ACIT, Pune V. Shri Harilal Chainrai Kataria, Pune

ITA 2443/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5898 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 11-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Business income; Proportionate interest
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2443/PN/2012 (ASSTT.YEAR : 2006-07) ACIT, CIRCLE-8, PUNE .. APPELLANT VS. HARILAL CHAINRAI KATARIA, 6, A-1, CHAMBERS, SAI CHOWK, VAIBAV NAGAR, PIMPRI, PUNE .. RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 16-01-2014 DATE OF PRONOUNCEMENT : 28-01-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 21-09-2012 OF THE CIT(A)-V, PUNE RELATING TO A.Y. 2006-07. 2. GROUNDS OF APPEAL NO.1 AND 2 BY THE REVENUE ARE AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.16,28 ,419/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUPPRESSION OF PROFIT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD.CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT IN THE STATEMENT RECORDED ON OATH DURING SURVEY, THE ASSESSEE HAD DECLARED THE AMO UNT OF RS.60 LAKHS AS HIS ADDITIONAL INCOME FOR A.Y.2006-07 OVER AN D ABOVE THE NORMAL INCOME AND HENCE WHAT IS ESTIMATED BY THE ASSESSI NG OFFICER IS ONLY NORMAL BUSINESS INCOME. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A CIVIL CONTRACTOR AND MAINLY WORKS FOR THE GOVERNMENT AGENCIES. IT F ILED ITS RETURN OF INCOME FOR A.Y. 2006-07 ON 31-10-2006 BY DECLARING TOTAL INCOME OF 2 RS.75,87,780/-. THE ASSESSING OFFICER COMPLETED TH E ASSESSMENT U/S.143(3) ON 17-11-2008 ACCEPTING THE RETURNED INC OME. SUBSEQUENTLY, THE ORDER PASSED U/S.143(3) WAS SET-ASIDE U/S.263 V IDE ORDER DATED 11-01- 2011 AND THE ASSESSING OFFICER WAS DIRECTED TO PASS THE ORDER DENOVO. 4. DURING THE COURSE OF SET-ASIDE PROCEEDINGS THE A SSESSING OFFICER OBSERVED FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAS DECLARED PROFIT OF RS.16,71,731/- AGAINST GROSS TURNOVER OF RS.4,12,57,874/- WHICH WAS 4.05%. HE REFERRED TO THE REPLY GIVEN BY THE A SSESSEE DURING THE COURSE OF SURVEY U/S.133A ON 27-09-2006 ACCORDING T O WHICH THE ASSESSEE HAD SUBMITTED THAT THE BOOKS OF ACCOUNT WE RE UPDATED UPTO JULY 2006. HOWEVER, NO SUCH BOOKS OF ACCOUNTS WERE FOUN D. HE OBSERVED THAT CERTAIN VOUCHERS WERE IMPOUNDED DURING THE COU RSE OF SURVEY ACCORDING TO WHICH SOME VOUCHERS CONTAINING THE NAM ES AND AMOUNTS WERE UNSIGNED. IN SOME OF THE VOUCHERS THERE WERE NAMES AND SIGNATURES BUT NO AMOUNTS WERE WRITTEN. IN CERTAIN TYPES OF V OUCHERS THEY WERE BLANK BUT SIGNED. IN VIEW OF THE ABOVE AND IN VIEW OF THE ADMISSION BY THE ASSESSEE DURING THE COURSE OF SURVEY THAT CERTA IN EXPENSES WERE INCURRED WHICH COULD NOT BE EXPLAINED IN THE INTERE ST OF BUSINESS THE ASSESSING OFFICER REJECTED THE BOOK RESULTS AND INV OKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND PROCEEDED TO COMPLETE THE ASSESSMENT U/S.144 OF THE I.T. ACT. WHILE DOING SO, HE ALSO R EJECTED THE CONTENTION OF THE ASSESSEE THAT SINCE HE HAS MADE DISCLOSURE O F RS.60 LAKHS THE PROFIT SHOULD NOT BE DETERMINED IN THE MANNER PRESCRIBED U /S.144 OF THE I.T. ACT. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY T HE ASSESSEE THE ASSESSING OFFICER ESTIMATED THE INCOME OF THE ASSES SEE FROM CONTRACT WORK BY APPLYING THE PROFIT RATE @8% AS ENVISAGED I N SECTION 44AD OF 3 THE I.T. ACT. HE THUS DETERMINED THE PROFIT FROM C ONTRACT WORK AT RS.33,00,150/-. SINCE THE ASSESSEE HAS ALREADY DISC LOSED PROFIT OF RS.16,71,731/- FROM CONTRACT WORK HE MADE ADDITION OF THE BALANCE PROFIT OF RS.16,28,419/- AS SUPPRESSION OF PROFIT FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER FURTHER MADE A DDITION OF RS.60 LAKHS WHICH WAS DISCLOSED BY THE ASSESSEE DURING TH E COURSE OF SURVEY AS INCOME FROM OTHER SOURCES. 5. IN APPEAL THE LD.CIT(A) FOLLOWING HIS ORDER FOR A.Y. 2007-08 DELETED THE ADDITION OF RS.16,28,419/-. WHILE DOIN G SO, HE ALSO OBSERVED THAT THE ASSESSEE HAS SHOWN PROFIT OF RS.16,71,731/ - ON A TOTAL TURNOVER OF RS.4,12,51,874/- WHICH WORKED OUT TO 4.05%. IF THE ADDITIONAL DECLARATION OF RS.60 LAKHS IS TAKEN INTO ACCOUNT TH E NET PROFIT GOES UPTO 17.38%, THEREFORE, THE ASSESSING OFFICER IS NOT JUS TIFIED IN MAKING ADDITION OF RS.16,28,419/-. HE ACCORDINGLY DIRECTE D THE ASSESSING OFFICER TO DELETE THE ADDITION. 5.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IDEN TICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN TH E IMMEDIATELY PRECEDING YEAR. WE FIND THE TRIBUNAL REJECTED THE GROUNDS RAISED BY THE ASSESSEE TOWARDS DELETION OF RS.30 LAKHS MADE BY TH E ASSESSING OFFICER BEING ADDITIONAL INCOME DECLARED DURING THE COURSE OF SURVEY BY OBSERVING AS UNDER : 4 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A ) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE F ACT THAT DURING THE COURSE OF SURVEY NO BOOKS OF ACCOUNTS WERE FOUND TO BE MAINTAINED BY THE ASSESSEE. THERE IS ALSO NO DISPUTE TO THE FACT THAT T HE ASSESSEE HAS MADE DECLARATION OF `60 LAKHS AS ADDITIONAL INCOME FO R A.Y. 2006-07 AND `30 LAKHS FOR A.Y. 2007-08 ON ACCOUNT OF VARIOUS DISCR EPANCIES POINTED OUT TO THE ASSESSEE BY THE SURVEY TEAM DURING THE COURSE OF SURVEY. UNDER THESE CIRCUMSTANCES, REJECTION OF BOOKS OF ACCOUN TS AND ESTIMATION OF PROFIT BY THE ASSESSING OFFICER IN OUR OPINION IS JUST IFIED. 6.1 SO FAR AS THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IT HAS DECLARED NET PROFIT OF 4.08% FOR A.Y. 2007-08 , 4.41% FOR A.Y. 2008- 09 AND 5.03 FOR A.Y. 2009-10 AND AFTER ADDING THE A MOUNT OF `30 LAKHS AS ADDITIONAL INCOME DECLARED DURING THE COURSE OF SURVE Y THE NET PROFIT FOR THE IMPUGNED ASSESSMENT YEAR BECOMES 6.77% AND THEREFORE THE SAME SHOULD BE ACCEPTED IN OUR OPINION DOES NOT FIND MUCH FORCE. ADMITTEDLY, THE SURVEY TOOK PLACE DURING THE IMPUGNED ASSESSMENT YEA R AND IT WAS DETECTED BY THE SURVEY TEAM THAT NO BOOKS OF ACCOUNTS WERE MAINTAINED AND THEREFORE NOTWITHSTANDING THE LOWER RATE OF PROF ITS DECLARED IN SUBSEQUENT ASSESSMENT YEARS AND IN ABSENCE OF ANY ADDITIONA L INCOME DECLARED IN ASSESSMENT YEAR 2008-09 AND 2009-10 THE SAME CANNOT BE TAKEN AS BASIS FOR THE IMPUGNED ASSESSMENT YEAR. SINCE THE TURNOVER/GROSS CONTRACT RECEIPT OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR ADMITTEDLY IS ABOUT `11.15 CRORES, THEREF ORE, THE PROVISIONS OF SECTION 44AD IS CERTAINLY NOT APPLICABLE. HOWEVER, THE NET PROFIT RATE OF 8% CAN BE THE BASIS FOR ESTIMATION OF P ROFIT IN A CASE WHERE NO ACCOUNTS ARE MAINTAINED OR THE ACCOUNTS APPEARED T O BE DEFECTIVE. UNDER THESE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER ESTIMATING THE NET PROFIT AT 8% OF THE TURNOVER/GROSS CONTRACT RECEIPT. FURTHER, SINCE THE ASSESSEE HAD DECLARED `30 LAKHS AS ADDITIONAL INCOME IN THE C OMPUTATION STATEMENT AND SINCE THE DIFFERENCE BETWEEN THE INCOME SHOWN IN THE PROFIT & LOSS ACCOUNT AT `45,44,995 AND THE ESTIMATED INCOME FROM CONTRACT WORK AT `89,19,251 IS MORE THAN `30 LAKHS, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT NO SEPARATE ADDITION OF ` 30 LAKHS IS REQUIRED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED DISCUSSION BY THE LEARNED CIT(A) WHILE UPHOLDING THE ESTIMATION OF 8% NET PROFIT ON THE CON TRACT RECEIPT AND DELETING THE ADDITION OF `30 LAKHS BY THE ASSESSING OFFI CER AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY E ITHER SIDE WE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY, WE UPHOLD THE SAME. THE GROUNDS RAISED BY THE ASSESSEE AS WELL AS THE REVENUE ARE ACCORDIN GLY DISMISSED. 6.1 SINCE THE CIT(A) FOLLOWING HIS ORDER FOR THE A. Y. 2007-08 HAS DELETED THE ADDITION OF RS.60 LAKHS MADE BY THE ASS ESSING OFFICER AS ADDITIONAL INCOME DECLARED DURING THE COURSE OF SUR VEY AND SINCE THE TRIBUNAL HAS ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL FILED BY THE REVENUE, THEREFO RE, FOLLOWING THE SAME 5 REASONING OF THE TRIBUNAL AND IN ABSENCE OF ANY CON TRARY MATERIAL BROUGHT TO OUR NOTICE THE GROUNDS RAISED BY THE REV ENUE ARE DISMISSED. 7. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UN DER : 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF INTE REST OF RS.3,96,900/- MADE BY THE ASSESSING OFFICER FOR DIVERSION OF THE INTER EST BEARING FUNDS FOR MAKING INTEREST FREE ADVANCES AND CLAIMING INTERE ST LIABILITY, WHEN THE ASSESSEE HAS NOT SUBSTANTIATED THE CLAIM THAT ONLY INT EREST FREE FUNDS HAVE BEEN USED TO EXTEND THE INTEREST FREE LOANS. 7.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSI NG OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASS ESSEE HAS MADE INTEREST FREE ADVANCE OF RS.26,46,993/- TO VARIOUS PARTIES WHILE ITS INTEREST BEARING BORROWINGS WAS RS.1,50,44,229/- AN D THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE OF RS.17,89,806/-. H E, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN WHY PROPORTIONATE INTEREST SHOU LD NOT BE DISALLOWED. IT WAS EXPLAINED THAT AS AGAINST INTEREST FREE ADVA NCE OF RS.26,46,993/- HE HAS TAKEN INTEREST FREE LOAN AMOUNTING TO RS.37,22, 587/-. IT WAS FURTHER EXPLAINED THAT OUT OF SUCH INTEREST FREE ADVANCE AN AMOUNT OF RS.10 LAKHS WAS MADE FOR MACHINERY WHICH COULD NOT MATERIALISE AND WAS RETURNED BACK. THE ADVANCE OF RS.17.58 LAKHS WAS SPENT ON M ISTYWOOD HOLIDAY RESORT AT MAHABALESHWAR AGAINST WHICH INCOME OF RS .1,60,500/- WAS SHOWN AND ADVANCE OF RS.9.25 LAKHS WAS INVESTED FOR PURCHASE OF VARIOUS PROPERTIES WHICH CANNOT BE CONSIDERED AS IN TEREST FREE ADVANCES. IT WAS ACCORDINGLY SUBMITTED THAT THERE WAS NO CASE FOR DIVERSION OF INTEREST BEARING FUNDS. HOWEVER, THE ASSESSING OFF ICER REJECTED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT INTER EST BEARING AS WELL AS INTEREST FREE FUNDS WERE IN THE CONSOLIDATED BASKET AND THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH DIRECT NEXUS BETWEEN INT EREST FREE FUNDS 6 RECEIVED AND INTEREST FREE ADVANCE GIVEN. HE ACCOR DINGLY DISALLOWED AN AMOUNT OF RS.3,96,900/-. 8. BEFORE CIT(A) THE ASSESSEE REITERATED THE SAME S UBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER. IT WAS SUBMITTE D THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AMOUNTING TO RS. 37,22,587/- AS AGAINST INTEREST FREE ADVANCE OF RS.26,46,993/-. RELYING O N THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RE LIANCE UTILITIES AND POWER LTD. IT WAS SUBMITTED THAT THERE IS NO CA SE FOR THE ASSESSING OFFICER TO MAKE ANY DISALLOWANCE ON ACCOUNT OF PROP ORTIONATE INTEREST FOR DIVERSION OF INTEREST BEARING FUNDS TOWARDS INTERES T FREE ADVANCE. 9. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY HOLDING AS UNDER : 17. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AS WELL AS REPLY OF THE APPELLANT. IT IS SEEN THAT AS AGAINST INTEREST FREE ADVANCE OF RS.26,46,993/- THE APPELLANT WAS HAVING SUFFICIENT INT EREST FREE FUND AMOUNTING TO RS.37,22,587/-. THE ASSESSING OFFICER HAS D ISALLOWED THE CLAIM ON THE GROUND THAT BOTH THE FUNDS WERE IN CONSO LIDATED BASKET AND NEXUS BETWEEN INTEREST FREE FUND AVAILABLE TO THE APP ELLANT AND INTEREST FREE ADVANCES MADE BY THE APPELLANT COULD NOT BE PRO VED. I FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE APPELLANT BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELI ANCE UTILITIES & POWER LTD. (2009) 313 ITR 340 (BOM.), WHEREIN IT HA S BEEN HELD THAT WHERE BOTH INTEREST BEARING FUNDS AS WELL AS INTEREST FR EE FUNDS ARE AVAILABLE AND INTEREST FREE ADVANCES HAVE BEEN MADE, PRESUMPTION WILL BE THAT INTEREST FREE ADVANCES ARE MADE OUT OF INTERE ST FREE FUNDS. THEREFORE, RELYING UPON THE ABOVE DECISION OF HONBL E BOMBAY HIGH COURT THE ASSESSING OFFICER IS DIRECTED TO DELETE THE AD DITION OF RS.3,96,000/. I ALSO FIND SUFFICIENT FORCE IN THE ARG UMENT OF THE APPELLANT THAT WHEN INCOME OF THE APPELLANT HAS BEEN ESTIMATED ON THE BASIS OF SEC.44AD, THERE WAS NO NEED TO DISALLOW INTEREST FURTH ER. THEREFORE, ON THIS ACCOUNT TOO, THE APPELLANT DESERVES TO SUCCEED. T HUS, THE APPELLANT GETS RELIEF OF RS.3,96,000/- AND GROUND NO. 5 & 6 ARE ALLOWED. 9.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 7 10. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE FINDINGS GIVEN BY THE LD.CIT(A) THAT THE ASSESSEE WAS HAVING SUFFICIENT I NTEREST FREE FUNDS AMOUNTING TO RS.32,22,587/- AS AGAINST INTEREST FRE E ADVANCE OF RS.26,46,983/- COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. 10.1 WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES POWER LTD. (SUPRA) HAS HELD THAT IF THERE WERE FUNDS AVAILABLE, BOTH INTEREST FREE AND OVER DRAFT AND/OR LOANS TAKE N, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE I NTEREST-FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE IN TEREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IT WAS ACCORD INGLY HELD THAT NO PORTION OF THE INTEREST CAN BE DISALLOWED. THE REL EVANT OBSERVATION OF THE HONBLE HIGH COURT READS AS UNDER : IF THERE BE INTEREST-FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD RAISE D A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST -FREE FUNDS AVAILABLE. IN OUR OPINION, THE SUPREME COURT IN EAST INDIA PHARMACEUTICAL WORKS LTD. V. CIT [1997] 224 ITR 627 HAD THE OCCASION TO CONSIDER THE DECISION OF THE CALCUTTA HIGH COURT IN WOOLCOMBERS OF INDIA LTD. [1982] 134 ITR 219 WHERE A SIMILAR ISSUE HAD ARISEN. BEFORE TH E SUPREME COURT IT WAS ARGUED THAT IT SHOULD HAVE BEEN PRESUMED THAT IN ESSENCE AND TRUE CHARACTER THE TAXES WERE PAID OUT OF THE PROFITS OF T HE RELEVANT YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNING O F THE BUSINESS AND IN THESE CIRCUMSTANCES THE APPELLANT WAS ENTITLED TO CLAI M THE DEDUCTIONS. THE SUPREME COURT NOTED THAT THE ARGUMENT HAD CONSI DERABLE FORCE, BUT CONSIDERING THE FACT THAT THE CONTENTION HAD NOT BEE N ADVANCED EARLIER IT DID NOT REQUIRE TO BE ANSWERED. IT THEN NOTED THAT IN WOOLCOMBERS OF INDIA LTD.`S CASE [1982] 134 ITR 219 THE CALCUTTA HI GH COURT HAD COME TO THE CONCLUSION THAT THE PROFITS WERE SUFFICIENT TO ME ET THE ADVANCE TAX LIABILITY AND THE PROFITS WERE DEPOSITED IN THE OVER DRAFT ACCOUNT OF THE ASSESSEE AND IN SUCH A CASE IT SHOULD BE PRESUMED THAT TH E TAXES WERE PAID OUT OF THE PROFITS OF THE YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNING OF THE BUSINESS. IT NOTED THAT TO RAISE TH E PRESUMPTION, THERE WAS SUFFICIENT MATERIAL AND THE ASSESSEE HAD URGED THE CONTENTION BEFORE THE HIGH COURT. THE PRINCIPLE, THEREFORE, WOULD BE THAT IF THERE ARE FUNDS 8 AVAILABLE BOTH INTEREST-FREE AND OVER DRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST- FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE THIS PRESUMPTION IS ESTABLISHED CONSIDERING THE FINDING OF FA CT BOTH BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE INCOME-T AX APPELLATE TRIBUNAL. CONSIDERING THE ABOVE, IN OUR OPINION, THERE IS NO ME RIT IN THIS APPEAL WHICH IS ACCORDINGLY DISMISSED. 10.2 RESPECTFULLY FOLLOWING THE DECISION OF THE JUR ISDICTIONAL HIGH COURT CITED SUPRA AND CONSIDERING THE FACT THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AT THE BEGINNING AS WELL AS AT THE CLOSE OF THE ACCOUNTING YEAR WHICH ARE FAR IN EXCESS OF INTEREST FREE LOANS ADVANCED TO THE SISTER CONCERNS, NO PORTION OF THE INTEREST, IN OUR OPINION, CAN BE DISALLOWED. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 28-01-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE, DATED : 28 TH JANUARY 2014 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-V, PUNE 4. THE CIT-V, PUNE 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE