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TMI Blog2017 (10) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... iled in response to notice u/s. 153A. 2. The learned CIT(A) erred in making addition of Rs. 78000/- on account of interest on borrowed capital disregarding the submissions given by the appellant only on the ground that the there is a direct nexus between the amount borrowed and interest free advances given. 3. The learned CIT(A) has erred : a) In rejecting the contention of the appellant that the interest expenditure was incurred for business purpose of the appellant and the same is allowable in the assessment u/s. 143(3) r.w.s 153A. b) In rejecting the contention of the appellant that the interest free advances were made out of its own interest free funds in the form of capital, profit of the year and interest free advances were much more than the amount advanced thus interest be allowed as expenditure u/s. 36(1) (iii). 4. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal." 4. The first issue raised vide ground of appeal No.1 is against the addition of Rs. 1,16,816/- on account of borrowed capital. 5. Briefly, in the facts of the case, search under section 132 of the Act was carried out at the premises of assessee on 10.02.2011. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st expenses, membership fees and depreciation which was neither claimed in the original return of income or revised return of income. The assessee was asked to give reason behind the fresh claim made in the return of income filed in response to notice under section 153A of the Act. The assessee explained that it was entitled to make the said claim in the return of income filed in response to notice under section 153A of the Act. The Assessing Officer held that as per provisions of section 153A of the Act, total income of the assessee for earlier six years was to be re-assessed, wherein the correct income was to computed; but the contention of assessee that it could make fresh claim and expenditure or deduction which was not made in earlier return was not accepted being not the position of law. The Assessing Officer held that what the assessee could not claim in original return or revised return, the same could not be claimed under the shelter of search assessment. Accordingly, the claim of assessee in this regard was rejected. In assessment year 2005-06, the assessee had made claim of interest expenditure of Rs. 1,16,816/- which was added back to the income of assessee. 6. The sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh claim of expenditure was against the assessee. 11. We have heard the rival contentions and perused the record. The first issue which arises in the present appeal is in respect of claim of expenditure on account of interest and in some cases on account of depreciation. Admittedly, the said expenditure was not claimed by the assessee in the return of income filed prior to search at the premises of assessee. However, consequent to search proceedings carried on the premises of assessee, notice under section 153A of the Act was served upon the assessee. In response thereto, in the return of income filed by the assessee, fresh claim of interest expenditure and depreciation on certain assets was made. The said claim was not allowed by the authorities below. The assessments for assessment years 2005-06 to 2008-09 i.e. appeals listed before us have not abated. In such cases, where the assessment has not abated, then the Hon'ble Bombay High Court (supra) has laid down that only undisclosed income and undisclosed assets detected during the course of search could be brought to tax. Applying the said ratio to the facts of the present case, we hold that the assessee is not entitled to claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He further took us through the copy of Balance Sheet and pointed out that in each of the cases, interest free funds which were available with the assessee were much higher than the interest free advances made by the assessee. He referred to the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom) that in order to determine the availability of funds, then the position as on the date of Balance Sheet has to be seen. He further referred to the ratio laid down by the Pune Bench of Tribunal in M/s. Kolte Patil Developers Ltd. Vs. DCIT in ITA Nos.1656 & 1657/PN/2014, relating to assessment years 2008-09 & 2009-10, order dated 29.04.2016 that day-to-day position is not to be seen to determine the availability of interest free funds. 14. The learned Departmental Representative for the Revenue in reply, pointed out that in the present case, the returns of income were only processed under section 143(1) of the Act. He further referred to the ratio laid down by the Pune Bench of Tribunal in Kranti Realtors Pvt. Ltd. Vs. ACIT in ITA Nos.2021 to 2023/PN/2013, relating to assessment years 2007-08 to 2009-10, order dated 10.11.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of non-abated assessment proceedings, wherein incriminating material was not found and the assessment was either made under section 143(1) or 143(3) of the Act. The Hon'ble Bombay High Court in CIT Vs. Shri Deepak Kumar Agarwal (supra) has upheld the order of Tribunal and has held that the additions made in the absence of any incriminating material in the case of non-abated proceedings are not sustainable and are to be deleted in cases of assessments under section 143(1) or 143(3) of the Act. In view of the ratio laid down by the jurisdictional High Court, we hold that in the case of non-abated assessments for the relevant assessment years, where no incriminating document was found during the course of search, whether the assessment was completed under section 143(1) or 143(3) of the Act, there is no basis for making the routine disallowance as made by the Assessing Officer i.e. the disallowance of interest expenditure on account of interest free advances made by the assessee. Accordingly, we hold so. The issue raised by the assessee in the bunch of appeals is thus, allowed. 18. The second aspect of the issue is the interest free funds available with the assessee. The perus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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