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TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 427
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....auze 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 for the assessment years 2010-11 and 2011-12 are as und....
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....terest 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 the assessee-company admitting these purchases as non-genuine. Rel....
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....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 was explained that consumable expenses claimed in these years were ....
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....he 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 the assessee was having following borrowings and liabilities in respective years : Assessment year 2010-11 : Total loan liability of Rs. 8,4....
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....nk 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 grouped under current liabilities. Thus, the appellant had sufficient non-interest bearing cash balance to have made interest-free advances of Rs. 259.22 lakhs. Moreover, the advances of Rs. 3,17,24,035 and Rs. 4,46,041 to Sharma Memorial Hospital Research ....
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....rest-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 behalf, the learned Assessing Officer did not even whisper any such proposal. The learned Assessing Officer grossly ignored that the assessee's financial statements reflected sufficient interest-free funds appearing under the head "current liabilities" which have been utilised in making the above advances/investments. Following submission a....
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....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 Institute. It is pertinent to note that, Sharma Memorial Hospital Research Institute is a public charitable trust duly registered under section 12AA of Income-tax Act, 1961 having registered office at H-1, Chitranjan Marg, C-scheme, Jaipur. This trust is running a nursing college and physiotherapy training centre. The trust has also obtained approval from the Government of Rajasthan, Indian Nursing Council, and Rajasthan University of Health ....
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....man 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 allowance of amount of interest paid by it on borrowed capital-Held, yes." (4) Comet Handicrafts v. Asst. CIT [2008] 114 TTJ (Delhi) 124 "Business expenditure-Interest on borrowed capital-interest- free loans for non-business purposes-Loans and advances of Rs. 9.85 lakhs were given to friends and relatives out of partners' own capital of Rs. 3.05 crores which was free of interest-Credit facilities were sanctioned for the purpose of assessee's export ....