Of Income Tax v. M/S.duroflex Private Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN TUESDAY, THE 19TH OCTOBER 2010 / 27TH ASWINA 1932 ITA.No. 98 of 2010() ------------------------ ITA.306/2009 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------- COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT ------------------------------------ M/S.DUROFLEX PRIVATE LTD., ALAPPUZHA. ADVS. SRI.JOSEPH MARKOSE, SENIOR ADVOCATE SRI.V.ABRAHAM MARKOS SRI.B.J.JOHN PRAKASH SRI.TOM THOMAS (KAKKUZHIYIL) SRI.TERRY V.JAMES THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 19/10/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: SVS/ C.N.RAMACHANDRAN NAIR &K. SURENDRA MOHAN, JJ. ------------------------------------------------------------ I.T.A.NO:98 OF 2010 ----------------------------------------------------------- Dated this the 19[th] October, 2010. JUDGMENT Ramachandran Nair, J. The question raised is whether the waiver of loan of Rs.62.50lakhs by the bank in favour of the respondent is assessable asincome. Even though in the assessment the Assessing Officeraccepted the assessee's claim that amount of loan waived by thebank is not assessable under the Act, the Commissioner in suomotu revision directed inclusion of the amount as income inassessment. In the appeal filed by the assessee the Tribunalcancelled the order of the Commissioner against which this appealis filed. 2. We have heard senior counsel Shri. P.K.R.Menon appearing for the revenue and senior counsel Shri. Joseph Markose appearingfor the respondent. 3. On the question of limitation the Tribunal held that therewas already a proceedings under Section 143(1) with reference towhich proceedings under Section 263 is time barred. The Tribunalhas relied on the decision of the Supreme Court in Commissioner ITA 98/2010 of Income Tax v. Alagendran Finance Ltd. (293 ITR 1). However,this is a case where Assessing Officer himself issued notice underSection 147 for revising the assessment to bring to tax the verysame amount in respect of which Section 263 order is issued by theOfficer. Proceedings initiated by the Assessing Officer to makeincome escaping assessment by issuing notice under Section 148was dropped only on 25/10/2006. In the case of AlagendranFinance Ltd the Supreme Court held that extended limitation is notavailable from the date of dropping of income escaping assessmentproceedings initiated under Section 147 if the re-opening was onissues other than the one considered by the Commissioner inproceedings under Section 263. In this case what we notice is thatthe Officer himself proposed to assess the amount by re-openingthe assessment under Section 148. Though he later dropped thesame we feel the Commissioner can always wait for correction ofthe assessment by the Officer himself and he is free to initiateproceedings for revision of assessment under Section 263 afterdropping of the proceedings initiated by the Officer under Section147. Admittedly the order issued under Section 263 is not timebarred if the limitation is reckoned from 25/10/2006, the date onwhich the officer dropped the re-assessment proceedings. Wetherefore reverse the order of the Tribunal on this issue and hold ITA 98/2010 that proceedings initiated by the Commissioner under Section 263was well within time. 4. On the merits of the case we have already decided the ITA 98/2010 that proceedings initiated by the Commissioner under Section 263was well within time. 4. On the merits of the case we have already decided the issue in our judgment in the case of Commissioner of IncomeTax v. Messrs. Accelerated Freeze Drying Co. Ltd. (judgment inITA 1774/2009 dated 22/3/2010) wherein we have held thatwaiver of funds do not constitute income. However, if any intereston which deduction was claimed and allowed for any earlier yearunder Section 36(1)(iii) happened to form part of this amountwaived then such amount is assessable as income under Section 41(1) of the Act. 5. We dispose of the appeal by modifying the order of theTribunal with direction to the Assessing Officer to verify the break-up details of the amount waived by the bank and assess onlyinterest if any waived that was allowed as deduction in any of theearlier years under Section 36(1)(iii) of the Act. C.N.RAMACHANDRAN NAIR Judge jj K. SURENDRA MOHANJudge