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2007] 292 ITR 310 [2008] 170 TAXMAN 123 (MAD.) HIGH COURT OF MADRAS Commissioner of Income-tax v. Tamilnadu Warehousing Corporation R. BALASUBRAMANIAN AND P.P.S. JANARTHANA RAJA, JJ. TAX CASE (APPEAL) NO. 2265 OF 2006 OCTOBER 10, 2006 Section 41(1) of the Income-tax Act, 1961 - Remission or cessation of trading liability - Assessment year 1989-90 - Commissioner, while exercising powers under section 263, set aside assessment on ground that during relevant assessment year, assessee surrendered Group Gratuity Scheme to LIC and received certain amount; and that while completing assessment, Assessing Officer had not made proper enquiry with respect to assessability of said sum under section 41(1) - Whether since admittedly, assessee had continued to show said amount as a liability in balance-sheet, Commissioner was wrong in holding that same was assessable under section 41(1) - Held, yes FACTS For the relevant assessment year, the assessment of the assessee-company was completed under section 143(3). The Commissioner, while exercising powers under section 263, observed that during the relevant assessment year, the assessee surrendered the Group Gratuity Scheme to the LIC and received certain amount; and that while completing assessment, the Assessing Officer had not made any proper enquiry with respect to assessability of said sum. He, thus, set aside the assessment, with a direction to the Assessing Officer to assess the said amount under section 41(1). On appeal, the Tribunal found that the assessee had admitted the amount in question as a liability in the balance-sheet and merely because the amount was not examined by the Assessing Officer for the purpose of income-tax, same could not be a condition for cancellation of the assessment order under section 263. The Tribunal further held that the Commissioner had not given a finding as to how the order was erroneous and prejudicial to the interests of the revenue. Accordingly, it cancelled the order passed under section 263 and restored the order passed by the Assessing Officer. On the revenue's appeal : HELD From the reasoning given by the Tribunal, it was clear that the assessee had continued to show the admitted…

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