EXPO GAS CONTAINERS LTD, MUMBAI V. CIT -6, MUMBAI

ITA 5210/MUM/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8785 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 04-11-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R MANJUNATHA SWANUJ
• Keywords: Depreciation; Opportunity of being heard; Audit objection; Capital receipt; Unabsorbed depreciation
• Section: 143(3); 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI , JM ITA NO. 5210 /MUM/ 2015 (ASSESSMENT YEAR: 2009 - 10 ) M/S. EXPO GAS CONTAINERS LTD. EXPO HOUSE, 150, SHERIFF DEVJI STREET, MUMBAI - 400 003 VS. CIT - 6, MUMBAI PAN/GIR NO. AAAFE 1419 R ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI GIRISH DAVE & SHRI TANZIL R. PADVEKAR RESPONDENT BY : SHRI R. MANJUNATHA SWANUJ DATE OF HEARING : 11.10.2018 DATE OF PRONOUNCEMENT : 27.12 .2018 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX , MUMBAI (LD.CIT FOR SHORT) DATED 04.03.2014 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2009 - 10. 2. THE GROUNDS OF APPEAL READ AS UNDER: I. 1. THE LEARNED COMMISSIONER OF INCOME TAX - 6 ('CIT') ERRED IN INVOKING THE PROVISION OF SECTION 263 WITHOUT HAVING JURISDICTION TO DO SO RENDERING THE ORDER AB INITIO VOID, ILLEGAL AND BAD IN LAW AND AS SUCH THE ORDER PASSED U/S 263 IS LIABLE TO BE QUASHED. WITHOUT PREJUDICE TO ABOVE GROUND, II. 1. THE LEARNED CIT ERRED IN PASSING AN ORDER U/S 263 SETTING ASIDE THE ASSESSMENT ORDER WITHOUT APPRECIATING THE FACT THAT THE ORDER PASSED BY THE ASSESSING OFFICER ('AO') WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. WITHOUT PREJUDICE TO ABOVE GROUND, III 1. THE LEARNED CIT ERRED IN, IN FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE IN SETTING ASIDE THE ASSESSMENT ORDER AND DIRECTING FRESH ASSESSMENT IN RESPECT OF 2 ITA NO. 5210/MUM/2015 LOANS WAI VED BY BANKS AND DETERMINATION OF BOOKS PROFIT EVEN THOUGH THE SAME WAS DETERMINED BY THE AO AFTER DUE EXAMINATION AND PROPER ENQUIRY. WITHOUT PREJUDICE TO ABOVE GROUND, IV 1. THE LEARNED CIT ERRED IN SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER AND DI RECTING HIM TO VERIFY VARIOUS ASPECTS OF THE LOANS WAIVED BY BANKS AND RE - EXAMINE THE TAXABILITY THEREOF. WITHOUT PREJUDICE TO ABOVE GROUND, V. 1. THE LEARNED CIT ALSO ERRED IN SETTING ASIDE THE ORDER PASSED BY THE AO AND DIRECTING HIM TO RECOMPUTE THE BOOK PROFIT. 3. AT THE OUTSET, IT IS NOTED THAT THERE IS A DELAY OF 548 DAYS IN FILING THIS APPEAL. THE SAME HAS BEEN CONDONED BY A BENCH OF THE ITAT VIDE ORDER SHEET DATED 19.09.2017. SUBSEQUENTLY, THIS APPEAL AHS BEEN HEARD BY US ON MERITS OF THE APPEAL . 4. IN THIS CASE, T HE LD. CIT OBSERVED THAT FROM THE PERUSAL OF THE RECORDS , IT IS NOTED THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE CLAIMED DEDUCTION OF RS.9,86,50,379/ - AS LOAN WRITTEN BACK UNDER OTS SCHEME, CONSIDERING IT AS CAPITAL RECEIPT NOT LIABLE TO TAX. IT IS RELEVANT TO MENTION HERE THA THE ASSESSEE IS IN THE JURISDICTION OF HON'BLE BOMBAY HIGH COURT AND, THEREFORE, DECISIONS OF THE HON'BLE BOMBAY HIGH COURT ARE BINDING ON THE A.O. AS WELL AS TAX PAYERS WITHIN ITS JURISDICTION. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS LTD. 308 ITR 417 AFTER ELABORATE DISCU SSION AND CONSIDERING THE DECISION OF HONBLE APEX COURT IN CIT VS. SUNDARAM IYERGAR AND SONS LTD. 222 ITR 344 (SC) CONCLUDED THAT IF THE BANK LOAN IS TAKEN BY THE ASSESSEE FOR TRADING ACTIVITY AND ULTIMATELY WAIVED BY THE BANK, AND ULTIMATELY THE AMOUNT W AS RETAINED IN THE BUSINESS, THE SAME WAS TAXABLE U/S. 23(IV). THE HON'BLE HIGH COURT FOLLOWED THE DECISION O F CIT VS ARIES ADVERTISING (P) LTD. 255 ITR 510 (MAD). WHILE CONCLUDING THA T WAIVED AMOUNT WAS TAXABLE U/S 28(IV) OF THE ACT, IT DISTINGUISHED ITS EARLIER DECISION OF MAHINDRA & MAHINDRA LTD. VS 261 ITR 501. THE HON'BLE MUMBAI HIGH COURT IN THE DECISION OF SOLID 3 ITA NO. 5210/MUM/2015 CONTAINERS LTD. AFTER ELABORATE DISCUSSION AND CONSIDERING THE DECISION OF APEX COURT IN CIT VS. SUNDARAM LYERGAR CONCLUDED THAT IF THE BANK LOAN IS TAKEN BY THE ASSESSEE FOR TRADING ACTIVITY AND ULTIMATELY WAIVED BY THE BANK, AND ULTIMATELY THE AMOUNT WAS RETAINED IN THE BUSINESS, THE SAME WAS TAXABLE U/S 28(IV). IT WAS CONTENDED BY THE ASSESSEE BEFORE THE COURT THAT AGAINST THE DECISION OF T HE TRIBUNAL REFUSING TO ACCEPT THE ARGUMENT OF THE ASSESSEE THAT AMOUNT WAIVED WAS 'CAPITAL RECEIPT' AND NEITHER SECTION 28(IV) NOR SEC. 41(1) WAS APPLICABLE IN RESPECT OF WAIVED AMOUNT. THE H.C DID NOT AGREE WITH THIS CONTENTION. 5. THEREAFTER HE REFERRED TO THE DECISION OF SOLID CONTAINERS LTD. (S UPRA). HE FURTHER OBSERVED THAT IT IS RELEVANT TO MENTION HERE THAT THE A.O. ITSELF OUGHT TO HAVE CARRIED OUT RELEVANT AND MEANINGFUL INQUIRIES AS TO A) WHAT WAS THE PURPOSE OF TAKING L OAN FRO M IDBI BANK AND UNION BANK OF INDIA; B) WHAT WERE THE TERMS AND CONDITIONS OF WAIVER OF LOAN AND C) HOW THE ASSESSED DAIRN THAT THE WAIVER WAS 'CAPITA, RECEIPT AND HOW THE RATIO OF THE DECISION OF SOLID CONTAINERS LTD WAS NOT APP LICABL E TO THE FACTS OF THE CASE. ON THESE VITA L , I SSUES, EVEN THOUGH THERE IS A CLE AR CUT NOTE IN THE DIRECTORS REPORT F I LED AS A PART OF ANNUA L REPORT NO INQUIRY WHATSOEVER HAS BEEN CARRIED BY THE A.O. HE NOTED THAT T HE DIRECTORS REPORT READS AS UNDER: 'SETTL EMENT OF DUES AFTER THE PROBLEMS WITH INDIAN OIL CORPORATION, THE BUSINESS OF THE COMPANY HAD SLOWED CONSIDERABLY AND THE COMPANY WAS UNABLE TO SERVICE THE DEBTS. DUE TO THE ABOVE REASON THE COMPANY CAME UNDER HEAVY PRESSURE FROM UNION BANK OF INDIA AND IDBI FOR MAKING THE PAYMENT AT THE EARLIEST. TO OVERCOME THE SAID SITUATION YOUR COMPANY HAD ENTERED INTO ONE T IME SETTLEMENT WITH UNION BANK OF INDIA AND IDBI. AS THE MATTER REGARDING INDIAN OIL CORPORATION WAS NOT RESOLVED UNTIL JUNE, 2008, THE COMPANY WAS UNABLE TO CLE AR THE OTS PAYMENTS. DESPITE ADVERSE CIRCUMSTANCES, THE COMPANY ULTIMATELY MADE PAYMENT DURING THE YEAR UNDER REVIEW. RS.2.65 CRORES WERE PAID TO INDIAN OIL CORPORATION, RS.6 CRORES TO IDBI 4 ITA NO. 5210/MUM/2015 AND RS.1.75 CRORES TO UBI AGGREGATING TO RS.10.40 CRORES FROM INTE RNAL ACCRUALS AND THE COMPANY HAD TO BORROW RS.6 CRORES. HE OBSERVED THAT I T IS APPARENT FROM THE PERUSA L OF THE BAL ANCE - SHEET, SCHEDULE UNDER TH E HEAD 'SECURED LOAN' THAT ASSESSES COMPANY HAD OBTAINED CASH CRE DI T AN WORKING CAPITA L L OAN FROM THE UNIO N BANK OF I NDIA WH I CH WAS SH OWN AS OUTSTANDING AS ON 31 .03. 2008 BUT HAS BEEN REDUCED TO N I L AS ON 3 1.03.2009 (ON ACCOUNT OF WAIVER AND PART PAYMENT UN DER THE ONE TIME SEGMENT SCHEME). SIMILARLY, THE LOAN FROM THE IDBI HAS BEEN SHOWN TOWARDS TERM LOAN AND CORPORATE LOAN, APART FROM INTERNATIONAL FUNDED LOAN. TH AT TH ESE AMOUNTS WERE ALSO OUTSTANDING TO IDBI AS ON 31/03/2009 ON ACCOUNT OF PART PAYMENT AND ONE TIME SETTLEMENT SCHEME. SCHEDULE C OF SECURED LOAN IS REPRODUCED BELOW: BALANCE - SHEET OF EXPO GAS CONTAINERS LTD. AS ON 31/03/200 9 31/03/2003 31/03/200S SCHEDULE 'C' : SECURED LOANS CASH CREDIT - 25,793,449 - 20,639,158 - 29,000,000 FROM FINANCIAL INSTITUTION CAPARO FINANCIAL SOLUTIONS LIMITED 50,000,000 1. D.B.I. TERM LOAN - 24,050,000 I. D.B.I. CORPORATE LOAN 1 - 32,508,615 1. D.B.I, CORPORATE LOAN 2 - 50,000,000 I. D.B.I. INT. FUNDED LOAN - 7,411,679 IDB I (STL) (6,945,000) 50,000,000 182,457,901 6. TH AT TH E AO FAILED TO CARRY OUT RELEVANT AND MEANINGFUL INQUIRIES ABOUT REASONS FOR WHICH LOANS WERE TAKEN AND ALSO ABOUT TERMS AND CONDITIONS OF 'ONE TIME SETTLEMENT' 5 ITA NO. 5210/MUM/2015 AS A RESULT OF WHICH THERE WERE NO DUES TO THE FINANCIAL INSTITUTION OR BANKS AS ON 31/03/2009. 9. APART FROM THE ABOVE, HE NOTED THAT IT IS ALSO OBSERVED THAT EVEN THE BOOK PROFIT U/S 115JB HAS BEEN WRONGLY WORKED OUT. TH AT TH E ASSESSEE HAD CLAIMED SET OFF OF RS.4,81,17,4107 - BEING LOWER OF BUSINESS LOSS (BOOK LOSS) AND UNABSORBED DEPRECIATION (AS PER BOOKS). TH AT TH E UNABSORBED DEPRECIATION AS PER BOOK WAS RS.4,85,58,547/ - . THAT IF THIS FIGURE IS REDUCED FROM THE ACCUMULATED BROUGHT FORWARD BOOK LOSS OF RS.6,43,57,403/ - WHICH IS INCLUSIVE OF UNABSORBED DEPRECIATION. IT MEANS UNABSORBED DEPRECIATIO N CARRY FORWARD, BUSINESS LOSS WAS RS.1,57,98,856/ - (RS.64357403 - RS.48558547). THE AO DID NOT CONSIDER WHETHER DEFERRED TAX ASSET HAS BEEN CONSIDERED FOR BOOK LOSS SHOWN OR THERE IS A SEPARATE ENTRY FOR IT. ASSUMING FIGURE OF RS.6,43,57,403/ - WAS NOT CORRECT AND DEFERRED TAX ASSET WAS TO BE CONSIDERED ALSO FOR BOOK LOSS THEN ALSO AO FAILED TO CONSIDER FOR A DJUSTMENT U/S 115JB CORRECT AMOUNT OF RS.4,85,58,547/ - INSTEAD OF RS.4,81,17.410/ - . THAT I F THERE WAS TYPOGRAPHICAL ERROR ON PART OF ASSESSEE, THEN ALSO NO QUESTION HAS BEEN ASKED DURING ASSESSMENT PROCEEDINGS. THAT I F OU ND THAT NO QUESTION HAS BEEN ASKED D URING ASSESSMENT PROCEEDINGS ON THESE ISSUES. THE A.O. ACTED IN A MECHANICAL FASHION TO PASS THE ASSESSMENT ORDER. 10. HE FURTHER NOTED THAT I T IS ALSO NOTICED THAT THERE IS REDUCTION OF SHARE CAPITAL (RS.10/ - PER SHARE HAS BEEN REDUCED TO RS.4/ - PER SHA RE). TH AT TH ERE IS SUBSTANTIAL WRITE OFF FROM THE SHARE PREMIUM ACCOUNT. I FIND THAT NO QUESTION HAS BEEN ASKED DURING ASSESSMENT PROCEEDINGS ON THESE ISSUES. THAT THE A.O. THUS, ACTED IN A MECHANICAL FASION AND PASSED THE ASSESSMENT ORDER WITHOUT CARRYING OUT RELEVANT AND MEANINGFUL ENQUIRIES. 6 ITA NO. 5210/MUM/2015 11. ACCORDINGLY, SHOW CAUSE NOTICE WAS ISSUED. THE LD. CIT NOTED THE ASSESSEES RESPONSE AS UNDER: WE ARE IN RECEIPT OF YOUR ABOVE MENTIONED NOTICE, WHEREIN YOUR HONOURS HAVE MENTIONED THAT YOU WISH TO SET ASIDE THE ASSESSMENT FOR THE ABOVE MENTIONED YEAR, WITH DIRECTIONS TO THE ASSESSING OFFICER TO REDO THE SAME AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, AS PER THE PROVISIONS OF LAW OR IN ALTERNATIVE YOUR HONOUR INTENDS TO TAKE ANY OTHER APPROPRIATE ACTION AS BEING DEEMED FIT. VIDE YOUR ABOVE MENTIONED NOTICE, YOU HAVE MENTIONED THE FOLLOWING ISSUES FOR TAXATION : - A) RS.9,8 6,5 0 ,379/ - AS LOAN RETURNED BACK UNDER OTS SCHEME, CONSIDERING IT AS ' REVENUE RECEIPT' LIABLE TO TAX. B) WRONG WORKING OF BOOK PROFIT . C) REDUCTION OF SHARE CAPITAL FROM RS.10/ - PER SHARE TO RS.4/ - PER SHARE. 1. VIDE YOUR ABOVE MENTIONED SHOW CAUSE NOTICE, YOU HAVE STATED THAT THE WRITE BACK IN RESPECT OF LOANS REPAID WAS COVERED IN FAVOUR OF REVENUE BY THE JURISDICTION OF BOMBAY HIGH COURT I.E. THE DECISION OF SOLID CONTAINERS LTD. 308 ITR 417 WHICH FOLLOWS THE DECISION OF HONBLE APEX COURT IN CIT VS. SUNDARAM IYERGAR AND SONS LTD. 222 ITR 344 (SC). HOWEVER, ON GOING THROUGH THE ABOVE TWO CASE LAWS, IT IS EVIDENTLY CLEAR THAT IN BOTH THE CASES, THE ABOVE ASSESSEES HAVE TAKEN LOAN FOR TRADING ACTIVITY AND THE SAID LOANS WERE WRITTEN BACK IN THE BOOK S OF ACCOUNTS. IN BOTH THE CASES, THE RESPECTIVE HIGH COURT AND APEX COURT HELD THAT THE LOAN FOR TRADING ACTIVITY WOULD CONSTITUTE REVENUE RECEIPT AND NOT CAPITAL RECEIPT. VIDE THE ABOVE NOTICE, YOUR HONOUR HAS ACKNOWLEDGED THE FACT THAT THE ABOVE TWO C OMPANIES HAD TAKEN BANK LOAN FOR TRADING ACTIVITY. THE UNDERSIGNED HAS TO REFER TO THE SUBMISSIONS MADE TO YOU, WHEREIN YOUR ASSESSEE HAS GIVEN DETAILS IN RESPECT OF THE LOANS SANCTIONED AS UNDER : - PARTICULARS SANCTION AMOUNT REMARKS IDBI PROJECT FINANCE SCHEME 485.00 SETTING UP A PLANT/ FACTORY. CORPORATE LOAN - 1 500.00 MARGIN MONEY FOR WORKING CAPITAL CORPORATE LOAN - 1 500.00 MARGIN MONEY FOR WORKING CAPITAL HENCE, IT MAY BE CLEARLY AND EVIDENTLY SEEN THAT ALL THE THREE LOANS WERE NOT TAKEN FOR TRADING ACTIVITY AND ARE NOT COVERED BY THE DECISION OF M/S. SOLID CONTAINERS LTD. 7 ITA NO. 5210/MUM/2015 KINDLY REFER TO PAGE 2 OF THE ORDER, WHEREIN YOUR HONOUR IN THE DECISION OF SOLID CONTAINERS LTD., HAS STATED THAT I N THE PRESENT CASE, THE MONEY WAS RECEIVED BY THE ASSESSEE IN COURSE OF CARRYING ON HIS BUSINESS. ALTHOUGH IT WAS TREATED AS DEPOSIT AND WAS OF CAPITAL NATURE, AT THE POINT OF TIME IT WAS RECEIVED, BY EFFLUX OF TIME THE MONEY HAS BECOME THE ASSESSEE'S OWN MONEY. WHAT REMAINS AFTER ADJUSTMENT OF THE DEPOSI TS HAS NOT BEEN CLAIMED BY THE CUSTOMERS. THE CLAIMS OF THE CUSTOMERS HAVE BECOME BARRED BY LIMITATION. THE ASSESSEE ITSELF HAS TREATED THE MONEY AS ITS OWN MONEY AND TAKEN THE AMOUNT TO ITS P & L ACCOUNT. THERE IS NO EXPLANATION FROM THE ASSESSEE WHY THE SURPLUS MONEY WAS TAKEN TO ITS P & L ACCOUNT EVEN IT IT WAS SOMEBODY ELSE'S MONEY.' WE WISH TO FURTHER STATE THAT IN THE INSTANT CASE THE DECISION OF M/S, SOLID CONTAINERS LTD IS NOT APPLICABLE AS YOUR ASSESSEE'S CASE PERTAINS TO ACQUISITION OF ASSETS AND NOT A TRADING LIABILITY AND HENCE IS CLEARLY COVERED BY MAHINDRA AND MAHINDRA LTD.,(2003) 261ITR 501 (MUM). IT HAS TO BE FURTHER MENTIONED THAT THE MUMBAI HIGH COURT IN THE CA SE OF XYLON HOLDING P. LTD., WHILE DISTINGUISHING THE DECISION OF SOLID CONTAIN ERS (SUPRA) HAS HELD THAT CESSATION OF LIABILITY TO REPAY LOAN TAKEN FOR CAPITAL PURPOSE IS NOT ASSESSABLE AS INCOME. FURTHER, THE MUMBAI TRIBUNAL IN THE CASE OF M/S. KING PRAWNS LTD., V/S. THE INCOME TAX OFFICER, ITA NO. 60/MUM/2010, ASSESSMENT YEAR 2004 - CLEARLY DISTIN GUISHED THE DECISION OF M/S. SOLID CONTAINERS LTD. STATING THAT THE LOAN TOKEN FOR NON - TRADING ACTIVITIES COULD NO! BE TAXED IN THE HANDS OF YOUR ASSESSES. COPY ENCLOSED. FURTHER, THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CHETAN CHEMICALS (P) LTD., (263 ITR 770) CLEARLY HELD THAT THE LOAN OTHER THAN TRADING PURPOSE WOULD NOT BE CONSTITUTED WITHIN THE DEFINITION OF INCOME AND HENCE WOULD NOT BE TAXABLE IN THE HANDS OF YOUR ASSESSEE. THE DECISION OF THE BANGALORE BENCH OF T HE TRIBUNAL IN THE CASE OF COMFUND FINANCIAL SERVICES (I) LTD., VS. DCIT (1998) 67 ITD (BANG.) 304 HAS HELD THAT THE REMISSION OF LOAN BY THE BANK COULD NOT BE CONSIDERED TO CONSTITUTE A REVENUE INCOME IN THE HANDS OF THE ASSESSEE. THE DECISION OF THE COC HIN BENCH OF THE TRIBUNAL IN ACCELERATED FREEZ & DRYING CO.LTD., VS. DCIT (2009) 31 SOT 442 (COCHIN) FOR THE PROPOSITION THAT THE LOAN WAIVED BY THE BANK WAS NOT A REVENUE RECEIPT AND THERE WAS NO SCOPE OF BRINGING IT TO TAXATION. KEEPING IN VIEW, THE ABOV E YOU ARE KINDLY REQUESTED NOT TO PASS ANY ADVERSE ORDERS IN RESPECT OF THE W RITTEN BACK OF THE LOAN AMOUNT OF RS.9,86,50,379/~AND KINDLY ACCEPT THE RECOMMENDATION OF THE ASSESSING OFFICER ON THE SAID MATTER. 8 ITA NO. 5210/MUM/2015 2. REDUCTION OF SHARE CAPITAL : - AS REGARDS TO THE REDUCTION OF SHARE CAPITAL, THE SHARE CAPITAL OF YOUR ASSESSEE WAS REDUCED FROM RS.7 ,78,64,000! - TO RS.4,67, 18,400/ - AS PER THE ORDER OF THE BOMBAY HIGH COURT. A COPY OF THE SAID ORDER OF THE HIGH COURT IS ENCLOSED HEREWITH. HENCE, IT MAY BE SEEN TH AT THERE IS NO IMPACT IN RESPECT OF REVENUE IN RESPECT OF THE ABOVE REDUCTION IN THE SHARE CAPITAL WHICH HAS BEEN ADJUSTED BY REDUCING THE PROFIT AND LOSS ACCOUNT/SHARE PREMIUM OF YOUR ASSESSEE LEADING TO A NEUTRAL TAX IMPLICATION. 3. ADJUSTMENT IN RESPECT OF BOOK PROFIT : - YOUR ASSESSEE HAS NO OBJECTION TO /ADJUSTING THE BOOK PROFIT AS PER THE PROVISIONS OF LAW'. 12. HOWEVER, THE LD. CIT WAS NOT CONVINCED. HE DIRECTED THE A.O. TO FORM FRESH ASSESSMENT WITH FOLLOWING OBSERVATION: 4. I HAVE CONSIDERED THE SUBMISSIONS MADE. IT IS APPARENT FROM THE PERUSAL OF THE DETAILS OF THE AMOUNT WAIVED BY IDBI BANK AND UNITED BANK OF INDIA IS THAT AMOUNT OF RS.9,86,50,379/ - HAS BEEN WAIVED PURSUANT TO ONE TIME SETTLEMENT(OTS). IN VIEW OF THE RATIO OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SOLID CONTAINERS LTD 308 ITR 417, THE PROJECT FINANCE SCHEME LOAN ONLY RS.485 CRORES WAS TAKEN FOR 'SETTING UP A PLANT/FACTORY, FOR EXPANSION OF THE EXISTING PLANT' FROM 2000 TO 3000UNITS( CAPACITY OF PRESSURE VESSELS) LOCATEDAT MIDC.MURBAD.DIST.THANE, MAHARASHTRA. THE REMAINING LOAN AMOUNT WAS GIVEN BY IDBI BANK & UNITED BANK OF INDIA FOR ' WORKING CAPITAL' & FOR 'CASH CREDITS'. IN VIEW OF THE RATIO OF MAHINDRA AND MAHINDRA LTD 261 ITR 501(MUM), IT IS ONLY WAIVER GRANTED ON THIS AMOUNT OF RS.485 CRORES, WHICH CAN BE CONSIDERED AS CAPITAL RECEIPTS. HOWEVER, THE REMAINING 'AMOUNT OF LOAN WAIVED, HAS TO BE CONSIDERED AS 'REVENUE RECEIPTS'. 5. IN THE DETAILED WORKING OF THE LOAN MADE BY IDBI, IT IS APPARENT THAT THIS PROJECT FINANCE SCHEME LOAN CONSTITUTES 22.62% OF THE NET AMOUNT DUE FOR ONE TIME SETTLEMENT (OTS),THE AMOUNT WAIVED PERTAINING TO THIS ALONE COULD BE TREATED AS CAPITAL RECEIPT WHICH MEANS ONLY RS.104.28 CRORES WOULD BE ON ACCOUNT OF CAPITAL RECEIPT OUT OF RS. 986.50 CRO RES OF THE AMOUNT WAIVED. THE A.O OUGHT TO HAVE CONSIDERED FOR TAX THE REMAINING AMOUNT OF RS.882.22 CRORES WHIFE PASSING THE ASSESSMENT ORDER. 6. SIMILARLY, THE A.O ERRED IN PASSING ORDER U/S 115JB, THE A.O OUGHT TO HAVE CONSIDERED ADJUSTMENT OF RS.4,85, 58,547/ - INSTEAD OF - RS.4,81,70,410/ - AS POINTED OUT ABOVE. 7. IN THE LIGHT OF THE RATIO OF THE DECISIONS OF MALABAR INDUSTRIAL CO. LTD. VS CIT 243 ITR 83(SC), CIT VS MAX INDIA LTD. 295 ITR 282(SC), CIT VS MANGAL CASTINGS 303 ITR 23(P&H), CIT V. KOHINOOR TOBACCO PRODUCTS(P)LTD.[1998] 234 ITR 557, CIT V. MAHAVAR TRADERS[1996] 220 ITR 167(MP), DUGGAL & CO.V. CIT[1996] 220 ITR 456, CIT VS MEPCO INDUSTRIES LTD 294 ITR 121(MAD.), MEERUT ROLLER FLOUR MILLS LTD VS CIT[2013] 35 TAXMAN.COM 183(AIL), BHARTI HEXACOM LTD V CIT [2013] 33 TAXMAN.COM.210(DELHI - TR.), CIT V RKBK FISCAL SERVICE(P) LTD [2013] 32 TAXMAN.COM.153(CAL.), M.I. OVERSEAS LTD V 9 ITA NO. 5210/MUM/2015 DIT(LNT.TAX)[2012] 28 TAXMAN.COM. 279(UTTARAKHAND), BHARAT OVERSEAS BANK LTD V CIT[2012] 26 TAXMAN.COM 330(CHENNAI), CIT V HARSH J.PUNJABI 345 ITR 451 (DEL.), CIT V INFOSYS TECHN.LTD 17 TAXMAN.COM 203 & SRIPAN LAND DEV.(P) LTD V CIT[2011] TAXMAN.COM 429(MUM ITAT), WHEREIN IT HAS BEEN HELD THAT FAILURE OF CARRY OUT RELEVANT AND MEANINGFUL INQUIRIES TANTAMOU NT TO PASSING OF ERRONEOUS ASSESSMENT WHICH IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. I AM OF THE CONSIDERED VIEW THAT A.O ERRED IN PASSING ASSESSMENT ORDER ON ACCOUNT OF FAILURE TO CARRY OUT RELEVANT AND MEANINGFUL ENQUIRY WITH REGARD TO ONE TI ME SETTLEMENT (OTS) WITH THE LENDING BANKS. LIKEWISE, A.O ALSO T HE LIGHT OF THE ABOVE DISCUSSIONS TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND I, THEREFORE, SET ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. THE AO IS DIR ECTED TO FRAME FRESH ASSESSMENT ORDER IN ACCORDANCE WITH PROVISIONS OF LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE AO WILL EXAMINE ALL THE ISSUES RAISED ABOVE AND TAKE APPROPRIATE ACTION AS WARRANTED BY THE FACTS AND CIRCUMSTANC ES OF THE CASE IN COURSE OF COMPLETING ASSESSMENT. 13. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 14. WE HAVE HEARD BOTH THE CO UNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT SUBSEQUENT TO THE PASSING OF ORDER U/S. 143(3) IN THIS CASE, THE AUDIT OBJECTION WAS RAISED. REPLY THEREOF WAS DULY GIVEN BY THE ASSESSEE. HE SUBMITTED THAT THEREAFTER THE REVISION U/S. 263 WAS DONE BY THE LD . CIT. HE SUBMITTED THAT WHEN THE ASSESSEE HAD SATISFIED THE A.O., THERE WAS NO OCCASION TO PASS THE REVISIONARY ORDER U/S. 263 OF THE ACT. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT IN REPLY TO THE SHOW CAUSE NOTICE, THE ASSESSEE HAS DULY GIVE N THE DETAIL OF THE BANK LOAN. THE SAME WAS NOT FOR TRADING ACTIVITY. HENCE, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SAME WAS NOT LIABLE TO BROUGHT UNDER THE AMBIT OF TAXATION. HE SUBMITTED THAT THE ASSESSEES OBJECTION AND SUBMISSIONS HAVE NOT BEEN DEALT WITH BY THE LD. CIT. IN THIS REGARD, HE PLACED RELIANCE UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. MAHINDRA AND MAHINDRA LTD. AND OTHERS (IN CIVIL APPEAL NOS. 6949 - 6950 OF 2004 VIDE ORDER DATED 24.04.2018). HE FURTHER REF ERRED TO 10 ITA NO. 5210/MUM/2015 THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD. [1993] 203 ITR 108 (BOM) AND SEVERAL OTHER DECISIONS. 15. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) SUBMITTED THAT NO ENQUIRY WHATSOEVER WAS DONE BY THE A.O. ON THIS ISSUE AND THE ASSESSMENT ORDER WAS PASSED WITHOUT ANY ENQUIRY. HE SUBMITTED THAT THE LD. CIT HAS REFERRED TO THE HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF SOLID CONTAINERS LTD. (SUPRA) AND THE DECISION OF HONB LE APEX COURT IN THE CASE OF SUNDARAM IYERGAR AND SONS LTD. (SUPRA). HE SUBMITTED THAT THE NATURE OF THE LOANS WAS NEVER ESTABLISHED BY THE ASSESSEE AND, HENCE, WITHOUT EXAMINING THE NATURE OF THE LOANS, THE ENTIRE LOAN WAIVER OF CANNOT BE TREATED AS LOAN TAKEN FOR TRADING ITEMS. HE SUBMITTED THAT THE LD. CIT HAS ONLY DIRECTED THE A.O. TO MAKE THE FRESH ASSESSMENT AS PER THE PROVISION OF LAW AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HENCE , HE SUBMITTED THAT THERE IS NO PREJUDICE CA USE TO THE ASSESSEE. IN THIS REGARD, HE PLACED RELIANCE UPON SEVERAL CASE LAWS. 16. UPON CAREFUL CONSIDERATION WE NOTE THAT IN THE ASSESSMENT ORDER PASSED IN THIS REGARD, THERE IS NO MENTION OF THE LOAN OF RS.98,65,379/ - WAIVED OFF BY THE BANKS BEING TRE ATED AS CAPITAL RECEIPT. THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT AUDIT QUERY IN THIS REGARD WAS RAISED SUBSEQUENTLY. WE NOTE THAT IN REPLY TO THE ABOVE AUDIT QUERY NOTICE, THE ASSESSEE NEVER DEALT WITH THE HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF SOLID CONTAINERS LTD. (SUPRA) AND THE DECISION OF HONBLE APEX COURT IN THE CASE OF SUNDARAM IYERGAR AND SONS LTD. (SUPRA). SUBSEQUENTLY, THE ISSUE WAS TAKEN BY THE LD. CIT U/S. 263 OF THE ACT, WHEREIN THE LD. CIT INDICATED THAT LOANS WHICH WERE TAKEN FOR 11 ITA NO. 5210/MUM/2015 TRADING PURPOSES , THE WAIVER THERE OFF WILL FORM UNDER THE REALM OF REVENUE INCOME. IN REPLY, THE ASSESSEE NEVER CATEGORICALLY STATED THAT ALL THE LOANS WERE EXCLUSIVELY FOR TRADING ACTIVITY AND UTILIZED AS SUCH. THE LANGUAGE USED IN THE REP LY IS EVIDENT FROM THE COPY OF THE SHOW CAUSE NOTICE SUBMITTED BEFORE US IN PAPER BOOK PAGE NO .68 , THE SAME READS AS UNDER : 17. FROM THE ABOVE, IT IS EVIDENT THAT AFTER PRINTING THE WORDS WORKING CAPITAL, THE SAME HAS BEEN CUT AND BY HAND IT IS MENTIONED TERM LOAN. THE LINE BELOW THE CHART MENTIONS THAT ALL THE THREE LOANS WERE NOT TAKEN FOR TRADING ACTIVITY. THE LANGUAGE USED IS CLEARLY CON FUSING AND DOES NOT CATEGORICALLY STATE THAT ALL THE THREE LOANS WERE TAKEN FOR TRADING ACTIVITY. STR ANGE LY, WE NOTE THAT IN THE REPLY TO THE SHOW CAUSE REPRODUCED BY THE LD. CIT IN HIS ORDER U/S. 263, THE CUTTING OF THE WORD WORKING CAPITAL SUBSTITUTING OF THE SAME WITH TERM LOAN, IS NOT MENTIONED THEREIN. THE SAI D REPRODUCTION IS AS UNDER: 12 ITA NO. 5210/MUM/2015 PARTICULARS SANCTION AMOUNT REMARKS IDBI PROJECT FINANCE SCHEME 485.00 SETTING UP A PLAT/FACTORY CORPORATE LOAN - I 500.00 MARGIN MONEY FOR TERM LOAN CORPORATE LOAN - I 500.00 MARGIN MONEY FOR TERM LOAN HENCE, IT MAY BE CLEARLY AND EVIDENTLY SEEN THAT ALL THE THREE LOANS WERE NOT TAKEN FOR TRADING ACTIVITY AND ARE NOT COVERED BY THE DECISION OF M/S. SOLID CONTAINERS LTD. 18. BE AS IT MAY, WE FIND THAT THE A.O. HAS NOT MADE ANY ENQUIRY REGARDING THE NATURE OF THE LOANS WA IVED OFF AND THE PURPOSES FOR WHICH THEY WERE UTILIZED. THE ASSESSEE ALSO HAS AT NO STAGE GIVEN THE CORRECT AND COMPLETE DETAILS AND THE PURPOSES FOR WHICH ALL THE LOANS WERE UTILIZED. THE CASE LAWS ON THE SUBJECT INCLUDED THAT FROM THE HONBLE APEX COURT IN THE CASE OF MAHINDRA & MAHINDRA LTD. (SUPRA), PROVIDED THAT WAIVER OFF LOANS WHICH WERE TAKEN AND UTILIZED FOR TRADING PURPOSES WOULD FALL UNDER THE REALM OF TAXATION AS REVENUE RECEIPT. THIS VIEW IS FULLY FORTIFIED BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF SUNDARAM IYERGAR AND SONS LTD. (SUPRA) RENDERED BY THE BENCH COMPRISING THREE OF LORDSHIP. UNDER SUCH FACTS AND CIRCUMSTANCES, WHAT THE LD. CIT IS DIRECTING TO THE A.O. IS TO PASS AN ORDER AFTER DOING MEANINGFUL ENQUIRY AND AS PER LAW AND AFTER GIVING THE ASSESSEE REASONABLE OPPORTUNITY. WE FIND THAT IN SUCH CIRCUMSTANCES, NO PREJUDICE WHATSOEVER IS CAUSE D TO THE ASSESSEE. I N THIS REGARD, WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF D ANIEL MERCHANTS PRIVATE LIMITED AND OTHERS VS. ITO (IN SPECIAL LEAVE PETITION NO. 23976/2017 AND OTHERS VIDE ORDER DATED 10.04.2017 , WHEREIN THE HONBLE APEX COURT HAS EXPOUNDED THAT THE ORDER DIRECTING THE A.O. TO CARRY THROUGH PROPER ENQUIRY CANNOT BE S AID TO BE LIABLE TO BE SET ASIDE. WE MAY GAINFULLY REFER TO THE PART OF THE SAID ORDER AS UNDER: 13 ITA NO. 5210/MUM/2015 IN ALL THESE CASES, WE FIND THAT THE COMMISSIONER OF INCOME TAX HAD PASSED AN ORDER UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 WITH THE OBSERVATIONS THAT T HE ASSESSING OFFICER DID NOT MAKE ANY PROPER INQUIRY WHILE MAKING THE ASSESSMENT AND ACCEPTING THE EXPLANATION OF THE ASSESSEE(S) INSOFAR AS RECEIPT OF SHARE APPLICATION MONEY IS CONCERNED. ON THAT BASIS THE COMMISSIONER OF INCOME TAX HAD, AFTER SETTING AS IDE THE ORDER OF THE ASSESSING OFFICER, SIMPLY DIRECTED THE ASSESSING OFFICER TO CARRY THOROUGH AND DETAILED INQUIRY. IT IS THIS ORDER WHICH IS UPHELD BY THE HIGH COURT. WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE HIGH COURT. THE SPECIAL LEAVE PETI TIONS ARE DISMISSED. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, IN OUR CONSIDERED OPINION, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT . 19. AS REGARDS THE OTHER DECISIONS RELIED UPON BY THE LD. COUNSEL OF THE ASSESSEE, WE FIND TH AT THE SAME ARE NOT APPLICABLE ON THE FACTS OF THE CASE. MOREOVER, THE LAW OF THE LAND DECLARED BY THE HONBLE APEX COURT IN THE CASE OF MAHINDRA & MAHINDRA LTD. (SUPRA) AND SUNDARAM IYERGAR AND SONS LTD. (SUPRA) ARE BINDING ON ALL SUBORDINATE COURTS AND T RIBUNALS AND, HENCE, WHEN THE A.O. HAS BEEN D IRECT ED BY THE LD. CIT TO PASS AN ORDER AFTER PROPER ENQUIRY AS PER LAW, THE SAME WILL BE CONSIDERED BY THE A.O. IN THE BACKGROUND OF THE AFORE - SAID DISCUSSION AND PRECEDENT, WE UPHOLD THE ORDER PASSED BY THE LD. CIT . 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 7 . 1 2 . 2 0 1 8 S D / - S D / - ( RAM LAL NEGI ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 7 . 1 2 . 2 0 1 8 ROSHANI , SR. PS 14 ITA NO. 5210/MUM/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI