Unless there is findings that investment not related to business and not utilized for business disallowance under sec 36(1)(iii) cannot raise

Last updated: 03 March 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
On this issue assessee contended in the ground that the Assessing Officer has erred in reopening the assessment mainly to disallow under section 14A of the Income Tax Act and took shelter under section 36(1)(iii) to avoid provisions of Section 14A which are not applicable for reopening assessments prior to 1.4.2001. It was noted that the return of income was filed on 29.12.2000 which was processed under section 143(1) on 3.11.1998. There was no scrutiny under section 143(3) and the processing has become final. Consequent to the Assessing Officer’s examination of return for the AY 2001-02, the assessment in this year was reopened. The reasons recorded by the Assessing Officer was that assessee company diverted its interest bearing funds to its group concerns and other several individuals on which no interest was claimed, nor income derived, whereas interest was paid on borrowed funds. AO has also stated the total figure of investment at `.1284.2 crores and the disallowance to be worked out at 18% at `.231.15lakhs. It was also recorded that some of the items pertains to share application money as well as interest on advances for the purposes of shares which require examination. After the reassessment, assessee took up the ground before the CIT (A) which the CIT (A) considered and rejected as stated in Para 3.3 as under

Citation :
Churu Trading Co. (P) Ltd 135 Continental Building Dr.A.B. Road, Worli Mumbai 400 018 PAN – AAACC 4853 G Appellant Vs Income Tax Officer Ward 6(2)-1 Aayakar Bhavan Mumbai 400020 Respondent