- (1.) Heard Learned Counsel on both sides.
(2.) In the present case, the Assessee took loan from Citi Bank N.A. to buy a hotel (capital asset). Default was committed in repayment of loan. Suit was filed for recovery, which was settled by signing consent decree on April 30, 1982. The consent decree recites that the borrowers acknowledge their liability to the Plaintiff-bank in the sum of Rs. 42,45,477, being the outstanding amount in the loan account of the bank as on April 30, 1982. However, it appears that, in the books of account of the Assessee, the outstanding amount repayable to the bank was Rs. 52,07,873 as on April 30, 1982. Consequently, the Department came to the conclusion that there was waiver by the bank to the extent of approximately rupees ten lakhs. This amount was sought to be taxed by the Department. We are not concerned with the taxability of the said sum of rupees ten lakhs. The Department initiated proceedings under Section 271(1)(c) of the Income-tax Act, 1961, against the Assessee. It is true that, in the books of account of the Assessee, the outstanding amount, as on April 30, 1982, was Rs. 52,07,873, including interest. However, the decree in favour of the bank was for Rs. 42,45,477 because that was the amount indicated as the outstanding amount due and payable by the Assessee to the bank in its books of account. It appears that the bank has not calculated the interest over the years possibly for the reason that, in its accounts, this amount was classified as "NPA".
(3.) In the peculiar facts and circumstances of this case, Section 271(1)(c) of the Income-tax Act, 1961, is not applicable.;