9911796707
TMI Blog2022 (7) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... addition is deleted on merits, the AO will verify and accordingly decide the issue afresh after confronting to the assessee. This issue of the Revenue appeal is allowed for statistical purposes. Addition on notional interest on interest bearing funds advanced for non-business purposes interest free - assessee has not explained any commercial expediency for giving interest free loans - CIT-A deleted the addition - HELD THAT:- We noted that the Revenue now before us could not controvert the above facts situation that there are funds available with both interest free in making these interest bearing advances and few there are opening balance also. Once interest free funds available with the assessee, which is more than the interest free advances, no disallowance can be made by resorting the provision of section 36(1)(iii) of the Act. We noted no infirmity in the order of CIT(A) and hence this issue of Revenue appeal is dismissed. Validity of assessment as beyond the limitation period prescribed vide sec. 153 - HELD THAT:- We noted that the assessment order was framed vide order dated 31.03.2015 and passed within time limit i.e., 31.03.2015, but it was served on the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng stock as per accounting principles and as per the provisions of the I.T. Act. 4. The brief facts are that the assessee is engaged in property development business during the financial year 2011-12 relevant to assessment year 2012-13. The Assessing Officer during the course of assessment proceedings noted that 63,042 sq.ft. of area is not for sale as stated by assessee and it has to be allocated to the concerned parties. The Assessing Officer taking the findings of Hon ble Madras High Court has accepted vide Memorandum of compromise dated 15.02.2001, which was upheld by Hon ble Madras High Court vide order dated 15.12.2006 and 28.08.2008. The AO noted that this area due to respective allottees, the assessee has recovered a part of construction and reduced it from the cost of construction and accordingly assessee company is legally protected to recover the money spent towards the development of KGN towers. The Assessing Officer recomputed the income from construction and sale of property after considering this area of 64,978 sq.ft. as opening balance and computed net profit at Rs. 6,14,13,736/- by noting as under: (viii) Hence the assessee s income from construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting point of view as the whale cost of development incurred for the project was attributable to the area belonging to the assessee company alone in as much as, but far the construction and completion of the whole building the assessee company could not have bettered its rights, title and interest In the property and recover the cost incurred on acquisition from M/s. RBF Nidhi Ltd. and other allottees, as correctly contended by the AR. Para 6.30:- The AO has all along not been able to appreciate the basic fact as pointed out earlier that area entitlement of allottees in the constructed building KGN Towers' had already been determined as per the Memorandum of Compromise and regardless that the allottees / creditors were put in possession or not of their share of area owned by them of 63,442 sq.ft., under no circumstances could that area belonging to the allottees be considered as appellant company's own stock and consequently, therefore could not have formed part of its closing stock. Para 6.31;-Therefore to sum up, as stated earlier, the AU has no where conclusively established that any amount has been received on account of the property from the allotte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot aware of the fate of the CIT(A) order for AY 2011-12 in ITA No. 1706/13-14 order dated 23.03.2015 and in case the addition there is sustained and has no objection in deleting the addition but if the recasted closing stock in that year is deleted this addition has same way to be treated. We also noted that the CIT(A) has deleted the addition on the basis that the same was considered in the re-casted profit and loss account of earlier assessment year i.e., AY 2011-12 and hence he deleted the addition. We find no infirmity in the order of CIT(A) but in case the addition is deleted in AY 2011-12 and that re-casted profit and loss on account of valuation of closing stock is made and that addition is deleted on same reasoning, that this year the issue has to be dealt with on merits. In view of the above, we remand this matter back to the file of the AO for verification whether this addition is already considered in AY 2011-12 while making addition by the AO at Rs. 16,52,72,766/-. In case that addition is deleted on merits, the AO will verify and accordingly decide the issue afresh after confronting to the assessee. This issue of the Revenue appeal is allowed for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he produced the complete accounts before the CIT(A). Thereby, the total advances interest free remains is Rs. 11,58,81,774/-, this includes the opening balance also. The CIT(A) going through these facts noted in para 9.5 to 9.8 read as under: 9.5 The AO appears to have proceeded on the misplaced premise and assumption that the assessee after obtaining both short term / long term borrowings during the year on 24% flat interest utilised them for advances to. various related parties as defined In Section 40(A)2B, interest free, for non business purposes and therefore has consequently disallowed and added back to the total income the notional interest 'receivable' on such advances aggregating to Rs.3.38 crores calculated at the flat rate of 24% per annum and that too, irrespective, of the dates of advancing of the amounts, without making any case, let alone a convincing case that it indeed was the case. 9.6 Further and more importantly the AO has nowhere established that the interest bearing term loan from Cosmos Bank was what was diverted for non business purpose, as he put it, free of interest to mostly related parties as also others. Neither has he made out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual physical disbursement of the loan amount to the assessee and therefore the loan granted by KMIL was never available to the appellant company for any other purpose including the alleged diversion of the same interest free to related parties which fact has neither been questioned or controverted by the AO. 9.8 The above taking over of the loan liability owed to Cosmos Bank by KN duly evidenced by an agreement between the two parties and the subsequent payment of interest of Rs.6.3 crores thereof, as also part of the principal amount of Rs.12.92 crores totalling in all to Rs.19.4 crores appears to have not even been considered by the AO while disallowing the interest at a flat rate of 24% on the alleged interest free advances, mostly to related parties as he put it, as there is precious little discussion on the matter in the assessment order. And deleted the addition by observing para 9.16 as under: 9.16 To sum up, the AO in the context and factual matrix of the instant case has failed, in the first instance, to establish that interest bearing funds borrowed were divered interest free for non business purposes mostly for related parties, as he put it, and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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