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2018 (1) TMI 1720 - AT - Income TaxDisallowance on account of expenses claimed in P&L account - assessee has failed to produce books of account but the assessee has claimed to have audited the books of account - CIT(A) relying on various judgements held that the accounts are audited to which, AO ought to have given due consideration but to meet the ends of justice he estimated the net profit @ 2.75% of gross contract receipts and sustained addition - HELD THAT:- Before us, ld D.R. could not point out any mistake in the order of the CIT(A). We find that the books of account of the assessee are audited and the assessee has furnished the tax audit report to which no adverse inference was drawn by the AO. We find that the CIT(A) has dealt on the issue and relied on various judicial pronouncement on this matter and estimated the net profit @ 2.75% of gross contract receipts and sustained addition - Hence, we uphold his order and dismiss the ground of appeal of the revenue. Disallowance out of interest expenses made by the AO on account of interest on fund diverted for non-business purposes - assessee firm has advanced various amounts to different parties, therefore, the assessee was required to explain the mode of advance - CIT(A) deleted the disallowance by observing that the AO has not brought on record any evidence to demonstrate nexus of the assessee with five parties - HELD THAT:- IT(A) has relied on various judicial pronouncements including the decision of Hon’ble Supreme Court in the case of S.A. Builders, [2006 (12) TMI 82 - SUPREME COURT], wherein, it was held that interest on borrowed funds cannot be disallowed if the assessee has advanced interest free loan to a sister concern as a measure of commercial expediency. The assessee has adopted the alternative of borrowing money from the market instead of liquidating its own assets. We find that except relying on the order of the Assessing Officer, ld .D.R. could not point out any specific error in the order of the CIT(A) and could not controvert the findings of the CIT(A) by bringing any positive material on record that the advances were not made to five parties for normal course of business. In view of above, we confirm the order of the CIT(A) in deleting the addition. Appeal filed by the revenue is dismissed.
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