A. KALYANASUNDHARAM ORDER These are two appeals by assessee, limited company, and issue is with regard to non-allowing of interest on reason that investment was not made for business purposes. 2 . rival contentions in regard to above have been very carefully considered. In this case AO disallowed interest in excess of 15 per cent. CIT(A) was of view that there was diversion of fund. assessee claimed that it had free reserves to tune of Rs. 1,58,23,406. assessee also provided statement of funds that were generated over years which showed funds that were received back from companies to which it had advanced earlier and extent of surplus funds still available for advance to sister- concern. For asst. yr. 1993-94 amount that was generated was to tune of Rs. 22.22 lakhs and surplus funds are Rs. 13.22 lakhs. In another statement also same figures are shown. This statement shows that assessee s own funds was more than what it had advanced to sister- concern. Therefore, question of assessee utilising borrowed funds for advancing to sister-concern is not correct. 3 . For asst. yr. 1995-96 also statement of funds showed assessee having Rs. 93.36 lakhs surplus funds after advancing funds to sister- concern. Therefore, for both assessment years assessee had clearly shown that it had funds from which it had advanced money. Therefore, disallowance as part of diversion of borrowed funds is not correct. disallowance is accordingly, deleted. I have gone through order of learned senior Vice President in above case. As I am unable to agree with findings of learned senior Vice President, I proceed to pass my order of dissent in this case. 2. These two appeals are by assessee. AO disallowed interest on ground that borrowed amounts were diverted to sister-concern for which no interest was charged. While taking ground of appeal assessee challenged disallowance of interest of Rs. 4,89,788 stating that investment was made for purpose not relating to business. assessee prayed for allowance of interest as expenses of company. It was contention of assessee that investments were out of reserve funds available with company and company purchased shares out of free reserves also. Hence disallowance is not justified. For asst. yr. 1995-96 grievance of assessee is that CIT(A) is wrong in confirming disallowance of Rs. 4,20,000 being interest at rate of 15 per cent per annum on amounts given to PMP Steel Rolling Mills (Madras) Ltd. and PMP Steels Ltd. Here also assessee s contention was that these amounts were given for purchase of shares out of own funds generated during that assessment year from income earned and by way of depreciation availed during that period. While hearing case assessee has also filed paper book along with 10th, 11th, 12th, 13th, 14th and 15th annual reports of assessee-company to show cash reserves. However, assessee could not establish that these documents were already available before Revenue authorities for purpose of deciding issue. It is settled law that if assessee is having sufficient reserve to advance amount, burden is on assessee. assessee, in our view, has not discharged burden that there are no borrowed funds diverted to sister-concerns free of interest. paper book filed before us requires adjudication by Revenue authorities. Hence this is fit case to be remanded back to file of AO for purpose of adjudication particularly with reference to position of funds as to whether assessee is having sufficient surplus funds for advancing to sister-concerns. It is also duty of assessee to prove that borrowed funds were never advanced to sister- concerns. For this aspect I feel that this case should go back to AO for purpose of adjudication. Therefore, I feel that order of CIT(A) is to be set aside and issue is to be remitted back to AO to decide issue in accordance with law. As in my view issue is to be remitted back to AO, deletion made by learned senior Vice President is not found agreeable to me. I differ on this. appeals are to be allowed for statistical purposes only. REFERENCE UNDER S. 255(4) OF IT ACT, 1961 VIMAL GANDHI, PRESIDENT VIMAL GANDHI, PRESIDENT appeals, referred to below, were heard by Shri A. Kalyanasundharam, senior Vice President and Shri N. Vijayakumaran, JM. Shri A. Kalyanasundharam had kept files with him for dictation of orders. However, orders were not passed till Shri A. Kalyanasundharam was transferred and relinquished his office as senior Vice President, Chennai Benches, Chennai. He appears to have sent proposed orders subsequently to learned JM for his signatures, who did not agree and has passed dissenting orders. Shri A. Kalyanasundharam is not available for stating point or points of difference and accordingly learned Vice President, Chennai Zone has sent these files to me. In terms of s. 255(4), I frame points of difference in five appeals as below and appoint zonal Vice President as Third Member, for dealing with cases in accordance with law : 1. ITA Nos. 955 and 1851/Mad/1995; asst. yrs. 1994-95 and 1995-96 MAC Industrial Products vs. Asstt. CIT. "Whether, on facts and in circumstances of case, impugned order of CIT(A) on preoperative expenses and interest is to be confirmed or appeal of assessee is to be allowed ?" 2. ITA No. 717/Mad/1998; asst. yr. 1996-97 Dy. CIT vs. Shripet Cybertech Systems Ltd. "Whether, on facts and in circumstances of case, appeal of Revenue is required to be allowed in part, as held by learned senior Vice President or is to be fully allowed, as held by learned JM ?" 3. WTA Nos. 316 to 318/Mad/1997; asst. yrs. 1990-91 to 1992-93 Mrs. Umayal Ramanathan vs. Asstt. CIT. "Whether, on facts and in circumstances of case, amount advanced to companies in dispute is liable to be added in wealth of assessee on valuation date, as held by learned JM or its value is to be taken at zero, as held by learned senior Vice President ?" 4. ITA Nos. 20 57 and 2058/Mad/1998; asst. yrs. 1993-94 and 1995-96 Kumaragiri Textiles Ltd. vs. Dy. CIT. "Whether, on facts and in circumstances of case, order of senior Vice President is to be upheld or that of JM, in respect of claim of interest made by assessee ?" 5. ITA No. 2771/Mad/1993; asst. yr. 1990-91 Smt. M.V. Rajamma vs. Asstt. CIT. "Whether, on facts and in circumstances of case, order of CIT under s. 263 is required to be set aside, as held by learned senior Vice President or upheld as held by learned JM ?" above points of differences in 5 cases are referred to Hon ble Vice President, Chennai as Third Member, for separate decision in each case, for disposal in accordance with law. M.K. CHATURVEDI, VICE PRESIDENT : These appeals came before me as Third Member to express my opinion on following question : "Whether, on facts and in circumstances of case, order of senior Vice President is to be upheld or that of JM, in respect of claim of interest made by assessee ?" 2. solitary issue raised in these appeals relates to disallowance of interest to extent of Rs. 4,89,788 on ground that assessee had diverted its borrowed funds to its sister-concerns without charging any interest. funds alleged to have been diverted to following three sister-concerns are as under : "1. M/s P.M.P. Textiles Spinning Mills Ltd. 2,84,850 2. M/s P.M.P. Steels (P) Ltd. 1,95,000 3. M/s Kumaragiri Electronics Ltd. 9,938 Total 4,89,788" 3 . It was contended before Revenue authorities that sums were advanced by assessee out of own funds to sister-concerns for allotment of shares. No borrowed funds were used for making such advances. It was noticed by Revenue authorities that assessee was having its own funds as well as borrowed funds. funds were in mixed bag. Due to paucity of funds assessee had to borrow money for business purposes. finding is recorded by AO that assessee had made bulk advances to sister- concerns out of cash credit with Andhra Bank, Madras Main (Explanade) Branch. 4 . It was contended before Tribunal that assessee did make advance to sister-concerns to purchase shares. Such advance was made out o f free reserves. It was submitted free reserves to tune of Rs. 1,58,23,406 were available with assessee. 5 . learned counsel for assessee invited my attention on provision of s. 139(9) of IT Act, 1961. It was stated that assessee did furnish trading and P&L a/c for all years and balance sheet. No defect memo under s. 139(9) was issued. This proves beyond shadow of doubt that assessee discharged its onus in respect of availability of funds. It was further submitted that powers of Tribunal in matter of setting aside assessment are large and wide, but these cannot be exercised to allow AO opportunity to patch up weak part of his case and to fill up omission. For this proposition reliance was placed on decision of Tribunal rendered in case of Asstt. CIT vs. Anima Investment Ltd. (2000) 68 TTJ (Del)(TM) 1 : (2000) 73 ITD 125 (Del)(TM). 6 . Learned counsel for assessee further relied on decision of apex Court rendered in case of Tin Box Co. vs. CIT (2001) 166 CTR (SC) 509 : (2001) 249 ITR 216 (SC). In this case Tribunal found that AO did not give to assessee proper opportunity of being heard. It was held that assessee had opportunity before CIT(A). Issue was decided on merits against assessee. On reference High Court held that there was no reason why Tribunal should set aside order of AO merely because that officer did not grant all reasonable opportunities to assessee. On appeal apex Court reversed order of High Court and held that once Tribunal found that AO had not given to assessee proper opportunity of being heard, assessee could have placed evidence before CIT(A) was really of no consequence. matter was restored to file of AO for fresh adjudication. 7. It was further submitted by learned counsel for assessee that assessee is expected to maintain books for 6 years and not beyond that, as such JM was not correct in restoring matter to file of AO for fresh adjudication. 8. learned Departmental Representative relied on decision of learned JM. It was submitted that assessee failed to adduce evidence before Revenue authorities in regard to its claim. As it was not clear that whether advance was made out of borrowed funds or out of own funds, learned JM rightly restored matter to file of AO for fresh adjudication. 9. Having heard rival submissions and after perusing details available on record, I find that learned JM restored matter to file of AO as because in his opinion assessee failed to discharge burden as to fact that no borrowed funds were diverted to sister-concerns free of interest. It is burden of assessee to prove beyond doubt that interest-free funds advanced to sister-concerns were not out of borrowed funds. It appears from records that before Revenue authorities no direct evidence was adduced in this regard. Burden of proof lies on person who has to prove fact and it never shifts. assessee failed to demonstrate existence of sufficient reserve out of which interest-free advances were said to have been made before Revenue authorities. What for funds were borrowed ? Whether such borrowed funds were used to advance money ? How much m o n e y was available with assessee ? All these questions were not examined. No finding is recorded apropos same. What evidence assessee did adduce before Revenue authorities to substantiate claim ? Assessee did furnish some documents and papers before Tribunal. It was not established fully well whether these documents were available with Revenue authorities. As such learned JM restored issue to file of AO for fresh adjudication. I have gone through both conflicting orders. In my opinion learned JM took correct view in matter. I concur with his decision. 1 0 . Now matter will go back to regular Bench for deciding appeals in accordance with majority. N. VIJAYAKUMARAN, J.M. In this case, on difference of opinion amongst Members who originally heard appeals, following question was referred for opinion of Hon ble Third Member : "Whether, on facts and in circumstances of case, order of senior Vice President is to be upheld or that of JM, in respect of claim of interest made by assessee ?" 2. Hon ble Third Member, vide order dt. 24th Jan., 2006 expressed view that opinion of learned JM took correct view in matter and accordingly he concurred with decision of learned JM. 3 . In view of majority decision of Bench, appeals of assessee are allowed for statistical purposes. *** KUMARAGIRI TEXTILES LTD. v. DEPUTY COMMISSIONER OF INCOME TAX