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2016 (11) TMI 711 - ITAT AHMEDABAD

2016 (11) TMI 711 - ITAT AHMEDABAD - TMI - Penalty levied on account of cessation of liability and estimation of net profit for concealment or furnishing inaccurate particulars of income - Held that:- As emerges from the record that the assessee was running into perennial losses and became a sick unit unable to pay its outstanding loans secured against the fixed assets. The loan in question, though adjusted to capital reserve account by the assessee, was not written off by the Gujarat Industrial .....

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No. 1983/Ahd/2013 - Dated:- 7-10-2016 - Shri R. P. Tolani, Judicial Member Revenue by : Smt. Sonia Kumar, Sr DR Assessee by : Shri K. K. Shah, AR ORDER This appeal by the Revenue is directed against the order of the Learned Commissioner of Income Tax (Appeals)-I, Surat dated 15.05.2013 for Assessment Year 2005-06. 2. The solitary ground raised is as under: On the facts and circumstances of the case, the Ld. CIT(A) is right in deleting the penalty of ₹ 18,41,219/-, levied on account of ces .....

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n question was made by the AO with following observations:- 6.3 In view of non-payment of loan and closure of business, the bank sold the Fixed Assets for ₹ 17,25,000/-. This amount of ₹ 17,25,000/- was adjusted against the outstanding loan of ₹ 66,73,456/- and the balance amount of ₹ 49,48,456/- was transferred to NPA account. However, it was not written off by the Bank. On the other hand, the appellant transferred the difference between the loan amount of ₹ 66,73, .....

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;Capital Reserve' account. Since the assessee was in the process of winding up, no useful purpose would have been served in filing the appeal inasmuch as the ultimate income was going to result in loss. Therefore, though the issue was debatable, assessee did not file appeal to avoid legal proceedings. Since the bank had not written off the loan, this was at the most a unilateral write off capital debt raised for plant and machinery. Therefore, technically it did not fall u/s 41(1) of the Act .....

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liability towards loan which was transferred to the 'Capital Reserve' account. Taxability of the same u/s 41 (1) is a highly debatable issue though, appellant choose not to file an appeal probably because the business was getting closed. ii. Secondly, it is a case where 'Short Term Capital Loss which should have been shown by the appellant, but not show, in its return of income. 6.6 As mentioned earlier, the Bank only transferred the loan amount to NPA account and has not written it .....

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s cancelled. 6. The ld. Counsel for the assessee relied on the judgments:- i) CIT vs. Reliance Petroproducts Pvt Ltd, [2010] 322 ITR 158 (SC) If all the relevant particulars are filed along with return of income, merely because some item is added or disallowed based on the information provided in the return, penalty u/s 271(1)(c) cannot be imposed. ii) CIT vs. Sugauli Sugar Works (P) Ltd, 236 ITR 518 (SC) Addition u/s 41(1) of the Act was not justified if the amount is written off by an unilater .....

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