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TMI Blog2016 (4) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2008-09 on 8.9.2008 declaring total loss of Rs. 5,11,538/-. The case was selected for scrutiny under CASS and accordingly, notices u/s 143(2) & 142(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act') were issued. In response to notices, the Authorised Representative of the assessee appeared and furnished the information called for. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has shown sundry debtors of Rs. 4,19,04,880/- in the name of M/s. Kumar Kotex Ltd. It was further noticed that the assessee has charged interest on the outstanding debtor balance for the financial year 2006-07 relevant to assessment year 2007-08. However, the assessee has failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r further held that the assessee itself has charged interest for the previous financial year, however could not offered any cogent reasons for not charging the interest for the year under consideration. With these observations, the Assessing Officer charged interest @ 12% on the outstanding debtor balance and added Rs. 50,28,585/- to the income of the assessee. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the Assessing Officer. The assessee further submitted that the debtor company's financial position was very weak and it went to BIFR for liquidation. The bankers have taken the possession of the assets of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore us. 4. The Ld. D.R. submitted that the CIT(A) was erred in deleting the additions made by the Assessing Officer towards interest charged on outstanding debtor balance. The Ld. D.R. further submitted that the assessee has not taken any steps to collect the amount due from the debtor and more over continued its business activity with the debtor, therefore, A.O. is rightly charged interest on the outstanding balance. The Ld. D.R. further submitted that the assessee itself, for the financial year 2006-07 has charged interest on the outstanding debtor balance, but failed to offer any reasons for not charging the interest for the current financial year. Under these circumstances, the order passed by the Assessing Officer should be upheld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f fact, for the previous financial year, we charged interest to create pressure on the assessee to make the payment. However, we realized that our efforts proved to be futile, therefore, we stopped charging interest. 6. The assessee contended that the A.O. cannot charge interest on sundry debtors, as there was no such condition for charging interest. We find force in the arguments of the assessee for the reason that it is not a case of A.O. that the asset is financial asset and there was a condition for charging the interest. When there is no condition, the A.O. cannot direct the assessee to charge interest on sundry debtors. The A.O. charged interest mainly on the ground that assesee has charged interest for the previous financial year an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is in the business of money lending to charge interest on the outstanding balance by following the mercantile system of accounting. Though, assessee charged interest for the last financial year, he explained the reasons for not charging the interest for the current financial year under consideration. From the perusal of the facts, it appears that the reasons given by the assessee appears to be reasonable. Therefore, we are of the opinion that charging interest on trade debtors is not correct. The CIT(A) after considering the relevant facts and circumstances of the case, deleted the additions made by the Assessing Officer. We do not see any error or infirmity in the order passed by the CIT(A). Hence, we inclined to upheld the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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