TaxTMI 
TaxTMI 
2004 (3) TMI 315
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....ciples of res judicata do not apply to income-tax proceedings. 2. That, the learned CIT(A) while deleting the above disallowances has completely ignored the fact that the disallowances in the aforesaid heads were made on the basis of circumstantial evidences as discussed in the assessment order, and that the assessee was unable to give unjustifiable reasons for such high expenses as also failed to establish the genuineness of payments." 3. The facts as taken from the record are that the assessee claimed deduction on account of various expenses like, Raffu, designing expenses, polishing and cutting expenses and Rangai and dyeing expenses. The AO disallowed Raffu expenses in a sum of Rs. 13,000 as no address of the parties to whom payments are given, has been filled. Design expenses are disallowed as no bills from the parties have been produced for verification. Even the AO observed that even the design expenses were not required to be made by the assessee. Similarly, polishing and cutting expenses were disallowed as the payments were not subject to verification. Rangai and dyeing expenses were disallowed, as the payees to whom payments have been made, were not produced for ver....
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....erest on debit balance standing in the account of M/s Ghanshyam Silk Sarees, a sister-concern of the assessee, appreciating the facts discussed in the assessment order that the assessee attempted to evade the tax liability by way of collusive agreement with the sister-concern, M/s Ghanshyam Silk Sarees, as it was beyond the business prudence of the assessee to forego interest on the advances made out of interest bearing loans. 4. That, the learned CIT(A) while deleting the above disallowance further ignored the fact that the assessee has debited interest to the extent of Rs. 2,86,659 in the P&L a/c out of which Rs. 2,47,954 pertain to the interest bearing loans taken from the sister concerns. Obviously, by way of collusive agreement between Mr. Ghanshyam Das and Mr. Mathura Das who stand in relationship of the son and father, a part of interest bearing loan has been diverted towards interest-free advances to the sister concern. 5. That, the learned CIT(A) erred in deleting the above disallowance ignoring the alternative fact that even if net interest was charged by the assessee on the advance made to M/s Ghanshyam Silk Sarees, a sister concern of the assessee, the interest cl....
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.... in the hands of the assessee. The assessee also relied upon the decision of Allahabad High Court in the matter of Jwala Prasad Radha Krishna vs. CIT (1992) 107 CTR (All) 1 : (1992) 198 ITR 415 (All). The CIT(A) considering the above facts and the agreement dt. 1st April, 1990, and the decision of the Allahabad High Court was of the view that no addition could be made as no interest accrued to the assessee. The Revenue is in appeal on the grounds mentioned above. 8. We have heard the learned Departmental Representative and the learned counsel for the assessee. The learned Departmental Representative, besides relying upon the grounds of appeal, argued that the assessee did not charge interest without any justification. It was also argued that the AO was justified in making the addition. The learned Departmental Representative relied upon the observations of the AO and argued that the CIT(A) did not consider the objection of the AO and also did not consider the points raised in the ground Nos. 4 and 5 mentioned above. The learned Departmental Representative argued that the decision of Allahabad High Court in the matter of Jwala Prasad Radha Krishna is not applicable. The learned D....
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....t is paid by the assessee, despite making diversion of the borrowed capital. However, the AO has not disallowed any amount paid as interest on the reason as borrowed capital was diverted. Since no disallowance is made, therefore, these reasons have no concern whatsoever on the point in issue involved in this appeal. The claim of the assessee had been that as per agreement dt. 1st April, 1990, interest was not charged. It was a lawful agreement between the parties and as such the Revenue Department cannot compel the assessee to charge the interest on the debit balance which too is arising from the last year. The Hon'ble Allahabad High Court in the matter of Jwala Prasad Radha Krishna considered the facts in the asst. yr. 1974-75. The assessee in that case advanced some money to three companies upon which interest was charged upto the year 1969. Thereafter, no interest was charged and more particularly, in the asset. yr. 1974-75 involved in that year. The Tribunal in that case held that the interest had neither legally nor actually accrued in favour of the assessee and consequently the assessee rightly did not show the same in its return. The Tribunal went on to observe that unless t....