TMI Blog2022 (7) TMI 1152X X X X Extracts X X X X X X X X Extracts X X X X ..... ng given several opportunities and secondly, since assessee has been unable to demonstrate with any supporting evidence that interest-free funds were utilised for giving advances to M/s Om Kailash Cotton, and since the assessee has claimed deduction of interest on the aforementioned interest bearing funds made available to M/s Om Kailash Cotton during the impugned assessment year, interest on the same is liable to disallowed. In the result, we are of the view, that in the instant set of facts, the assessee s appeal is liable to be dismissed. - ITA No. 2348/Ahd/2014 - - - Dated:- 22-7-2022 - Shri P.M. Jagtap, Vice President And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri S.N. Divetia, A.R. For the Revenue : Shri R.R. Makwana, Sr. D.R. ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-XX, Ahmedabad in Appeal no. CIT(A)-XX/158/12-13 vide order dated 23/01/2014 passed for the assessment year 2010-11. 2. The assessee has taken the following grounds of appeal:- 1.1 The order passed u/s.250 on 02-07-2014 for A.Y.2010-11 by C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans and Advances to Sundry Debtors , the assessee has changed the type of fund which in fact was not in financial year 2008-09 as such the transfer of funds is a clear motive and an afterthought attempt to evade tax. The AO further noticed that the assessee had taken interest-bearing loans on which interest to the tune of ₹ 1,55,11,995/-was paid during the impugned assessment year 2010-11 . Against this, assessee had given loans and advances to M/s Om Kailash Cotton of ₹ 5,84,19,065/- on which no interest was charged. In view of the above facts and circumstances, the AO disallowed interest expense amounting to ₹ 36,84,544/- out of interest expenses claimed of ₹ 1,55,11,995/- and added the same to the total income of the assessee. 4. In appeal before first appellate authority, the assessee contended that it had sufficient interest-free funds since it was a cash-rich company having huge cash balances and net profits before depreciation and hence it cannot be presumed that interest-bearing loans were utilised for giving interest free advances. However, Ld. CIT(Appeals) rejected the assessee s contention by holding that the assessee has claimed that the clo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance of ₹ 3,07,80,727/-, the Ld. CIT(Appeals) held that even in appeal effect proceedings, no bifurcation has been furnished regarding the apportionment between financial transactions and trading transactions with M/s Om Kailash Cotton. Rather, the assessee for the purpose of computation of interest disallowance of ₹ 19,13,491/- offered for taxation, has incorrectly taken the opening balance as ₹ 5,24,388/- instead of ₹ 3,07,80,727/-and therefore the computation presented by the assessee cannot be relied upon. Accordingly, Ld. CIT(Appeals) again directed the AO to work out the interest disallowance on the opening balance of ₹ 3,07,80,727/- taking into consideration only the financial transactions, and in the event the assessee is again unable to give any further bifurcations of the opening balance of ₹ 3,07,80,727/-then the entire opening balance may be presumed to be relating to financial transactions only. 6. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) in the second round of appellate proceedings. We note that the ITAT in ITA No.266/Ahd/2013 in the assessee s own case for the immediately prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be presumed that interest-bearing funds for use for purpose of granting interest free advances to M/s Om Kailash Cotton. He further drew attention to pages 11 to 16 of the paper book and contended that the same relates to interest disallowance computed at 12% in respect of financial transactions with M/s Om Kailash Cotton. In response, the Ld. DR relied upon the observations made by Ld. CIT(Appeals) in the appellate order. 8. We have heard the rival contentions and perused the material on record. We note that that the assessee, at any stage the proceedings, has been unable to produce bifurcation between financial and trading transactions with M/s Om Kailash Cotton, despite having been given several opportunities to produce the same. Neither has the assessee given bifurcation of opening balance of Rs. 3,07,80,727/- between trading transactions and financial transactions, nor has the assessee furnished such bifurcation in respect of amounts advanced to M/s. Om Kailash Cotton during the year under consideration. The assessee has not been able to produce any justifiable reason why the closing balance in loans and advances account of financial year 2008-09 of ₹ 3,07,80,727/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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