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TMI Blog2014 (4) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... issues are stated in below: The assessee is a partnership firm and is engaged in the business of dealing in electrical goods. During the course of assessment proceedings, the AO noticed from the Fund Flow statement filed by the assessee that there was a net increment of Rs.60.12 lacs in the bank balances lying in the flexi and current accounts of the assessee. The AO noticed that the assessee had also availed loans from family members and relatives @ an interest rate of 12%. The AO took the view that the assessee has kept the above said borrowed funds idle in the bank account, i.e., it was not utilised for business purposes. Accordingly, took the view that the interest expenditure relating to the above said amount of Rs.60.12 lakhs needs t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld AR submitted that the assessee has routed its business transactions through the Current account. He further submitted that the transfer between the Current account and Flexi FD account is automatic i.e. if there is excess balance, it will be transferred to FD account and if there is shortage of funds, the FD will be closed and transferred to current account. He submitted that the assessee received a huge "incentive amount" from its suppliers by the end of the year and hence the bank balance stood at a higher figure as on the date of last year. Accordingly, the ld AR submitted that the view entertained by the AO that the borrowed funds have been kept idle is incorrect. The ld AR also contended that the assessee has not diverted any fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount, the daily balances would change every day depending upon the deposits and collections. Hence, in order to put the bank balances for better use, the assessee seems to have opted for Flexi Current account and in that process, it has earned a sum of about Rs.5.00 lakhs as interest also. Further, it is not the case of the AO that the funds have been diverted to other purposes, which did not earn any income. Hence, in our view, the AO has entertained the view that the assessee has kept the funds idle is not based on any material but only on surmises and conjectures. We also notice that the AO has computed notional interest of Rs.7,21,537/- on the outstanding bank balance as at the year end, which is not permissible under the Act. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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