GANESH BHASKARRAO MANEDESHMUKH,,PUNE vs. INCOME-TAX OFFICER,,

The brief facts of the case as emanating from records are: The assessee is a Civil Contractor engaged mainly in construction of dams, canals, etc. The assessee filed his return of income for the impugned assessment year on 15-10-2010 declaring total income of Rs.62,58,035/-. There was mismatch of TDS credit, therefore, the case of the assessee was selected for scrutiny under CASS. Statutory notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was issued to the assessee on 26-08-2011. In scrutiny assessment proceedings, the Assessing Officer made disallowance u/s. 14A of the Act Rs.1,19,332/- and made proportionate disallowance of interest Rs.5,96,369/- on interest free Loans and Advances to various persons.

Shri Pawan V. Auti appearing on behalf of the assessee submitted at the outset that he is not pressing ground Nos. 3 to 7 in respect of disallowances made u/s. 14A of the Act. In respect of ground Nos. 1 and 2 relating to disallowance of interest Rs.5,96,369/- the ld. AR submitted that the disallowance has been made by the Assessing Officer on the pretext that the assessee has advanced interest bearing funds to various persons without charging interest. The ld. AR submitted that a perusal of the Balance sheet at page 10 of the paper book would show that own interest free funds of the assessee are much more than the loans and advances made. The ld. AR pointed that the assessee has capital to the tune of

On the other hand Shri Achal Sharma representing the Department vehemently defended the findings of Commissioner of Income Tax (Appeals) in confirming the addition. The ld. DR submitted that a perusal of assessment order clearly reveal that the disallowance of interest has been made by Assessing Officer on the basis of admission made by the assessee. The assessee had furnished the working of proportionate disallowance of interest before the Assessing Officer and on the basis of that working alone the Assessing Officer had made disallowance of Rs.5,96,369/-.

Controverting the submissions made by the DR, the ld. AR submitted that before the Assessing Officer the assessee had furnished written submissions giving the working of interest calculation on loans and advances and has also given the working of interest disallowance to be made with respect to loans and advances. Admittedly, as per the working furnished by the assessee before the Assessing Officer the assessee had admitted that disallowance to the extent of Rs.1,13,608/- is to be made. The interest in respect of total loans and advances @ 14% per annum was

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. We have also considered the documents on which the ld. AR has placed reliance. The assessee in appeal has raised two issues. The ground Nos. 1 and 2 are in respect of disallowance of interest Rs.5,96,369/-. The ground Nos. 1 to 7 are qua disallowance u/s. 14A r.w. Rule 8D.

In so far as disallowance of interest is concerned the contention of the assessee is that the assessee has advanced loans to the tune of Rs.8,059,781/-. The assessee has sufficient own funds and interest free funds to cover the interest free loans and advances. We find that in assessment proceedings the assessee has admitted that the interest bearing funds were also used for advancing of interest free loans. The assessee computed interest on such interest bearing funds at Rs.1,13,608/-. The ld. AR of the assessee has again admitted this fact before us. Thus, in view of the assessee’s own admission we are of considered view that disallowance of interest should be restricted to Rs.1,13,608/-.

A perusal of the Balance sheet at page 10 of the paper book clearly indicates that the assessee has sufficient own funds to cover the loans and advances. However, in view of assessee’s own admission, we restrict disallowance to Rs.1,13,608/-. Accordingly, the ground Nos. 1 and 2

The ground Nos. 3 to 7 raised in the appeal are in respect of disallowance made u/s. 14A r.w. Rule 8D. The ld. AR of the assessee stated at the Bar that he is not pressing this issue. Accordingly, ground Nos. 3 to 7 raised in appeal by the assessee are dismissed as not pressed.

In the result, the appeal of assessee is partly allowed in the terms aforesaid.