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TMI Blog2022 (10) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... credit account needs to be examined as to whether the deposits are from business operations or there are also deposits by way of fund transfer from other bank accounts and the nature of such funds from other bank accounts in the nature of borrowings or from business operations. In case of borrowed funds have been transferred to this particular cash credit account and such funds are then utilized in giving loans and advances, again a nexus is established between the borrowed funds and the loans/advances. In our view, this particular aspect of the matter in terms of nature and movement of funds in the cash credit account through which the advances have been given to M/s Mirage Infrastructure Private Limited has not been examined by either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income Tax (Appeals)3, Gurgaon [in short CIT(A) ] for Assessment Year 2014-15 wherein the sole ground of appeal raised by the assessee reads as under: That order passed u/s 250(6) of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-3, Gurgaon is against law and facts on the file in as much as he was not justified to arbitrarily uphold the action of the Learned Assessing Officer in disallowing a sum of Rs. 4,04,200/- out of interest account by resort to the provisions of Section 36(1)(iii). 2. The brief facts of the case are that a search action was carried out at the business and residential premises of M/s Longowalia Group on 04.09.2014 and assessee was one of the persons whose premis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was for buying the office space in the upcoming project of M/s Mirage Infrastructure Pvt Ltd and the amount was in the nature of business advance paid from its current bank account. However, no documentary evidence was furnished to substantiate the same. Thereafter, a show cause was issued to the assessee as to why disallowance of proportionate interest may not be made u/s 36(1)(iii) of the Act. In response, the assessee filed its submissions relying on certain decisions which were considered but not found acceptable to the AO. As per the AO, the assessee had paid so called capital advance from its cash credit account and the assessee has not submitted any documentary evidence like vouchers, communication letter between the parties regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee has failed to put forth any plausible explanation/documentary evidence to explain that the advanced was due to any business expediency. In view of the same, the addition of Rs.4,04.200/- made u/s 36(1)(iii) was sustained. Against the said findings and order of the ld CIT(A), the assessee is in appeal before us. 5. During the course of hearing, the ld AR reiterated the submissions made before the ld CIT(A) and drawn our reference to the balance sheet of the assessee company and submitted that from the balance sheet, it is clearly evident that the assessee had sufficient share capital and reserves which were much more than the amount advanced and therefore, the ld CIT(A) was not justified in sustaining the disallowance so ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the financial year relevant to the impugned assessment order. Even the copy of the cash credit account is not on record which could shed some light on movement of funds during the year and in particular, the position and availability of funds at the time of advancing the funds to M/s Mirage Infrastructure Private limited. As generally understood, the cash credit limit is in nature of a credit facility provided by the banks for working capital purposes to its clients and there are withdrawals and deposits from time to time for meeting business expenditure and receipts from business operations. Depending on the position of the funds in the said cash credit account on a given day, where the withdrawals are more than the deposits, the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he advances were given from assessee s cash credit account, a simplistic presumption cannot be drawn that advances were from borrowed funds given that the cash credit account is likely to have credits/deposits from assessee s business operations and/or other bank accounts. The credits and withdrawals in such cash credit account need to be examined and a clear nexus is required to be established between the borrowed funds and making of loans/advances to M/s Mirage Infrastructure Private Limited. On the same footing, the argument of the assessee regarding availability of its own funds need to be tested and examined after analyzing the nature and position of funds at the relevant point of time of making such advances. We, therefore, deem it ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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