is noticed that there is no requirement of mandatory audit of the books of account of trusts governed by the said Act as per the said provisions. The assessee was therefore requested to cite the specific provisions of the Indian Trust Act which impose the legal obligation of getting the books of account audited. In the response furnished on 28.01.2022, the assessee did not specify the provisions of Indian Trust Act, 1882, which provide for mandatory audit of the books of account of trusts. Instead, the assessee pointed out that its trust deed provided for auditing of accounts. Though the assessee stated that the trust deed has been enclosed to the reply, it is noticed that the same was not enclosed. Regardless of whether the assessee supplied the copy of trust deed or not, it is evident that there is no requirement in the relevant law for auditing the books of account. Thus, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raising this alternative contention that the principal portion of loan waived by the lender should be excluded while computing total income. The Ld A.R placed his reliance on the decision rendered by Hon ble Supreme court in the case of CIT vs. Mahindra Mahindra limited (Civil Appeal Nos. 6949 6950 of 2004) in this regard. He submitted that there is no estoppel against law and hence, any receipt, which is not taxable under the law, cannot be brought to tax merely on the reasoning that the assessee himself has offered the same for taxation. 11. The Ld D.R,, however, submitted that the assessee has not raised this ground before Ld CIT(A) and is raising this alternative contention for the first time before the Tribunal. Accordingly, he submitted that this alternative ground should not be admitted. 12. In the rejoinder, the Ld A.R submitted that the ground urged by the assessee is a legal ground and all facts relating thereto are available on record. Accordingly, he submitted that this ground may be admitted and adjudicated by the Tribunal, as held by Hon ble Supreme Court in the case of NTPC Ltd (229 ITR 383)(SC). 13. We have heard rival contentions on this issue. The es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich can be taxed shall arise from the business or profession. Also, in order to invoke the provision of Section 28 (iv) of the IT Act, the benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of Rs. 57,74,064/-- is having received as cash receipt due to the waiver of loan. Therefore, the very first condition of Section 28 (iv) of the IT Act 9which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. Hence, in our view, in no circumstances, it can be said that the amount of Rs 57,74,064/-- can be taxed under the provisions of Section 28 (iv) of the IT Act. 14) Another important issue which arises is the applicability of the Section 41 (1) of the IT Act. The said provision is re--produced as under: 41. Profits chargeable to tax.-- (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first--mentioned person) and subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount had not been debited to the trading account or to the 11profit or loss account in any of the assessment years. Here, we deem it proper to mention that there is difference between trading liability and other liability . Section 41 (1) of the IT Act particularly deals with the remission of trading liability. Whereas in the instant case, waiver of loan amounts to cessation of liability other than trading liability. Hence, we find no force in the argument of the Revenue that the case of the Respondent would fall under Section 41 (1) of the IT Act. 17) To sum up, we are not inclined to interfere with the judgment and order passed by the High court in view of the following reasons: (a) Section 28(iv) of the IT Act does not apply on the present case since the receipts of Rs 57,74,064/-- are in the nature of cash or money. (b) Section 41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record that the Respondent has not claimed any deduction under Section 36 (1) (iii) of the IT Act qua the payment of interest in any previous year. 18) In view of above discussion, we are of the considere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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