Mukat Pipes Limited Vs ACIT (ITAT Mumbai)
In , the Mumbai ITAT dealt with the validity of reassessment proceedings and the taxability of waiver of principal loan amount under Sections 41(1) and 28(iv) of the Income Tax Act for AY 2012-13. The assessee had originally filed its return declaring nil income after set-off of carried forward losses, and assessment under Section 143(3) was completed on 17.03.2015. Subsequently, the Assessing Officer reopened the assessment under Section 147 by issuing notice under Section 148 on 27.03.2019 on the ground that the assessee had credited Rs. 11.03 crore to its Profit and Loss Account as waiver of bank loans but excluded the same from taxable income.
The Assessing Officer held that the waived loan represented working capital borrowing used for trading purposes and therefore constituted taxable income under Section 41(1). The reassessment resulted in addition of Rs. 11.03 crore and corresponding computation under Section 115JB. The CIT(A) upheld the reopening and addition, relying on earlier decisions which treated waiver of business loans as income.
Before the Tribunal, the assessee challenged both the reopening and the addition on merits. It argued that the reopening beyond four years was invalid because the Assessing Officer had formed belief solely from material already available in the balance sheet and financial statements examined during original scrutiny assessment. Reliance was placed on Bombay High Court judgments holding that reassessment beyond four years cannot be sustained in absence of failure to disclose fully and truly all material facts.
