TMI Blog2019 (7) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... s upheld by the CIT(A) the A.O. in the order passed u/s 153A/143(3) for assessment year 2012-13, has not made any such disallowance. We, therefore, find merit in the argument of the assessee that following the rule of consistency no disallowance u/s 36(1)(iii) is called for. Even otherwise, the bank account of the assessee is a mixed one where the own funds as well as the business receipts are deposited. The own capital of the assessee is far more than the investment made for the industrial plot which, according to the Assessing Officer, has not been put to use for business purposes. The income of the current year of the assessee of ₹ 1.06 crores is much more than the investment towards industrial plot. We, therefore, hold that no disallowance could be made u/s 36(1)(iii) on account of the said investment in the industrial plot in view of the decision of the Hon'ble Bombay High Court in the case of Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] . The grounds of appeal No.1 and 2 by the assessee are, therefore, allowed. Addition on account of loan received u/s 68 - HELD THAT:- We find force in the argument of the ld. counsel for the assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee are accordingly allowed. - ITA No.4944/Del/2016 - - - Dated:- 25-7-2019 - Shri R.K. Panda, Accountant Member And Shri Kuldip Singh, Judicial Member For the Assessee : Shri Rakesh Gupta And Shri Somil Aggarwal, Advocates For the Revenue : Ms Ashima Neb, Sr. DR ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 18th July, 2016 of the CIT(A)-18, New Delhi, relating to assessment year 2011-12. 2. The grounds of appeal No.1 and 2 raised by the assessee read as under:- 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of ₹ 2,20,164/- u/s 36(l)(iii) and further erred in enhancing the disallowance under the said, section to the extent of ₹ 4,19,436/- and that too without giving show cause notice and without observing the principles of natural justice. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01/08/2007 Punjab National Bank Cash Credit 1,10,300.00 01/02/2008 Punjab National Bank Cash Credit 17,90,000 31/03/2008 Closing Balance 19,00,300 01/04/2008 Opening Balance 19,00,300 12/12/2008 Punjab National Bank Cash Credit 9,18,126 31/03/2009 Closing Balance 28,18,426 01/04/2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot, the proviso to section 36 (i)(iii) would apply squarely, calling for suitable disallowance in this regard. In fact the disallowance of interest on the average debit balance being higher than the total purchase consideration for the plot i.e. ₹ 53,29,620/-, would call for disallowance at the rate of 12% (the rate has not been disputed by the appellant) i.e. ₹ 6,39,600/-. The same would be directed to be disallowed in place of ₹ 2,20,164/- made by the Assessing Officer. 5. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal. 6. The ld. counsel for the assessee, made two-fold arguments challenging the addition made by the Assessing Officer and enhanced by the CIT(A). Referring to page 89 to 156 of the paper book which contains the assessment order for earlier years, the ld. counsel submitted that in the past, no disallowances were made on account of such interest paid by invoking the provisions of section 36(1)(iii). Even in assessment year 2008-09, although the Assessing Officer has made disallowance under section 36(1)(iii), but, not on account of investment in the industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erring to the decision of the Hon'ble Delhi High Court in the case of CIT vs. DD Industries Ltd. (2015) 117 DTR 355 (Del ), he submitted that the Hon'ble High Court in the said decision has held that when the assessee is possessed of mixed funds which include its own funds in sufficient quantity, a presumption that its own funds were utilized for the advances is to be drawn. In earlier years also an amount was advanced from out of surplus funds for purchase of showroom and no borrowed funds were utilized for these advances and no disallowance of interest paid was made during those years in orders made under 143(3) and since, in the instant assessment year, facts were identical, no disallowance could be made. It was held that disallowance under section 36(1)(iii) cannot be extended to advances given in the assessment year which are opening balance during the year. Accordingly, the disallowance made under section 36(1)(iii) by the Assessing Officer was held to be not proper and the order of the Tribunal was upheld. Relying on various other decisions, he submitted that following the rule of consistency no disallowance u/s 36(1)(iii) is called for. 10. Referri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for. Further, the assessee has not established the commercial expediency. She accordingly submitted that the order of the CIT(A) be upheld and the grounds be dismissed. 14. We have considered the rival arguments and perused the orders of the Assessing Officer and CIT(A). We have also considered the various decisions cited before us. We find the Assessing Officer, invoking the provisions of section 36(1)(iii) made disallowance of ₹ 2,20,164/- on the ground that the assessee has diverted its interest bearing funds for purchase of an industrial plot at Greater Noida which has not been put to use for business. We find the ld.CIT(A) enhanced the disallowance to ₹ 6,39,600/-the reasons for which has already been reproduced in the preceding paragraphs. It is the submission of the ld counsel for the assessee that neither in the past nor in the subsequent assessment years disallowance is made u/s 36(1)(iii). Further, the own capital funds of the assessee is far more than the investment made in the industrial plot and the income of the assessee during the impugned assessment year is more than 1.06 crores. Therefore, no disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AO in making aggregate addition of ₹ 34,50,000/- on account of loan received u/s 68 is bad in law and against the facts and circumstances of the case. 17. Facts of the case, in brief, are that the Assessing Officer, during the course of assessment proceedings, observed from the balance sheet that the assessee had shown advances received amounting to ₹ 2,25,08,885/- during the year. From the various details furnished by the assessee to discharge the onus cast u/s 68 of the IT Act, the Assessing Officer noted that the assessee could not substantiate the credit worthiness of the following parties with the following remarks:- Name of Party Net Advance Received Remarks 1. Mahesh Finsec Pvt. Ltd. ₹ 5,00,000 The assessee failed to furnish the PAN/ITR/Audited financial statements. 2. Indian Probuild Pvt. Ltd. ₹ 29,50,000 The co. s ITRs filed for A.Y. 11-12 and 10- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the said page, he submitted that the assessee had repaid the entire amount of ₹ 1,29,50,000/- between February, 2012 to July, 2014. So far as Mahesh Finsec Pvt. Ltd. is concerned, he submitted that the allegation of the Assessing Officer that the assessee failed to furnish the PAN, ITR, audited financial statements, etc., is contrary to what he has mentioned in the preceding paragraphs. Referring to page 74 of the paper book, he drew the attention of the Bench to the balance sheet as on 31st March, 2011 wherein the share capital reserves and surplus of the said company had been shown at ₹ 53.78 crores. He submitted that name of the company has since been changed to RPL Capital Finance Ltd., after amalgamation as approved by the Hon'ble High Court. Relying on various decisions, the ld. counsel for the assessee submitted that when the assessee discharged the onus cast on it by furnishing the various details to substantiate the identity and credit worthiness of the loan creditors and genuineness of the transaction, no addition u/s 68 is called for. So far as the various decisions relied on by the ld.CIT(A) as well as the ld. DR are concerned, he submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 29,50,000/-. So far as the amount received from Indian Probuild Pvt. Ltd., of ₹ 29,50,000/- is concerned, it is an admitted fact that the assessee filed the confirmations, bank account statements reflecting the advances, ITR copies/audited financial statements, etc., which has been mentioned by the Assessing Officer at para 5 of the order and which reads as under:- The assessee furnished the confirmations, bank account statements of the advancers reflecting the sums and the ITR copies/audited financial statements, vide its letters dated 22.10.2013, 28.01.2014 and 03.02.2014. 25. From the copy of the ledger account of the said party in the books of account of the assessee, we find, apart from the amount of ₹ 29,50,000/- received as advance from India Probuild Pvt. Ltd., the assessee has also received another advance of ₹ 1 crore from the said party on 18th May, 2011 and the assessee started repaying the amount of ₹ 1,29,50,000/- between February 2012 to July, 2014 the details of which are as under:- 15th February, 2012 - ₹ 25 lakhs ..... 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