TaxTMI 
TaxTMI 
2020 (12) TMI 166
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar 2013-14. 2. The assessee has raised following grounds of appeal: "1. On the facts and circumstances of the case as well as law on the subject, after accepting submission of assessee on addition made by assessing officer the Learned Commissioner of Income Tax (appeals) has erred in confirming the part of disallowance on a new ground which was not even briefed in assessment order. 2. On the facts and circumstances of the case as well as law on the subject, the Learned Commissioner of Income Tax (appeals) has erred in confirming the disallowance of interest expense to the extent of Rs. 70,00,000/-. 3. It is prayed that above additions/disallowances made by Assessing Officer and confirmed by Commissioner of Income-tax (Appeals) may pl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 10 crore, however, while filing the Return of Income declared income of Rs. 8.76 crore, which is lower than the income declared in search. The assessee has claimed huge interest of amount to reduce the returned income and that interest expenses are afterthought. 4. The AO issued show cause notice as to why the interest claimed should not be disallowed. The AO noted that the reply was furnished by the assessee in response to show cause notice, however, the contents of reply is not referred in the assessment order. The AO simply recorded that the reply of assessee is considered and is not acceptable and disallowed the entire interest expenses of Rs. 90,11,978/-. 5. Aggrieved by the disallowance of Interest expenses, the assessee filed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ause as to why undisclosed income be not held to be consumed in business or to be considered to have led to increased interest expenses in books by taking money through accounting channel, re-routing own unaccounted money as loans or utilizing unaccounted income to earn interest. The ld.CIT(A) recorded that no replies were filed by the assessee on these issues. The ld. CIT(A) took his view that during search assessee disclosed income of Rs. 10 crore, out of its books of account. This amount was available to assessee for used in the project and interest income is claimed in the books only because income was kept unaccounted. The ld.CIT(A) further held that even if the average unaccounted income is held to be available in previous year, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ely immediately preceding assessment year. The AO disallowed the entire interest expenses by holding that Interest Expense is claimed only to reduce the income being afterthought. In the first appeal the Ld. CIT(A) accepted the contention that interest expenses were paid during the course of business and TDS was made on interest payment and accordingly allowable. 10. The Ld.CIT(A) made addition of interest income on notional basis on different aspects holding that if undisclosed income declared by assessee would have been available in the books of accounts of assessee, notional interest of approximately 14% of average interest rate of such available unaccounted "on money", the assessee would have been earned interest, accordingly, the Ld.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ied by Ld. AR of the assessee. There is no dispute that while filing the Return of Income, in response to notice under section 153A of the Act the assessee offered additional income disclosed during the search action. The assessee in its Profit and Loss Account filed with the Return of Income, in response to notice under section 153A, claimed interest expenses of Rs. 90,11,978/-. The A.O. made disallowance of entire interest expenses by taking view that interest expenses ind claimed to reduce the income and is afterthought. However, on appeal before the Ld.CIT(A), the Ld.CIT(A) held that the AO has not pointed out that the expenses claimed by the assessee is not wholly and exclusively for the purpose of business and that expenses are not r....