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TMI Blog2020 (12) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... at the tax effect in this case is below the limit prescribed in CBDT Circular 17/2019 dated 08/08/2019 for filing an appeal before the ITAT. 3. It is observed that as per the latest Circular of CBDT, the Assessing Officer is required to file an appeal before ITAT only if the tax effect is more than 50 lakhs. Thus, taking note of CBDT Circular No. 17/2019 dated 08/08/2019 and considering the fact that the tax effect in the instant appeal is less than Rs. 50 lakhs, the present appeal deserves to be dismissed as not maintainable. However, we make it clear that the issue(s) raised in the instant appeal is left open to be examined in the appropriate proceedings, if arises, in future. At the same time, we also make it clear that if the appeal fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t's case. 5. The CIT(Appeals) should also have noted that the Supreme Court has already held in the case of Munjal Sales Corporation vs. CIT, 298 ITR 298, that interest on diversion of funds was not disallowable, if sufficient own funds were available with the assessee. 6. The CIT(A) also erred in not following the decision of the Jurisdictional Tribunal decision in DCIT vs. S. Jameela, ITA No. 704/Coch/2010 dtd. 20/07/2010. 4. The facts of the case are that the assessee had paid bank interest of Rs. 3,33,896 and the same was debited in the profit and loss account. The balance in the Federal Bank PCFC loan was Rs. 1,29,49,690/- as on 31.03.2007. Verification of the current account of partner Abdul Rehman Kunju showed that Shri Abdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that interest free funds were available for advancing the interest free loans to sister concerns. The CIT(A) sustained the addition of Rs. 94,592/- made by the Assessing Officer by following the decision of the Jurisdictional High Court in the case of V.I. Baby (123 Taxman 894). 6. Against this, the assessee is in appeal before us. The Ld. AR submitted that the Shri M. Abdul Rehman Kunju, Managing Partner of the assessee firm had drawn Rs. 46,77,466/- from the business during the relevant assessment year. According to the Ld. AR, the bank interest paid for a short period on a packing credit advance of Rs. 1,29,49,690/- was Rs. 3,33,896/-. The Ld. AR submitted that the capital and current account balance of this partner in the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gards investment in South Indian Bank, which is the banker of the appellant, in the form of FDs and shares, the assessee's explanation seems to be reasonable, since these investments and deposits have been made to keep and maintain high priority relation with the bankers to gain business benefits and as the appellant has explained that these were basically to obtain for Letters of Credit to be opened for the import of raw cashew nuts, which is the business of the appellant". With regard to the above deposits made with the Bank and purchase of its shares, in our view, the question of diversion of funds does not arise at all, as the assessee has stated the purpose of making the deposits and purchasing the shares. It is further to be not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er that the capital of the assessee stood at Rs. 3.59 crores as on 01-04-2006 and Rs. 3.08 crores as on 31-03-2007. Even if the gift of Rs. 58.50 lakhs referred above is deducted from the capital account, it is seen that the assessee is still possessing sufficient capital. Accordingly, we are of the view that the gift amount of Rs. 58.50 lakhs should be treated as a personal withdrawal and hence it cannot be considered as diversion of funds, since the assessee is in possession of sufficient capital. Accordingly, we set aside the order of the Ld. CIT(A) on this issue and direct the Assessing Officer not to treat the same as diversion of funds. 8.1. In this case of Shri Abdul Rehman Kunju, the current account with the firm is as follows: Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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