TaxTMI 
TaxTMI 
2014 (3) TMI 182
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....he fact that the amount of Rs.3.27 Crores (Rs.3,27,00,000/-) was not credited to the drawings account of Shri George Jacob and that the income disclosed in the Return of Income filed by Shri George Jacob is not correct - a. did not the Tribunal err in disallowing interest of Rs.3.27 Crores paid to partner Shri.George Jacob ? b. Did not the Tribunal err in disallowing interest of Rs.3,27,00,000/- paid to partner Shri George Jacob ? 3. Whether, on the facts and in the circumstances of the case, did not the Tribunal err in deleting the additions made under Sections 40A(3) and 40(a)(ia) ? 4. (a) Whether, on the facts and in the circumstances of the case and also for the reasons given by the Assessing Officer and the CIT(A) read with Ground G, the Tribunal is right in law and fact in deleting the addition of Rs.12,18,00,000/- (Twelve Crores eighteen lakhs) made under Sec.68 of the I.T. Act ? (b) In the absence of detailed fund flow statement of the partner along with his balance sheet and net wealth statement being produced, the Tribunal is right in law and fact in concluding that the partner utilized the funds withdrawn from the other two firms for depositing in the assesse....
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.... be charged on the excess drawings made by the partners. To which the assessee sent a reply on 04.08.2008 offering explanation saying as there was credit balance in the capital account of the partners during the financial year 2004-05, and since no interest was paid to them during the said financial year to their Profit and Loss account, hence interest chargeable on the current account as on 31.03.2006 was nil, they have not charged any interest on the over drawings. The said explanation was not accepted by the assessing officer for the reason that the assessee was in the habit of paying interest on the money borrowed by the firm and as a matter of fact the borrowed funds were diverted for the personal use of the partners, therefore, such expenditure incurred was not used for the business purpose. Hence Section 37(1) of the Income Tax Act has to be applied. He also opined that non payment of interest to the partners in the previous financial year was irrelevant so far as not charging interest on the overdrawn amounts. Therefore, by calculating interest at 12% per annum assessing officer proceeded to disallow the said amount as interest. However, this came to be viewed from a differ....
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....ned that there is a debit to the Profit and Loss account of the assessee which indicates total interest payment made by them and it amounts to Rs. 3,29,86,356/-. Out of this total amount of interest a huge chunk of interest amounting to Rs. 3.27 Crores was paid to Mr.George Jacob, one of the partners. This was on the basis of credit balance appearing in the partner's current account. But, however, interest was not seen credited to his drawing account. Further, interest receipt was not disclosed by the assessee in the return of income submitted by him for the assessment year 2006-07 before the Deputy Commissioner of Income Tax, Circle I, Thiruvalla. On account of this factual situation the claim of the assessee was rejected, therefore this claim of payment of interest expenditure Rs. 3,27,00,000/- was disallowed. In the Profit and Loss account for the year ending with 31.03.2006, this amount of Rs. 3,27,00,000/- was not shown as income of Mr.George Jacob. So far as the expenditure and income pertaining to the present assessee, other details are given in the CIT(Appeals) orders. 7. So far as the second issue is concerned, the amounts actually shown as the capital amount of one....
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....e respondent/assessee did not furnish any details with regard to the firm from where the said amounts were drawn, therefore, the assessing officer was justified in suspecting that genuineness of the transaction and credit worthiness of the said firm. According to the first appellate authority, though the stand of the appellant assessee was that these amounts came to the hand of one of the partners or through other firms i.e. Muthoot Bankers and Muthoot Properties, but no balance sheet pertaining to these two financial years were filed in support of the contention of the respondent/assessee. On the other hand, perusal of the file pertaining to Muthoot Properties and Mar George Memorial Medical Centre, the appellant firm has drawn disallowance for investment in the appellant firm. Surprisingly this Rs. 12.18 Crores did not find a place in the books of account of the appellant firm. The copy of the current account filed was rejected and was not taken into consideration. According to the first Appellate Authority, the respondent/assessee was under an obligation to establish how this Rs. 12.18 Crores came to the acocunt of the appellant firm as the facts were not matching with the stand....
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....he first appellate authority and the appellate Tribunal is that the first appellate authority as well as the assessing officer did not have the benefit of checking any of the records which were produced before the Tribunal as a paper book. Some of the documents which were part of the paper book produced before the Tribunal are placed before us as additional documents by filing an Interlocutory Application. Additional documents are, copies of account of four partners, copy of the common order in the case of Muthoot Bankers, Trivandrum in ITAT Cochin Bench, computation of income of Shri.George Jacob and Profit and Loss Account and Balance Sheet of Shri George Jacob, true copy of the account of Shri George Jacob, true copy of the account of Shri George Jacob in Muthoot General Finance, true copy of the account of Shri George Jacob in Muthtoot bankers and true copy of the account of Shri George Jacob in Muthoot Builders. 12. According to learned Standing Counsel for the appellant/revenue, the additional documents now brought on record cannot be taken into consideration as they were not part of material produced before the assessing officer as well as CIT (Appeals). According to him,....