TaxTMI 
TaxTMI 
2017 (11) TMI 368
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....tions laid down under Section 147 of the Act required to be fulfilled before reopening such assessment. 1.3 It is submitted that the proceedings initiated for reopening the assessment under Section 148 of the Act for reopening the assessment are bad in law and invalid. The appellant prays that the assessment framed by the learned Assessing Officer be quashed or set aside as null and void and bad in law. 11. ADDITION IN RESPECT OF ALLEGED RECEIPT OF Rs. 65,00,000/-: 2.1 On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in upholding the computation of income made by the Assessing Officer as Income from Other Sources in respect of a sum of Rs. 65,00,000/ - paid directly by SHRM Group, one of the shareholder of the Appellant company to the bank, in respect of guarantee invoked by the bank, as alleged receipt in the hands of the Appellant. 2.2 On the facts and in the circumstances of the case and in law, the learned CIT (A) and the learned Assessing Officer failed to appreciate the detailed submissions made by the Appellant and the rule of law laid down in various decisions relied upon by the Appellant in....
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....iled to appreciate the detailed submissions made by the appellant and the rule of law laid down in various judicial pronouncements relied upon by the appellant in this behalf. It is submitted that the interest income for the year be taxed under the head Profits and Gains of Business or Profession and not under the head Income from Other Sources. The appellant prays that the learned Assessing Officer be directed to compute the income of the appellant under the head Profits and Gains of Business and Profession and allow set off of carried forward losses there against. 4. The Grounds taken in ITA No.1116/Mum/2013 for 2001-02 are as under:- I. PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT Rs. 59,32,500/-: 1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in confirming penalty imposed under Section 271(l)(c) of the Act at Rs, 59,32,500 for alleged furnishing of inaccurate particulars of income of the appellant. 1.2 On the facts and in the circumstances of the case and in law, the learned CIT(A) failed to appreciate the explanation offered by the Appellant in its pro....
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....after referred to as Bank) had extended cash credit facilities to the assessee company in the earlier years. These facilities were secured by way of hypothecations of all movable assets including book debts and stocks. Further, these facilities were guaranteed by Group SHRM - France, one of the shareholders of the assessee company. Since the assessee company was not able to repay the overdrafts availed and interest due thereon, the corporate guarantee given by Groupe SHRM - France was invoked by the Bank for recovery of the amount payable by the assessee company to the Bank. Copies of letter dated 27/10/1998, 22/05/1998 and 11/03/1999 issued by the Bank, in this behalf, are placed on the record. Accordingly, during the year ended 31st March, 2000 Groupe SHRM paid a sum of Rs. 73,33,834.70 (Rs. 65,00,000 for principal amount and Rs. 8,33,834 for interest thereon). This amount was directly paid by Groupe SHRM to the bank as it has given the guarantee and the same was invoked by the bank. Consequently, the assessee company had credited a sum of Rs. 65,00,000/- representing the principal component to its Capital Reserve Account and a sum of Rs. 8,33,834/- representing the interest comp....
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....nt quality. It became a definite trade surplus". 12. In the instant case, the assessee company had obtained a secured loan and one of the shareholders of the assessee company had paid part of the principal amount directly to the Hank and the Bank had waived the remaining part of the principal amount. Further, the amount paid directly by the concerned shareholder of the assessee company was also waived by such shareholder. Hence, the entire principal component, not being a trading transaction, was duly credited to Capital Reserve Account. Accordingly, even the ratio of the decision of the Supreme Court in the case of CIT Vs. TV Sundaram lyengar & Sons Limited (Supra) is not applicable to the facts and the circumstance of the case. The fact that there is a difference between the amount received in the course of a trading transaction and other deposit or loan is evident from the decision of the Hon'ble Supreme Court in the case of K.MS. Lakshmanier & Sons (1953) 23 ITR 202 where trade advances were not treated as loans and security deposits were treated as loans. The Apex Court, in this case, has discussed the issue as under: "On the other hand, a more recent decision ....
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....ns of Section 41(l) of the Act nor the rule of law laid down in the decisions relied upon by AO can be invoked to treat that as income within the meaning of Section 41(1) of the Act. Accordingly, AO is directed to delete the addition so made u/s.41(1). 14. As we have already decided the merit in favour of the assessee, we are not going to deal with the issue of reopening which is now academic in nature. 15. In the result, appeal for the A.Y.2000-01 is allowed. 16. In the A.Y.2001-02, assessee is aggrieved for addition of Rs. 1.50 crores in respect of waiver of loan on settlement with the bank by invoking the provisions of Section 41(1) read with Section 28(iv) of the Act. 17. We have considered rival contentions and found that Banque Nationale De Paris (herein after referred to as Bank) had extended overdraft facilities to the assessee company in the earlier years. These facilities were secured by way of hypothecations of all movable assets including book debts and stocks. Further, these facilities were guaranteed by Group SHRM - France, one of the shareholders of the assessee company. Since the assessee company was not able to repay the overdrafts availed and interest ....