C & M FARMING LTD, NASHIK V. CIT 10, MUMBAI

ITA 3782/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75750 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 29-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Revision of order; Question of law; Difference of opinion; Assessment record; Capital receipt; Change of opinion
• Section: 143(3); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , . JKTSUNZ BEFORE SHRI VIJAY PAL RAO, JM & SHRI RAJENDRA, AM , ./ I.T.A. NO. 3782/MUM/2012 ( / ASSESSMENT YEAR :2007-08) M/S C&M FRAMING LTD. C&M HOUSE, N.D. PATEL, ROAD, BEHIND GPO, NASIK MAHARASHTRA 422 001. / VS. COMMISSIONER OF INCOME TAX 574, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ./ ./PAN/GIR NO. : AAACC0473C ( /APPELLANT ) .. ( / RESPONDENT ) ! # /ASSESSEE BY : SHRI K. GOPAL # / REVENUE BY : SHRI. SANJEEV JAIN # / DATE OF HEARING : 21 FEBRUARY 2014 # /DATE OF PRONOUNCEMENT: 28 TH FEBRUARY 2014 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E REVISION ORDER DATED 14.3.2012 OF COMMISSIONER OF INCOME TAX PASSED U/S 263 OF INCOME TAX ACT FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1 . THE LD. COMMISSIONER OF INCOME TAX [ HEREINAFTER REFERRED TO AS LD. CIT] ERRED IN PASSING THE ORDER DATED 14.03.2012 UNDER S ECTION 263 OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSMENT ORDER DATED 31.12. 2009 PASSED UNDER SECTION 143(3) IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERES T OF REVENUE. HENCE, THE PROVISIONS OF SECTION 263 OF THE ACT ARE NOT ATTRACTED IN THE APPELLANTS CASE. THEREFORE, THE ORDER DATED 14.03.2012 PASSED BY THE LD. CIT UNDER SECTION 263 OF THE ACT IS BAD IN LAW AND THE SAME MAY BE QUASHED. 2 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE LD. AO HAS PASSED THE ASSESSMENT ORDER DATED 31.12.2009 UNDER SECTION 143(3) OF THE ACT AFTER DUE APPLICATION OF MIND AND AFTER CARRYING ON REQUIRED INVESTIGATIONS. THER EFORE, THE LD. CIT IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 AND HENCE, T HE ORDER PASSED UNDER SECTION 263 OF THE ACT IS WITHOUT JURISDICTION. 3. WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT(A) FA ILED TO APPRECIATE THAT THE ISSUES RAISED DURING THE COURSE OF THE PROCEEDINGS UNDER SECTION 263 DO NOT SATISFY THE CONDITIONS THAT THE ASSESSMENT ORDER DATED 31.12.20 09 IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE. THEREFORE, THE ORDER PASSED UNDER SECTION 263 OF THE ACT DATED 14.03.1012 IS BAD IN LAW AND HENCE , THE SAME MAY BE QUASHED AND SET ASIDE. 3. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I NCOME TAX ACT ON 31.12.2009. THE COMMISSIONER, ON PERUSAL OF THE ASSESSMENT RECORD F OUND THAT THE ASSESSEE HAS NOT ADDED BACK AN AMOUNT OF RS. 30,60,895/- WHICH WAS FOUND T O BE INADMISSIBLE U/S 40(A) NOR ADDED BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. FURTHER IT WAS ALSO NOTICED BY THE COMMISSIONER THAT AN AMOUNT OF RS. 22.52 CRORES BEI NG THE PRINCIPLE AMOUNT OF LOAN WHICH WAS WAVED OFF BY THE BANK HAS NOT BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT NOR ADDED BACK IN THE COMPUTATION OF INCOME. ACCORDINGLY, THE COMMISSIONER WAS OF THE VIEW THAT THE ORDER PASSED U/S 143(3) DATED 31.12.2009 IS ERRONEO US AND PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, A SHOW CAUSE NOTICE DATED 29.11.201 1 U/S 263 OF THE INCOME TAX ACT WAS ISSUED TO THE ASSESSEE. THE ASSESSEE FILED ITS REPL Y TO SHOW CAUSE NOTICE VIDE LETTER DATED 8.12.2012 AND MAINLY CONTENDED THAT WHEN THE SCRUTI NY ASSESSMENT U/S 143(3) IS MADE AFTER CONSIDERING THE REPLY OF THE ASSESSEE ON THE ISSUE THEN NON-DISCUSSION OF THE FACT IS NOT ENOUGH TO INVOKE THE PROVISIONS OF SECTION 263 OF T HE INCOME TAX ACT. THE ASSESSING OFFICER HAS TAKEN A POSSIBLE VIEW THEN THE COMMISSIONER IS NOT PERMITTED TO TAKE A DIFFERENT VIEW BY EXERCISING THE POWER U/S 263. THE COMMISSIONER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT AS REGARDS INADMISSIBLE AMOUNT U/S 40 (A) OF RS. 30,60,895/- THE ASSESSEE HAS MADE NO SUBMISSIONS IN RESPONSE TO SHOW CAUSE NOTIC E ABOUT THE LIABILITY OF SUCH AMOUNT. THE COMMISSIONER HAS HELD THAT WHEN THE A.O HAS NOT DONE A PROPER VERIFICATION ON THIS 3 ISSUE WHILE PASSING THE ASSESSMENT ORDER THEN THE S AID ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, THE COMMISSIO NER SET ASIDE THE ORDER AND REMITTED THE ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO FRA MED ASSESSMENT DE-NOVO. ONTHE ISSUE OF WAVER OF LOAN THE COMMISSIONER HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS: CIT VS KARAM CHAND THAPAR 222 ITR 112 (SC) CIT VS SUNDARAM IYENGAR (T.V.) AND SONS LTD. 222 IT R 344 (SC) SOLID CONTAINERS LTD. VS DCIT 308 ITR 417 (BOM) 4. ACCORDINGLY, THE COMMISSIONER HELD THAT WAVER OF PRINCIPLE AMOUNT OF LOAN WAS TO BE TREATED AS INCOME OF THE ASSESSEE. HOLDING THE ASSE SSMENT ORDER PASSED U/S 143(3) AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E THE SAME WAS SET ASIDE TO THE FILE OF THE A.O TO FRAME THE ASSESSMENT DE-NOVO. 5. BEFORE US THE LD. A.R OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSMENT HAS BEEN FRAMED U/S 143(3) AFTER CONSIDERING ALL THE FACTS O N THE ISSUE OF WAVER OF LOAN. THE LD. A.R HAS POINTED OUT THAT THE BANK LOAN HAS BEEN WAVED A S A RESULT OF ONE TIME SETTLEMENT. THE ASSESSEE OFFERED THE INTEREST COMPONENT OF THE WAVE R AND SINCE THE PRINCIPLE AMOUNT CANNOT BE TREATED AS THE INCOME THEREFORE, THE SAME CANNOT BE ASSESSED TO TAX. THE LD. A.R HAS POINTED OUT THAT THE A.O HAS RAISED A QUERY DURING THE ASSESSMENT PROCEEDINGS ON THIS ISSUE AND THE ASSESSEE REPLIED THE SAME VIDE ITS LETTER D ATED 28.12.2009. THE LD. A.R HAS REFERRED THE REPLY OF THE ASSESSEE DATED 28.12.2009 FILED BE FORE THE A.O ON 29.12.2009 AND SUBMITTED THAT THE A.O RAISED CERTAIN QUERIES DURING THE HEAR ING ON 22.12.2009 REGARDING THE WAVER OF PRINCIPLE COMPONENT OF LOAN AS BUSINESS INCOME U/S 41(1) OF THE INCOME TAX ACT. THE ASSESSEE EXPLAINED AND SUBMITTED ITS REPLY TO THE Q UERY WHICH HAS BEEN CONSIDERED BY THE A.O. ACCORDINGLY BY ACCEPTING THE REPLY OF THE ASSE SSEE, THE A.O DID NOT ASSESS THE PRINCIPLE COMPONENT OF THE WAVER OF LOAN BY THE BANK. THE LD. A.R HAS THEN POINTED OUT THAT IN REPLY 4 TO SHOW CAUSE NOTICE THE ASSESSEE HAS EXPLAINED THI S FACT TO THE COMMISSIONER THAT THIS ISSUE HAS BEEN CONSIDERED BY THE A.O IN THE ASSESSMENT PR OCEEDINGS AND TAKEN A POSSIBLE VIEW. THEREFORE, PROVISIONS OF SECTION 263 CANNOT BE INVO KED ON THE ISSUE ON WHICH TWO VIEWS ARE POSSIBLE AND A.O HAS TAKEN ONE OF THE POSSIBLE VIEW S. THE LD. A.R HAS RELIED UPON THE FOLLOWING DECISIONS: GRASIM INDUSTRIES LTD. VS CIT 321 ITR 92 CIT VS 211 TAXMAN 108 CIT VS MAX INDIA LTD. 295 ITR 282 FINE JEWELLERY INDIA LTD. VS ACIT 56 SOT 22 6. THUS THE LD. AR HAS CONTENDED THAT THE A.O HAS E XAMINED THE ISSUE AND ACCEPTED THE EXPLANATION OF THE ASSESSEE FOR NOT TREATING THE PR INCIPLE COMPONENT OF WAVER OF LOAN AS INCOME U/S 41(1) OF THE INCOME TAX ACT THEN THE COM MISSIONER CANNOT EXERCISE ITS JURISDICTION U/S 263 MERELY BECAUSE HE DOES NOT AGR EE WITH THE VIEW OF THE ASSESSEE. PLACING RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIO NAL HIGH COURT IN CASE OF CIT VS JILO HOLDING PVT. LTD. (SUPRA) THE LD. A.R HAS SUBMITTED THAT THE HONBLE HIGH COURT AFTER CONSIDERING THE DECISION IN CASE OF SOLID CONTAINER S LTD. VS DCIT (SUPRA) HAS HELD THAT THE PRINCIPLE PART OF THE LOAN WAVED CANNOT BE TREATED AS INCOME U/S 41(1) OR U/S 28(IV) OF THE INCOME TAX ACT. THE LD. A.R HAS REFERRED THE PROFIT AND LOSS ACCOUNT AND SUBMITTED THAT THE ASSESSEE ITSELF HAS OFFERED TO TAX THE WAVER OF INT EREST AND WAVER OF PRINCIPLE AMOUNT HAS BEEN CREDITED TO THE CAPITAL RESERVE IN THE BALANCE SHEE T. THE LD. A.R HAS SUBMITTED THAT IN THE NOTES FORMING PART OF ACCOUNTS AT THE PAGE NO. 5 OF THE PAPER BOOK THE ASSESSEE HAS EXPLAINED THE DETAILS OF ONE TIME SETTLEMENT OF ITS DEBTS. SI NCE THE LOAN IN QUESTION WAS A TERM LOAN AND THEREFORE, THE WAIVER OF THE SAME CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE. HENCE, THE LD. A.R HAS SUBMITTED THAT THE ISSUE EVEN ON MERITS IS COVERED IN FAVOUR OF THE ASSESSEE AND 5 THEREFORE, THE IMPUGNED ORDER OF THE COMMISSIONER I S NOT SUSTAINABLE SO FAR AS IT RELATES TO THE ISSUE OF WAVER OF LOAN AND TREATING THE PRINCIPLE L OAN AMOUNT AS INCOME OF THE ASSESSEE U/S 41(1) OF THE INCOME TAX ACT. 7. ON THE OTHER HAND, THE LD. D.R HAS SUBMITTED THA T THE ALLEGED REPLY DATED 28.12.2009 IS CLAIMED TO HAVE BEEN FILED BY THE ASSESSEE ON 29 .12.2009 BUT THERE IS NO REFERENCE OF THE SAID REPLY IN THE ASSESSMENT ORDER ON THIS ISSUE BE CAUSE THE A.O HAS NOT AT ALL DISCUSSED THIS ISSUE. HE HAS FURTHER SUBMITTED THAT WHEN THE A.O H AS NOT DISCUSSED THE ISSUE IN THE ASSESSMENT ORDER THEN THERE IS NO INQUIRY AND EXAMI NATION OF THE ISSUE BY THE A.O AND CONSEQUENTLY THERE IS NOT APPLICATION OF MIND ON TH E PART OF THE A.O. HE HAS FURTHER SUBMITTED THAT EVEN ON THE ISSUE OF INADMISSIBILITY OF AMOUNT OF RS. 30,60,895/- U/S 40(A) OF THE INCOME TAX ACT NEITHER THE ASSESSEE HAS EXPLAINED NOR THE A.O HAS TAKEN UP THIS ISSUE IN THE ASSESSMENT ORDER AND THEREFORE, THERE IS A COMPLETE LACK OF INQUIRY AND APPLICATION OF MIND ON THE PART OF THE A.O WHICH RENDERS THE ASSESSMENT OR DER ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE HAS RELIED UPON THE IMP UGNED ORDER OF THE COMMISSIONER AND SUBMITTED THAT THE COMMISSIONER HAS PLACED RELIANCE ON THE DECISIONS OF THE HONBLE SUPREME COURT AS WELL AS HONBLE JURISDICTIONAL HIG H COURT AND THEREFORE, THERE WAS ONLY ONE VIEW POSSIBLE ON THIS POINT AS HELD BY THE HON BLE SUPREME COURT AS WELL AS HONBLE JURISDICTIONAL HIGH COURT. WHEN THE A.O HAS NOT TAK EN ANY VIEW ON THE ISSUE IN QUESTION THEN THERE IS NOT QUESTION OF CHANGE OF OPINION BY THE C OMMISSIONER WHILE EXERCISING THE POWER U/S 263. HE HAS RELIED UPON THE ORDER OF THE TRIBUN AL IN CASE OF HINDUSTAN TIN WORKS LTD. VS. DCIT (092 ITD 101). IN REBUTTAL THE LD. A.R HAS SUB MITTED THAT THIS ISSUE IS A DEBATABLE ISSUE AS PER THE DECISION OF HONBLE HIGH COURT IN CASE O F XYLON HOLDING PVT. LTD. (SUPRA) THEREFORE, TWO VIEWS ARE POSSIBLE ON THIS ISSUE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFUL PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT WHILE PASSING THE ASSESSMENT O RDER U/S 143(3) ON 31.12.2009 THE A.O 6 HAS NOT DISCUSSED ANYTHING ABOUT THESE TWO ISSUES O N WHICH THE COMMISSIONER HAS INVOKED HIS JURISDICTION U/S 263. AS FAR AS THE ISSUE OF DI SALLOWANCE U/S 40(A) REGARDING A SUM OF RS.30,60,895/- THE SAME WAS FOUND AS INADMISSIBLE U /S 40(A) AS PER THE AUDITORS REPORT OF THE ASSESSEE HOWEVER, THE COMMISSIONER NOTED THAT NEITH ER THE ASSESSEE DISALLOWED IN THE COMPUTATION OF INCOME NOR THE ASSESSING OFFICER HAS ADDED THE SAME. AFTER CONCLUSION OF HEARING OF THE MATTER TH LD. OF THE ASSESSEE PRODUC ED COPY OF THE CONSEQUENTIAL ORDER DATED 25/03/2013 PASSED BY THE A.O. IN PURSUANT TO THE RE VISION ORDER UNDER SECTION 263. WE FIND THAT IN THE CONSEQUENTIAL ORDER THE A.O. STATED THA T THE SAID AMOUNT OF RS.30,60,895/- HAS ALREADY BEEN DISALLOWED U/S 40(A)(IA) VIDE ORDER PA SSED UNDER SECTION 143(3) DATED 31/12/2009. THE MATTER WAS ACCORDINGLY FIXED FOR CL ARIFICATION ON 07/02/2014 AND 21/02/2014. AFTER CONSIDERING THE CLARIFICATION FUR NISHED BY A.O. AS WELL AS BY LD. AR OF ASSESSEE WE FIND THAT THE SAID AMOUNT OF RS.30,60,8 95/- WAS DISALLOWED BY THE ASSESSEE ITSELF IN THE REVISED COMPUTATION AND ALSO FIND PLACE IN T HE COMPUTATION OF INCOME IN THE ORIGINAL ASSESSMENT ORDER DATED 31/12/2009 HOWEVER, THE FACT WAS NEITHER EXPLAINED BEFORE THE COMMISSIONER DURING THE REVISION PROCEEDINGS NOR BE FORE US DURING THE HEARING OF THE APPEAL AND ONLY ON PRODUCTION OF CONSEQUENTIAL ORDER PASSE D BY AO THIS FACT FIST TIME CAME TO OUR NOTICE. NEVERTHELESS, WHEN THE AMOUNT WAS ALREADY D ISALLOWED AT THE TIME OF ORIGINAL ASSESSEMENT THEN THERE IS NO QUESTION OF DISALLOWAN CE IN THE REVISION ORDER. 9. AS REGARDS THE ISSUE OF PRINCIPLE AMOUNT OF LOAN WHICH WAS WAVED OFF BY THE BANK IN ONE TIME SETTLEMENT UNDISPUTEDLY THIS ISSUE HAS NOT BEEN DEALT WITH OR DISCUSSED BY THE A.O IN THE ASSESSMENT ORDER DATED 31.12.2009 PASSED U/S 14 3(3). FROM THE PLAIN READING OF THE ASSESSMENT ORDER IT DOES NOT EXHIBIT THAT THE A.O H AS RAISED ANY QUERY ON THIS ISSUE. HOWEVER, THE ASSESSEE CLAIMED TO HAVE FILED REPLY DATED 28.1 2.2009 ON 29.12.2009 WHEREBY A QUERY RAISED BY THE A.O ON THIS ISSUE OF WAVER OF PRINCIP LE PORTION OF LOAN HAS BEEN DULY EXPLAINED BY THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THE I MPUGNED ORDER HAS BEEN PASSED ON 31.12.2009 7 AND THEREFORE, THERE IS HARDLY ANY POSSIBILITY OF C ONSIDERING THE ALLEGED REPLY OF THE ASSESSEE WAS FILED ON 29.12.2009. APPARANTLY THE ISSUE OF TR EATING THE WAVER OF PRINCIPLE PART OF LOAN AS INCOME OF THE ASSESSEE HAS NOT BEEN DULY EXAMINE D BY THE A.O AND EVEN IF IT IS PRESUMED THAT THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM/E XPLANATION OF THE ASSESSEE IT WAS DONE SO IN HASTE WITHOUT PROPER INQUIRY AND VERIFICATION AN D THE SAME WOULD NOT TANTAMOUNT THAT THE A.O HAS TAKEN A VIEW. EVEN OTHERWISE, IF THE A.O HAS TAKEN A VIEW THE SAME WAS NOT SUSTAINABLE IN LAW AS IT WAS CONTRARY TO THE LAW LA ID DOWN ON THE POINT BY THE HONBLE SUPREME COURT AS WELL AS HONBLE JURISDICTIONAL HIG H COURT IN CASES AS RELIED UPON BY THE COMMISSIONER AND IT WOULD EMPOWER THE COMMISSIONER TO EXERCISE ITS JURISDICTION U/S 263 OF SUCH ISSUE. THEREFORE, WHEN THE ORDER OF THE ASSESS ING OFFICER DOES NOT EXHIBIT ANY THOUGHT PROCESS ON THE ISSUE OF TAXABILITY OF WAVER OF THE LOAN THEN IT CANNOT BE INTERFERRED THAT THE A.O HAS APPLIED HIS MIND ON THIS ISSUE WHILE FRAMIN G THE ASSESSMENT U/S 143(3). THE PROCEEDINGS BEFORE THE ASSESSING OFFICER ARE QUASHI JUDICIAL PROCEEDINGS THEREFORE, THE DECISION ON THE ISSUE MUST BE EXPLICIT AND SUPPORTE D BY REASONS AND NOT SOMETHING TO BE ACCEPTED ON THE BASIS OF ASSUMPTION. WHEN THERE IS NO EXAMINATION AND ADJUDICATION OF THE ISSUE AS CLEAR FROM THE ASSESSMENT ORDER THEN IT CA NNOT BE PRESUMED THAT THE ASSESSING OFFICER HAS EXAMINED AND VERIFIED THE ISSUE AND THE N TAKEN A VIEW. WE ARE OF THE VIEW THAT A MERE CLERICAL WORK OF VERIFICATION OF QUANTITATIVE FIGURES WOULD NOT BE TERMED AS EXAMINATION OF ISSUE OF TAXABILITY AND APPLICATION OF MIND BY A DJUDICATING AUTHORITY LIKE A.O. IT IS MANIFEST FROM THE ASSESSMENT ORDER THAT THERE IS A COMPLETE LACK OF INQUIRY ON THIS ISSUE. ACCORDINGLY, THE A.O FAILED TO APPLY HIS MIND ON TH E ISSUE PARTICULARLY WHEN THE DECISIONS OF HONBLE SUPREME COURT AS WELL AS HONBLE JURISDICTI ON HIGH COURT IN CASE OF CIT VS SUNDARAM IYENGAR (T.V.) & SONS LTD. (SUPRA) AND SO LID CONTAINERS LTD. VS DCIT (SUPRA) WHICH ARE BINDING ON THE A.O. AS NO CONTRARY DECISI ONS WERE AVAILABLE AT THE POINT OF THE FRAMING THE ASSESSMENT HENCE, IT CANNOT BE SAID THA T THERE WERE TWO POSSIBLE VIEWS ON THIS 8 ISSUE. A LACK OF INQUIRY AND NON-APPLICATION OF MIN D ON THE PART OF THE A.O RENDERS HIS ORDER ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS PERTINENT TO NOTE THAT NEITHER BEFORE THE COMMISSIONER NOR BEFORE US THE ASSESSEE HAS CLAIMED THAT THE LOAN IN QUESTION WAS TAKEN FOR ACQUISITION/PURCHASE OF ASSET. THEREFORE, IF THE LOAN IS TAKEN FOR BUSINESS OF THE ASSESSEE AS WORKING CAPITAL THEN THE DECISIONS RELI ED UPON BY THE COMMISSIONER ARE FULLY APPLICABLE ON THIS ISSUE. WHEN THERE IS NO ADJUDICA TION BY THE A.O THEN THERE IS NO QUESTION OF TAKING A VIEW ON THE POINT. THE A.O IS DUTY BOUND T O MAKE AN INQUIRY OF A PARTICULAR ITEM OF INCOME AND IF HE DOES NOT CONDUCT AN INQUIRY THEN T HE COMMISSIONER IS JUSTIFIED IN EXERCISING ITS POWER U/S 263 TO INTERFERE THE ASSESSMENT ORDER WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HAVING REGARD TO THE FACT THAT THE LOAN IN QUESTION HAS NOT BEEN CLAIMED TO HAVE BEEN TAKEN FOR PURCHASE OF CAPITAL ASSET THE CONTENTION OF THE ASSESSEE THAT THE COMMISSIONER HAS EXERCISED ITS POWER U/S 263 ON CHA NGE OF OPINION IS NOT ACCEPTABLE. THERE IS NO CONSIDERATION BY THE A.O MUCH LESS PROPER CON SIDERATION TO THE ISSUE IN QUESTION WHICH CLEARLY SHOWS A LACK OF THE INQUIRY ON THE PART OF THE A.O. TO ADJUDICATE THE ISSUE. 10. AT THIS STAGE WE WOULD LIKE TO DISCUSS THE DECI SIONS RELIED UPON BY BOTH THE PARTIES. THE LD. A.R HAS HEAVILY PLACED RELIANCE ON THE DECI SION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS XYLON HOLDING PVT. LTD. THE HONB LE HIGH COURT HAS CONSIDERED THE FACTS OF THE SAID CASE AS WELL AS CONTENTION OF THE ASSES SEE IN PARA 7 AS UNDER: AS AGAINST THE ABOVE, MR. PARDIWALLA, COUNSEL FOR T HE RESPONDENT-ASSESSEE SUBMITS THAT THE ISSUE ARISING IN THIS APPEAL WOULD STAND C OVERED BY THE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LTD. (SUPRA). ACCORDING TO HIM, THE DECISION OF THIS COURT IN THE MATTER OF SOLID CONTAINERS LTD. ( SUPRA) IS NOT APPLICABLE AS IN THAT CASE THE LOAN WAS TAKEN FOR BUSINESS PURPOSE AND NO T FOR PURCHASE OF A CAPITAL ASSET AS IN THIS CASE. SO FAR AS THE ALTERNATIVE SUBMISSI ON IS CONCERNED, MR. PARDIWALLA SUBMITS THAT SECTION 28(IV) OF THE ACT WOULD NOT A PPLY TO ANY BENEFIT RECEIVED IN CASH OR MONEY AS IN THIS CASE. THIS ISSUE ACCORDING TO M R. PARDIWALLA IS ALSO COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF MAHINDR A & MAHINDRA LTD. (SUPRA). THEREFORE, HE SUBMITS THAT THE APPEAL SHOULD NOT BE ENTERTAINED. 9 11. AFTER CONSIDERING THE FACT THAT THE LOAN WAS TA KEN FOR PURCHASE OF CAPITAL ASSET THE HONBLE HIGH COURT HAS HELD IN PARA 8 AS UNDER: WE HAVE CONSIDERED THE SUBMISSIONS. THE ISSUE ARISI NG IN THIS CASE STAND COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF MAHINDR A & MAHINDRA LTD. (SUPRA). THE DECISION OF THIS COURT IN THE MATTER OF SOLID CONTAINERS LTG D. (SUPRA) IS ON COMPLETELY DIFFERENT FACTS AND INAPPLICABLE TO THIS CASE. IN THE MATTER OF SOL ID CONTAINERS (SUPRA) THE ASSESSEE THEREIN HAD TAKEN A LOAN FOR BUSINESS PURPOSE. IN VIEW OF T HE CONSENT TERMS ARRIVED AT, THE AMOUNT OF LOAN TAKEN WAS WAIVED BY THE LENDER. THE CASE OF TH E ASSESSEE THEREIN WAS THAT THE LOAN WAS A CAPITAL RECEIPT AND HAS NOT BEEN CLAIMED AS DEDUCTI ON FROM THE TAXABLE INCOME IN THE EARLIER YEARS AND WOULD NOT COME WITHIN THE PURVIEW OF SECT ION 41(1) OF THE ACT. HOWEVER THIS COURT BY PLACING RELIANCE UPON THE DECISION OF THE APEX COURT IN THE MATTER OF CIT V T.V. SUNDARAM IYENGER & SONS LTD. [1996] 222 ITR 344/ 88 TAXMAN 429 HELD THAT THE LOAN WAS RECEIVED BY THE ASSESSEE FOR CARRYING ON ITS BUSINE SS AND THEREFORE, NOT A LOAN TAKEN FOR THE PURCHASE OF CAPITAL ASSETS. CONSEQUENTLY, THE DECIS ION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LTD. (SUPRA) WAS DISTINGUISHED AS IN TH E SAID CASE THE LOAN WAS TAKEN FOR HE PURCHASE OF CAPITAL ASSET AND NOT FOR TRADING ACTIV ITIES AS IN THE CASE OF SOLID CONTAINERS LTD. (SUPRA. IN VIEW OF THE ABOVE, THE DECISION OF THIS COURT IN THE MATTER OF SOLID CONTAINERS LTD. (SUPRA) WILL HAVE NO APPLICATION TO THE FACTS OF TH E PRESENT CASE AND THE MATTER STANDS COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF MAHI NDRA & MAHINDRA LTD. (SUPRA). THE ALTERNATIVE SUBMISSION THAT THE AMOUNT OF LOAN WRI TTEN OFF WOULD BE TAXABLE UNDER SECTION 28(IV) OF THE ACT ALSO CAME UP FOR CONSIDERATION BE FORE THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LTD (SUPRA) AND IT WAS HELD THEREIN THAT SECTION 28(IV) OF THE ACT WOULD APPLY ONLY WHEN A BENEFIT OR PREREQUISITE IS RECEIVED IN KIND AND HAS NO APPLICATION WHERE BENEFIT IS RECEIVED IN CASH OR MONEY 12. THUS, IT IS CLEAR THAT THE DECISION IN CASE OF JILON HOLDING PVT. LTD. IS BASED ON THE FACT THAT THE LOAN WAS TAKEN BY THE ASSESSEE FOR PURCHAS E OF CAPITAL ASSET AND THE WAVER OF THE SAME WOULD NOT BE TREATED AS INCOME OR BENEFIT OR PREREQ UISITE U/S 28(IV) OF THE INCOME TAX ACT. ON THE CONTRARY THE DECISION IN CASE OF SOLID CONTA INERS LTD. VS DCIT (SUPRA) IS BASE ON THE FACT THAT THE LOAN TAKEN BY THE ASSESSEE WAS FOR TH E BUSINESS PURPOSE BEING WORKING CAPITAL AND THEREFORE, ON WAVER OF SUCH LOAN IT WAS TREATED AS INCOME OF THE ASSESSEE BEING TRADING RECEIPT. THE RELEVANT FINDING OF THE HONBLE JURISD ICTIONAL HIGH COURT IN CASE OF SOLID CONTAINERS LTD. VS DCIT (SUPRA) IS AS UNDER: WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE B Y THE RIVAL PARTIES. THE ASSESSEE COMPANY HAD TAKEN CERTAIN LOAN FROM M/S. P.S. JAIN MOTORS. THIS AMOUNT WAS PAYABLE TO THEM WITH INTEREST OF RS.2,83,819/-. THE PARTY FILE D A SUIT FOR RECOVERY AND THEREAFTER THE ASSESSEE COMPANY FILED COUNTER-CLAIMS AND THE MATTE R WAS SETTLED OUT OF THE COURT WHEREBY THE ASSESSEE COMPANY WAS NOT TO PAY ANY AMOUNT. THE ASSESSEE COMPANY CREDITED TO THE PROFIT 10 AND LOSS ACCOUNT THE INTEREST AMOUNT AND OFFERED TH E SAME FOR TAXATION. WITH REGARD TO THE ADDITION OF RS.6,86,071/-, THE ASSESSEE COMPANY DIR ECTLY CREDITED THE AMOUNT TO THE RESERVES ACCOUNT CONSIDERING THE SAME AS CAPITAL RECEIPT. IT WAS CLAIMED BY THE LEARNED COUNSEL THAT THE AMOUNT WAS NOT A DEEMED PROFIT UNDER SECTION 41 (1) OF THE ACT. ACCORDING TO THE LEARNED COUNSEL, THIS AMOUNT CANNOT BE CHARGED EVEN UNDER T HE PROVISIONS OF SECTION 28 OF THE ACT AS THE AMOUNT EARNED IS NEITHER A REVENUE RECEIPT NOR INTENDED FOR REVENUE ACCOUNT. IN THIS CONNECTION, WE WOULD LIKE TO REFER TO THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR AND SONS LTD. (1996), 222 ITR 344 WHEREIN THE HONOURABLE SUPREME COURT HAS LAID DOWN THAT 'IF THE AMOUNT IS RECEIVED IN THE COURSE OF TRADING TRANSACTIONS, EVEN THOUGH IT IS NOT TAXABLE IN THE YEAR OF RECEIPT AS BEING OF CAPITAL CHARACTER, THE AMOUNT CHANGES ITS CHARACTER WHEN TH E AMOUNT BECOMES THE ASSESSEE' S OWN MONEY BECAUSE OF LIMITATION OR BY ANY OTHER STATUTO RY OR CONTRACTUAL RIGHT. WHERE THE ASSESSEE RECEIVED DEPOSITS IN THE COURSE OF TRADING TRANSACTIONS, THE AMOUNT OF SUCH CREDIT BALANCES WHICH WERE BARRED BY LIMITATIONS AND WHICH WERE WRITTEN BACK BY THE ASSESSEE TO THE PROFIT AND LOSS ACCOUNT WERE TO BE ASSESSED AS THE ASSESSEE' S INCOME'. IN VIEW OF THE ABOVE DECISIONS OF THE APEX COURT AND ALSO KEEPING IN VIE W THE PROVISIONS OF SECTION 28(IV) OF THE ACT, WE FIND FULL JUSTIFICATION FOR MAKING THE ADDI TION OF RS.6,86,071/-. ACCORDINGLY, THE FINDINGS OF THE LEARNED CIT (A) ARE UPHELD.' IT IS WORTHWHILE TO REFER TO OBSERVATION OF APEX CO URT IN T.V. SUNDARAM IYENGER & SONS [ 1966] 222 ITR 344. 22. THE PRINCIPLE LAID DOWN BY ATKINSON, J. APPLIES IN FULL FORCE TO THE FACTS OF THIS CASE. IF A COMMON SENSE VIEW OF THE MATTER IS TAKEN,L THE ASSE SSEE, BECAUSE OF THE TRADING OPERATION, HAD BECOME RICHER BY THE AMOUNT WHICH IT TRANSFERRE D TO ITS PROFIT AND LOSS ACCOUNT. THE MONEYS HAD ARISEN OUT OF ORDINARY TRADING TRANSACTI ONS. ALTHOUGH THE AMOUNTS RECEIVED ORIGINALLY WERE NOT OF INCOME NATURE, THE AMOUNTS R EMAINED WITH THE ASSESSEE FOR A LONG PERIOD UNCLAIMED BY THE TRADE PARTIES. BY LAPSE OF TIME, THE CLAIM OF THE DEPOSIT BECAME TIME- BARRED AND THE AMOUNT ATTAINED A TOTALLY DIFFERENT QUALITY. IT BECAME A DEFINITE TRADE SURPLUS. ATKINSON, J. POINTED OUT THAT IN TATTERSALL CASE NO TRADING ASSET WAS CREATED. MERE CHANGE OF METHOD OF BOOKKEEPING HAD TAKEN PLACE. BUT, WHERE A NEW ASSET CAME INTO BEING AUTOMATICALLY BY OPERATION OF LAW, COMMON SENSE DEM ANDED THAT THE AMOUNT SHOULD BE ENTERED IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR AND BE TREATED AS TAXABLE INCOME. IN OTHER WORDS, THE PRINCIPLE APPEARS TO BE THAT IF AN AMOUN T IS RECEIVED IN COURSE OF A TRADING TRANSACTION, EVEN THOUGH IT IS NOT TAXABLE IN THE Y EAR OF RECEIPT AS BEING OF REVENUE CHARACTER, THE AMOUNT CHANGES ITS CHARACTER WHEN THE AMOUNT BE COMES THE ASSESSEE' S OWN MONEY BECAUSE OF LIMITATION OR BY ANY OTHER STATUTORY OR CONTRACTUAL RIGHT. WHEN SUCH A THING HAPPENS, COMMON SENSE DEMANDS THAT THE AMOUNT SHOUL D BE TREATED AS INCOME OF THE ASSESSEE. 23. IN THE PRESENT CASE, THE MONEY WAS RECEIVED BY THE ASSESSEE IN COURSE OF CARRYING ON HIS BUSINESS. ALTHOUGH IT WAS TREATED AS DEPOSIT AND WA S OF CAPITAL NATURE, AT THE POINT OF TIME IT WAS RECEIVED, BY EFFLUX OF TIME THE MONEY HAS BECOM E THE ASSESSEE' OWN MONEY. WHAT REMAINS AFTER SADJUSTMENT OF THE DEPOSITS HAS NOT BEEN CLAI MED BY THE CUSTOMERS. THE CLAIMS OF THE CUSTOMERS HAVE BECOME BARRED BY LIMITATION. THE ASS ESSEE ITSELF HAS TREATED THE MONEY AS ITS OWN MONEY AND TAKEN THE AMOUNT TO ITS PROFIT AND LO SS ACCOUNT. THERE IS NO EXPLANATION FROM THE ASSESSEE WHY THE SURPLUS MONEY WAS TAKEN TO ITS PROFIT AND LOSS ACCOUNT EVEN IF IT WAS SOMEBODY ELSE' MONEY. IN FACT, AS S ATKINSON, J. POINTED OUT THAT WHAT THE ASSESSEE DID WAS THE COMMON SENSE WAY OF DEALING WITH THE AMOUNTS.' THE PRESENT APPELLANT CAN HARDLY DRIVE ANY ADVANTAG E FROM THE CASE OF MAHINDRA & MAHINDRA LTD. (SUPRA). AS IN THAT CASE, ACLEAR FIND ING WAS RECORDED THAT THE ASSESSEE 11 CONTINUED TO PAY INTEREST AT THE RATE OF 6% FOR A PERIOD OF 10 YEARS AND THE AGREEMENT FOR PURCHASE OF TOOLINGS WAS ENTERED INTO MUCH PRIOR TO THE APPROVAL OF LOAN ARRANGEMENT GIVEN BY THE RESERVE BANK OF INDIA. THEREFORE, THE LOAN A GREEMENT, IN ITS ENTIRETY, WAS NOT OBLITERATED BY SUCH WAIVER. SECONDLY, THE PURCHASE CONSIDERATION RELATED TO CAPITAL ASSETS. THE TOOLINGS WERE IN THE NATURE OF DIES AND THE ASS ESSEE WAS A MANUFACTURER OF HEAVY VEHICLES. THE IMPORT WAS THAT OF PLANT AND MACHINER Y AND THE WAIVER COULD NOT CONSTITUTE BUSINESS. THE FACTS OF THE PRESENT CASE ARE ENTIREL Y DIFFERENT IN AS MUCH AS IT WAS A LOAN TAKEN FOR TRADING ACTIVITY AND ULTIMATELY, UPON WAIVER TH E AMOUNT WAS RETAINED IN BUSINESS BY THE ASSESSEE. THUS, THE PRINCIPLE STATED BY THE SUPREME COURT IN THE CASE OF T.V. SUNDARAM AYENGAR & SONS LTD. (SUPRA) WOULD BE SQUARELY APPLI CABLE TO THE FACTS OF THE PRESENT CASE. THE AMOUNT WHICH INITIALLY DID NOT FALL WITHIN THE SCOPE OF THE PROVISIONS RENDERING IT LIABLE TO TAX SUBSEQUENTLY HAVE BECOME THE ASSESSEE' INCOME BEING PART OF THE TRADING OF THE ASSESSEE. SIMILAR VIEW WAS ALSO TAKEN BY A BENCH OF MADRAS HI GH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. ARIES ADVERTISING PVT. LTD., 2002 (25 5) ITR 510. THE COURT TOOK THE VIEW THAT THE ASSESSEE BECAUSE OF TRADING OPERATION BECAME RI CHER BY THE AMOUNT WHICH HAD BEEN TRANSFERRED AND/OR RETAINED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. IN VIEW OF THE ABOVE SETTLED POSITION OF LAW AND TH E FACTS OF THE PRESENT CASE, WE ARE OF THE CONSIDERED VIEW THAT NO QUESTION OF LAW MUCH LESS S UBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION IN THE PRESENT APPEAL. APPEAL DISMISS ED IN LIMINE. 13. IN THE CASE IN HAND THE ASSESSEE HAS NOT CLAIME D THAT THE LOAN IN QUESTION WAS TAKEN FOR PURCHASE OF CAPITAL ASSET THEREFORE, THE ORDER PASS ED BY THE A.O IS OTHERWISE NOT SUSTAINABLE IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF SOLID CONTAINERS LTD. VS DCIT (SUPRA). THE ORDER OF THE AO IS CONTRARY TO THE BINDING LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT AND FURTHER IT WA S WITHOUT AN INQUIRY AND PASSED IN HASTE. THERE WAS COMPLETE FAILURE ON THE PART OF THE A.O T O APPLY HIS MIND TO THE ISSUE OF TAXABILITY OF WAVER OF LOAN BY THE LENDERS WHICH RENDERS THE O RDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE COMMISSIONER HAS GIVEN THE REASONS TO EXERCISE THE POWERS U/S 263 IN PARA 4.3.1 AND 4.3.2 AS UNDER: 4.3.1 IN THE INSTANT CASE, ON THE BASIS OF AMOUNT I NADMISSIBLE U/S 40(A), THE TAX AUDITOR IN HIS REPORT BY CLAUSE 17(F) HAS REPORTED THAT AN AMOUNT OF RS. 30,60,895 IS INADMISSIBLE U/S. 40(A) OF THE INCOME TAX ACT, 1961 AND NEITHER THE ASSESSEE NOR THE ASSESSING OFFICER HAS ADDED BACK THE SAID AMOUNT IN THE COMPUTATION OF INCOME. EVEN IN RESPONSE TO THE SHOW CAUSE NOTICE U/S 263, THE ASSESSEE HAS MADE NO SUBMISSION ON THE ALLOWABILITY OF SUCH AN AMOUNT OTHER THAN SAYING THAT THE SAID AMOU NT HAS BEEN ALLOWED BY THE ASSESSING OFFICER AFTER CONSIDERING THE ISSUE. AHENCE, IT IS CLEAR THAT THE ASSESSING OFFICER HAS NOT DONE A PROPER VERIFICATION ON THIS ISSUE, WHILE PA SSING THE ASSESSMENT ORDER. IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER PASSED U/S 143(3) D ATED 31.12.2009 IS ERRONEOUS AND 12 PREJUDICIAL TO THE INTEREST OF REVENUE, AND THE SAM E IS SET ASIDE TO THE FILE OF AO TO FRAME THE ASSESSMENT, DE NOVO. 4.3.2 ON THE ISSUE OF WAIVER OF LOAN DURING THE YEA R UNDER CONSIDERATION, THE ASSESSEE HAD SETTLED LOANS UNDER ONE TIME SETTLEMENT WITH KB C BANK, BELGIUM, PEGASUS ASSETS RECONSTRUCTION CO. LTD. AND INDUSIND BANK LTD. AMOU NTING TO RS. 40,86,38,638/- OUT OF WHICH RS. 18,33,79,615/- BEING INTEREST WAIVER WAS CREDITED TO THE PROFIT & LOSS ACCOUNT AND THE PRINCIPLE WAIVER AMOUNTING TO RS. 22,52,59, 023/- WAS DIRECTLY CREDITED TO THE BALANCE SHEET WITHOUT ROUTING THROUGH THE PROFIT & LOSS A/C. IN THIS REGARD, ON THE ISSUE OF THE TRUE NATURE OF LIABILITY, THE HONBLE SUPREM E COURT IN THE CASE OF CIT VS. KARAMCHAND THAPPER & OTHERS (222 ITR 112) HAS LAID DOWN THE PRINCIPAL THAT THE AMOUNT INITIALLY NOT RECEIVED AS A TRADING RECEIPT CAN BECOME A TRADING RECEIPT SUBSEQUENTLY. IT CANNOT BE LAID DOWN THAT, AS A MAT TER OF LAW, ANY AMOUNT THAT THAT WAS INITIALLY NOT RECEIVED AS ASSESSEE AS A TRADING REC EIPT, CAN NEVER BECOME A TRADING RECEIPT, CAN NEVER BECOME A TRADING RECEIPT. IF AN AMOUNT IS RECEIVED IN THE COURSE OF BUSINESS, EVEN THOUGH IT IS NOT TAXABLE IN THE YEAR OF RECEIP T, AS BEING OF REVENUE CHARACTER, THE AMOUNT CHANGES ITS CHARACTER WHEN THE AMOUNT BECOMES THE ASSESSEES OWN MONEY BECAUSE OF LIMITATION OR ANY OTHER STATUTORY OR CON TRACTUAL RIGHT. WHEN SUCH A THING HAPPENS, COMMONSENSE DEMANDS THAT THE AMOUNT SHOULD BE TREATED AS INCOME OF THE ASSESSEE AS HAS BEEN HELD BY HONBLE SUPREME COURT IN THE CASE OF SUNDARAM IYENG ER (T.V.) AND SONS LTD. (1996), 222 ITR 344 , 353 . IN THAT CASE, UNCLAIMED BALANCES REPRESENTING DEPOSITS FROM CUSTOMERS BECAME TIME BA RRED. IT HAS BEEN HELD BY THE APEX COURT THAT THE AMOUNT SO TRANSFERRED WERE ASSESSABL E IN THE HANDS OF THE ASSESSEE. THE OPERATIVE OF THE AFORESAID JUDGMENT OF HONBLE SUPR EME COURT IN THE CASE OF SUNDARAM IYENGER (T.V.) & SONS LTD., RENDERED BY A BENCH CON SISTING OF THREE HONBLE JUDGES INCLUDING THE CHIEF JUSTICE, IS REPRODUCED AS UNDER :- THE PRINCIPLE LAID DOWN BY ATKINSON, J. APPLIES IN FULL FORCE TO THE FACTS IF THIS CASE. IF A COMMON SENSE VIEW IF THE MATTER IS TAKEN, THE ASSESSEE; BECAUSE OF THE TRADING OPERATION, HAD BECOME RICHER BY THE AMOUNT WHICH IF TRANSFERRED TO ITS PROFIT AND LOSS ACCOUNT. THE MONEYS HAD ARISEN OUT IF ORDINARY TRAD ING TRANSACTIONS. ALTHOUGH THE AMOUNTS RECEIVED ORIGINALLY WAS NOT OF INCOME NATUR E, THE AMOUNTS REMAINED WITH THE ASSESSEE FOR A LONG PERIOD UNCLAIMED BY THE TRADE P ARTIES. BY LAPSE OF LONG TIME, THE CLAIM OF THE DEPOSIT BECAME TIME BARRED AND THE AMO UNT ATTAINED A TOTALLY DIFFERENT QUALITY. IT BECAME A DEFINITE TRADE SURPLUS. ATKINS ON, J. POINTED OUT THAT IN TATTERSALL'S CASE NO TRADING ASSET WAS CREATED. MERE CHANGE OF M ETHOD OF BOOK-KEEPING HAD TAKEN PLACE. BUT, WHERE A NEW ASSET CAME INTO BEING AUTOM ATICALLY BY OPERATION OF LAW, COMMON SENSE DEMANDED THAT THE AMOUNT SHOULD BE ENT ERED IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR AND BE TREATED INCOME. IN OTHE R WORDS, THE PRINCIPLE APPEARS TO BE THAT OF AN AMOUNT IS RECEIVED IN COURSE OF TRADI NG TRANSACTION, EVEN THOUGH IT IS NOT TAXABLE IN THE YEAR OF RECEIPT AS BEING OF REVENUE CHARACTER, THE AMOUNT CHANGES ITS CHARACTER WHEN THE AMOUNT BECOMES THE ASSESSEE'S WO N MONEY BECAUSE OF LIMITATION OR BY ANY OTHER STATUTORY OR CONTRACTUAL RIGHT. WHE N SUCH A THING HAPPENS, COMMON SENSE DEMANDS THAT THE AMOUNT SHOULD BE TREATED AS INCOME OF THE ASSESSEE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS LTD. 308 ITR 417 HAS ALSO HELD THAT WAIVER OF PRINCIPAL PORTION OF LOAN WAS TO BE TREATED AS INCOME OF THE ASSESSEE. HENCE, THE AMOUNT OF PRINCIPAL WAIVER AMO UNTING TO RS. 22,52,59,023/- SHOLD HAVE BEEN TREATED AS INCOME OF THE ASSESSEEE. IN VI EW OF THE ABOVE, THE ASSESSMENT ORDER PASSED U/S 143(3) DATED 31.12.2009 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, AND THE SAME IS SET ASIDE TO THE FILE OF T HE ASSESSING OFFICER TO FRAME THE ASSESSMENT ORDER, DE NOVO. 13 14. IT IS CLEAR THAT THE INTERFERENCE BY THE CIT(A) WAS NOT MERELY ON THE GROUND THAT HE WAS HAVING A DIFFERENT VIEW ON THE MATTER BUT THERE WAS FAILURE ON THE PART OF THE A.O TO APPLY MIND AND TO FOLLOW THE DECISION ON THE POINT. BEFOR E PARTING WITH THE ISSUE WE FIND THAT THE REPLY DATED 27.12.2009 ALLEGEDLY FILED ON 29.12.200 9 ITSELF GOES TO PROVE THAT THE A.O HAS PASSED THE ORDER IN HASTE WITHOUT EXAMINING THE ISS UE. FROM THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE THE ONLY CONCLUSION CAN BE DRAWN IS THAT THERE IS A LACK OF INQUIRY ON THE PART OF THE A.O AND THEREFORE, IT IS A CASE OF COMPLETE FAILURE ON THE PART OF THE A.O TO APPLY MIND ON THE ISSUE. HENCE, WE ARE OF THE VIEW THAT THE CO MMISSIONER WAS JUSTIFIED IN EXERCISING THE POWER U/S 263 OF THE INCOME TAX ACT. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF FEBRUARY 2014 SD/- (RAJENDRA ) ACCOUNTANT MEMBER SD/- (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 28 TH FEBRUARY 2014 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI