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2016 (4) TMI 805 - ITAT JAIPUR

2016 (4) TMI 805 - ITAT JAIPUR - TMI - Assessment u/s 153A - disallowance of interest U/s 36 - Held that:- The notices U/s 153A were issued on 15/1/2010 in all the years. Even for A.Y. 2007-08 in both the cases, no notice U/s 143(2) was issued on or before 31/8/2008. It is settled law when no assessment proceedings are abated on the date of search, no notice can be sent U/s 153A of the Act to the assessee in the case of no incriminating documents were found and seized during the course of search .....

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e has capital ₹ 1.72 crores against the investment of ₹ 1.26 crores and loan and advances of ₹ 42.36 lacs. Capital is more than investment made and loan advance given. The decision of Hon’ble Bombay High court in the case of CIT Vs. Reliance Utilities & power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ) is squarely applicable in the case of assessee. Further the ld Assessing Officer has not established the nexus between the interest bearing loan with interest free advances given, .....

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passed by the ld CIT(A)-4, Jaipur for A.Y. 2004-05, 2005-06, 2007-08 and 2009-10 and 2nd set of appeals of Nirmal Kumar Agarwal arise against the order dated 03/12/2014 passed by the ld CIT(A)-4, Jaipur for A.Y. 2004-05 & 2007-08. The effective ground of one of the appeal is as under:- 1. On the facts and in the circumstances of the case the ld CIT(A) has grossly erred in confirming the action of ld. A.O. of completing the assessment U/s 153A of the IT Act, 1961 when no incriminating paper w .....

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ment proceedings were pending before the ld A.O. as on the date of search, therefore the order of ld CIT(A) deserves to be held bad in law and the consequent additions deserves to be deleted. 2. On the facts and in the circumstances of the case the ld CIT(A) has grossly erred in upholding the disallowance of ₹ 64,235/- being excess of interest paid over the interest received by the assessee without in any manner appreciating the nature of business in which the appellant is engaged, thus th .....

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2. In other appeals of both the assessees, similar identical grounds have been taken in all the years. 3. All the appeals filed by the assessees have been heard together and issue in all the appeals are identical, therefore, for sake for convenience, common order is passed in both the cases of assessees. 4. The ld Assessing Officer observed that the assessees are having income from finance brokerage. A search seizure operation was carried out U/s 132(1) of the Income Tax Act, 1961 (in short the .....

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assessment proceedings. They also produced books of account, which have been examined by the Assessing Officer. The ld Assessing Officer observed that the assessee had paid following interest in the case of Damodar Das Agarwal. S.No. A.Y. Amount Paid Amount Received 1. 2004-05 82,500/- 18,265/- 2. 2005-06 3,51,405/- 1,96,409/- 3. 2007-08 5,56,513/- 4,15,773/- 4. 2009-10 71,847/- 28,782/- The assessee had paid following interest in the case of Nirmal Kumar Agarwal. S.No. A.Y. Amount Paid Amount R .....

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assessees claimed before the Assessing Officer that whatever unsecured loan taken were wholly and exclusively for the purpose of expanding business activity and has legitimately claimed the interest expenditure in the return of income. After considering the assessee s reply, it has been held that there is no direct nexus has been established by the assessee that borrowed fund on interest has been utilized for the business purposes. Thus, he disallowed interest of ₹ 64,235/- in A.Y. 2004-0 .....

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the appellant was not able to establish the business interest being served by these interest free loans. During the appellate proceedings also, no specific details had been brought on record to establish the inter unit business transactions to prove that these interest free advances were for business interest of the appellant and also the assessee has not able to demonstrate that interest free fund available with the assessee in form of reserve or capital fund for advancing interest free to the .....

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on of interest on the borrowings to the extent those borrowings are directed to the sister concerns or others without interest. Therefore, he confirmed the addition in both the cases. 6. Now the assessees are in appeals before us. The ld AR of the assessees has submitted that the assessee had filed his return of income U/s 139(1) of the Act, which were processed U/s 143(1)(a) of the Act and income as declared by the assessee in the respective return stood accepted as no notice U/s 143(2) were is .....

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Damodar Das Agarwal is as under:- A.Y. Date of return u/s 139(1) Last date for notice u/s 143(2) Date of search Date of notice u/s 153A Date of service of notice u/s 153A Date of filing of return u/s 153A 2004-05 27/10/2004 31/10/2005 24/08/2009 15/01/2010 21/01/2010 23/02/2010 2005-06 31/07/2005 31/07/2006 24/08/2009 15/01/2010 21/01/2010 23/02/2010 2007-08 31/08/2007 31/08/2008 24/08/2009 15/01/2010 21/01/2010 23/02/2010 2009-10 - 24/08/2009 15/01/2010 21/01/2010 31/03/2010 The chart in the c .....

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offered by the assessee in the return of income filed U/s 153A. As per rule, the assessee s case was scrutinized U/s 153A read with Section 143(3) of the Act and a lump sum disallowance out of general and interest expenses claimed by the assessee had been made by the Assessing Officer. This action on the part of Assessing Officer is squarely out of jurisdiction as Section 153A does not authorize to him to complete the assessment under the section without referring to any seized material. The as .....

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f search. It is further submitted that no material whatsoever, which can be termed to be on incriminating nature and indicating any undisclosed income pertaining to relevant year were found during the course of search. Therefore, order of the Assessing Officer suffers from serious errors and which is also contrary to the settled law. These disallowances can be made in the regular assessment by the Assessing Officer. The time for scrutinizing the case as mentioned in the chart has already been ex .....

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eof would not arise and therefore, the ld Assessing Officer shall have no power to complete assessment U/s 153A without referring to any seized material. He further relied on the decision in the case of Gurinder Singh Bawa Vs. DCIT (2012) 28 Taxmann.com 328 (Mum Trib) wherein similar view has been upheld by the Hon ble ITAT, Mumbai Bench. In the case of Jai Steel India Vs ACIT 259 CTR 282 wherein the Hon ble Jurisdictional High Court has held that in Section 153A word assess has been used the co .....

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arch or requisition. He further relied on the following case laws:- (i) Kusum Gupta Vs DCIT, ITA Nos. 4873/Del/2009, (2005- 06) 2510 (A.Y. 2003-04), 3312 (A.Y. 2004-05) 2833/Del/2011(A.Y. 2006-07). (ii) MFG Automobiles Ltd. Vs ACIT, ITA Nos. 4212 & 4213/Del/2011. (iii) Tarannum Zafar Khan Vs ACIT, ITA Nos. 5888 to 5890/Mum/2009. (iv) Vee Gee Industrial Enterprises Vs. ACIT, ITA No. 1/Del/2011 & ITA No. 2/Del/2011. (v) ACIT Vs Shri Manoj Narain Aggarwal, ITA NOs. 5518 to 5524/Del/2012. (v .....

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has been reconsidered by the Hon ble Delhi High Court in the case of CIT Vs Kabul Chawla 234 Taxman 300 (Delhi) wherein it has been held that in case of Canara Housing Development Co. Vs DCIT, incriminating documents were found during the course of search. Therefore, even the Hon ble Karnataka High Court decision is also in favour of the assessee. It is also a trite law that when there is two opinion on the issue by the Jurisdictional High Court as well as other High Court, the Jurisdictional H .....

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ral presumption to be taken is that any advance/investment have been made out of own fund and not out of the borrowed fund as held by the Hon ble Bombay High Court in the case of CIT Vs Reliance Utilities & Power Ltd. 313 ITR 340 (Bom). The burden of proof is on the revenue to establish that interest bearing fund had been advanced by the assessee to the interest free advances. The ld Assessing Officer failed to establish the onus cast upon him. He simply made addition in surmises and conject .....

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icer cannot step into shoes of the businessman to examine the expediency of any investment made by the assessee. For which he relied on the decision in the case of S.A. Builders Ltd. Vs CIT(A) 288 ITR 1 (SC) and Empire Jute Co. Ltd. Vs. CIT 124 ITR 1 (SC). Therefore, he prayed to delete the addition confirmed by the ld CIT(A). 7. At the outset, the ld DR has vehemently supported the order of the ld CIT(A) and argued that a detailed findings has been given by the ld CIT(A) in respective assessmen .....

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e us the ld DR had not brought our notice that some incriminating documents were found and seized during the course of search. The case laws relied by the ld CIT(A) i.e. Canara Housing Development Co. Vs DCIT (supra), which was considered by the Hon ble Delhi High Court in the case of Kabul Chawla (supra) has held that there was incriminating documents found during the case of Canara Housing Development Co. Vs DCIT (supra), which has been considered by the Hon ble Delhi High court. It is also un .....

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