Commissioner Of Income Tax-Iii Ludhiana v. M/S Trident Infotech Corporation Ltd

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No. 267 of 2012 (O&M) Date of decision: 23.04.2013 Commissioner of Income Tax-III Ludhiana ...Appellant versus M/s Trident Infotech Corporation Ltd. ...Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MS. JUSTICE RITU BAHRI Present: Mr. Rajesh Katoch, Advocate for the appellant. HEMANT GUPTA, J. (ORAL) The present appeal under Section 260A of the Income Tax Act,1961 (for short 'the Act') arises out of an order dated 26.03.2012 passed bythe Income Tax Appellate Tribunal, Chandigarh Bench 'A' Chandigarh (forshort 'the Tribunal') in relation to assessment year 2004-05 whereby thepenalty imposed consequent to addition of Rs.45,14,373/- andRs.11,45,476/- was set aside by the Tribunal. During the year in question, the assessee has given interest freeadvances and borrowed interest bearing loan. The question whether theadvances of interest free loan in these circumstances is entitled todeductions under Section 36(1)(iii) of the Act came to be decided by thiscourt in the case of Commissioner of Income Tax vs. Abhishek Industries Ltd (2006) 286 ITR 1. The court has held to the following effect: “34. .....Once it is borne out from the record that the assessee hadborrowed certain funds on which liability to pay tax is being incurred and on the other hand, certain amounts had been advanced to sisterconcerns or others without carrying any interest and without anybusiness purpose, the interest to the extent the advance had beenmade without carrying any interest is to be disallowed under section36(1)(iii) of the Act. Such borrowings to that extent cannot possiblybe held for the purpose of business but for supplementing the cashdiverted without deriving any benefit out of it. Accordingly, theassessee will not be entitled to claim deduction of the interest on theborrowings to the extent those are diverted to sister concerns or otherpersons without interest.” In the present case, the assessee has furnished its return prior tothe judgment of this Court in Abhishek Industries Ltd. case (supra). Inview of the principles of law laid down in the aforesaid judgment, theAssessing Officer made addition to the extent of Rs.45,14,373/-. Thelearned Tribunal has set aside the penalty on the aforesaid addition inter aliafor the reasons that such additions were made on account of judgment ofthis Court in Abhishek Industries Ltd. case(supra) and it does notestablish that the assessee has either concealed its income or furnishedinaccurate particulars of income. The scope of the provisions of the Actcame to be interpreted by this court in the aforesaid judgment. Therefore,the claim of the Assessee cannot be said to be concealment of income,which may attract penalty. In respect of addition of Rs.11,45,476/-, the assessee claimed it asbad debts expenses in the profit and loss account filed with the return ofincome. But vide letter dated 24.10.2006, the assessee communicated to theAssessing Officer that actually this amount was written off in the books ofaccount and the same be added to the returned income at the time of thereafter, the assessment was finalized by the Assessing Officer on28.11.2006. The learned Tribunal found that when the assessee hasdisclosed the particulars in the return of income and withdrawn his claim ofexpenditure being made because of an inadvertent mistake and offered thesame as additional income, there is no justification to hold that the assesseehas furnished inaccurate particulars of income. Therefore, the order ofpenalty was set aside. Consequently, we do not find that the reasoning given by theTribunal warrants any interference in appeal when the additions are directresult of judgment of jurisdictional Court. The appeal is dismissed accordingly. (HEMANT GUPTA) JUDGE April 23, 2013G.Arora/Vimal (RITU BAHRI) JUDGE