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TMI Blog2023 (1) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... s availability with the assessee which is out of withdrawal from the firm on 05.03.2011 just one month before. For balance Rs.11 lakhs, we are of the view that the assessee is able to explain the same out of the returned income of Rs.20,19,656/- and withdrawals admitted by AO at Rs.6,77,130/-. Hence, we delete the addition on merits and allow the appeal of assessee on this ground. This issue of assessee s appeal is allowed. Disallowing interest on debt balance of partners - HELD THAT:- As we noted that first of all there is no evidence that the assessee has diverted interest bearing funds for this debt balance of partners account. AO is unable to bring nexus that the interest bearing funds were diverted towards partner s debt balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent by : Shri AR.V. Sreenivasan, Addl.CIT ORDER PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-12, Chennai in ITA No.69/CIT(A)-12/2015-16 dated 14.12.2017. The assessment was framed by the DCIT, Non Corporate Circle 10(1), Chennai for the assessment year 2012-13 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the Act ), vide order dated 28.03.2015. 2. At the outset, it is noticed that this appeal is barred by limitation by 28 days as noted by the Registry. The facts are that the order appealed against i.e., the appellate order of CIT(A) dated 14.12.2017 was received by assessee only on 14.12.2017 as noted in Form No.36. The appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash as under:- 01/04/2011 - Rs.3,00,000/- 05/04/2011 - Rs.18,00,000/- The AO asked the assessee to explain. The assessee explained vide letter dated 09.03.2015 that they have heaving drawing of Shri Najmul Hasan and the income returned during the year is Rs.28 lakhs, which explains the source of cash introduced. The assessee explained that the firm has given cash amounting to Rs.10 lakhs to Shri Najmul Hasan on 05.03.2011 and his wife having sundry debtors and other investments amounting to Rs.28,51,676/- from which, this amount of Rs.21 lakhs was invested as capital in the firm. The AO noted that the partner Shri K. Najmul Hasan has returned the income for assessment year 2012-13 at Rs.20,19,656/- and not Rs.28 lakhs as cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source to that extent for the capital introduced on 1/4/2011 and partly for 5/4/2011 being proximate dates to the date of cash receipt. But there is no clear fund flow available to explain the deposit of rest of the amount. Therefore, I confirm the addition to the extent of Rs.11,00,000/-. 6. After hearing ld. senior DR and going through the case records, we notice that there is no dispute that there is returned income for assessment year 2012-13 of Rs.20,19,656/- and admittedly, there is a withdrawal of Rs.6,77,130/- during the year as cash as admitted by AO in assessment order while rejecting the assessee s explanation. We noted that there is no dispute that out of Rs.21 lakhs, the CIT(A) accepted the explanation of Rs.10 lakhs avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has diverted interest-bearing borrowed funds for the purpose of non-business purpose. The interest disallowance is computed at 12% of the net debit balance which works out to Rs.17,01,453/-. This interest is considered as being incurred for nonbusiness purpose and disallowed under section 37. The CIT(A) also confirmed the action of AO by observing in para 5.3.4 as under:- 5.3.4 The AR of the appellant was asked to substantiate his reasoning by way of credible evidence. It is clear that there is a huge debit balance of Rs.1,41,78,744/- in the accounts of the partners. The argument that partners belong to a community where interest was not charged cannot be a valid explanation. It is immaterial whether interest was charged or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the view that there cannot be any notional interest charged for taxing in the partner s debt balance specifically when there is no discussion in the partnership deed, if any, has provided any charging of interest on debt balance and rates specified therein. Since these evidences are not brought on record by the AO or there is no discussion, simpliciter the notional interest cannot be charged and cannot be disallowed u/s.37 of the Act. Hence, we delete the addition and allow this issue of assessee s appeal. 10. The next issue in this appeal of assessee is as regards to addition by disallowance of interest on TDS of Rs.69,058/-. 11. We have heard ld. Senior DR and gone through the case records. There is no disallowance by the AO. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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