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2019 (4) TMI 742 - ITAT VISAKHAPATNAMDisallowance of interest expenditure u/s 57(iii) - borrowed funds invested in the company for the purpose of business - ‘commercial expediency’ - Assessee has claimed the interest expenditure under the head ‘income from other sources’ which resulted into loss and same was claimed as set off against the income from capital gains and the business income - HELD THAT:- There is no dispute that the assessee has borrowed the funds and made the investments in the business. The Assessing Officer did not make out a case that the assessee has diverted the funds for non-business purpose. Business consideration is the decision of the assessee, but not the Assessing Officer. The Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT [2006 (12) TMI 82 - SUPREME COURT] held that the expression of ‘commercial expediency’ is an express of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The assessee has made the investments for the purpose of business and paid the interest. The income under the head ‘income from other sources’ resulted into loss which was claimed for set off under section 71 of the Act. Intra head loses are allowable to be set off against other sources of income in the same assessment year. Since the Assessing Officer did not make out a case that the assessee has diverted the funds for non-business purposes, we do not see any reason to interfere with the order of the ld. CIT(A) and the same is upheld. Appeal of the Revenue on this ground is dismissed. Disallowance u/s 14A r.w.r. 8D - interest on borrowed funds for investment in M/s. Vishnu Priya Hotels Pvt. Ltd.which yield dividend income which is exempt from the total income - diverting of funds for non-business purposes - HELD THAT:- Assessing Officer has invoked section 14A r.w.r. 8D incorrectly and made the disallowance without having earned the dividend income. On an identical issue, in the case of M/s. Redington (India) Ltd. [2017 (1) TMI 318 - MADRAS HIGH COURT] has taken a view that no disallowance is called for under section 14A in the absence of dividend income. Also see P. Venkateswara Rao Vs. ACIT [2018 (12) TMI 514 - ITAT VISAKHAPATNAM] Addition based on Loose sheets found in search - Black money receipt - on money consideration for sale of the flat - HELD THAT:- In the instant case a loose sheet was found evidencing the on money consideration for sale of the flat. The said loose sheet was not in the handwriting of the assessee or of any of the family members. No statement was recorded from the author of the loose sheet regarding the contents and enquiries were conducted with the buyer of the flat. The assessee has never agreed or accepted that he has received the sale consideration over and above the amount recorded in the registered document and no evidence was found with regard to receipt of cash. Therefore, we are unable to sustain the order of the CIT(A)) and the same is set aside and the appeal of the assessee is allowed. Cash found at the time of search - HELD THAT:- Assessee filed the wealth tax returns in response to the notice issued by the Assessing Officer under section 17 of the Wealth Tax Act and the assessments were accepted by the department taking the cash balance as per wealth tax returns and no defects were found. Therefore, we are unable to discard the cash flow statement. Neither the Assessing Officer nor the ld. CIT(A) find any defect in the cash flow statement submitted by the assessee during the wealth tax proceedings also Therefore, we hold that the cash balance available as on the date of search is treated as explained and no addition is warranted. Accordingly, we set aside the order of the ld. CIT(A) and delete the addition made by the Assessing Officer. The appeal of the assessee on this issue is allowed. Addition on account of jewellery found during the course of search - AO even categorically found that the explanation of the assessee is found to be reasonable, however, the Assessing Officer made the addition in the absence of any evidence in form of wealth tax returns - HELD THAT:- Once the explanation found to be reasonable, there is no case for making the addition in the hands of the assessee. Merely because of non-furnishing of wealth tax returns, the Assessing Officer cannot make the addition in the hands of the assessee when it was explained to the Assessing Officer that the jewellery belonged to his wife and mother. If at all the addition is required to be made it should be made in the right person duly initiating the proceedings. In the absence of wealth tax returns, if the gold and jewellery is to be taxed, the same is required to be brought to in the hands of the assessee’s wife & mother, but not in the hands of the assessee. Apart from the above, the assessee filed wealth tax returns for the Assessment Years 2009-10 & 2010-11, which was accepted by the department without making any addition. Therefore we hold that there is no case for making the addition on account of gold and jewellery found during the course of search in the hands of the assessee.
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