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TMI Blog2017 (11) TMI 1747X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) erred in law and on facts has confirmed the disallowance on account of interest on loans to associate concerns to the extent of Rs. 12,04,742/- without considering the facts of the case in right spirit. 3.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the additions to the extent of Rs. 25,000/- out of total additions of Rs. 50,000/- made on account of General Expenses on estimated basis. 4.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has dismissed the ground relating to the initiation of penalty proceedings under section 271 (1)(c) of the I T Act. 5.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the charging of interest under section 234B, 234C and 234D of the Income Tax Act, 1961." 3. The brief facts of the case as per the issue involved in the grounds of appeal are as under:- Disallowance on account of bad debt of Rs. 33,90,768/-:- 4. The assessee has filed return of income declaring income of Rs. 15,160/-.During the course of assessment proceedings u/s. 143(3) the assessing officer noticed that assessee has claimed bad debt to the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balances on account of debt representing interest income offered earlier for taxation as mentioned in para-5.2.17.2.b ((A) Rs. 5, 67, 826 and (B) Rs. 14,30,166). In the result, Rs. 33,00,174/- (Rs.13,02,182 + Rs. 5,67,826+Rs.14,30, 166) has been allowed as bad debts in appeal and balance addition on account of disallowance of bad debt of Rs. 33,90,768/- is confirmed. Thus, this ground of appeal is partly allowed." 5. We have heard rival contention and perused the material on record carefully. The assessing officer has disallowed the bad debt claim of the assessee of Rs. 66,90,942/- on the ground that assessee had failed to provide sufficient reasons for writing off this debt as bad for the year under consideration. The assessing officer has relied on the decision of the hon'ble Gujarat High Court in the case of M/s. Dhal Enterprises and Equipment 207 ITR 719 (Guj). We observed that assessing officer has not taken into consideration amended provision of section 36(1)(vii) that w.e.f. 01.04.1989 that the amount of debt become bad if it is written off as irrecoverable in the account of the assessee for the previous year. We have further observed that The Ld.CIT(A) has considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it was paying interest to the bank. 8. We have heard rival contentions and perused the material on record carefully. We observed that assessee has provided a loan to its sister concern as supra in this order of Rs. 1,33,39,689/-. The assessee has charged interest on the above loan from the assessment year 2002-03 to 2005-06. The assessee has stopped charging interest on the aforesaid loan on the reasoning that preceding year interest was not recovered. On an analysis of the accounts, it came to our notice that assessee has availed loan from the banks and forwarded this loan to sister concern from whom it has not recognized the interest income on the ground that sister concern has stopped paying any interest to the assessee. It is pertinent to observe that the assessing officer has not doubted the genuineness of the transaction i.e. taking loan from the banks and forwarding it to the sister concern. The assessing officer has not made any inquiry whether interest expenditure relatable to the loan's deduction from the accounts and given to the sister concern is an allowable deduction or not in the present scenario? We further find that assessee has been following mercantile sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts, bills, vouchers etc. and not pointed out any discrepancy in unaccounted sale, expenditure etc. Therefore, we restrict the disallowance out of general expenses to Rs. 10,000/- only. In the result the appeal of the assessee is partly allowed on this issue. 10. Grounds of appeal no. 4&5 are of general and consequential nature therefore, same are not adjudicated. 11. The assessee has raised the following grounds of appeals for the other assessment years:- ITA No. 836/Ahd/2012 Assessment Year 2007-08 "1.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the addition on account of interest on loans to associate concerns to the extent of Rs. 10,87,560/- out of the total addition of Rs. 17,34,120/- without considering the facts of the case in right spirit." ITA No. 2627/Ahd/2012 Assessment Year 2009-10 "1. The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the addition on account of interest on loans to associate concerns to the extent of Rs. 8,75,437/- without considering the facts of the case in right spirit. 2. The learned Commissioner of Income Tax (Appeals) erred in law and on facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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