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Issues involved:
1. Disallowance of interest amount by the Assessing Officer. 2. Addition of unaccounted cash found during search. Disallowance of interest amount: The Revenue filed an appeal against the deletion of an addition of Rs. 87,493 made by the Assessing Officer on account of disallowance of interest. The Assessing Officer contended that the cash in hand, which was substantial, was not used for business purposes. The Assessing Officer disallowed the interest based on various reasons, including lack of evidence for the cash being used for business needs. However, the assessee explained that the cash balance was necessary for routine and extraordinary expenses related to the business. The Commissioner of Income Tax(Appeals) accepted the assessee's contention, stating that borrowed funds were indeed used for business purposes, and allowed the interest under section 36(1)(iii) of the Income Tax Act, 1961. The Tribunal upheld the decision of the Commissioner, noting that the Assessing Officer failed to prove that borrowed funds were diverted for non-business purposes. Addition of unaccounted cash found during search: The Revenue appealed against the deletion of an addition of Rs. 25,00,000 made by the Assessing Officer on account of unaccounted cash found during a search. The cash was seized during a search at a railway station, and the Assessing Officer made the addition due to lack of satisfactory explanation regarding the source of the cash. However, the Commissioner of Income Tax(Appeals) deleted the addition, stating that the cash was duly accounted for as per the cash book of the Mumbai Office. The Tribunal agreed with the Commissioner, emphasizing that the cash was part of the cash balance as per the books of the Mumbai Office and was supported by evidence found during the search. The Tribunal concluded that the addition made by the Assessing Officer was based on doubts and suspicion, and upheld the decision to delete the addition.
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