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The Assistant Commissioner of Income Tax, Circle-I (1) , Trichy Versus M/s. Trichy Steel Rolling Mills Ltd.

2016 (5) TMI 403 - ITAT CHENNAI

Penalty u/s 271(1)(c) - bogus write off of bad debts and interest claimed as deduction which is attributable towards the interest free loan advanced to sister concern - Held that:- It is apparent from the orders of the Revenue that the assessee has not established the genuiness of its claim of bad debts. If the assessee had genuine debtors arising from the sale of steel, it would have been easy for it to establish so. The assessee has also not made any attempt to prove that its earlier admission .....

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xpenditure was debited in the books of accounts for earning such income. Hence it is abundantly clear that these debtors are bogus. Further, the assessee has transferred its interest bearing funds to its sister concerns as interest free advances and thereby erroneously absorbed the interest pertaining to that funds in its books of account. This amount of interest can be computed arithmetically with accuracy and cannot be termed as estimation and has been rightly disallowed. Therefore, the relian .....

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the learned Assessing Officer is justified in levying penalty on the assessee - Decided against assessee. - I.T.A.No.835/Mds/2014 - Dated:- 29-3-2016 - SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER For The Appellant : Mr. A.V.Sreekanth, JCIT For The Respondent : Mr. S.Sridhar, Advocate ORDER Per A. Mohan Alankamony, AM:- This appeal is filed by the Revenue aggrieved by the order of the learned Commissioner of Income Tax (Appeals), Tiruchirapalli dated 20.12.2 .....

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towards the interest free loan advanced to sister concern. 3. Brief facts of the case are that the assessee company is engaged in the business of manufacturing of iron rods and bars filed its return of income on 27.03.2008 declaring Nil income. The case was selected for scrutiny and thereafter the assessment was completed by the learned Assessing Officer under section 143(3) of the Act on 30.12.2009 disallowing various claims of the assessee and initiating penalty proceedings under section 271(1 .....

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wards interest free advance as deduction. It was mentioned in its books of account that the debts related to aqua firm activity of the assessee in Nellore. However, the name of the aqua firm was not revealed. During the course of earlier assessment proceedings, the assessee company had stated that the company did not have any such activity or business. At that time, it was further stated by the assessee company that the unaccounted sale proceeds of steel which were not invoiced were brought into .....

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ther observed that the assessee company had obtained bank overdraft amounting to ₹ 12,60,15,000/- against which the assessee had paid interest of ₹ 1,12,67,000/-. From the above sum of ₹ 12,60,15,000/- the assessee company had transferred ₹ 5,01,00,000/- to M/s KBDL as interest free advance. Therefore, the learned Assessing Officer had disallowed the interest amount of ₹ 44,79,440/- which is attributable to interest free advance and added the same to the income of t .....

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m had been made thereby. More over the company has huge accumulated losses only and had suspended its operation since 2009. There is no possibility of the company earning sufficient profits to set off against the huge accumulated loss. Further, the company has also no indication nor does the management has any inclination to resume operations and hence has no necessity or intention to suppress income. The assessee reply has been perused. Regarding bad and doubtful debts written off, the assessee .....

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any did not mention any word about loan to Karnataka Braveries and Distilleries Ltd in their reply to penalty U/S 271 (1) (c). The assessee company has got overdraft facilities of ₹ 12,60,15,000/- from Andhra Bank in their name and diverted ₹ 5,01,00,000/- of the overdraft loan to the KBDL. The assessee company has claimed interest on the overdraft facilities in their Profit and Loss account and reduce the profit. The assessee company diverted the loan to sister concern and claimed i .....

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essee failed to prove the facts of the case, I am satisfied that it is a fit case for levy of penalty u/s 271 (1) ( c) of the Income Tax Act 1961. The income sought to have been evaded by the assessee is ₹ 2,24,79,440/-. The minimum penalty leviable is ₹ 75,66,580/- in this case is and maximum penalty leviable is ₹ 2,26,99,737/-. Given the facts and circumstances of this case I hereby levy a penalty of ₹ 75,66,580/- which should be paid as per demand notice and challan en .....

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ducts P. Ltd., reported in 322 ITR 158 held that the assessee had disclosed the particulars of the claim made fully and therefore no penalty can be levied. 6. Similarly, the learned Commissioner of Income Tax (Appeals) opined that disallowance of interest made by the learned Assessing Officer was on estimation basis and therefore penalty cannot be levied. Reliance was placed in the decision of Sudarshan Silk & Sarees Vs. CIT reported in 300 ITR 205 and in the case of K.R. Chinny Krishna Chet .....

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to its sister company from interest bearing funds. 8. The learned Authorized Representative on the other hand relied on the orders of the learned Commissioner of Income Tax (Appeals) and argued in support of the same. 9. We have heard both the parties and carefully perused the materials available on record. It is apparent from the orders of the Revenue that the assessee has not established the genuiness of its claim of bad debts. If the assessee had genuine debtors arising from the sale of stee .....

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