TMI Blog2012 (11) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany on the basis of original return of income ignoring the revised return filed by the assesse It is well settled that when a revised return is filed by the assessee, the original return is totally substituted and the revised return alone has to be taken into consideration in completing the assessment. The earlier return, after a revised return has been furnished, cannot form the basis of assessment. - In favor of assessee. Deemed income u/s 41(1) - Principal amount under Scheme of OTS waived - addition to income - Held that:- As decided in Solid Containers Ltd. vs. DCIT [2008 (8) TMI 156 - BOMBAY HIGH COURT] that although the loan was taken by the assessee for trading activity but upon waiver, the said loan was returned by the assessee in the business and the same, therefore, was taxable in its hands as income - against assessee. - IT Appeal No. 8485 (Mum.) of 2011 - - - Dated:- 23-10-2012 - P.M. Jagtap and Amit Shukla, JJ. ORDER P.M. Jagtap, Accountant Member - This appeal filed by the assessee is directed against the order of learned CIT(Appeals)-17, Mumbai dated 31-10-2011 whereby he upheld the order of the AO treating the revised return filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Refunded till date Buyer Sale Consideration Particulars of property sold Advance Received. Date of Cancellation 29.06.06 Adjusted Against loan Given by Assessee to Chirag Holdings (a Sister concern of Deebro Silk Industries) Deebro Silk Industries Pvt. Ltd., Gala No. 20/B, Bldg No. 1, Industrial Estate, M.V Road, Andheri (East), Mumbai 59 Rs.17.81 crores Development Rights for part of Land situated at Ambernath Rs. 3 crores 03.12.2008 25.9.06 Rs.5 lakhs Lok Holdings and Constructions Ltd., Lok Bhavan, Lok Bharti Complex, Marol Maroshi Road, Andheri (E), Mumbai-59. Rs. 18 Crores. 75% rights in Land at Veera Desai Property Andheri 13,271.10 sq. mtrs. Rs. 3 Crores. 4.12.2008 27.09.06 Rs.5 lakhs Azofen Pvt Ltd., Lok Bhavan, Lok Bharti Complex, Marol Maroshi Road Andheri (E), Mumbai 59. Rs. 51 Crores Land of 1,24,143 sq. mtrs at Kalyan. Rs. 3 Crores. 28.11.2008 30.12.20 06 Rs. 5 Lakhs Azofen Pvt. Ltd., Lok Bhavan, Lok Bharti Complex, Marol Maroshi Road Andheri (East) Mumbai 59. Rs.56.26 Crores. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company was having a direct or indirect control (d) The AO also noted that in the original return the assessee had declared its income on the basis of its consistently followed accounting policy, as noted in schedule Q of the notes to accounts, as follows: "(iii) Revenue recognition in respect of property sale transactions is on the basis of agreement of sale and are subject to execution of conveyance and compliance of applicable legal formalities. " The AO also noted that sale was correctly recognized in 2006-07 keeping in view the Transfer of Property Act, 1882 and Sale of Goods Act, 1930. As the sale had been recognized on' the basis of its OWA accounting policy, the assessee could not now say that there was any omission or wrong statement in the original return of income. (e) The AO noted that the auditors of the assessee had themselves expressed reservations on the revision of accounts, as follows "As per our opinion, which opinion is also supported by the Institute of Chartered Accountants of India, a company cannot reopen and revise the accounts once adopted by the shareholders at an Annual General Meeting. Contrary to this opinion, the Board of Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the joint venture agreement, Shri Chetan Gandhi is a distant relative of the MD of the assessee company, Shri Lalit Gandhi. The sale agreements were valid legal documents and the assessee has, prior to cancelling these agreements, taken no legal measures to recover its dues or forfeit the part consideration received by it. Hence the AO held : "The manner and the facts by which the sale agreements have been cancelled clearly indicates that these are mutually convenient documents created through collusive activities for the sole purpose of wriggling out from the tax liability which was otherwise payable by the assessee. Since all these parties were closely connected with the assessee and the assessee has a lot of influence on all these parties, and in one of the transactions assessee himself was a buyer through a joint venture partnership r the cancellation of the agreements has been solely a devise to reduce the tax liability. In A.Y. 2009-10, the auditors have qualified the accounts of the assessee company as follows: "In our opinion and to the best of knowledge and according to the explanation given to us and subject to the specific reference being drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hypothetical income in its books. The entire consideration receivable by the assessee under these agreements had neither being received nor recruit. Only a token money had been received on advance. No formalities had been completed to give control of the properties to the assignees. As the agreements were not registered the assignees were under no legal obligation to carry out the agreement. In view of the above, it was submitted that the income from these agreements had not accrued or arisen to the assessee and the entries in the books were erroneous. The cancellation deeds were only a recognition of the existing position that no income had accrued from the said agreements." In the light of the above submissions, it was contended on behalf of the assessee before the learned CIT(Appeals) that there was a wrong statement of income made in the original return inasmuch as there was no such income accruing or arising to the assessee and, therefore, the revised return filed by it correcting the said wrong statement was valid in accordance with the provisions of section 139(5). 6. In addition to the submissions made on the preliminary issue relating to valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which such income is to be taxed. However, income must accrue or arise as a precondition before it can be taxed. A formal cancellation deed was executed without obliterated the original agreements with whatever little value it might have. The assessee was development work ever commenced. The so called development agreement was only MOU and not registered. The agreement could not be enforced in court. The agreement finally was cancelled without any work. The assessee continued to retain the same rights in the property as before the development agreement. No income therefore accrued or arose to the assessee. Other 2 agreements were in relation to 'sale of land/property'. Again, the agreements were only preparatory and in the nature of MOU. The title to the property never passed to the buyers. No possession was given. Again no consideration was received except the token advance against these MOUs. The property continues to belong to the assessee in the same manner as before. No change in the status of the property. The proposed buyer can not enjoy or deal with property in any manner in exclusion to the assessee. Therefore no income can be contemplated from such agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the assessee was fully justified in excluding hypothetical income based on erroneous book entries by filing revised return. In any case, the hypothetical income cannot be taxed even under original return based on stingless preparatory agreements on the grounds of 'real income theory'. The original agreement being a nullity does not give rise to any income albeit cancellation deeds executed subsequently. The original agreements have become nonest owing to cancellation deed based on the 'doctrine of relation back. 7. After taking into consideration the submissions made on behalf of the assessee as well as the material available on record, the learned CIT(Appeals) proceeded to decide initially the issue relating to the validity of revised return filed by the assessee. In this regard, he referred to the provisions of section 139(5) and held that the word "discovers" used in the said provision connotes discovery of some omission or wrong statement in the return of which the assessee was not aware at the time of filing of the original return. He also held that for a return to be eligible for the revision u/s 139(5), not only should there be a wrong statement or omission, but the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts. He held that the revised accounts, on the basis of which the revised return was claimed to be filed by the assessee, thus were not valid within the purview of the Companies Act and this being so, there was no bona fide in the assessee's submission that original audited accounts of the company did not reflect the real income of the company. The learned CIT(Appeals) accordingly upheld the action of the AO in holding that the revised return filed by the assessee was not a valid one. 9. The learned CIT(Appeals) then proceeded to examine the issue relating to taxability of profit arising from the five transactions in immovable property as income in the hands of the assessee for the year under consideration on merit. In this regard, he examined the relevant agreements for sale and development and found that there was no clause in the entire agreement dealing with the termination or cancellation of the agreement. He also examined the relevant termination agreements and held on such examination that although the reason for termination was mentioned therein as due to inability of the other party to pay the balance consideration to the assessee, the entire act of cancellation or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that this reasoning given by the authorities below is contrary to the facts on record and there was no reason for them to hold that the assessee knew all along that the original return of income was not true and correct. He submitted that this stand taken by the authorities below is self contradictory inasmuch as the assessee was alleged to have the knowledge of the original return of income being not true and correct right from the beginning while the assessment has been completed on the basis of the said original return accepting the income declared therein with some minor addition. 13. The learned counsel for the assessee pointed out that the original return filed by the assessee was processed by the AO u/s 143(1) on 22-10-2008 and the notices u/s 143(2) and 142(1) were issued on 04-03-2009 and 02-06-2009 respectively only after filing of the revised return by the assessee on 01-01-2009. He contended that the revised return filed by the assessee thus was impliedly accepted by the AO and the notices u/s 143(2) and 142(1) were issued to scrutinize the said return. He contended that the AO, therefore, was not justified to treat the revised return filed by the assessee as invali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the assessee, the same cannot be ignored. He also contended that it is a well settled legal position that once a revised return is filed, the existence of original return of income is obliterated thereafter. 15. The learned counsel for the assessee submitted that when the revised return of income filed by the assessee had not been declared to be defective u/s 139(9) and the same was acted upon by the AO by issuing notice u/s 143(2), the said return had obliterated the existence of original return filed by the assessee and it was not open to the Revenue to rely entirely upon the original return ignoring completely the revised return filed by the assessee. He contended that the assessee in any case is entitled to make its claim before the appellate authority as held by the Hon'ble Supreme Court in the case of National Thermal Power Co. v. CIT 229 ITR 383 and the appellate authority can entertain the said claim made even otherwise by filing the revised return as held by Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT 284 ITR 323. 16. The learned DR, on the other hand, strongly supported the impugned order of the learned CIT(Appeals) upholding the action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Thus in order to enable the assessee to furnish a revised return u/s 139(5), the following conditions must be satisfied: (i) that the original return must have been furnished u/s 139(1) or in pursuance of a notice issued u/s 142(1), (ii) that the assessee discovers any omission or any wrong statement therein and (iii) that the revised return is filed at any time before the assessment is made or before the expiry of one year from the end of the relevant assessment year. In the present case, the original return was filed by the assessee in response to a notice issued u/s 142(1) and the revised return was filed by it on 01-01-2009 that is before the assessment was made as well as before the expiry of one year from the end of the relevant assessment year i.e. assessment year 2007-08. The conditions (i) and (iii) thus were duly satisfied in the present case as stipulated in section 139(5) and there is no dispute about the same. The only dispute is about the satisfaction of second condition as to whether there was discovery of any omission or wrong statement by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of agreement of sale and the second limb is revenue recognized in such manner shall be subject to execution of conveyance and compliance of applicable legal formalities. He contended that initial recognition of revenue thus was in anticipation and was conditional upon further progression of the agreement of sale in as much as if subsequently in the case of sale of land, conveyance deed is not executed or in the case of development agreement, necessary legal formalities are not complied with, the revenue recognized earlier on the execution of agreement would be cancelled. He submitted that that none of the five agreements executed by the assessee proceeded beyond the stage of signing of agreement and the assessee did not receive a single rupee by way of sale proceeds. He contended that in these facts and circumstances of the case, the Accounting Policy followed by the assessee clearly required that the revenue recognized on signing of agreement in anticipation must be reversed. 20. The learned counsel for the assessee submitted that the assessee in any case is liable to tax on income which the provisions of Income-tax Act determine and not on any higher or lower income which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccrued in the books of account of the assessee firm on the basis of earlier agreement. 22. The learned counsel for the assessee also relied on the decision of Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd. v. CIT 225 ITR 746 (SC) and submitted that the assessee in the said case was an electricity company keeping accounts on mercantile system. It increased the tariff of electricity supplied and billed the consumers at the enhanced rate. This resulted into long drawn litigation as well as intervention of the government and finally the assessee could not collect the charges from consumers on the basis of enhanced tariff and received much smaller amounts than that shown as accrued in the books of accounts of the assessee. The question arose as to whether the assessee was required to be assessed on the income which was treated as accrued on the basis of enhanced tariff or on the actual electricity charges realized by it from its customers. The matter travelled to Supreme Court and Hon'ble Supreme Court held that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were made represented only hypothetical income and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the Sale of Goods Act, 1930 does not apply to an immovable property and therefore reliance of the Revenue thereon is clearly misplaced. 24. As regards the stand of the Assessing Officer and CIT(A) that the sister concerns of the assessee made huge profits on sale of shares at higher market price achieved as a result of higher revenue recognized in the assessee's accounts, the learned counsel for the assessee submitted that these observations are based on mere suspicion, conjuncture and surmises. He submitted that no evidence other than pure guess work has been relied upon so as to arrive at the finding that the assessee deliberately recognized higher revenue so as to make profit out of artificially inflated market price of the assessee company's shares. He submitted that there are many holes in this hypothesis of the authorities below. First it is mere assumption of the Assessing Officer/CIT(A) that the prices of the shares of the assessing company moved upwards because of the revenue recognized in relation to the five agreements in consideration. Secondly, there is no material to hold that it was done in collusive matter. He submitted that there has been no adverse find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment in the case of Morvi Industries Ltd. 82 ITR 835(SC), the learned counsel for the assessee submitted that the same is distinguishable on facts in as much as it was a case of an assessee forgoing an income which had already been accrued to him. He submitted that as explained by of the assessee, the agreements were abandoned and accordingly cancelled because of the sudden change in the matrix of the real estate market as a result of which the agreements no longer remained attractive and there is nothing brought on record to dislodge this claim of the assessee. As regards the allegation of the revenue authorities that these agreements with related parties were aimed at artificially jacking-up price of the assessee company's shares in the market so that the sister concerns of the assessee could make huge profits on sale of the shares of the assessee company, he submitted that if it was so, no fault could be found with the reversal of the recognition of revenue by the assessee in the revised return of income. He however hastened to clarify that all the acts of the assessee were entirely bona fide and prompted by objective business considerations. The agreements in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cancellation of agreement in past related to some stray flat buyers who wanted to cancel the booking and obtain the refund of amounts paid. The projects were implemented in those cases and buildings were indeed constructed and the cancelled flats were indeed sold albeit to another buyer. On the other hand, the cancellation of agreements in the year under consideration related to the projects as a whole. The factual matrix of those projects and recognition of revenue in relation thereto under the designated accounting policy of the assessee demanded that the cancellation be given effect from the date of agreement itself. The reasons for this are quite obvious and easy to understand. Cancellation of the bookings by some stray buyer merely resulted into the sale of the flat to another buyer. The cancellation of projects resulted into anticipated income not materializing. He contended that the need to revise the earlier accounting entry therefore arose because it was necessary to withdraw recognition of revenue which did not accrue at all. Reliance in this regard was placed by him upon the judgments of Hon'ble Supreme Court in the cases of CIT v. Birla Gwalior (P.) Ltd. 89 ITR 266 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Statements on oath recorded at the time of survey proceedings and also the admissions of the Managing Director therein. She emphasized that in his Statement recorded on oath at the time of survey proceedings, Shri Lalit C. Gandhi, the then Chairman-cum Managing Director of Lok Group of companies, admitted that the revenues were recognized in accordance with the company's consistently followed accounting policies to recognize sales on execution of Agreements. She pointed out that Shri Eanthi also admitted the tax liability of the assessee company in his statement recorded on oath at the time of survey proceedings as well as by his subsequent communication vide letters dated 12th a 23rd September, 2008. 31. Regarding the assessee's plea that following the second limb of the Accounting Policy for 'revenue recognition' being adopted by the assessee, the estimated accrued revenue of Rs.135.47 crore recognized in the financial year 2006-07 could be cancelled by virtue of cancellation of the Agreements by way of filing revised return, the learned DR submitted that merely by adopting the Accounting Policy of revenue recognition subject to execution of conveyance and/or compliance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he financial year. She submitted that it is significant to note in this connection that the assessee has got its accounts audited thrice for the financial year 2006-07 relevant to A.Y. 2007- 08 and the third audit report is dated 31.03.2009 whereas the assessee has filed its revised return of income on 01.01.2009 i.e. prior to such audit report. 34. The learned DR submitted that the Assessing Officer has rightly observed that it is apparent that owing to higher revenue recognized in the assessee's books of accounts during the year under consideration, the assessee company's shares on Bombay Stock Exchange were quoted at a higher market price, resulting into benefit to its sister concerns on sale of shares of the assessee company at such higher market price. It is reiterated that the cancellation of Agreements and consequently revision of return of income was not a bona fide act on the part of the assessee. She submitted that keeping in view the provisions of Section 220 of the Act read with the Ministry's General Circular No.1/2003, a company cannot lay more than one set of annual accounts for a particular financial year unless it has reopened/revised such annual accounts after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verrious judicial pronouncements cited by both the sides in support of their respective stand. Under the Income-tax Act, income charged to tax is the income that is received or is deemed to be received in India in the previous year relevant to the year for which assessment is made or the income that accrues or arises or is deemed to accrue or arisen in India during such year. The computation of such income is to be made in accordance with the method of accounting regularly employed by the assessee. If the accounts are maintained under the mercantile system, what has to be seen is whether income can be said to have really accrued to the assessee. There are settled principles to ascertain whether income can be said to have really accrued to the assessee. In the present case, the assessee is following mercantile system of accounting and before we decide as to whether the income in question from the relevant five transactions in immovable property can be said to have really accrued to the assessee in the year under consideration on the touchstone of these principles and in the light of the propositions propounded by the Hon'ble Supreme Court in the various judicial pronouncements, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not will depend on the provision of law relating thereto and not on the view which the assessee might take nor can the existence or absence of entries in the books of accounts be decisive or conclusive in the matter. In the case of H.M. Kashiparekh Co. Ltd. v. CIT 39 ITR 706, Hon'ble Bombay High Court held that the income-tax is a levy on income and although the Income-tax 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, the substance of the matter is the income. It was held that if income does not result at all, there cannot be a tax, even though in book keeping entries are made about a hypothetical income which does not materialize. In our opinion, the ratio laid down in these decisions of the Hon'ble Supreme Court and of the Hon'ble jurisdictional High Court makes it abundantly clear that the entries made by the assessee in the books of accounts are not determinative of the question whether the assessee has earned any income and what is to be considered to decide the said question is the true nature of the transaction and whether in fact it has resulted in profit to the assessee. We, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in this regard, any agreement entered into by the parties can be terminated or cancelled by mutual consent even in the absence of any clause specifically permitting to do so. Moreover, as a result of cancellation of the agreements, the relevant immovable properties have come back to the assessee company and the same are duly reflected in its balance sheet for the subsequent years as demonstrated by the learned counsel for the assessee. In our opinion, there is thus no reason to doubt the genuineness or bona fide of the action of the assessee in cancelling the agreements which has been accepted and duly acted upon by all the parties concerned. It is pertinent to note here that the reason for cancellation of agreements was explained by the assessee before the authorities below as change in the market scenario relating to real estate and this reason given by the assessee to justify the decision taken to cancel the agreements as a honest and prudent business man has not been doubted or disputed by the authorities below by bringing any material or evidence on record. 40. The Revenue authorities have doubted the authenticity of the revised accounts when the accounts prepared o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resold after the cancellation. The relevant transactions in dispute, however, were relating to transfer of land or rights therein and the cancellation of such transactions, in our opinion, cannot be equated with the cancellation of tenements of the housing project undertaken and executed by the assessee. In our opinion, as per the accounting policy followed by the assessee company, the Revenue in respect of property sale transaction was recognized originally in the books of accounts of the year under consideration on the basis of agreement of sale which was subject to execution of conveyance and compliance of applicable legal formalities. Accordingly, in the original return of income, the revenue so recognized in the accounts was offered to tax by the assessee company. However, as a result of cancellation of the relevant transactions, there was no income really accrued to the assessee which was chargeable to tax and the declaration of such income turned out to be a wrong statement of which the assessee became aware only on cancellation. It, therefore, revised the accounts which, in our opinion, was in conformity with the accounting policy followed by it and also revised the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer in section 2(47) of the Income-tax Act, 1961 as in the case of stock in trade, the transfer u/s 2(47) of the Income-tax Act, 1961 is not applicable and what is applicable is the contextual or the ordinary meaning of the word "transfer". It was held that when the legal title and possession of the property were with the assessee, then the transfer or sale was not possible merely by allowing the developer to carry out the construction work and unless and until the title of the property is passed on to the customer, there cannot be a sale or stock of the immovable property which is stock in trade. In our opinion, if the ratio of the decision of the Tribunal in the case of R. Gopinath (HUF) (supra) is applied to the facts of the present case, it become abundantly clear that the relevant agreements entered into by the assessee did not result in sale or transfer of immovable properties constituting stock in trade as the title of the said properties was not passed on to the purchasers and the same remained with the assessee all throughout. It, therefore, cannot be said that there was accrual of income to the assessee as a result of the said transactions/agreements in the year unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this question has to be considered by taking the probability or improbability of realization in the realistic manner. Hon'ble Supreme Court held that in the facts and circumstances of the case, it was not possible to hold that there was real accrual of income to the assessee company in respect of the enhanced charges for supply of electricity and the claim made by the assessee at the increased rates on the basis of which necessary entries were made represented only hypothetical income which could not be said to have really accrued to the assessee company during the relevant previous years. To come to this conclusion, Hon'ble Supreme Court, inter alia, relied on its earlier judgment in the case of Shoorji Vallabhdas Co. (supra) wherein it was held that income-tax is a levy on income and although Income-tax Act takes into account two points of time at which the liability to tax is attracted viz. the accrual of income or its receipt, the substance of the matter is the income. It was held that if the income does not result at all, there cannot be a tax even though in book keeping entries were made about hypothetical income which does not materialize. 45. In his impugned order, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had leased a plot on rent and had made certain advances on interest to M under an agreement. M was to construct the Hotel on the said plot which he was unable to do. A fresh agreement, therefore, was entered into between the assessee and M subsequently under which the assessee waived rent and interest and received back the plot. In these facts and circumstances, the doctrine of real income was held to be applicable by the Hon'ble Bombay High Court holding that no rental or interest income could be charged in the hands of the assessee on the basis of earlier agreement with M. In the present case, the original agreements/transactions in respect of immovable properties have been subsequently cancelled/terminated and as a result of the said cancellation/termination, the relevant immovable properties have been returned back to the assessee which are duly reflected in its balance sheet as stock in trade in the succeeding years as demonstrated by the learned counsel for the assessee from the relevant balance sheet placed on record. As further submitted by him, the assessee company is still holding the said immovable properties as stock in trade. Having regard to all these facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the year under consideration and if at all there was such wrong statement, the assessee was aware of the same as the execution of the original agreements with the sister concerns and cancellation thereof subsequently was a preplanned affair with an intention to rig the prices of its shares so that the sister concerns could sale the shares of the assessee company at higher price in order to make huge profits. We are unable to accede to this theory of the Revenue. In our opinion, if the profits reflected in the accounts as found during the course of survey represented figures inflated by the assessee company with an intention as alleged by the Revenue, there was no reason for its Chairman-cum-Managing Director to agree to pay tax on such huge income. If he was aware of the fact that the said profits represented inflated figures which was not real, there was nothing to prevent him from saying so in his statement recorded during the course of survey instead of agreeing to pay tax thereon. Even in the letter submitted by the assessee company after the survey to the AO, it offered to pay such tax. 50. As regards the allegation of the Revenue that it was done by the assessee with an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit by his impugned order. 51. The last issue raised by the assessee in its appeal as taken in ground No. 2(m) relates to the addition of Rs.9,42,021/- made by the AO on account of waiver of principal amount. 52. In its profit loss account filed along with the return of income, principal amount of Rs.9,42,021/- under Scheme of OTS waived during the year under consideration was credited by the assessee. For the purpose of computation of total income, the said amount, however, was excluded by the assessee on the ground that it was a capital receipt not chargeable to tax either u/s 41(1) or even u/s 28(iv). This stand of the assessee was not found acceptable by the AO keeping in view the decision of Hon'ble Bombay High Court in the case of Solid Containers Ltd. vs. DCIT 308 ITR 417 wherein it was held that although the loan was taken by the assessee for trading activity but upon waiver, the said loan was returned by the assessee in the business and the same, therefore, was taxable in its hands as income. Relying on the said decision of Hon'ble jurisdictional High Court, the principal amount waived of under the Scheme of OTS was treated by the AO as the income of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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