TaxTMI 
TaxTMI 
2010 (9) TMI 1178
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....e by the Assessing Officer on account of disallowance of interest. 2.1. The Assessing Officer made this addition for the detailed reasons given in para 6 of the assessment order. In this para, the Assessing Officer observed that the assessee had substantial amount of cash in hand, which according to him was never used for the purpose of business. He, therefore, took the view that cash in hand is nothing but unsecured loans taken from others and partners' capital. It was also stated that since the business of the assessee is to transport parcels and cash from one place to another, it is not required for the assessee to keep so much cash in hand at any point of time. The Assessing Officer asked the assessee to explain as to why the interes....
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....86,92,390/- and such huge cash balance was not required for routine expenses and losses. (iv) It is stated that the assessee was required to prove the actual use on the funds borrowed on which interest is paid and that the appellant had not been able to prove the actual use of fund for the purpose of business. (v) Assessee's contention that funds were not diverted or that income was not diverted by way of payment is not acceptable on the ground the deduction of interest is to be allowed only on the capital used for the purpose of business and according to him there is no user of fund borrowed by the appellant. The main contention of the A.O. is that the capital borrowed has to be proved to have been used for the purpose of....
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.... order contended that there was no necessity of cash in hand. The Assessing Officer rightly disallowed the interest paid amounting to Rs. 87,493/-. 6. On the other hand, Shri P.M. Mehta, ld. counsel appearing on behalf of the assessee vehemently supported the order of Learned Commissioner of Income Tax(Appeals). 7. Having heard both the sides, we have carefully gone through the orders of authorities below. It is pertinent to note that the assessee had cash balance as per the cash book. Looking to the nature of business, it is necessary for the assessee to maintain cash balance. Therefore, it cannot be said that borrowings are not used for the purpose of business. It is also pertinent to note that nowhere in the assessment order, the A....
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....order. During the course of search, cash belonged to the assessee amounting to Rs. 26,25,000/-. This cash found was seized. In para 5 of the assessment order, the Assessing Officer stated that cash of Rs. 25,00,000/- found wrapped in newspaper and kept in a bag, and does not shown names of sender or the receiver. Shri Prakash Ishverlal Patel was available at that time and his statement was recorded under section 131 of the Act on 21/22.07.2004. In this statement, he stated that cash belonged to the firm and was being transferred to Ahmedabad. The DDIT(Inv.), Unit-II(3), Mumbai seized the amount for the reasons that since no satisfactory explanation with regard to the source of cash and disclosure in regular books of accounts could be furnis....
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....ished copies of the relevant pages of cash book which clearly show that there was cash balance of more than Rs. 25 lakh at Mumbai Office and that the cash so sent was also recorded on the date of search. Thus all the evidences found at the time of search and explanation given in the course of assessment proceedings by the appellant are supporting the appellant's claim that the cash so seized was as per the cash book of Mumbai Office. The A.O. has simply stated that the reasons for transfer of cash from Mumbai to Ahmedabad are not given and that the transfer could have been to Head Office. I am of the view that it is for the assessee to decide as to where the cash is required and it is not the A.O. who has to decide as to where the cash shou....
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....e practice to carry the cash book. Subsequently, relevant pages of cash book were produced, which clearly indicate that cash balance available was more than Rs. 25 lacs at the Mumbai Office, and that the cash so sent was recorded on the date of search. He accordingly contended that the Assessing Officer made the addition on doubts and suspicion and the Learned Commissioner of Income Tax(Appeals) is legally and factually correct in deleting the same. 13. Having heard both the sides, we have carefully gone through the orders of authorities below. It is pertinent to note that at the time of search itself, Shri Prakashbhai I. Patel stated that at the mini bus in Mumbai cash was found which included the amount of Rs. 25 lacs belonged to the a....