2011 (12) TMI 763

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..... me Tax (Appeals) on the ground that assessee has made interest free advance of borrowed funds in arbitrary, unjust, unwarranted and at any rate very excessive by wrongly observing that books of the assessee are not proper and do not disclose its full and true income and as such are not reliable. (ii) That the sustaining of disallowance of business development expenses of ₹ 2,13,123/- by Ld. Commissioner of Income Tax (Appeals) is arbitrary, unjust, unwarranted and at nay rate very excessive by wrongly observing that books of the assessee are not proper and do not disclose its full and true income and as such are not reliable. (iii) That the sustaining of disallowance of telephone expenses of ₹ 2,05,123/- by Ld. Commissioner .....

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..... g Officer inferred that assessee has no interest free funds available to the firm. He found that assessee has not been charging any interest on the advances given, as per the table below:- Opening balance Debit Credit Closing balance Interest forgone Indian paper and fertilizer (sister concern of the assessee with same address) 2,60,424 1,09,000 2,60,424 1,09,000 21,250 Jagdambay Builders Pvt. Ltd. 1,00,000 Nil Nil 1,00,000 12,500 Mozaic Nil 1,00,000 Nil 1,00,000 11,460 Khanna Farms (sister concern of the assessee) Nil 1,00,000 Nil 1,00,000 11,460 56,670 Cash / imprest with partners 836045 104556 161226 3.1 Assessing Officer observed that assessee has failed to justify the connection of these advances with .....

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..... fficient interest free funds are available to assessee to give advances to the concerns. Accordingly, the issue stands remitted to the file of the Assessing Officer. 7. Apropos disallowances on account of business development expenses; telephone expenses; electricity and water expenses and disallowance of legal & professional expenses. The Assessing Officer in this case has made the following disallowances on estimate basis :- i) Business development expenses total expenses of ₹ 2,56,404/- - disallowed 80% being ₹ 2,13,123/-. ii) Telephone expenses ₹ 3,72,430/- - disallowed 80% being ₹ 2,05,123/-. iii) Electricity and water charges of ₹ 2,02,874/- - disallowed 75% being ₹ 2,02,874/-. iv) Leal and .....

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