TaxTMI 
TaxTMI 
2009 (9) TMI 988
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....terest. 3. The brief facts of the case are that the Learned Assessing Officer observed that assessee claimed interest of Rs. 4,38,293/-and assessee had substantial amount of cash in hand which was never used for the purpose of business. The cash in hand is nothing but unsecured loan taken from others and partner's capital. Since the business of the assessee is to transport parcels and cash from one place to another, it is not required of the assessee to keep so much cash in hand at any point of time. Therefore, he disallowed the interest expenditure of Rs. 4,38,293/- claimed by the assessee. Similarly, the Learned Assessing Officer disallowed the deduction of interest expenditure in Assessment Year 2001-02 of Rs. 7,71,134/- in Assessment Year 2002- 03 of Rs. 9,36,950/- in Assessment Year 2003-04 Rs. 9,48.704/- in Assessment Year 2004-05 and Rs. 9,50,627/- in Assessment Year 2005-06. 4. In appeal before the Learned Commissioner of Income Tax(Appeals), the assessee submitted that the observation of the Assessing Officer referred to above are not justified. It is submitted that the cash balance is required for the purpose of business having regard to the nature of business, whic....
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....per the cashbook. The A.O. has the borrowed funds are not used for the purpose of business does not establish it. Merely because the appellant is maintaining cash balance, it cannot be said that the borrowing are not used for the business. It is not the case that borrowed funds are diverted anywhere. The cash balance is maintained in business and i.e. as per the needs as judged by assessee. The claim is thus admissible u/s. 36(1)(iii) of I.T. Act. The disallowance is unjustified and therefore, is deleted." 7. The Learned Departmental Representative supported the order of the Learned Assessing Officer, whereas the Learned Authorised Representative of the Assessee supported the order of the Learned Commissioner of Income Tax(Appeals). 8. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. The short issue involved in this ground of appeal is that interest expenditure on amount borrowed were disallowed on the ground that amount borrowed were kept as cash with the assessee and the same was in the opinion of the Learned Assessing Officer not utilised for the business purposes of the assessee. The Learned Commiss....
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....ually, they were subject to attack and loot by miscreants/antisocial elements. During the course of search, parcels belonging to various angadias were found from the custody of the employees of respective angadias. During the course of search, an amount of Rs. 20 lacs belonging to the applicant firm was seized by the authorised officers from the custody of the employee of the applicant firm. The said Rs. 20 lacs were being sent by the Mumbai office of the applicant firm out of its cash balance as per cash books to the Ahmedabad Office. Along with the said amount, a letter was also sent/enclosed informing therein that the amount of Rs. 20 lacs is sent out of the cash balance of Rs. 20,26,471/- as on 21.07.2004. Photocopy of the relevant page of the said cash book was enclosed during the course of assessment proceedings. This fact was also stated by employee of the appellant firm Shri Kanubhai K. Patel vide his statement recorded under section 132(4) of the Act on 22.07.2004. Relevant questions & answers are reproduced below: Q.9 During the course of physical verification of gray colour trunk which was found in the blue colour van MH 0451298, an amount of Rs. 20,00,000/- kept i....
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....to another, but no such bharatia was found with the cash. 11. In appeal before the CIT(A) it was argued that reasons given by the Assessing officer as above are totally irrelevant. In fact, the Learned Assessing Officer has nothing to say about the evidences found, explanations submitted and statement recorded at the time of search, which proved beyond doubt that cash was transferred from the cash balance of the Mumbai office & therefore, addition made by the Learned Assessing Officer is not justified. Therefore it was submitted to delete the addition of Rs. 20 lacs & oblige. 12. The CIT(A) after considering the submissions of the assessee held as under :- 13. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In the instant case, cash of Rs. 20 lacs was found from the van at the time of carrying of the same from Mumbai to Ahmedabad. At the time of the search of van itself, the person who was found in possession of the cash explained that the cash belong to the Mumbai branch of the assessee and the same was being taken to the Ahmedabad branch of the assessee. The Learned Assessing Officer added above a....