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2017 (9) TMI 1020 - AT - Income TaxAddition u/s. 68 - basis of AIR information, the assessing officer issued notice to the assessee under section 143(2) and further issued notice under section 142(1) - Held that:- Assessee has furnished copy of cash book before us showing the deposit of ₹ 5,00,000/- on 15.11.2010 and further ₹ 5,00,000/- on 12.01.2011 with Tamilnad Bank (P) Ltd. We have seen that the assessee filed detailed reply before the AO along with cash book and again before the ld. CIT(A) vide submission dated 21st July 2014. From the orders of authorities below, we noticed that the addition was made by AO solely on the basis of AIR Information and without any corroborative evidence. The Revenue/AO has not made any independent enquiry. Instead of examining the evidence furnished before the assessing officer, the assessing officer merely relied upon the AIR Information which is not sustainable in the eyes of law. Revenue has not made any enquiry to find out whether the AIR information was correct or not. The additions made solely on such borrowed information are not sustainable in the eyes of law. Addition u/s 68 is not sustainable - Decided in favour of assessee. Addition u/s 40A(2)(b) - AO disallowed the interest payment in excess of 12% - assessee failed to prove the nexus of Directors remuneration as well as the interest expenses - Held that:- The Hon’ble Allahabad High Court in Abbas Wazir (P) Ltd. Vs. CIT [2003 (9) TMI 50 - ALLAHABAD High Court ] held that while invoking the provision of section 40A(2) of the Act the reasonableness of the expenditure for the purpose of business has to be seen from the point of view of businessmen and not that of Revenue, the approach has to be seen that the reasonableness must be looked into from the businessmen’s point of view. We have seen that the assessee paid interest @ 15% to 18% to related parties. In our considered opinion the interest paid by the assessee is not unreasonable. The assessing officer has not given any specific reason as to why the interest paid by assessee is unreasonable. Considering the peculiarity of the facts of the case the disallowance is deleted.
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