TaxTMI 
TaxTMI 
2015 (2) TMI 1122
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....cted u/s.194A from such payment. It was explained by the assessee that when the cooperative credit society constitutes with its members only and no other person or public is involved, the interest payment is to self and as such provisions of section 194A and section 40(a)(ia) are not attracted. However, the AO was not satisfied with the explanation given by the assessee and held that the assessee has contravened the provisions of section 40(a)(ia) r.w.s.194A(3)(iii)(a) r.w.s.80P(2)(a)(i) r.w.s. 80P(4). He therefore disallowed the payment of Rs. 9,26,418/-. 3. The AO similarly noted that assessee has forwarded loans and advances for business and non-business purposes. The assessee furnished the relevant details of information pertaining to the financial statements. The AO asked the assessee to substantiate incidences of interest attributed on such loans and advances forwarded within the meaning of section 14A of the I.T. Act r.w. Rule 8D of the I.T. Rules. It was explained by the assessee that interest cannot be disallowed as long as nexus between interest bearing funds and interest free advances is not established. It was explained that since the assessee has borrowed funds and ....
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....er observed that a survey u/s.133A of the I.T. Act in the case of the Sanklechas had taken place on 17- 10-2007. During the course of survey proceedings certain entries relating to labour and material expenses in connection with Gaikwad Sankul Project were found recorded on page 43 of Annexure 60. Shri Prakash Sanklecha, one of the partner in his statement recorded on 17-10-2007 had stated that these figures were not recorded in the regular books of account of M/s. Vijay Builders for which he surrendered this amount of Rs. 25 lakhs as additional income in the hands of M/s. Vijay Builders for A.Y. 2008-09. The details of entries found on page 43 of Annexure 60 are as follows : Material purchases Labour payments 03-04-2007 2,10,000 10-04-2007 2,50,000 15-04-2007 1,75,000 10-06-2007 2,80,000 06-05-2007 2,35,000 29-06-2007 3,00,000 28-05-2007 2,50,000 20-07-2007 2,25,000 10-06-2007 1,55,000 30-07-2007 1,45,000 12-07-2007 2,75,000 Total 13,00,00 Total 12,00,000 4.3 The Ld.CIT(A) noted that while the assessee has shown labour charges....
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....siness purposes. The funds were fully utilised for the purposes of the business by the Sister Concerns who are engaged in the similar business. The addition may please be deleted. 2. On the facts and in the circumstances of the case and in law the Learned Assessing Officer is not justified in disallowing and the Ld. CIT(A) II, Nashik confirming the proportionate interest under section 36(1)(iii) when there are no nexus between the funds borrowed and the funds advanced to the sister concerns. The addition may be please be deleted. 3. On the facts and in the circumstances of the case and in law the Learned Assessing Officer is not justified in disallowing and the Learned CIT(A) II, Nashik confirming the proportionate interest under section 36(1)(iii) when the appellant had sufficient non-interest bearing funds, profit and sufficient capital. The addition may be please be deleted. 4. On the facts and in the circumstances of the case and in law the Learned CIT(A) is not justified in applying the decision in case of Ravindra Singh Arora vs. ACIT (2012) 53 SOT 124 (Hyd) ignoring the Supreme Court's decision in the case of S.A. Builders vs CIT (2007) 288 ITR 1(S). The additio....
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....e, by applying the ratio of the decision of the jurisdictional High Court, no addition/disallowance is called for u/s.36(1)(iii) of the I.T. Act. 8. The Ld. Departmental Representative on the other hand relied on the order of the CIT(A). 9. After hearing both the sides, we find from the audited accounts that the capital account of the partners as on 31-03-2008 stood at Rs. 31,03,627/- as per page 14 of the paper book. Similarly, the assessee has also obtained interest free advances from relatives at Rs. 11,91,358/- as per page 17 of the paper book. Thus, from the various details furnished by the assessee in the audited accounts it is seen that the partners capital at Rs. 31,03,627/-and interest free loans and advances obtained from relatives at Rs. 11,91,358/- comes to Rs. 42,94,985/-. As against this the assessee has advanced interest free loans at Rs. 27,98,411/- 9.1 We find the Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd. (Supra) has held that if there was funds available both interest free and overdraft and/or loans taken, then a presumption would arise that investment would be out of interest free funds generated or available with the com....
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....s unaccounted advances for the A.Y. 2008-09. However, all the advances received and paid are already recorded in the regularly maintained books of account. The assessee had produced all those documents before the AO for verification. He submitted that on the basis of detailed submissions filed before the AO, he accepted the contention of the assessee. Referring to the works accounts for the year ending 31-03-2008, a copy of which is placed at page 14 of the paper book he submitted that the assessee has shown the works expenses at Rs. 75,42,955,- the details of which are available in Schedule-M. Referring to the details of Schedule-M, which is placed at page 23 of the paper book he submitted that the assessee had shown labour charges at Rs. 14,38,060/-. Similarly, the assessee had also shown purchases of materials to the tune of Rs. 68,11,278/- as per works account for the year ending 31-03-2008, a copy of which is placed at page 15 of the paper book. Therefore, it is wrong to say that the assessee had not shown the labour charges or material purchased. He accordingly submitted that no addition is called for. 13. The Ld. Departmental Representative on the other hand referring to ....
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....e open to the AAC to introduce into assessment new sources, as his power of enhancement is restricted only to income which was subject matter of consideration for purposes of assessment. The Hon'ble Supreme Court in the case of Rai Bahadur Hardutroy Motilal Chamaria (Supra) has held that the power of enhancement of AAC is restricted to subject matter of assessment or sources of income which have been considered expressly or by clear implication by ITO from point of view of taxability of assessee. Therefore, AAC had no jurisdiction to assessee a source of income which had not been processed by ITO and which was not disclosed either in return filed by the assessee or in assessment order. We find that following the above decisions the Hon'ble Delhi High Court in the case of Sardarilal and Company (Supra) has held that whenever question of taxability of income from a new source of income is concerned which has not been considered by the AO, jurisdiction to deal with same in appropriate cases may be dealt with u/s.147/148 and section 263 if requisite conditions are satisfied. It is inconceivable that in presence of such specific provisions a similar power is available to the first appel....
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....ribunal was justified in holding that in calling for a remand report on the aforenoted four points, the Commissioner had exceeded his jurisdiction. While computing the total business income of the assessee, the Assessing Officer had estimated the sales at an enhanced figure and had applied a higher rate of gross profit. Thus, the only matter dealt with by the Assessing Officer in the assessment order was the estimation of profits and gain of the business of the assessee. None of the aforenoted four points had any bearing on the question of estimation of either the sales or the gross profit rate. From the observations, extracted above', it is evident that the Commissioner had his doubts about the capacity of the assessee to raise finances for the purchase of goods and show a huge turnover in the very first year of his business. In other words, the enquiry ordered by the Commissioner was to satisfy himself about the source of investment by the assessee. It is axiomatic that failure to prove the sources of investment will result in addition in the hands of the assessee under a different provision of law and will not have much relevance in the estimation of sales and gross profit r....