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TMI Blog2014 (3) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... -payment of interest on excess amounts drawn by the partners of the firm they claim that certain capital amounts were available with the firm in respect of each of the four partners who had drawn excess amount, and as no interest was paid in the previous financial year, they did not charge any interest for the assessment year in question. The Tribunal placing reliance on paper book filed by the respondent/assessee in question which never was the subject matter of consideration before the assessing officer and the first appellate authority - the controversial issues raised before cannot be analyzed with reference to the factual situation - Even otherwise, the Court need not go into the veracity and genuineness of the facts placed on record now - In the absence of the additional documents for consideration before the assessing officer and CIT(Appeals), one cannot conclude that the opinion of the assessing officer and CIT (Appeals) were erroneous - Similarly Tribunal refers to several documents which persuaded reversal of the opinion of the assessing officer and CIT(Appeals) – thus, the matter is remitted back to the AO for fresh consideration – Decided in favour of Revenue. - IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ighted in Ground 'I', the Tribunal is right in law and fact in deleting the premium of Rs.61,29,162/- on Keyman Insurance Policy ? 6. Whether, on the facts and in the circumstances of the case- a. are not the consideration of various disallowances and deletions by the ITAT by wrongly putting the burden of proof b. should not the ITAT have put the assessee to proof ? 2. The facts that led to the present appeal in brief are as under. The assessee is a partnership concern engaged in the business of money lending and we are concerned with the assessment year 2006-07. Totally four additions made by the Assessing Officer became the subject matter of adjudication before the first appellate authority and the second appellate authority which are as under: 1. Interest chargeable on excess drawings effected by the partners of the firm amounting to Rs. 19,90,753/-. 2. Interest paid to one of the partners by name Sri.George Jacob disallowed i.e., Rs. 3,27,00,000/-. 3. Introduction of money by Mr.George Jacob, Rs. 12,18,00,000/- one of the partners assessed, as income under other source. 4. Premium of Rs. 61,29,162/- paid towards Keyman Insurance which came to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision for interest on excess drawings made by the partners. Though approved the opinion of the assessing officer in rejecting the explanation offered by the assessee, Tribunal considered the matter in a more detailed manner. As the assessee firm is dealing in money lending business the specific rate of interest fixed under Section 40(b)(iv) being 12%, same rate of interest is payable by the firm on capital borrowings. It was difficult to believe that firm was not charging any interest on the amount drawn in excess by the partners. It also refers to payment of Rs. 3.27 Crores being interest to one of the partners, Sri.George Jacob. From this, payment of interest was ascertainable, therefore, according to the first appellate authority, the assessing officer was justified in adding a sum of Rs. 19,90,753/- being the interest on the excess drawn amounts by the partners. He also opined that the cash system of accounting does not provide any shelter to the explanation made by the assessee. General procedure followed by the professionals where cash system of accounting is followed is also indicated. 5. So far as this issue is concerned, he refers to the opinion of the assessing offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s all the entries for interest are only in cash entries and no payment reached through the Bank. The entire money gone to the other firms only through the device of partners' account and according to the appellate authority, it is all created for the purpose of avoiding the above provision. From this exercise undertaken by the assessee firm, they draw two situations which could have been the intention of the assessee firm. i.e., though the partner has received Rs. 3.27 Crores, he did not offer the same for tax and second, partner has not factually received the money. According to the first Appellate Authority, it was only in the absence of non-compliance of provisions of Section 40A(3) etc, such conclusion alone is possible, therefore affirms the opinion of the assessing officer in disallowing the interest expenditure. So far as this aspect of the matter, Tribunal at paragraph 9 onwards discusses the same and opines that the term expenditure under Section 40A(3) should not be given an interpretation so as to adversely affect the assessee and therefore interest payment to the partners are not covered under Section 40A(3). So far as 40(a)(ia) he accpets the stand of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 Crores with the assessee firm, the various sources of drawings made by him from the other firms like Muthoot Bankers and Muthoot Builders have been filed before the assessing officer, therefore, the assessee was able to establish the stand, since the assessing officer did not attempt to verify such explanation of the assessee, he was not satisfied with the genuineness of the credit. It further opines, the assessing officer could have ascertained these facts by verifying the records pertaining to Muthoot Bankers and Muthoot Builders. 10. Then coming to the 4th issue with regard to disallowance of premium paid towards Keyman Insurance, the assessing officer opined that the Keyman Insurance policy means a life insurance policy taken by the person on the life of another person or for the employee of the person who took the policy or which was connected in any manner whatsoever with the business of the person who took the policy. Therefore the policy being taken in the name of partners and in the absence of policies being taken either in the name of employees or any person engaged in any manner whatsoever with the business of the firm cannot be allowed as expenditure. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also brought to our notice certain discrepencies found in the additional documents contending that these documents do not reflect the correct and genuine picture supporting the stand of the respondent/assessee, therefore, no reliance could be placed on these documents. 13. It is noticed from the orders of the assessing officer, CIT(Appeals) and the Tribunal that the entire system of accounting maintained by the respondent/assessee is by way of cash. It is also to be noted that similar accounting system is maintained so far as the sister firms and also the accounts of the partners including Mr.George Jacob. The stand of the respondent/assessee before both the appellate authorities was, the funds coming to the respondent/assessee was belonging to one of the partners, i.e. Shri.George Jacob and the funds reached him through other sister firms, therefore, there is proper explanation so far as Rs. 12.18 Crores. So far as non-payment of interest on excess amounts drawn by the partners of the firm they claim that certain capital amounts were available with the firm in respect of each of the four partners who had drawn excess amount, and as no interest was paid in the previous financial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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