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TMI Blog2015 (10) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of interest free advance to Smt Mamta Agarwal, and Rs. 1,58,878, in respect of interest of free advance to Shri Rakesh Agarwal, are to be disallowed out of interest paid by the assessee. We will take up all the three issues together. 3. To adjudicate on the above issues, only a very few material facts need to be taken note of. The asseseee, a manufacturer and trader of hardware goods, had taken certain interest bearing borrowings from banks etc and was paying interest on such borrowings. During the course of scrutiny assessment proceedings, the Assessing Officer noted that, on one hand, the assessee has resorted to such borrowings, and on the other hand, he has given interest free advance to Smt Mamta Agrawal, his daughter in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital of Rs. 176 lakhs and business profit of Rs. 82.45 lakhs, and both these amounts put together are far in excess of the interest free investments made by the assessee. With these undisputed facts in mind, let us take a look at the legal position laid down by Hon'ble Bombay High Court, in the case of CIT Vs Reliance Utilities & Power Ltd (313 ITR 340), as stated thus, "The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments". On the basis of this principle, as has been consistentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to disallowance of Rs. 60,491 for sales tax liability for the assessment year 1981-82. 11. As the first disallowance stands deleted in quantum proceedings, and there cannot be thus any occasion for imposition of penalty in connection with the same, we only need to deal with imposition of penalty in respect of second quantum disallowance of Rs. 60,491 for sales tax liability. 12. The Assessing Officer noted that the amount of Rs. 60,491 does not pertain to the relevant assessment year and, accordingly, the same was disallowed. The assessee did not challenge this disallowance. When Assessing Officer required the assessee to show cause as to why penalty should not be imposed in respect of this wrong claim, it was explained by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment was made. In these circumstances, even if it was an inadmissible claim, by no stretch of logic, this can be a fit case for imposition of penalty under section 271(1)(c) of the Act. Learned Departmental Representative, when confronted with these facts, did not have much to say, beyond placing his dutiful reliance on the orders of the authorities below.
15. In view of the above discussions, and bearing in mind entirety of the case, we deem it fit and proper to delete the impugned penalty. The assessee gets the relief accordingly.
16. In the result, this appeal is allowed.
17. To sum up, while ITA 120/Agra/13 is allowed, ITA 121/Agra/13 is partly allowed.
Pronounced in the open court today on 30th day of June, 2014. X X X X Extracts X X X X X X X X Extracts X X X X
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