Real income doctrine and revised return validity applied to property transactions, while loan waiver income remained taxable.

Book entries are not conclusive for taxability: income from immovable property transactions was held not to have really accrued where title did not pass, consideration was not actually realised, and the agreements were later cancelled. On that basis, the revised return filed within time under section 139(5) was treated as valid because it withdrew a wrong statement in the original return. By contrast, the waiver of principal under a one-time settlement scheme was treated as taxable business-related income, with the addition sustained in the absence of any distinguishing feature from binding precedent. The result was partial relief to the assessee.

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Issues: (i) Whether the revised return filed by the assessee under section 139(5) of the Income-tax Act, 1961 was valid and whether the income from the five immovable property transactions had really accrued to the assessee in the relevant year. (ii) Whether the waiver of the principal amount under the one-time settlement scheme was taxable in the assessee's hands.

Issue (i): Whether the revised return filed by the assessee under section 139(5) of the Income-tax Act, 1961 was valid and whether the income from the five immovable property transactions had really accrued to the assessee in the relevant year.

Analysis: The original return was filed in response to notice under section 142(1) and the revised return was filed within time. The crucial question was whether there had been a discovered omission or wrong statement in the original return. The Court held that book entries and the form of the original accounts were not conclusive of taxability. The five transactions were found not to have resulted in transfer of title or actual realization of consideration, the agreements were later cancelled, and the properties remained with the assessee as stock-in-trade. Applying the doctrine of real income and the principle that income must actually accrue before it can be taxed, the Court held that the original declaration of income represented a wrong statement which was correctly withdrawn by the revised return.

Conclusion: The revised return was valid and the addition on account of alleged profits from the five transactions was not sustainable; this issue was decided in favour of the assessee.

Issue (ii): Whether the waiver of the principal amount under the one-time settlement scheme was taxable in the assessee's hands.

Analysis: The waived amount was treated as income by the Assessing Officer and the Court found no material to distinguish the case from the binding jurisdictional precedent relied upon by the Revenue. The waiver was connected with the assessee's business liability and was not shown to fall outside the chargeability adopted by the assessing authority.

Conclusion: The addition on account of waiver of principal amount was upheld and this issue was decided against the assessee.

Final Conclusion: The appeal succeeded on the principal issue relating to revised return and accrual of income, but failed on the waiver of principal amount, resulting in partial relief to the assessee.

Ratio Decidendi: For tax purposes, book entries are not determinative; income can be taxed only when it has really accrued or arisen, and a revised return is valid where the original return contains a bona fide wrong statement discovered later.

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