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TMI Blog2015 (10) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... RT BOMBAY), as stated thus, “The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments”. On the basis of this principle, as has been consistently held by coordinate benches of this Tribunal, as long as interest free funds available to an assessee are in excess of the non business investments or interest free advances, presumption has to be that investments or interest free advances are out of interest free advances, and, accordingly, disallowance in respect of interest paid on borrowings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt ORDER Per Pramod Kumar: ITA No 121/Agra/13 1. This appeal is directed against the order dated 26th December 2012, passed by the learned Commissioner (Appeals), in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2007-08. 2. In ground nos. 1, 2 and 3, the assessee has raised grievances against learned CIT(A) s holding that amounts of ₹ 1,10,000, on estimated basis, ₹ 78,000, in respect of interest free advance to Smt Mamta Agarwal, and ₹ 1,58,878, in respect of interest of free advance to Shri Rakesh Agarwal, are to be disallowed out of interest paid by the assessee. We will take up all the three issues together. 3. To adjudicate on the above iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Shri Rakesh Agarwal. The assessee is aggrieved and is in further appeal before us. 4. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case in the light of the applicable legal position. 5. We find that it is an undisputed position that interest free funds available to the assessee are far in excess of the interest free advances given by the assessee. In the documents filed before us, it is shown that the assessee had a capital of ₹ 176 lakhs and business profit of ₹ 82.45 lakhs, and both these amounts put together are far in excess of the interest free investments made by the assessee. With these undisputed facts in mind, let us take a look at the legal posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the result, the appeal is partly allowed in the terms indicated above. 9. This appeal, which calls into question correctness of learned Commissioner (Appeals) s order dated 27th December 2012 upholding the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2007-08. 10. The penalty impugned in this appeal is of ₹ 58,000 and it pertains to quantum disallowances of interest on borrowings, which stands deleted by our order hereinabove in ITA No. 121/Agra/13, and to disallowance of ₹ 60,491 for sales tax liability for the assessment year 1981-82. 11. As the first disallowance stands deleted in quantum proceedings, and there cannot be thus any occasion for imposition of penalty in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before us, that the deduction was made in a transparent manner inasmuch as it was stated in the profit and loss account as Sales Tax Arrears 81-82 and as such it cannot be said to be a case of furnishing inaccurate particulars of income. It is also an undisputed position that even the tax auditor missed the disallowance in the tax audit report. There is nothing before us to indicate malafide in this action. It is also not a case of double deduction for the same amount, as the relevant previous year was the year in which payment was made. In these circumstances, even if it was an inadmissible claim, by no stretch of logic, this can be a fit case for imposition of penalty under section 271(1)(c) of the Act. Learned Departmental Represent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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