TMI Blog2022 (10) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ALLAHABAD HIGH COURT] and case of CIT vs. Tin Box Co. [ 2002 (11) TMI 75 - DELHI HIGH COURT] - Thus, once the presumption is drawn that the appellant made interest free loans to the related parties, no disallowance of interest u/s 36(1)(iii) is warranted. We direct the Assessing Officer to delete the addition made u/s 36(1)(iii) of the Act. Accordingly, the grounds of appeal no.2 and 3 filed by the appellant stand allowed. Exclusion of a sum shown in the Profit Loss Account as part of sales, offered to tax, on the ground that this income does not belong to the appellant - HELD THAT:- Keeping in view the principle that no income can be taxed, even if the income was offered to tax by mistake, the additional ground of appeal is admitted. However, we remand this additional ground of appeal to the file of the Assessing Officer with the direction that the same may be deleted in the hands of the appellant on due verification, it is found that the same income was offered to tax in the hands of Mr. Kruti Jain and income had not accrued to the appellant. Thus, the additional ground of appeal filed by the assessee stands partly allowed. Addition on account of difference in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout appreciating that no disallowance of interest was warranted. 3] The learned CIT(A) failed to appreciate that the disallowance of interest was not warranted since it had sufficient interest free funds available with it to advance funds to the sister concerns. 4] The learned CIT(A) erred in not specifically deleting the addition made of Rs.1,38,19,166/- u/s 41(1) of the Act and erred in directing the A.O. to decide the issue in line of the directions given by Hon'ble ITAT in the assessee s own case for A.Y. 2008-09. 5] The learned CIT(A) erred in confirming the disallowance of commission expenditure of Rs.31,54,244/- paid to L. K. Jain (HUF) on the ground that the assessee company had failed to prove that any services were rendered by the said entity. 6] The appellant craves leave to add, alter, amend or delete any of the above grounds of anneal. 4. Briefly, the facts of the case are that the appellant is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of developers and dealing in land. The return of income for the assessment year 2012-13 was filed on 29.09.2012 declaring total income of Rs.5,92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the ld. CIT(A) to the concerned person. The order of the ld. CIT(A) was lying with the Accounts Assistant who noticed while clearing his cupboard and thereafter, he immediately informed to the concerned person, who in turn taken necessary steps for filing the appeal. Thus, it was explained that the delay of 393 days was occurred on account of factors which are beyond the control of the appellant. 7. On the other hand, ld. CIT-DR opposed the condonation of delay. 8. Having heard the rival submissions and perused the averments made in the affidavit, we find that it is not the case of CIT-DR that the appellant had deliberately delayed filing of the appeal. Therefore, keeping in view of the decision of the Hon ble Supreme Court in the case of N. Balakrishnan v. M. Krishnamurthy, 7 SCC 123 (SC) wherein, it was held as follows :- the primary function of a Court is to adjudicate the dispute between the parties and to advance substantial justice; and that rules of limitation are not meant to destroy the right of parties, but they are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. It held that there is no presumption t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance on the decision of the Hon ble Supreme Court in the case of South Indian Bank Ltd. vs. CIT, 130 taxmann.com 178 (SC) and the decision of the Hon ble Jurisdictional High Court in the case of CIT vs. Reliance Utilities Power Ltd., 313 ITR 340 (Bom.). 11. On the other hand, ld. CIT-DR submits that in the absence of nexus between the interest free funds available with the assessee and loans advances given to the sister concerns, the submission of the appellant cannot be accepted. 12. We heard the rival submissions and perused the material on record. The issue in the ground of appeal no.2 and 3 relates to the disallowance of interest u/s 36(1)(iii) on the ground that the interest bearing funds had been diverted for the purpose of making loans and advances to the sister concerns or related parties. The Assessing Officer was of the opinion that the appellant company had diverted the interest bearing funds for the purpose of advancing interest free loans to the promoters and directors or related parties, therefore, the AO had resorted to the proportionate disallowance of interest u/s 36(1)(iii). Even on appeal before the ld. CIT(A), the ld. CIT(A) had negatived the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring 9 H. 39 Ares for consideration of Rs.90,00,000/- along with one Mr. Kruti Jain. Out of the above sale consideration, share of Kruti Jain was Rs.42,38,000/-. It was claimed that the entire sale consideration was offered to tax wrongly in the hands of the appellant company. Even though the share of the appellant company is only Rs.47,62,000/- out of total consideration of Rs.90,00,000/- entire consideration was offered to tax. Thus, it was submitted that an amount of Rs.42,38,000/- was wrongly offered to tax in the hands of the appellant. The appellant is seeking the exclusion of the said sum from the returned income. Thus, it was submitted that the same amount was taxed twice once in the hands of the appellant and again in the hands of Mr. Kruti Jain. 16. On the other hand, ld. CIT-DR submits that the additional ground of appeal cannot be admitted as no such claim was made in the return of income. 17. We heard the rival submissions and perused the material on record. The case of the appellant is based on the principle that no income can be taxed merely because the appellant had wrongly offered to tax. The taxing authorities cannot levy tax unless or otherwise, the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a part of inventory in the financial year 2011-12. The appellant company had filed a detailed explanation which was set out by the Assessing Officer vide para 4 of the assessment order. The appellant further made a submission that while computing the taxable income only the cost of construction was claimed as deduction which means that the value of opening stock and the closing stock had non-bearing in the computation of taxable income. However, the Assessing Officer was of the opinion that it resulted in distortion of taxable income. He further held that opening stock as well as closing stock should be valued by adopting the same method and principles. As a result of removal of value of the advance for land from closing stock, there was a understatement of taxable income and, accordingly, he made the addition of Rs.16,60,06,720/- to returned income. Even on appeal before the ld. CIT(A), the findings of the Assessing Officer had been confirmed by holding that closing balance of stock of preceding year, should be adopted as opening balance of the current year and the valuation of opening and closing balances should be done, adopting the same method of accounting and principles. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrong treatment given in the books of accounts in the earlier years by not including the value of advance given for purchase of land both from opening and closing inventory. As a result of altering the valuation of closing stock alone by the AO without a corresponding change at the other end i.e. in the beginning of the previous year, there would be distortion of profits and true profits would not be reflected as held by the Privy Council in CIT vs. Ahmedabad New Cotton Mills Co. Ltd., AIR 1930 PC 56. The Hon ble Delhi High Court in the case of CIT vs. Mahavir Alluminium Ltd., 297 ITR 77 (Delhi) following the ratio laid down in the Ahmedabad New Cotton Mills Co. Ltd. (supra) held that where the Assessing Officer alters the valuation of the closing stock, is bound to alter the valuation of opening stock on the same basis in order to avoid distortion of the taxable income for the year under consideration. The action of the AO in the present case, by altering the valuation of the closing stock alone runs contrary to the rationale of the decision, referred to supra. Further, it would also result in the inflated hypothetical income. It is settled principle of law that it is real income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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