TaxTMI 
TaxTMI 
2022 (10) TMI 1112
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.... (3)/153A of the income tax act 1961 dated 31/12/2018 passed by the learned assessing officer. 03. Briefly stated the facts shows that assessee filed original return of income on 24/9/2011 declaring loss of Rs. 115,515/-. Search was carried out in the case of India Bulls group on 13/7/2016 and the case of the assessee company was also centralized. Therefore notice u/s 153A was issued on 25/7/2017 in response to which the assessee filed return of income on 12/8/2017 declaring a net loss of Rs. 115,515/- on to that the assessment order was passed u/s 143 (3) on 31/12/2018 assessing the total income of the assessee at a loss of Rs. 35,515. 04. The only issue involved in this appeal is the as per balance-sheet submitted by the assessee it has earned interest income of Rs. 5,492,847 and has also incurred the interest expenditure of Rs. 50,585,023/- both these income and expenses have been charged to the inventory on net basis. However, in the return of income the assessee has shown interest income of Rs. 5,492,847 u/s 56 of the income tax act and further has claimed deduction of interest expenditure of Rs. 50,585,023 as business expenditure. However same was restricted to the exte....
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....inental warehousing Corporation is Ltd 374 ITR 645 and the decision of the Honourable Supreme Court in case of Sinhgad technical education society accepted the contention of the assessee and allowed the same. He also dealt with this issue on the merit of the case and wide paragraph number 6.3 he deleted the adjustment to the closing inventory because the learned assessing officer has not given any reason as to why the net interest expenses not allowable as an expenditure as according to him the interest paid on loan utilized for business purposes is an allowable expenditure. He held that there is a direct nexus between interest income and corresponding interest expenditure. Accordingly he held that the assessee has rightly claimed deduction of interest expenditure u/s 57 of the income tax act. He directed the learned assessing officer to allow net interest expenditure of Rs. 45,092,176 as business expenditure and capitalize the net interest of the same amount in cost of project inventory. With respect to the addition of Rs. 80,000 on account of unaccounted income he allowed the claim of the assessee following his own decision in another group concern for the same assessment year. ....
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....the adjustment in the closing inventory of the assessee could have been made. Therefore, according to him, information that comes into the possession of the learned assessing officer while framing an assessment order u/s 153A of the income tax act though not found during the course of search, the concluded assessment can be disturbed by making assessment based on that material. Therefore, the sum and substance of the argument of the learned departmental representative is that if the information comes into the possession of the assessing officer while framing an assessment order u/s 153A, based on that material, assessment of the assessee can be upwardly revised even in unabated assessment. He further submitted that the learned CIT - A has not given any reason why the fixed deposit interest should be considered as business income. 08. The learned authorized representative vehemently supported the order of the learned CIT - A on the issue that there is no incriminating material found during the course of search and therefore the adjustment of closing value of the inventory could not have been made in the case of the assessee in absence of any incriminating material found during th....
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....ly because the order of the settlement commission has been challenged before the Honourable High Court there is no reason to this regard that order unless upset by the higher appellate forum. It was also not shown before us that the above sum has also not been included in the petition before the settlement commission. Therefore, as the amount has already been taxed in the settlement petition of the assessee group, making addition once again in the hence of this assessee will amount to double taxation of the same income. Therefore, ground number 5 - 7 of the appeal are dismissed. 012. In the result ITA number 1423/M/2022 filed by the learned assessing officer for assessment year 2011 - 12 is dismissed. 013. ITA number 1436/M/2022 filed by the learned assessing officer against the same appellate order passed by the learned CIT - A wherein ground number 1, 2,4 & 5 are with respect to the adjustment of interest expenditure in the closing inventory. This issue is identical to the issue involved in the appeal of the learned assessing officer for assessment year 2011 - 12 wherein we have held that in absence of any incriminating material valuation of closing stock cannot be tinkered....
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....g material found during the course of search. In the present case the return of income was filed on 26/11/2013 and search took place on 13/7/2016 and therefore the impugned assessment year is concluded assessment, which could have been upwardly adjusted only on account of incriminating material found during the course of search. We find that no such incriminating material has been referred to in the assessment order and no such incriminating material has been produced before us during the course of hearing. In view of this following our reasoning given in the appeal of the learned assessing officer for assessment year 2011 - 12 and 2012 - 13 as above, we dismiss ground number 1-4 of the appeal of the learned assessing officer for assessment year 2013 - 14. 018. Accordingly ITA number 2377/M/2021 for assessment year 2013 - 14 filed by the learned assessing officer is dismissed. 019. ITA number 1424/M/2022 is filed by the learned assessing officer for assessment year 2014 - 15 against the order of the learned CIT - A - 54, Mumbai who passed an consolidated order for assessment year 2011 - 12 to 2016 - 17. 020. In the present case the return of income was filed on 27/11/2014 ....
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....grieved that the interest income comprised of interest received from fixed deposit which is rightly considered by the learned assessing officer Under the head income from other sources has been allowed by the learned CIT - A to be considered as taxable Under the head income from business and profession. The learned assessing officer is further aggrieved that appellate authority failed to appreciate the fact that the assessee failed to substantiate with documentary evidence the business expediency of the loan given from which interest expenses was earned and therefore the same is allowable u/s 57 of the income tax act but not u/s 36 (1) (iii) of the act. 025. The briefly stated the facts of the case shows that assessee filed its return of income on 30/10/2017 declaring loss of Rs. 21,722,719 which was revised on 2/05/2018 at same figure. Searched place on India Bulls group on 13/7/2016 and consequently the assessment order was passed u/s 143 (3) of the act on 30/12/2018 as it is not a concluded assessment year and therefore same was abated. 026. During the course of assessment proceedings the learned assessing officer noted that assessee has earned interest income of Rs. 11,52....
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....terest on loan to profit and loss account as the development activities was interrupted. He further looked at accounting standard 16 and held that in case of the assessee, the appeal the end of financial year 2010 - 11 the interest cost has been capitalized. However from financial year 2011 - 12 the assessee company has debited the interest cost directly to the profit and loss account as the development activities were interrupted. He further noted that the assessee company has explained the reason why the accounting treatment of interest income for the year Under consideration is different from the act in assessment year 2011 - 12 accordingly he held that income from interest from fixed deposit is held to be business income. With respect to the disallowance of interest expenditure of Rs. 48,806,022 u/s 36 and allowing the same u/s 57, it was held that as the interest income on fixed deposit has been held as business income and the learned assessing officer has not given any reason as to why interest is not allowable as a business 6 expenditure where the assessee has claimed to have obtained the loan for business purposes, he held that interest of Rs. 48,806,022 is allowable as ded....
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.... 030. The learned authorized representative referred to page number 80 of the paper book to show that as per note number 19 assessee has borrowed debentures to the extent of Rs. 1,09,68,000 930,000/- which were issued in the year ended on 31 March 2009. He further referred to the annual accounts for financial year 2012 - 13 and submitted that the project court started in financial year 2012 - 13 and because of the legal dispute, the funds were kept in the fixed deposit receipt. He referred to the agreement dated 25th day of August 2016 where the assessee is one of the party for development of group housing colony. Therefore, when the interest expenditure on the debenture is considered as business expenditure, the interest on fixed deposit receipt should also be considered as business income. It was stated that the order passed by the learned CIT - A is correct. 031. The learned departmental representative vehemently opposed the above submission and stated that the funds kept in the fixed deposit receipts are the surplus funds and therefore, interest arising from that cannot be considered as business income. 032. We have carefully considered the rival contention and perused....