TaxTMI 
TaxTMI 
2015 (11) TMI 427
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.... purchase of consumable goods, i.e., cotton, gauze and bandage, etc., amounting to Rs. 27,28,014 for the assessment year 2010-11 and Rs. 30,13,125 for the assessment year 2011-12 by holding : (i) entire purchases of consumable goods from M/s. Krishna Surgicals were not genuine. (ii) ignoring the undisputed fact that all the payments against these purchases made from M/s. Krishna Surgicals were through account payee cheques. There is no evidence that any incriminating evidence was found during the course of search indicating the receiving back of any amount in this behalf as alleged. (iii) Relying on the statement of Shri Jayant Khandelwal, Prop. M/s. Krishna Surgicals without appreciating the fact that the copy of the statement or cross-examination thereof was not accorded to the assessee ; thereby the addition has been sustained in utter violation of principles of natural justice. (iv) The addition can be made solely on the basis of uncorrobo rated statement of the managing director who is not entitled to make such admissions binding the other directors and company." 3. The Revenue has raised common grounds in its both appeal, i.e., I. T. A. Nos. 803 and 804/JP/2014....
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....purchases of consumable goods and deleted the disallowance of interest under section 36(1)(iii) qua diversion of interest bearing funds held by the Assessing Officer for non-business purposes. Aggrieved on the orders of the learned Commissioner of Income-tax (Appeals), the assessee as well as the Department both are before us. 6. Learned counsel for the assessee contends that during the course of search proceedings, from the statement of Dr. Shailendra Sharma, managing director of the assessee-company department obtained an admission that part of the purchases of cotton gauze made from a firm, namely, M/s. Shri Krishna Surgicals (SKS for short) were not genuine and the amount of the bills raised were received back in cash after deduction of 6 per cent. towards value added tax (5 per cent.) and expenses (one per cent.). No incriminating material was found during the search to corroborate this state of affairs. The learned Assessing Officer treated the entire purchases of Rs. 27,28,014 and Rs. 30,13,175 for the assessment years 2010- 11 and 2011-12 from SKS as unverifiable. The learned Assessing Officer also referred to the statement of one Shri Tara Prakash Sharma, accountant of ....
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....ted nor doubted by the Department. M/s. Shree Krishna Surgical is one of the vendor out of many who supply consumable goods to the assessee. The search under section 132 was initiated at the business and residential premises at around 7.00 a.m. and on June 8, 2011 which went on up to midnight of June 10, 2011. The statements were recorded after passage of almost 42 hours in the midnight of June 9, 10, 2011. The statements of Dr. Shailendra Sharma were taken at various times firstly at the time of starting of the search on June 8, 2011 and lastly in the late midnight of June 10, 2011 after physical search and verification of the entire house and business places, i.e., at the time of conclusion of the search. All the goods received from M/s. Shree Krishna Surgical were duly recorded in the books of account which have not been doubted at all and the payments were made through payees account cheque through banking channels. The allegation of the learned Assessing Officer that the payment made through cheque was returned back in cash is completely baseless inasmuch as neither any incriminating material in this behalf nor a rupee of excess cash was found during the course of search. It w....
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.... merits are rejected then disallowance out of unverifiable purchases may be restricted to 15 per cent., following this judgment. 8. The learned Commissioner of Income-tax (Departmental representative) Ms. Rolee Agrawal relied on the orders of the lower authorities on this issue. It is contended that the statement about unverifiable purchases and plough back of the cheque amount has been admitted by way of statements of managing director, accountant and proprietor of SKS. These statements are admissible piece of evidence and no effective rebuttal thereof has been offered by the assessee. Apropos pressure or coercion it is contended that the managing director has disclosed the amounts as disclosed in the statement, therefore, it cannot be held that for part statement there was pressure and for other part there was no pressure. 9. Learned counsel for the assessee contends that statement of Shri Jayant Khandelwal was recorded behind its back, neither copy thereof nor cross- examination was provided consequently this statement has no evidentiary value. 10. Adverting to the Revenue's appeals the learned Commissioner of Income-tax (Departmental representative) contends that t....
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....of payment Cheque No. Dated Amount (Rs.) Bank Cheque 517403 11.09.2008 1,75,00,000 Axis Bank Ltd. Cheque 517417 28.11.2008 75,00,000 Axis Bank Ltd. Cheque 517421 30.12.2008 20,00,000 Axis Bank Ltd. Cheque 517442 11.5.2009 10,00,000 Axis Bank Ltd. Cheque 517443 21.5.2009 5,00,000 Axis Bank Ltd. Cheque 517444 21.5.2009 5,00,000 Axis Bank Ltd. Cheque 517445 31.5.2009 5,00,000 Axis Bank Ltd. Cheque 517453 7.7.2009 5,00,000 Axis Bank Ltd. Total 3,00,00,000 As per this contract the developer was required to develop a composite project on the property of the appellant located at village Gokulpura at Kalwar Road, Jaipur. The amount of Rs. 3 crores, was to be refunded to the developer after completion of the project. It was further informed that this amount was returned in the assessment year 2013-14 since M/s. Modest Builder failed to complete the project as per this agreement. Given the above facts it is seen that the appellant had with him an amount of Rs. 300 lakhs as interest-free funds available with it ....
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..../unquoted shares of various companies 31,46,490 11. Noncurrent investments in immovable properties 1,56,84,000 Total 7,22,88,901 13. It is contended that for the assessment year 2010-11, the learned Assessing Officer has treated a sum of Rs. 259.22 lakhs out of total 722.88 lakhs (after reducing the interest-free funds available share capital of Rs. 415.75 lakhs and reserves and surplus of Rs. 47.91 lakhs) as having been made out of borrowed funds. Similarly for the assessment year 2011-12 the learned Assessing Officer has treated a sum of Rs. 223.46 lakhs out of total 723.19 lakhs (after reducing the interest-free funds available share capital of Rs. 415.75 lakhs and reserves and surplus of Rs. 83.98 lakhs) as having been made out of borrowed funds. The learned Assessing Officer has failed to appreciate the effect of availability of share capital ; reserves and other interest-free funds which were applied in the acquisition of assets which are necessarily connected with its business and in making interest-free advances. It was demonstrated to the learned Commissioner of Income-tax (Appeals) that before drawing any adverse inference in this ....
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....y and appearing in its balance-sheet wherein the total investment of Rs. 1,56,84,000 was made and incidentally this amount is also included by the learned Assessing Officer in the list of alleged non-business advances/asset/investments while making disallowance. If the amount of Rs. 3 crores is further added to the other interest-free funds available with the assessee and as allowed by the learned Assessing Officer, i.e., Rs. 463.66 lakhs, the total interest- free funds available with the assessee come to Rs. 763.66 lakhs which is more than the total alleged non-business advances/assets/investments of Rs. 722.88 lakhs. Thus there is no question of application of interest bearing funds in non-business advances/assets/investments. It was further submitted to the learned Commissioner of Income-tax (Appeals) that the total alleged non-business advances/assets/investments includes a sum of Rs. 3,17,24,035 which were made to a sister-concern namely M/s. Sharma Memorial Hospital and Research Institute which is solely and exclusively for the purpose of business and in consideration of the commercial relations between assessee and the said concern, i.e., Sharma Memorial Hospital Research In....
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....fficient to cover the loan given to a sister concern of Rs. 5 lakhs only, the Appellate Tribunal ought to have held that the loan given was from the assessee's own funds." (2) CIT v. Hotel Savera [1999] 239 ITR 795 (Mad) : Whether the inter est-free advances are made out of own funds or out of funds borrowed, presumption arises that the money advanced came out of its own funds. (3) CIT v. Radico Khaitan Ltd. [2005] 274 ITR 354 (All) ; 142 Taxman 681 "Section 36(1)(iii) of the Income-tax Act, 1961-Interest on borrowed capital-Assessment year 1990-91-Assessee-company had advanced loan of Rs. 17.19 lakhs to its sister concern-It had borrowed huge sum from bank and financial institutions and claimed deduction on amount of interest paid on borrowed capital-Assessing Officer disallowed amount towards proportionate interest on said advances-Tribunal deleted disallowance of interest on ground that there was sufficient fund available with assessee-company in form of share capital reserve and surplus other than borrowed money for diverting a sum of Rs. 17.19 lakhs to its sister concern-Whether in view of findings recorded by Tribunal, assessee-company was entitled to full allowa....