TaxTMI 
TaxTMI 
2020 (5) TMI 453
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....al of assessee is against the order of CIT(A) confirming the action of Assessing Officer in disallowing proportionate expenses of interest without appreciating the facts of the case. For this, assessee has raised following ground no. 1 :- "1. On the facts and in the circumstances of the case and in law, the learned C.I.T.(A) erred in confirming the action of the A.O. in disallowing proportionate interest expense amounting to Rs. 94,23,665/- and that too without appreciating the facts and circumstances of the case fully and properly." 3. The brief facts are that the assessee is engaged in the business of manufacture and trading of industrial fabrics, dipped nylon, chafer fabrics and other fabrics. The Assessing Officer, on verifi....
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....0,07,814/- Neeta M Mehta 67,39,895 81,31,360 13,91,465 Rs. 9,75,763/- Total 5,14,13,491 7,72,89,582 Rs. 94,23,665/- 4. Assessee produced complete books of account and details of loans given and loans taken from various parties including financial institutions and banks before the Assessing Officer. Assessee was also asked to prove the nexus between the availability of interest free funds and funds given to above parties noted in the chart. After going through the reply of assessee, the Assessing Officer noted that interest bearing funds were diverted towards non-interest bearing advances given by assessee to other parties. He also noted that interest bearing funds utilized for such investments on whic....
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....onsidered the same parties and deleted the proportionate disallowance of interest vide para 6, 6.1 to 6.3 as under :- "6. We have heard the rival submissions and perused the materials available on record. We find that the preliminary argument made by the ld AR is that no disallowance of interest could be made on the funds borrowed in the earlier years and lying in opening balance as on 1.4.2009 when the said borrowings and utilization thereon were accepted as meant for business purposes in earlier years. Reliance in this regard has been rightly placed on the decision of Hon'ble Karnataka High Court in the case of CIT vs Sridev Enterprises reported in 192 ITR 165 (Kar) wherein it was held as under:- "4. We are in agreement ....
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....a particular year cannot subsequently be held by it to have become bad prior to that year. 6.1. It is not in dispute that the borrowings were made in earlier years and its utilization thereon in earlier years has been accepted as genuine and meant for business purposes in the earlier years. It is not in dispute that no disallowance of interest has been made in earlier years with regard to the said borrowings and utilization thereon. The ld AR stated that the assessments for the Asst Years 2007-08 to 2009-10 were completed u/s 143(1) of the Act and no proceedings were either initiated by the ld AO u/s 147 of the Act or by the ld CIT u/s 263 of the Act even after passing of the impugned assessment order for any of those years i.e Ass....
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....143(1) of the Act after due application of mind by the ld AOs' at that relevant point of time. If it be so, then the entire judicial decisions rendered by the Hon'ble Supreme Court and Hon'ble High Courts in the context of reopening would get completely defeated. Hence we are not inclined to accept the arguments of the ld DR in this regard. We find that the ld AR submitted that the amounts advanced to Neeta M Mehta alone had increased during the year. We find that with regard to amounts advanced to all other parties except Neeta M Mehta, the closing balance had only reduced when compared to the opening balance and hence there cannot be any disallowance of interest on the opening balance of loans advanced to parties as per the ratio laid dow....