- (1.) The present appeal under section 260A of the Income Tax Act has been filed against order dated 14-6-2005 passed by the Income Tax Appellate Tribunal (Bench Lucknow) in ITA No. 118/Luc/2005 for the assessment year 2001-02. The appeal was admitted on the following substantial question of law :- "Whether the Income Tax Appellate Tribunal is justified in law in deleting the addition of Rs.18,32,000/- sustained by the CIT (A) without appreciating the facts of the case ?
(2.) The facts giving rise to the instant appeal are as follows :- The assessee is an Individual by status carrying on business of financing and investments. The modus operandi of the assessee's business is borrowing funds from the market and advancing it on interest to other parties. During the assessment year under consideration, the assessee has shown gross interest receipts from his business of financing to the extent of Rs.56,49,614/- against which he had paid interest on borrowed funds amounting to Rs.53,31,137/-. The Assessing Officer found that the assessee had invested an amount of Rs.2,01,33,605/- in shares including an investment of Rs.2 crores in the shares of Agmo Tex Ltd. He also noticed that the assessee has substantial interest in the above concern and no benefit or income has been derived or accrued in respect of investment of Rs.2 crores in the shares of Agmo Tex Ltd. The Assessing Officer after considering that the assessee had non interest bearing funds of Rs.85.5 lakhs and that the assessee was paying the interest on the borrowed fund ranging from 12% to 21%, considered the rate of interest of 18% and disallowed the proportionate interest on the remaining amount of Rs.1,14,50,000/- which comes to Rs.20.61 lakhs out of the interest expenses debited by the assessee. The assessment was completed u/s. 143(3) of the Income Tax Act, 1961 on 31.03.2004 on an income of Rs.24,12,6000/-.
(3.) Being aggrieved, the assessee filed an appeal before CIT(A), Kanpur who vide his order dated 02.02.2005 has allowed a relief of Rs.2,29,000/- out of total addition of Rs.20,61,000/- in respect of interest disallowed on account of investment in shares.;