TaxTMI 
TaxTMI 
2013 (9) TMI 597
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....ever, those grounds are revolving around the main issue as raised vide Ground No.4 reproduced above. 3. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) r.w.s. 153A of the IT Act dated 31/10/2008 were that a search u/s.132 of IT Act was conducted on 25/10/2006 at the Rajkot branch of the assessee. The assessee is in Angadia business. The assessee is carrying courier packets stated to be containing goods or cash to be delivered at several places through-out India. The packets are being delivered at the behest of the Centre. For the lead Assessment Year, i.e. for 2001-02 in response to notice u/s.153A of the Act, a return was filed declaring an income of Rs.12,29,713/-. It was noticed by the AO that the assessee has claimed interest expenditure on unsecured loans. The assessee was asked to establish the business nexus. Further it has also been noted by the AO that for the assessment years in question, the assessee had claimed interest expenditure totalling to Rs.87,35,707/- and the bifurcation of the same is as under:- A.Y. Interest Expenditure 2001-02 1381799 2002-03 987663 2003-04 662235 2004-05 951080 2005-06 1552024 2006-07 152158....
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....ing the case-laws and the details furnished by the assessee, he has concluded that the borrowed funds were not utilized for the purpose of the business. According to him, the interest debited to P&L account on the said expenditure was liable to be disallowed. Accordingly, a calculation was made and for A.Y. 2001-02 disallowance of Rs.13,81,799/- was made. For rest of the years, on identical manner, the AO had made the disallowance of interest expenditure. The matter was carried before the first appellate authority. 4. Before ld.CIT(A), it was contested as under:- "..Appellant submitted that it was; the burden on department to prove that the appellant has not used funds for the business purpose and has diverted its interest bearing funds for nonbusiness purpose i.e. advances to friends & relatives, creating non-business assets/payment, withdrawn by the partners for their personal use etc. A.O. has not brought any evidence that the appellant has used the cash balance for non-business purposes. Appellant also submitted that during the course of the various searches in past, cash as per cash book was invariably found at head office & branches, which: support the contention of the poi....
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....le u/s.36(i)(iii) of I.T. Act. In view of these facts, the disallowance of interest on borrowed funds is not justified and therefore, the addition made is deleted." 5. Now the revenue is before us. Ld.CIT-DR Mr.BKS Pandya appeared and placed reliance on the order of AO. He has vehemently argued that during the course of assessment proceedings, the assessee had failed to furnish the requisite details. Vide several notices, the AO had made certain enquiries specially asking the assessee to demonstrate the daily requirement of cash for each branch. But branch-wise as well as day-wise requirement of daily cash could not be demonstrated by the assessee. Ld.DR has placed reliance on Punjab Stainless Steel Industries vs. CIT reported at (2010) 324 ITR 396) [Delhi] and on Inamulhaq S.Iraki vs. Addl.CIT in ITA No.243/Ahd/2011 and ITA No.3512/Ahd/2010, order dated 31/01/2012 [ITAT "B" Bench Ahmedabad]. 6. From the side of the respondent-assessee, ld.AR Mr.P.M.Mehta appeared and submitted that since the assessee is in angadia business, therefore there is always a requirement of cash. The AO had erred in not appreciating the nature of business, necessity to maintain the cash balance, mode of....
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.... As a result, this ground of Revenue is also rejected." 7.1. Likewise, ITAT "B" Bench Ahmedabad In ITA Nos.748,751,752 and 753/Ahd/2008 for A.Ys 1999-2000, 2002-03, 2003-04 and 2004-05 in the case of "ACIT vs. Shri Vasantlal Ambalal Patel", vide order dated 07/01/2011, has held as under:- "6. We have carefully considered the arguments of both the sides and perused the material placed before us. From the perusal of the assessment order of all the years under consideration, we find that there was no allegation by the AO that any part of the business carried on by the assessee is illegal business. The disallowance of interest by the AO was on the ground that the assessee kept huge cash balance. The assessee carried out only one business of Angadia and from such composite business, profit/loss is worked out in the respective years and the AO himself has treated the business of the assessee to be one business. The contention of the learned counsel that neither in any of the past years nor in the subsequent years, part of the business of the assessee was held to be illegal by the AO, has not been disputed by the learned DR. The contention of the ld.DR is based upon various presumption.....
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....transaction of the assessee. We find that it is case of the revenue that the borrowed funds were utilized by assessee for any other purposes than its business. The assessee be imprudent in holding large amount of cash but when the cash was possessed for business purposes it would constitute business asset the assessee and the borrowings connected therewith had to be held for business purposes. We therefore, do not find any error in the order of the Learned Commissioner of Income Tax (Appeals) in deleting the disallowance of interest of expenditure. Therefore, this ground of appeal of Revenue is dismissed." 7.3. In all these cases, in the like manner, the AO had found that there was huge cash balances. On one hand, the allegation was that those assessees have maintained idle cash balances, however, at the same time borrowed money and paid interest thereon. Therefore, in the same manner, it was alleged by the Revenue Department that the borrowed money was kept as cash in hand and borrowed money was not in fact utilised for the purpose of the business. The Tribunal has taken a view that it could be a possibility that the assessee might be imprudent in holding large amount of cash but....