TaxTMI 
TaxTMI 
2022 (8) TMI 434
X X X X Extracts X X X X
X X X X Extracts X X X X
....'the Act') relating to the Assessment Year (A.Y) 2015- 16. 2. The brief facts of the case is that the assessee is an individual and proprietor of M/s. S.K. Steel and is engaged in the business of trading of scrap. For the Assessment Year 2015-16, the assessee filed his return of income by e-filing on 30.09.2015, declaring total income of Rs. 30,98,830/. The return was processed u/s. 143(1) of the Act and then selected for scrutiny assessment. 3. During the course of assessment proceedings, the A.O. found that the assessee had given loan and advances to M/s. S.S. Enterprise which was a proprietary concern of the assessee's son, a sum of Rs. 21,67,952/- during this assessment year. However, no interest is being charged by the assessee. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... given by Ms. Rashmi Saraf, on perusal of Income Tax Return of the Lender it is seen that she has declared income of Rs. 2,62,900/ only. The assessee also filed copy of bank statement of Ms. Rashmi Saraf evidencing advance of the above loans of Rs. 10,00,000/. A perusal of bank statement shows that the loan is advanced on 19.02.2015 by RTGS and cash of Rs. 2,00,000/- is deposited on 18.02.2015. Further, it is seen that cash of Rs. 5,00,000/- is deposited on 30.01.2015. The assessee failed to explain this cash deposits before advancing the above loan. Thus the Ld. CIT(A) held that the lender does not have the creditworthiness to advance loan of Rs. 10,00,000/- and also before advancing above loan , a sum of Rs. 7,00,000/- has been deposited ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ms. Rashmi Saraf. All the grounds stated hereinabove are without prejudice to each other. The appellant craves leave to add, delete, amend, alter or withdraw one or more grounds of appeal. 6. The Ld. Counsel Shri Samir Bhuptani appearing for the assessee submitted that the lower authorities has misplaced the Hon'ble Supreme Court judgment in the case of S.A. Builders wherein the issue was about the application of "borrowed fund" in making advance to sister concern. Whereas the facts in the assessee's case is that the assessee was in possession of "interest free fund" and there is no question of application of "borrowed fund" to sister concern. For the Assessment year 2015-16, the assessee has made a profit of Rs. 31,04,682/- and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rashmi Saraf after making TDS of Rs. 1348. This addition is also not correct in law. 7. Per contra, the Ld. Sr. D.R. Shri V.K. Singh appearing for the Revenue supported the order passed by the lower authorities and pleaded that no further interference and pleaded to dismiss the appeal field by the assessee. 8. We have given a thoughtful consideration and perused the materials available on record including the Paper Book filed by the assessee. It is seen from record, the assessee paid interest free loan of Rs. 21,67,952/- to M/s. S.S. Enterprise, out of the interest free funds available with the assessee, who has made a profit of Rs. 31,04,682/- during the assessment year 2015-16. It is not the case of the assessee that "borrowed funds....
X X X X Extracts X X X X
X X X X Extracts X X X X
....expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure, if it was incurred on grounds of commercial expediency". Undoubtedly, this aspect of the matter is important for the reason that in case the fact of commercial expediency o: advancing interest free advances to the subsidiary companies is established, even if one is to come to the conclusion that interest free advances to the subsidiary companies are out of the borrowed funds, interest on borrowed funds is to be allowed in full nevertheless. However, having held that the assessee did have sufficient interest bearing funds to advance interest free advances to sister concerns, this aspect of the matter is somewhat academic. In ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the above judicial precedents, we hold that the addition of Rs. 2,60,154/- made u/s. 36(1)(iii) r.w.s. 40A(2)(b) by the lower authorities are hereby deleted and the grounds of appeal raised by the assessee are hereby allowed. 8.3. Regarding the addition of Rs. 10,00,000/- made as unexplained cash credit, we see from the Paper Book filed by the assessee at page no. 112. The bank statements of Ms. Rashmi Saraf, a sum of Rs. 5,00,000/- was deposited through cheque of HDFC Bank on 30.01.2015, which is misread by the Ld. CIT(A) as "cash deposit" and confirmed the addition in the hands of the assessee. The assessee also produced the bank statement of Ms. Rashmi Saraf wherein the entire loan with interest was repaid on 19.09.2015, a sum of Rs....