CIT vs Trident Infotech Corpn. Ltd.

The present appeal u/s 260A of the Income Tax Act, 1961 (for short the Act) arises out of an order dated 26-3-2012 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 u/s 36(1)(iii) of the Act came to be decided by this court in the case of Commissioner of Income Tax-I Vs. Abhishek Industries Ltd., 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 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 u/s 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, 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.