2014 (7) TMI 514

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....,188, made under section 36(1)(iii), disallowance of motorcar expenses of Rs. 15,629 and depreciation on motorcar of Rs. 18,410 on ad-hoc basis @ 20%. 3. The assessee, in ground no.3, has challenged the initiation of penalty proceedings under section 271(1)(c), which is rejected being pre-mature as the quantum proceedings and penalty proceedings are separate and distinct and, therefore, initiation of penalty can be challenged only during the course of penalty proceedings. 4. Facts in brief:- The assessee is an individual engaged in the business of wholesale dealer in plywood in the name and style of "Bombay Plywood". The Assessing Officer, during the course of assessment proceedings, noted that the assessee has shown net interest of Rs. 1....

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.... expenditure. It was further submitted that the assessee has furnished all the details of over draft funds which were used to discharge liability and expenditure. The summary of the overdraft account was also submitted before the learned Commissioner (Appeals). Accordingly, it was submitted that the borrowing of the funds in the form of overdraft account was purely commercial and for business requirement and such an overdraft account was obtained against the security of fixed deposit only and, therefore, the interest received and interest paid are inextricably linked. 6. The learned Commissioner (Appeals), however, rejected the assessee's contention on the ground that the onus was upon the assessee to prove that interest expenditure of Rs.....

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....under section 36(1)(iii) and even otherwise also, it is not allowable under section 57(3). Regarding disallowance on account of motorcar expenditure and depreciation, he strongly supported the order of the Assessing Officer. 11. We have carefully considered the rival contentions, perused the relevant findings of the authorities below and the material available on record. It is seen that the assessee, in the Trading account and Profit & Loss account, had shown interest of Rs. 11,38,489, on net basis. The interest has been received under the following heads:- i) Interest received on FDRs Rs. 4,12,924 ii) Interest received on others Rs. 1,57,797 iii) Interest received on recurring deposit Rs. 11,61,642 Rs. 17,32,363 Out of the aforesaid a....