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TMI Blog2018 (12) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of the business. - no disallowance can be made Treating the amount of ₹ 3,39,456/- as undisclosed income of the assessee - Held that:- On perusal of the ledger of the assessee in the books of the V Arks Engineers private Ltd we note that the assessee has raised invoices for ₹ 16,09,044/- which evidences that the assessee has worked for V arks Engineers private Ltd for ₹ 16,09,044/- in the year under consideration. The copies of ledgers are placed on pages 69 to 73 of the paper book. Therefore we do not find any infirmity in the order of the Ld. CIT(A). Hence the ground of appeal of the assessee is dismissed. Regarding the penalty appeal, at the outset, we note that there was no representation made by the assessee on merit. Therefore we are of the view that the matter should be restored back to the file of AO in the interests of justice and fair play. Accordingly we remit the issue to the file of AO with the direction to adjudicate the issue of fresh in the light of the order of this Tribunal in relation to the quantum appeal of the assessee. Hence the ground of appeal of the assessee is allowed for statistical purposes. - ITA No.1093/AHD/2014 And ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee in the present case is a partnership firm and engaged in the business of fabrication contracts. The assessee has claimed interest expenses of ₹ 42,62,462/- in its profit and loss account. Out of such interest expenses, a sum of ₹ 23,70,314/- was paid to the persons as specified under section 40A(2)(b) of the Act. 3.2 The assessee in its balance sheet as on 31 March 2007 has shown advances in the name of 15 parties amounting to ₹ 52,30,661/- only. As per the assessee, the advances were given to the parties as an advance for the business transactions. Therefore no interest was charged on such advances. The assessee in support of his claim has filed the ledger copies of the 15 parties as discussed above. 3.3 The assessee has also taken a loan of ₹ 45,09,000/- in January 2007 to buy the machinery. But the assessee claimed that it did not purchase any machinery, but the amount of loan was utilized for the business activities. 4. However, the AO was not satisfied with the contentions of the assessee because in some of the cases, the advances claimed by the assessee were adjusted at the end of the year. There was no evidence filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was placed. The Ld. AR also drew our attention on page 102 of the paper book where the schedule 10 of the balance sheet was placed wherein the names of the parties to whom the advances were given were shown. 7.2 Similarly the Ld. AR submitted that the loan taken for the purchase of the machinery was utilized by making payment to the syndicate bank in order to reduce the interest expenses. There was overdraft facility in the bank account maintained with the syndicate bank. 8. On the other hand the Ld. DR submitted that the advances given by the assessee are not representing the business transactions. The Ld. DR vehemently supported the orders of authorities below. 8.1 We have heard the rival contentions and perused the materials available on record. The issue in the instant case relates to the advances made by the assessee to 15 parties. As per the AO, the advances were not made for the purpose of the business. Accordingly the AO was of the view that the borrowed funds have been diverted for a non business transaction. 8.2 Similarly, the AO found that the money borrowed by the assessee for the purchase of machinery was not utilized for the purpose of the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to the above parties the Ld. AR for the assessee has not brought any evidence suggesting that these advances were adjusted against any expense either in the year under consideration or in the subsequent year. 8.9 However the Ld. AR at the time of hearing requested before us to restore the matter to the file of AO for fresh adjudication and assured us to file the necessary documents. The Ld. DR did not object if the matter is restored back to the file of AO for fresh adjudication as per the provisions of law. 9. On perusal of the ledgers of the parties as discussed above, we note that in some of the cases there were regular financial transactions between the assessee and the parties. Sometime the assessee has shown credit balance of the parties during the year and sometime the assessee has shown debit balance during the year. But the AO has worked out the amount of proportionate interest on the closing balance as appearing at the end of the financial year. In our considered view the interest if at all needs to be disallowed on account of diversion of funds then the period for which the assessee has given the advance to these parties should be taken into consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dited to the assessee is of ₹ 16,09,044/- only against which there was a deduction of the TDS at ₹ 18,053/- only. The assessee has claimed the credit of the TDS by the full amount of ₹ 18,053/- only in its income tax return. 11.2 In view of the above, the AO found a difference of ₹ 3,39,456/- which was not recorded by the assessee in its books of accounts. On confrontation by the AO about the said mismatch the assessee failed to make any satisfactory reply. Therefore the same was treated as undisclosed income of the assessee. 12. Aggrieved assessee preferred an appeal before the Ld. CIT(A) the assessee before the Ld. CIT(A) submitted that V Arks engineers private Ltd did not provide the requisite TDS certificate well in time. As such the TDS certificate was provided only at the fag end of the due date of the filing of the return. 12.1 The assessee also filed the confirmation from the V Arks Engineers private Ltd for the payment made to the assessee in the year under consideration. 12.2 However the Ld. CIT(A) disregarded the contention of the assessee by observing that the assessee should have revised the return of income. 12.3 The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eep the proceedings in abeyance as requested by the appellant vide his letter dated 14-07-2014 and ought not have uphold the order of ACIT Cir-3, CIT (A) 10, Ahmedabad levying the penalty u/s. 27.1 (l)(c). 3) Your appellant 'respectfully submits that the order of ACIT-Cir,3 levying the penalty u/s.271(1)(c) be cancelled in view of fact that the quantum appeal is being till pending before-honourable ITAT C Bench Ahmedabad. Your appellant, craves for leave to add and or alter all or any grounds of appeal before final hearing of our appeal. 18. The only issue raised by the assessee in this appeal is that the Ld. CIT (A) erred in confirming the penalty imposed by the AO under section 271(1)(c) of the Act. 18.1 The assessee for the year under consideration has filed his return of income declaring loss of ₹ 38,36,499/- only. The case of the assessee was selected under scrutiny and accordingly the assessment was framed under section 143(3) of the Act wide order dated 24th of December 2009 after making the addition of the following expenses 1. Disallowance of interest expenses ₹ 11,68,759/- 2. Unaccounted income ₹ 3,39,456/- 19. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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