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2016 (5) TMI 405 - AT - Income TaxAddition on account of bogus purchase - Held that:- Since the AO has merely proceeded to make an addition of ₹ 26,86,130/- on the basis of letter dated 19.12.2011, wherein M/s. Sumit Agriculture Industries denied business transaction with Smt. Suman Jain, the same is not sustainable in the eyes of law because Smt. Suman Jain transacted with M/s. Sumit Agriculture Industries only as proprietor of M/s. Sandip Enterprises and not in her individual capacity. This fact has been got rectified by the assessee during the appellate proceedings by producing the entire record of M/s. Sandip Enterprises referred hereinbefore. In the given circumstances, there is no question of issuance of second letter dated 28.12.2011 by M/s. Sandip Enterprises confirming all the business transaction with assessee under pressure. Had the notice u/s 133(6) of the Act been issued to M/s. Sumit Agriculture Industries seeking complete business transaction with M/s. Sandip Enterprises, the incorrect information would not have been filed by M/s. Sumit Agriculture Industries. - Decided against revenue Disallowance of interest paid on borrowed capital - CIT(A) allowed the claim - Held that:- In the instant case, when from the document produced before the AO, CIT (A) as well as in the additional evidence before the Tribunal by the assessee, it is proved that the loan amount borrowed by the assessee in individual capacity was utilized for earning profit from M/s. Sandip Enterprises, a proprietorship concern of the assessee, a direct link has been established and as such, the interest cost incurred on the said personal borrowing was integral part of the earning profit in the said business. Moreover, when assessee has proved that borrowings taken in individual capacity was on lower bank interest of 0.25% BPLR as against regular rate of 1.75% BPLR it has certainly enhanced the profit of M/s. Sandip Enterprises also and in such circumstances, the interest amount of ₹ 35,43,206/- has been rightly allowed to be deducted by the CIT (A). So we find no illegality or infirmity in the finding returned by the CIT (A) and consequently, grounds determined against the revenue.
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