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2019 (3) TMI 627 - AT - Income TaxDisallowance on account of diversion of the fund - interest expenses - HELD THAT:- M/s Goyal & Co was having a similar contract with M/s Anshul associates. In the case of M/s Anshul associates the ITAT was pleased to delete the addition made by the AO. As the facts of the case on hand are identical to the facts of the case as discussed above, we respectfully following the same reverse the order of authorities below. Thus we set aside the order of CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Disallowance of wooden material expenses - HELD THAT:- There remains no ambiguity that there was any evasion of taxes. Therefore in our considered view, the disallowance cannot be made under the provision of Rule 40(A)(2)(b) of the Act. The genuineness and the business connection of wooden expenses have not been doubted by the authorities below. Therefore we can safely hold that the expenses were incurred in connection with the business of the assessee. In view of the above, we set aside the order of the Ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Addition of the other material expenses - HELD THAT:- The assessee incurred the expenses in the earlier assessment year which were carried forward to the year under consideration. We note that there was no such disallowance made by the authorities below in the immediately preceding assessment Year. Therefore we are of the view the opening balances which have been carried forward from the earlier Years cannot be disturbed in the year under consideration. We also note that genuineness and the business connections of the expenses have not been doubted. The only reason for the disallowance is that these expenses are not in pursuance to the joint development agreement. Thus such expenses were either to be allowed to the assessee or Goyal & Co. and both the companies are paying the tax at the same rate. Therefore, respectfully following the reasoning as given in the preceding ground no. 2 Para 14 of this order, we reverese the order of the authorities below. Thus we set aside the order of the ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Disallowance of miscellaneous work expenses - HELD THAT:- The expenses were incurred in the immediately preceding assessment year cannot be ignored. It is because the expenses were accepted by the Revenue in the earlier assessment year which was brought to the under consideration as the opening balance. It is established law that the closing balance of one year becomes the opening balance of the next year. Therefore the opening balance brought forward from the earlier year cannot be disturbed in the year under consideration. Accordingly, we are not inclined to uphold the finding of the authorities below. Thus we set aside the order of the Ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
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