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TMI Blog2017 (8) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... s taxed accordingly without appreciating the facts and circumstances of the case and wi thout giving suf f icient opportunity. The Appellant craves leave to add, alter, rescind or amend any of the above grounds of appeal". 2. Briefly stated, the facts of the case are that the assessee firm which is deriving income from brokerage and commission, rental receipts along with other sources of income, had filed its return of income on 28.09.2012, declaring total income of Rs. 88,68,570/-. Search and seizure proceedings u/s. 132 of the 'Act' were conducted on 12.10.2011 on M/s Pipavav Defence and Offshore Engineering Company Ltd., (for short 'PDOECL') and its associate concerns, and the assessee concern was therein covered. 3. That the case of the assessee was thereafter taken up for scrutiny proceedings u/s. 143(2). That during the course of the assessment proceedings the A.O observed that the assessee had raised interest bearing loans against which interest expenditure of Rs. 5,23,872/- was claimed in the 'Profit & loss account'. The A.O while deliberating on the allowability of the aforesaid interest expenditure observed that the assessee had advanced interest free amounts to cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n personal expenses having been included in the aforesaid expenditure could be ruled out. The CIT(A) thus on the basis of his aforesaid conviction upheld the disallowance of 20% of the vehicle expenses made by the A.O. 5. The assessee being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. That during the course of the hearing of appeal it was submitted by the ld. Authorized representative (for short 'A.R.') for the assessee, that during the course of the assessment proceedings it had vide its letter dated 28.02.2014 (filed with the A.O on 10.03.2014) specifically brought to the notice of the A.O that though the assessee had incurred interest expenditure of Rs. 5,23,872/- in respect of the interest bearing loans so raised by it, but it was during the year under consideration also in receipt of interest of Rs. 3,93,569/- on loans advanced by it to certain parties. It was further submitted by the ld. A.R. that the assessee had vide its aforesaid letter further brought to the notice of the A.O that as it had received interest free loans from certain parties, therefore, it had not charged any interest on certain amounts that were advanced by it to cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted by the assessee before him, had however summarily upheld the similar disallowance in A.Y. 2008-09 and A.Y. 2012-13 ( year under consideration) for the reason that the assessee had failed to establish that the interest free loans had not been advanced out of the interest bearing funds. It was averred by the ld. A.R that though the assessee had prepared written submissions in his case for the year under consideration, viz. A.Y. 2012-13 and A.Y 2008-09 on similar lines, but however the CIT(A) declined to take the same on record for the reason that the said appeals had been disposed of by him on 22.03.2016. The ld. A.R in order to substantiate his aforesaid contentions took us through Page 3 and Page 7 of his 'Paper book' (APB), which revealed interest free loans available with the assessee during the year under consideration. The ld. A.R further took us to Page 4 and Page 8 of the 'APB' which revealed the interest received by the assessee on the loans advanced to the parties. The ld. A.R thus taking us to certain notings at Page 8 of the 'APB' submitted that as against the interest free amounts advanced by the assessee and capital account of partners (debit Balance), which aggre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O is directed to consider the claim of the assessee in respect of interest of Rs. 3,93,569/-(supra) which is claimed by him to have been received in respect of the amounts advanced to third parties, as well as verify the availability of interest free funds with the assessee at the time when the interest free advances were given by him to certain parties. That in case if the claim of the assessee that it had received interest of Rs. 3,93,569/-(supra) from the parties to whom amounts had been advanced is found to be in order, then the disallowance of the interest expenditure of Rs. 5,23,872/-(supra) made by the A.O shall be scaled down/reduced to the said extent. Still further, in case if the assessee is able to substantiate the availability of interest free funds with him at the time of advancing of the interest free loans/advances, then to the said extent no disallowance of the interest expenditure claimed by the assessee u/s. 36(1)(iii) would be liable to be made. We thus restore the matter to the file of the A.O for fresh adjudication in the backdrop of our aforesaid observations. The Ground of appeal no. 1 raised by the assessee is thus allowed for statistical purposes. 8. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect and consequently allowed in the hands of the assessee, subject to the condition that the same had been used by the assessee for the purpose of his business, but however, are of the considered view that the facts involved in the present case are to some extent distinguishable. That in the case of the present assessee the A.O had carried out disallowance of 'vehicle expenses' not merely for the reason that some part of usage of the motor cars could safely be attributed to the personal usages by the partners of the assessee firm and their family members, but also on the ground that the documentary evidence supporting incurring of the vehicle expenses by the assessee neither did inspire much confidence, nor the authenticity of the same could be proved to the hilt by the assessee. We thus in the totality of the facts involved in the case of the present assessee, in all fairness restrict the disallowance made by the A.O. in respect of 'vehicle expenses' to 10%. The order of the CIT(A) upholding the disallowance of 'vehicle expenses' at the rate of 20% is thus modified in light of our aforesaid observations. The Ground of appeal No. 2 raised by the assessee is partly allowed. 8. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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