9911796707
TMI Blog2011 (7) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,120 made by the Assessing Officer u/s.36(1)(iii) of the Income Tax Act, 1961. 3. Facts of the case in brief are that the assessee company is engaged in the business of manufacturing of polyester and dealing in cotton yarn and waste. During the year under consideration, the assessee company debited an amount of ₹ 69,76,984 to its profit and loss account on account of interest paid on loans taken from banks amounting to ₹ 4,47,24,765. The assessee company has also given interest free advances to various persons amounting to ₹ 47,38,005. During the course of assessment proceedings, the Assessing Officer asked the assessee to explain as to why proportionate interest should not be disallowed for giving interest free advances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should be made. The assessee however did not file any details during the appellate proceedings on the ground that its records were destroyed in Surat floods in the year 2006. 4.1 However, the learned CIT(A) was not satisfied with the explanation given by the assessee and upheld the disallowance made by the A.O. by holding as under : "I have considered the submissions of the appellant. As per balance sheet of the appellant, share capital of the appellant is ₹ 11,62,200 and there is no balance in the reserve and surplus account. Whereas debit balances as per profit and loss account is ₹ 7,33,51,230. Therefore, it cannot be said that the appellant has any surplus funds which it could use for the purpose of giving interest loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile of A.O. with the following observation : " After hearing the rival submissions and perusing the record, we find that the aspect of commercial expediency as directed by the Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT cited supra has not been looked into either by the Assessing Officer or the CIT(A). The ratio laid down by the Hon'ble Supreme Court in the S.A. Builders Ltd. Vs. CIT (cited supra) is applicable to the facts of the present case. However, the matter is set aside to the file of the Assessing Officer to look into the commercial expediency of advancing interest bearing funds, as interest free advances, to the parties. The Assessing Officer shall afford reasonable opportunity of hearing to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales of cotton waste at the average rate of ₹ 33.16 per kg whereas the average purchase rate of cotton waste by the assessee is ₹ 38.10 per kg. It was explained by the assessee to the Assessing Officer that transactions for the sale of cotton waste are entered into in advance and the sale rate was fixed at the time of entering into sale transactions. However, the delivery of cotton waste took place later on. The assessee claimed that the market situation was highly volatile and this affected the working of the assessee company. These contentions of the assessee were rejected by the Assessing Officer on the ground that the assessee has filed a general reply without actually providing specific instances. It has not filed any accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 25.5.2009 in ITA No.5136/Mum/2004-05 is concerned, the decision was delivered by the ITAT on the facts existing in that year. In that year, there was no finding that there is no evidence with the appellant to show that it has entered into sale transactions in advance. As already pointed out in the current year, the appellant has not produced any evidence for making claim that it is entering into sale transactions in advance. The action of the Assessing Officer is upheld. This ground of appeal is not allowed." Aggrieved with such order of the CIT(A), the assessee is in appeal before us. 8. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the paper book filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
