TMI Blog2018 (2) TMI 1642X X X X Extracts X X X X X X X X Extracts X X X X ..... ny specific defect in the vouchers or pointing out any specific instance. Assessing Officer has merely acted on presumption. - I.T.A. No.41/Lkw/2017 - - - Dated:- 22-2-2018 - SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER For The Appellant : Shri R. R. Jain, F.C.A. Shri Sameer Jain, F.C.A. For The Respondent : Shri Yashvendra Singh, D.R. ORDER PER T. S. KAPOOR, A.M. This is an appeal filed by the assessee against the order of learned CIT(A) dated 24/10/2016. The grounds of appeal taken by the assessee are reproduced below: 1. Learned CIT (A) erred on facts in law in confirming the disallowance of ₹ 2,02,057/- being notional interest on alleged interest fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital account was placed and it was submitted that the assessee had a capital of ₹ 1,68,25,925/- whereas the interest free advances given by the assessee were quite insignificant as compared to assessee s own capital. It was submitted that during the year itself the assessee had earned a net profit of ₹ 21,95,000/- as is apparent from the copy of capital account itself. Reliance in this respect was placed on the case of Smt. Chanchal Katyal vs. CIT 298 ITR 182 (All) and in the case of CIT vs. Kapsons Associates 381 ITR 204 (P H) for the proposition that where the own funds exceed the non interest bearing advances, no disallowance can be made u/s 36(1)(iii) of the Act. 2.1 As regards the other disallowance sustained by learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free capital of the assessee, the amount of interest free advances are only to the extent of ₹ 22,45,078/-. Since the interest free own funds of the assessee far exceed the interest free advances, the disallowance u/s 36(1)(iii) was not warranted in view of various judicial pronouncements relied on by Learned A. R. Hon'ble Allahabad High Court in the case of Smt. Chanchal Katyal vs. CIT [2008] 298 ITR 182 (All) has held as under: That the borrowed money on which the assessee was liable to pay interest to its creditors had not been diverted towards interest-free loans to the two firms. It was not the case of the Revenue that the assessee was following the mercantile system of accounting and under the agreements, the interest e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isc. expenses and travelling expenses, Learned A. R. submitted that the entire expenditure was open to verification and Assessing Officer has merely acted on presumption. In our opinion, the Assessing Officer cannot make ad hoc disallowance specifically in view of the case laws relied on by Learned A. R. Hon'ble Calcutta High Court in the case of Ashok Surana vs. CIT [2016] 384 ITR 267 (Cal) has held as under: The assessee was an individual engaged in the business of producing television serials and had offices at Calcutta, Bangalore, Delhi and Mumbai. For the assessment year 2001- 02, the assessee had shown to have incurred expenses on account of telephone. The Assessing Officer disallowed 20 per cent. of the expenditure on the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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