Case Law Details
1. Briefly stated relevant facts are that the assessee is a company engaged in providing business auxiliary services to ICICI Bank Ltd. During the F.Y. 2008-09 they ventured to provide such similar services to ICICI Home Finance Company Ltd. by entering into a contract dated 01.05.2008 with them. However, by letter dated 20.04.2009 the assessee was informed by the ICICI Home Finance Co. Ltd. that the agreement dated 01.05.2008 was declared void ab initio by the Board of Directors in their meeting held on 20.04.2009 as a result of which the transaction of income
was reversed by the assessee as there was no legally enforceable right to such income under a void contract. However, the AO added back a sum of Rs. 2,05,39,063/- and Rs. 21,73,292/- to the income of the assessee. The assessee contended that the amount of Rs. 2,17,13,292/- includes Rs. 2,05,39,063/- also. By way of order passed u/s 154 of the Act the AO rectified the mistake and determined the amount of dis allowance at Rs. 2,17,13,292/- only. The appeal preferred by the assessee against the assessment order challenging the addition of Rs. 2,17,13,292/- was dismissed by the Ld. CIT (A) holding that since the assessee had performed their part of contract as agreed between the parties, there was no justification to hold that no lawful income had arisen to the assessee on the ground of non-est contract.
2. Aggrieved by the impugned order dismissing the appeal, the assessee is before us in this appeal on the ground that the Ld. CIT (A) erred in law and on facts in confirming the addition.
3. It is argued by the ld. AR that the provisions of Section 297 of the Companies Act are mandatory in nature and any violation thereof renders the contract void ab initio but not voidable at the option of the Board and since no real income arises under a void contract, the income transactions were reversed by the assessee as such no tax could be assessed merely on the book entries. According to him it is neither the entries in the books of account nor consent of the parties that would give rise to the determination of tax liability, but it is the real income that alone has to be brought to tax. Per contra, Ld. DR vehemently relied upon the orders of the authorities below.
4. We have carefully gone through the record. Vide paragraph no. 7.3 the Ld. CIT (A) observed as follows:
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