COMMISSIONER OF INCOME TAX III LDH V. M/S TRIDENT INFOTECH CORP LTD

ITA/267/2012

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax-III Ludhiana against M/s Trident Infotech Corporation Ltd., concerning penalties imposed for the assessment year 2004-05. The penalties were related to additions made to the assessee's income, which were later contested. The primary legal issue was whether the penalties were justified based on the additions made following the Tribunal's interpretation of Section 36(1)(iii) of the Income Tax Act, 1961, in light of the judgment in Commissioner of Income Tax vs. Abhishek Industries Ltd. The Tribunal found that the assessee had not concealed income or furnished inaccurate particulars, leading to the setting aside of the penalties, a decision which was upheld by the High Court.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 718649 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 23-04-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Abhishek Industries Ltd (2006) 286 ITR 1
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: RAJESH KATOCH
• Keywords: Concealment of income; Deductions; Inaccurate particulars of income; Interest Free Advances; Penalty; Borrowed interest bearing loan; Bad debts expenses
• Section: 36 (1) (iii); 260A

Judgement Text

"ITA No. 267 of 2012 (O&M) 1 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 by the Income Tax Appellate Tribunal, Chandigarh Bench 'A' Chandigarh (for short 'the Tribunal') in relation to assessment year 2004-05 whereby the penalty imposed consequent to addition of Rs.45,14,373/- and Rs.11,45,476/- was set aside by the Tribunal. During the year in question, the assessee has given interest free advances and borrowed interest bearing loan. The question whether the advances of interest free loan in these circumstances is entitled to deductions under Section 36(1)(iii) of the Act came to be decided by this court 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 had borrowed certain funds on which liability to pay tax is being incurred Kumar Vimal 2013.04.30 14:33 I attest to the accuracy and integrity of this document Chandigarh ITA No. 267 of 2012 (O&M) 2 and on the other hand, certain amounts had been advanced to sister concerns or others without carrying any interest and without any business purpose, the interest to the extent the advance had been made without carrying any interest is to be disallowed under section 36(1)(iii) of the Act. Such borrowings to that extent cannot possibly be held for the purpose of business but for supplementing the cash diverted without deriving any benefit out of it. Accordingly, the assessee will not be entitled to claim deduction of the interest on the borrowings to the extent those are diverted to sister concerns or other persons without interest.” In the present case, the assessee has furnished its return prior to the judgment of this Court in Abhishek Industries Ltd. case (supra). In view of the principles of law laid down in the aforesaid judgment, the Assessing Officer made addition to the extent of Rs.45,14,373/-. The learned Tribunal has set aside the penalty on the aforesaid addition inter alia for the reasons that such additions were made on account of judgment of this Court in Abhishek Industries Ltd. case(supra) and it does not establish that the assessee has either concealed its income or furnished inaccurate particulars of income. The scope of the provisions of the Act came 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 as bad debts expenses in the profit and loss account filed with the return of income. But vide letter dated 24.10.2006, the assessee communicated to the Assessing Officer that actually this amount was written off in the books of account and the same be added to the returned income at the time of finalizing the assessment for the assessment year in question. It is, Kumar Vimal 2013.04.30 14:33 I attest to the accuracy and integrity of this document Chandigarh ITA No. 267 of 2012 (O&M) 3 thereafter, the assessment was finalized by the Assessing Officer on 28.11.2006. The learned Tribunal found that when the assessee has disclosed the particulars in the return of income and withdrawn his claim of expenditure being made because of an inadvertent mistake and offered the same as additional income, there is no justification to hold that the assessee has furnished inaccurate particulars of income. Therefore, the order of penalty was set aside. Consequently, we do not find that the reasoning given by the Tribunal warrants any interference in appeal when the additions are direct result of judgment of jurisdictional Court. The appeal is dismissed accordingly. (HEMANT GUPTA) JUDGE (RITU BAHRI) JUDGE April 23, 2013 G.Arora/Vimal Kumar Vimal 2013.04.30 14:33 I attest to the accuracy and integrity of this document Chandigarh "