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TMI Blog2024 (3) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... s justified in coming to the conclusion that the interest expenditure claimed by assessee was allowable. Addition u/s 68 in respect of cash credits - ITAT deleting the addition made by holding that the additions were made by the AO without proper examination of evidences furnished and proper reasoning - HELD THAT:- For credit from one Paresh Patel ITAT has accepted, and rightly so, the explanation of assessee that the confirmation letter for Rs. 1,38,772/- only referred to the closing balance at the end of the year and the same was carried forward in the succeeding year. The ITAT has also come to a factual finding that Paresh Patel has confirmed the balance available on 31st March 1991 also and the amount was repaid on 14th June 1991. Similarly with regard to cash credit from one Nitin Patel, there is a factual finding that there was a confirmation letter for the year ending 31st December 1986 and the ledger account furnished showed that the outstanding balance was repaid subsequently. The ITAT also has come to a factual finding that there was no reason to suspect this cash credit. The next item related to cash credit from one Ranak Pate ITAT has come to a finding on facts that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Years 1987-1988, 1988-1989, 1989-1990 and two appeals filed by Revenue for Assessment years 1988-1989 and 1989- 1990. 2. Respondent/Assessee, an individual, was carrying on business as sole proprietor in the name and style of M/s B.C. Devidas. Assessee, who was a registered broker of Bombay Stock Exchange, was also engaged in trading in securities and shares. In addition to the profit, assessee also received salary and commission from CIFCO Limited and Food and Inns Limited in which he was a director. 3. Following the allegation of involvement in multicrore securities transactions scam of nineties infamously known as Harshad Mehta Scam, Assessee got labelled as notified party on 2nd July 1992 under the Special Court's (TORTS) Act, 1992. Assessee was investigated by Central Bureau of Investigation in June 1992 followed by the search and seizure action conducted by the Income Tax Department on 16th October 1992. 4. The assessment was originally completed after the search operations. Both assessee as well as Revenue filed appeals before the ITAT. The ITAT restored the matters to the file of the Assessing Officer for denovo assessments with the directions that before pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of CIT(A) which was not contested by the Revenue as such the same disallowance cannot be made while completing the set aside assessment, without appreciating the fact that there is no evidence in support of the claim of finality of the addition? 6. The first issue relates to disallowance of interest expenses incurred for non-business purposes. The Assessing Officer has disallowed interest of Rs. 12,19,181/- paid to banks and others on the ground that assessee diverted interest bearing funds for giving interest free advances. During Assessment Year 1988-1989 also the Assessing Officer had disallowed a sum of Rs. 8,99,443/- on same grounds. The ITAT came to a factual finding that assessee had huge interest free sundry creditors balance with him and the Assessing Officer has failed to recognize the same. The ITAT came to a finding, with which we agree, that when interest free funds and interest-bearing funds are mixed together, they loose their respective identity and hence, the presumption should be that assessee has used interest free funds to give interest free advances. The ITAT in the impugned order has given a table of the position of funds and has concluded that even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. (emphasis supplied) 7. The second issue relates to the addition made under Section 68 of the Act in respect of cash credits. In the first round of proceedings, the Assessing Officer has added a sum of Rs. 33,26,921/- under Section 68 of the Act and in the set aside proceedings, reduced the addition to Rs. 20,20,367/-. The CIT(A) had also confirmed the same. The cash credit entries relating to six individuals have been added under Section 68 of the Act. The first relates to one Paresh Patel amounting to Rs. 14,15,157/-. During the year under consideration, the aggregate amount of credit available in this account was Rs. 15,53,929/-. The Assessing Officer found that the confirmation letter referred to only Rs. 1,38,772/- and the difference of Rs. 14,15,157/- was considered as unexplained cash credit. The ITAT has accepted, and rightly so, the explanation of assessee that the confirmation letter for Rs. 1,38,772/- only referred to the closing balance at the end of the year and the same was carried forward in the succeeding year. The ITAT has also come to a factual finding that Paresh Patel has confirmed the balance available on 31st March 1991 also and the amount was repaid on 14th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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