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2020 (10) TMI 616 - AT - Income TaxRectification u/s 154 - disallowance of interest on account of purchase of land - assessee has contended before the ld. CIT (A) that the said land was acquired by the assessee out of its own funds and not borrowed funds - HELD THAT:- CIT (A) considered the fact that the assessee has availed cash credit limit on which the interest was paid during the year under consideration but no loan was taken by the assessee for purchase of land in question. Therefore, when the total borrowed funds is less than the total expenditure on the current assets then it becomes a matter of scrutiny to find out whether the borrowed fund has been utilized by the assessee for purchase of land in question. Prima facie, it appears that the assessee has made investment during the year in the current assets which is more than the borrowed funds, therefore, the borrowed funds was utilized by the assessee for the current assets and not for the acquisition of the land in question. While passing the order under section 154 AO has not issued any notice to the assessee and without giving an opportunity of hearing to the assessee the disallowance is made. Disallowance made by the AO on account of proportionate interest expenditure is highly arbitrary and not justified. The same is deleted. - Decided in favour of assessee.
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