TaxTMI 
TaxTMI 
2014 (1) TMI 932
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....te Authority enhanced the disallowance u/s 36(1)(iii) by Rs.1,55,976/-, while upholding the disallowance made by the Assessing Officer. On the disallowance made u/s 14A, the Ld.Commissioner of Income Tax (Appeals) granted part relief to the assessee. Further aggrieved the assessee is in appeal before us on the following effective grounds. "2. That having regard to the facts and circumstances of the case, Ld.Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the action of Ld.AO by making addition of Rs.6,93,580/- u/s 36(1)(iii) of the Act. 3. That Ld.Commissioner of Income Tax (Appeals) have erred in law and on facts in further enhancing the disallowance by Rs.1,55,976/- u/s 36(1)(iii) of the Act as against disallowance of Rs.6,93,580/- made by the Ld.A.O. 4. That Ld.Commissioner of Income Tax (Appeals) have erred in law and on facts in further enhancing the disallowance suo moto by Rs.1,55,976/- u/s 36(1)(iii) of the Act without giving prior notice for enhancement to the appellant company." 4. Mr.Ranjan Chopra, the Ld.Counsel for the assessee submitted that there is a mistake committed by the Ld.AO as well as the Ld.Commissioner of Income T....
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....sallowance of the claim made by the assessee u/s 36(1)(iii) of the Act. He relied on certain case laws in support of his contention that on the ground of consistency no disallowance can be made. On the issue of enhancement by the Ld.Commissioner of Income Tax (Appeals) he submitted that this is bad in law as no notice of enhancement as required under the Act was given to the assessee. 5. The Ld.D.R. Ms.Shumana Sen on the other hand relied on the order of the ld.AO as well as the Ld.Commissioner of Income Tax (Appeals) and submitted that the assessee has admitted that it has advanced interest free loans to sister concerns and that these were not given based on commercial expediency. She relied on the case laws referred to by the Ld.A.O. in his order to the proposition that the disallowance can be made. She further relied in the following case laws for the proposition that res judicata does not apply to income tax proceedings. 67 ITR 106 (S.C.) M.M. Ipoh & Others vs CIT, Madras She further relied on the judgement of the Hon'ble Punjab & Haryana High Court in the case of Abhishek Industries, 286 ITR p.1. 6. Joining the issue Mr.Ranjan Chopra, the Ld.Counsel for the assesse....
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.... in the company Purifalir India P.Ltd. As on 31.3.2005 the assessee did not have any secured or unsecured loans. Thus it cannot be inferred that the investment of Rs.50,70,856/- made by the assessee in M/s Puriflair India P.Ltd. is out of borrowed funds. For the Assessment Year 2005-06, 2006-07, 2007-08 and 2008-09, no disallowance was made by the Assessing Officer u/s 36(1)(iii) of the Act. Similarly for the Assessment Year 2010-11 also no disallowance was made by the Ld.A.O. 9. Coming to the running accounts balances in the account of M/s Puriflair India P.Ltd. and Desiccant Roters International P.Ltd. of Rs.2,49,863.11 and Rs.1,25,200.15, we find that these are advances on account of material sold and not interest free loans. The total interest free funds available with the assessee are Rs.2,63,93,096/- as against investment of Rs.50,70,856/- and advances of Rs.3,75,063.26. The Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. reported in 313 ITR 340 (Bom) held that when interest free funds are available, then the presumption would be that such interest free funds were invested or advanced as interest free loans/advances. If this presumption i....
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....xpenditure in the year under consideration. The Karnataka High Court in CIT vs.Sridev Enterprises (1991) 192 ITR 167 has held that a departure from a finding in respect of deductions permitted during the past years would result in a contradictory finding. 5. We are also of the view that it would not be equitable to permit the Revenue to take a different stand in respect of expenses which were the subject matter of previous year's assessments. In our opinion, consistency and definiteness of approach by the Revenue is necessary in the matter of recognizing the nature of an account maintained by the assessee so that the basis of a concluded assessment is not ignored without actually reopening the assessment." The Hon'ble Court followed the propositions laid down by in the case of Sri Devi Enterprises (supra). In the case of CIT vs. Basti Sugar Co.Ltd. the Hon'ble Delhi High Court in ITA 89/1993 1st Sept.2010 held as follows: "Even in respect of other parties a finding of fact was recorded that balances were old and no new loans had been advanced in the year under consideration. This is when it is found that there was no nexus between the money borrowed by the assessee from....