2024 (7) TMI 1230

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.... under: "1. The learned Addl/JCIT(A) erred in confirming disallowance of Rs. 11,48,472/- being interest at 12% of interest free advances. Your appellant submits that the disallowance is not justified for 3 reasons stated in appellant's written submissions which are reproduced on page 2 and 3 of the appellate order but not dealt within the appellate order. Your appellant prays that the disallowance be deleted Or alternatively reduced as per aforesaid submissions." 2. The facts of the case in brief are that assessee has filed his return of income (in short 'ROI') on 25.11.2014 declaring total income of Rs. 4,85,370/-. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 28.08.2015. During the year under conside....

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....al assets, the advances were received back in subsequent year. It was also stated that khandsari business is closed for last three years. 2.2 The reply of assessee was considered by the AO but and it was not found tenable. On verification of balance-sheet, he noticed that assessee has shown secured loans and unsecured loans as on 31.03.2014 of Rs. 8,40,44,048/- and Rs. 1,64,05,115/- respectively. During the year under consideration, assessee has taken further unsecured loans of Rs. 66,00,000/- from Shri Ashokbhai N Savaliya and also introduced capital on which assessee is paying interest also. Considering the above facts, AO held that assessee has diverted interest bearing funds towards interest free loans and advances. As per Sec.36(1)(ii....

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....ted that appellant had made detailed submission before the Addl./JCIT(A), which were either ignored or not dealt with or not decided in a logical manner in accordance with law. It is stated that advances were given for the purposes of business for renovation of the existing plant, which is not disputed. The advances given for machinery cannot be said to be not for the purpose of business. It was also argued that even if it is assumed that the advances are not for the purpose of business, the assessee had enough interest free funds available with it and as per various judicial decisions, it could be presumed that the interest free advances were made from the interest free funds available with the assessee. Alternatively, it was pleaded that ....

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....tallation of machinery and re-construction of the old building which was planned when the advance was given. The advance was given for purchase of capital goods, i.e., turbine for generator of power. The Ld.AR of the assessee stated that out of 24 khandsaries only 4 are doing business and due to non-viability 20 units were closed recently. It was also submitted that the advances were subsequently received back by the appellant. It was also submitted that for the last three years, khandsary business is closed. In view of the above facts, we are of the considered view that loans and advances were given for business purposes. It is the assessee who decides as to how the business should be done and when expansions or modernization should be und....