Facts of the Case

The assessee, Curewel (India) Ltd., was subjected to assessment for AY 2002–03 under Section 144 of the Income Tax Act (best judgment assessment). The matter went through multiple rounds of litigation:

  • Initially, the Assessing Officer (AO) passed an order making several additions.
  • The Income Tax Appellate Tribunal (ITAT) remanded the matter for fresh adjudication.
  • In the second round, the ITAT again set aside the assessment, observing that the earlier assessment was harsh, arbitrary, and unjustified, and directed a fresh assessment (de novo).
  • During the fresh proceedings, the assessee raised a new claim: that the waiver of loan by Canara Bank amounting to ₹1,36,45,525 should not be treated as taxable income.

However, the AO rejected this claim without examining merits, stating that fresh claims cannot be raised in remand proceedings. This view was upheld by CIT(A) and ITAT.

Issues Involved

  1. Whether a fresh claim can be raised by the assessee during remand proceedings?
  2. Whether the ITAT erred in treating the remand as limited rather than a complete (de novo) remand?
  3. Whether income arising from waiver of loan liability requires adjudication on merits?

Petitioner’s Arguments (Assessee)

  • The ITAT’s earlier order clearly constituted a complete and wholesale remand, not limited to specific issues.
  • Once the assessment is set aside entirely, the proceedings start afresh, allowing new claims to be raised.
  • The AO himself made fresh additions in the reassessment, indicating that the proceedings were indeed de novo.
  • Reliance placed on Sehet Synthetics Pvt. Ltd. v. CIT was misplaced since that case dealt with limited remand.

Respondent’s Arguments (Revenue)

  • The assessee cannot raise a fresh claim at the remand stage.
  • The AO rightly rejected the claim at the threshold without examining merits.
  • The ITAT correctly upheld the position based on judicial precedent.

Court’s Findings / Order

  • The remand order dated 10.03.2011 was a complete de novo remand, not restricted in scope.
  • The earlier assessment was set aside due to being excessive, harsh, and arbitrary.
  • Therefore, the AO was duty-bound to examine the fresh claim on merits, rather than rejecting it procedurally.
  • The ITAT erred in misunderstanding the scope of remand and wrongly relying on Sehet Synthetics Pvt. Ltd. v. CIT (302 ITR 126).
  • The impugned ITAT order was set aside, and the matter was remanded back to the AO for fresh adjudication on merits.

Important Clarification by Court

  • The Court clarified that it did not express any opinion on the merits of the claim regarding loan waiver.
  • The AO must independently evaluate whether such waiver is taxable income.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2019:DHC:6469-DB/VSA28112019ITA2592018.pdf

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