Vimpsan Investment Pvt. Ltd., Ahmedabad V. The Income tax Officer, Ward-8(4), Ahmedabad

CO 355/AHD/2004

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6813 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 1 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-01-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 27-12-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P M MEHTA
• Assessee Lawyers: KARTAR SINGH
• Keywords: Business income; Proportionate interest
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT , JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NOS.3475 / AHD/2004 & 750/AHD/2007 (ASSESSMENT YEAR 2001-02) ITO, WARD 8(4), AHMEDABAD VS. VIMPSAN INVESTMENT PVT. LTD., RAM NIVAS NO.1, KHANPUR, AHMEDABAD C.O. NOS.355/AHD/2004 & 262/AHD/2011 (ASSESSMENT YEAR 2001-02) VIMPSAN INVESTMENT PVT. LTD., VS. ITO, WARD 8(4), RAM NIVAS NO.1, AHMEDABAD KHANPUR, AHMEDABAD PAN/GIR NO. : AAACV7074Q (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI KARTAR SINGH CIT DR RESPONDENT BY: SHRI P M MEHTA, AR DATE OF HEARING: 05.01.2012 DATE OF PRONOUNCEMENT: _____.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THESE ARE TWO APPEALS OF THE REVENUE FOR THE ASSES SMENT YEAR 2001- 02. ONE APPEAL IN I.T.A.NO. 3475/AHD/2004 IS IN TH E CASE OF QUANTUM PROCEEDINGS WHEREAS THE SECOND APPEAL IN I.T.A.NO. 750/AHD/2007 IS IN PENALTY PROCEEDINGS IN RESPECT OF THE PENALTY DELET ED BY LD. CIT(A) BEING THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF TH E INCOME TAX ACT, 1961. THE CROSS OBJECTIONS OF THE ASSESSEE ARE FOR THE ASSESSMENT YEAR 2001-02. FIRST C.O. IS FILED BY THE ASSESSEE IN QU ANTUM PROCEEDINGS AND VARIOUS GROUNDS ARE RAISED FOR PART DISALLOWANCE CO NFIRMED BY THE LD. I.T.A.NO3475 /AHD/2004 I.T.A.NO. 750/AHD/2007 C.O.NO.355/AHD/2004 & C.O. NO.262/AHD/2011 2 CIT(A) IN C.O. NO.355/AHD/2004. IN THE SECOND C.O. , THE ASSESSEES GRIEVANCE IS REGARDING CONFIRMATION OF PART PENALTY OF RS.6,64,616/- OUT OF TOTAL PENALTY IMPOSED BY THE A.O. OF RS.52,68,26 9/- U/S 271(1)(C) OF THE ACT. 2. REGARDING GROUND NO.1 OF THE QUANTUM APPEAL, LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE SUBMITTED THAT THE ASSESSEE HAD MADE PR OVISIONS IN RESPECT OF PREMIUM PAYABLE ON DEEP DISCOUNT BONDS ISSUED BY TH E ASSESSEE COMPANY WHICH ARE REDEEMABLE AFTER 6 YEARS AND HENCE, IN TH E PRESENT YEAR, DEDUCTION WAS CLAIMED FOR THE 1/6 TH OF THE TOTAL AMOUNT OF REDEMPTION PREMIUM TO THE EXTENT OF RS.5 CRORES AS AGAINST TOT AL RS.30 CRORES PAYABLE AFTER 6 YEARS. HE FURTHER SUBMITTED THAT THIS PROV ISION MADE BY THE ASSESSEE COMPANY IS IN LINE WITH THE JUDGEMENT OF H ONBLE APEX COURT RENDERED IN THE CASE OF MADRAS INDUSTRIAL INVESTMEN T CORPORATION LTD. AS REPORTED IN 225 ITR 802. HE FURTHER SUBMITTED THAT IN THE SUBSEQUENT YEAR, THESE DEEP DISCOUNT BONDS WERE REDEEMED PREMA TURE AS PER OPTION EXERCISED BY BOND HOLDERS AND THE ASSESSEE CREDITED THE INCOME OF RS.2.30 CRORES IN THE ACCOUNTING YEAR ENDED ON 31.0 3.2002 I.E. THE NEXT YEAR AND THE SAME WAS OFFERED TO TAX IN THAT YEAR A ND HENCE, NO DISALLOWANCE IS JUSTIFIED IN THE PRESENT YEAR. RE LIANCE WAS PLACED ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN T HE CASE OF CIT VS S M HOLDING AND FINANCE PVT. LTD. AS REPORTED IN 26 4 ITR 370, IN WHICH SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CAS E OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD (SUPRA). 3. REGARDING GROUND NO.2 OF THE REVENUE, LD. D.R. S UPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORD ER OF LD. CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE I.T.A.NO3475 /AHD/2004 I.T.A.NO. 750/AHD/2007 C.O.NO.355/AHD/2004 & C.O. NO.262/AHD/2011 3 JUDGEMENTS CITED BY THE LD. A.R. OF THE ASSESSEE. WE FIND THAT REGARDING GROUND NO.1 OF THE REVENUES APPEAL, A CLEAR FINDIN G IS GIVEN BY THE LD. CIT(A) THAT PREMATURE SURRENDER OF BONDS TOOK PLACE IN THE NEXT YEAR WHICH THE ASSESSEE CANNOT TAKE NOTE OF IN THE YEAR UNDER CONSIDERATION BECAUSE IT IS NOT POSSIBLE TO FORESEE THE CIRCUMSTA NCES. HE HAS ALSO GIVEN A CLEAR FINDING THAT LIABILITY OF INTEREST IS NOT A CONTINGENT LIABILITY AND IT IS ONE OF THE OPTION AVAILABLE WITH THE BOND HOLDER THAT THEY CAN GET IT CONVERTED INTO SHARES OF THE COMPANY AFTER 6 MON THS AND BEFORE 72 MONTHS OF BOND PERIOD. UNDER THESE FACTS, WE FEEL THAT THIS PROVISION WAS MADE BY THE ASSESSEE ON A CORRECT BASIS AS PER THE DECISION OF HONBLE APEX COURT RENDERED IN THE CASE OF MADRAS INDUSTRIA L INVESTMENT CORPORATION LTD. (SUPRA) AND IN VIEW OF THE PREMATU RE SURRENDER OF BONDS BY THE BOND HOLDER IN THE NEXT YEAR, EXCESS AMOUNT DEBITED IN THE PRESENT YEAR HAS BEEN OFFERED TO TAX IN THE SUBSEQUENT YEAR AND, THEREFORE, UNDER THESE FACTS OF THE PRESENT CASE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE BECAUSE DEDUC TION CLAIMED BY THE ASSESSEE IN THE PRESENT YEAR IS AS PER THE JUDGEMEN T OF HONBLE APEX COURT AND ALSO AS PER THE JUDGEMENT OF HONBLE BOMB AY HIGH COURT RENDERED IN THE CASE OF S M HOLDING AND FINANCE PVT . LTD. (SUPRA) AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUND NO.1 OF THE REVENUE IS REJECTED. 5. REGARDING GROUND NO.2 OF THE REVENUES APPEAL, W E FIND THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) AS PER PARA 21 OF HIS ORDER WHICH IS REPRODUCED BELOW: 21. IN THIS REGARD ASSESSEE'S FIRST AND FOREMOST C ONTENTION IS THAT THE ASSESSMENT ORDER ITSELF TAKES NOTICE OF THE FAC T THAT 'THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRAD ING IN PLASTIC, SHARES, SECURITIES AND CONSULTANCY'. OBVIOUSLY, EVE N AS PER THE ASSESSING OFFICER THE ASSESSEE IS TRADER IN SHARES AND SECURITIES. FOR A TRADER IN SHARES AND SECURITIES THE WHOLE OF INTEREST EXPENDITURE IS ALLOWABLE AS DEDUCTION IN THE COMPUT ATION OF I.T.A.NO3475 /AHD/2004 I.T.A.NO. 750/AHD/2007 C.O.NO.355/AHD/2004 & C.O. NO.262/AHD/2011 4 BUSINESS INCOME ITSELF, IN VIEW OF THE GUJARAT HIGH COURT DECISION IN. THE CASE OF COTTON FABRICS 131 ITR 99. DURING T HE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT ALSO RELIED ON THE DECISION OF BOMBAY IT AT IN THE CASE OF MAFATLAL HOLDINGS LTD., DATED 23-04- 2003 AND STATED THAT DIVIDEND INCOME IS NOT EXEMPT AND DISALLOWANCE U/S. 14A IS NOT JUSTIFIED. ALTER CAREF ULLY CONSIDERING THE SUBMISSIONS OF THE COUNSEL OF THE APPELLANT, IT IS NOTICED THAT BEFORE THE GUJARAT HIGH COURT, THERE WAS NO QUESTIO N OF EFFECT OF SEC. 14A BEING CONSIDERED BECAUSE THAT PROVISION WA S NOT ON THE STATUTE BOOK WHEN THE SAID DECISION WAS RENDERED, S IMILAR!}', IN THE CASE OF MAFATLAL HOLDINGS LTD. ALSO, THE APPLICABIL ITY OF SEC. 14A WAS NOT DISCUSSED. IN THE ALTERNATIVE, THE COUNSEL OF THE APPELLANT HA S ARGUED THAT THE DISALLOWANCE OF INTEREST AMOUNTING TO RS. 3,72.88,7 43/- IS EXCESSIVE. I HAVE ALSO CONSIDERED THE SUBMISSIONS M ADE BY THE APPELLANT. IT IS NOTICED THAT THE DISALLOWANCE HAS BEEN MADE BY THE A.O. AT THE RATE OF I5O ON RS. 24.85,91.626/-. WHI CH INCLUDES STOCK IN TRADE OF RS. 5,44.89.529/-. THE INCOME FRO M SALES OF STOCK IN TRADE WILL BE TAXED AS BUSINESS INCOME AND, THER EFORE, THE QUESTION OF INVOKING SEC. 14A ON THIS AMOUNT DOES N OT ARISE. AS REGARDS DIE BALANCE AMOUNT OF RS. 19,41,02,097/-. I T IS SEEN THAT THE SAME REPRESENTS INVESTMENT IN SHARES. AS PER THE DETAILS FURNISHED BY THE APPELLANT DURING THE COURSE OF APPELLATE PRO CEEDINGS, WHICH WERE ALSO AVAILABLE WITH THE A.O. IT IS SEEN THAT THE APPELLANT IS HAVING AN OPENING BALANCE OF SHARE CAPITAL AND RESE RVE AMOUNTING TO RS. 1,47,50,979/-, WHICH WAS AT THE DISPOSAL OF THE APPELLANT ON WHICH THE QUESTION OF PAYING ANY INTEREST DOES NOT ARISE. IN SHORT, DIE BORROWED FUNDS USED FOR INVESTMENT IN SHARES WO ULD BE ONLY RS. 17.93.51.118/- (19,41,02,097 MINUS 1,47,50,979- /-) AND HENCE, THE DISALLOWANCE US. 14A IS LO BE CALCULATED ON THE BALANCE AMOUNT OF RS. 17,93,51,118/-. IT IS FURTHER SEEN THAT TH E TOTAL BORROWED FUNDS IS OF RS. 185.38,31,129/- AGAINST WHICH INTER EST HAS BEEN PAID AT RS. 12.18.83.793-. CONSIDERING THE FACT THAT THE INTEREST RATE VARIES FROM TIME TO TIME, THE OVERALL INTEREST RATE PAID HAS TO BE CONSIDERED AND IN THAT CASE IT IS SEEN THAT THE AVE RAGE RATE OF INTEREST ON RS. 185,38,31,129/ - COMES LO ABOUT 6.5 7%. THEREFORE, I AM OF THE VIEW THAT PROPORTIONATE INTEREST ON INV ESTMENT OF RS. 17,93,51,118.- APPLYING THE SAID RATE HAS TO BE DIS ALLOWED U.S. 14A. WHICH COMES TO RS.1,17,91,794/ -. THE A.O. IS DI RECTED TO RESTRICT THE DISALLOWANCE TO RS. 1,17,91,794/-. AS REGARDS THE DISALLOWANCE OF DEMAT CHARGES OF RS. 23,832/-, I FIND THAT THE SAME REPRESENTS TO THE INVESTMENT MAD E IN SHARES AND, I.T.A.NO3475 /AHD/2004 I.T.A.NO. 750/AHD/2007 C.O.NO.355/AHD/2004 & C.O. NO.262/AHD/2011 5 THEREFORE, THE DISALLOWANCE OF THE SAID AMOUNT IS Q UITE IN ORDER AND THE SAME IS HEREBY CONFIRMED. 6. WE FIND THAT THE DECISION OF LD. CIT(A) IS ON TH IS BASIS THAT PROPORTIONATE INTEREST ON INVESTMENT OF RS.1793.51 LACS SHOULD BE ON THE BASIS OF AVERAGE RATE OF INTEREST PAID BY THE ASSES SEE. THE AVERAGE RATE OF INTEREST HAS BEEN WORKED OUT BY LD. CIT(A) @ 6.57% AND DISALLOWANCE AT THIS RATE WAS CONFIRMED BY HIM AND THIS HAS BEEN WORKED OUT AT RS.1,17,91,794/- IS AGAINST THE AMOUNT OF DISALLOWA NCE MADE BY THE A.O. OF RS.3,72,88,743/-. TO THIS EXTENT, THE ORDER OF LD. CIT(A) IS JUSTIFIED BUT HIS ACTION OF REDUCING SHARES HELD AS STOCK IN TRADE OF RS.5,44,89,529/- FROM THE AMOUNT OF TOTAL INVESTMENT FOR COMPUTING T HE AMOUNT OF INTEREST TO BE DISALLOWED AS AGAINST THE RATIO LAID DOWN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT (P) LTD. AS REPORTED IN 119 TTJ 289 (MUM.) (SB). IN THAT CASE, IT WAS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL THAT EVEN FOR SHARES HELD AS STOCK IN TRADE, DISALLOWANCE HAS TO BE MADE U/S 14A. HENCE, THE AMOUNT OF SUCH INVESTMENT CANNOT BE REDUCED TO COMPUTE THE AMOUNT OF INTEREST TO BE DIS ALLOWED AS HAS BEEN DONE BY LD. CIT(A). THIS ASPECT OF THE ORDER OF LD . CIT(A) IS REVERSED AND THE A.O. IS DIRECTED TO COMPUTE THE INTEREST TO BE DISALLOWED U/S 14A @ 6.57% OF RS.23,38,40,647/- (RS.24,85,91,626 RS. 1,47,50,979). THIS GROUND IS PARTLY ALLOWED. 7. IN THE RESULT, APPEAL OF THE REVENUE IN I.T.A.NO . 3475/AHD/2004 IS PARTLY ALLOWED. 8. NOW, WE TAKE UP THE APPEAL OF THE REVENUE IN RES PECT OF PENALTY PARTLY DELETED BY LD. CIT(A) IN I.T.A.NO. 750/AHD/2 007. IN RESPECT OF THIS PENALTY APPEAL, LD. D.R. SUPPORTED THE PENALTY ORDER WHEREAS THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT NO PENALTY IS J USTIFIED IN THE PRESENT CASE. I.T.A.NO3475 /AHD/2004 I.T.A.NO. 750/AHD/2007 C.O.NO.355/AHD/2004 & C.O. NO.262/AHD/2011 6 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT IN THE PRESENT CASE, IT IS NOTED BY THE LD. CI T(A) IN HIS QUANTUM ORDER, THAT PART OF SHARES WERE INCLUDED IN STOCK I N TRADE OF THE ASSESSEE AND INTEREST DISALLOWED ON THAT PART WAS DELETED BY LD. CIT(A). WE HAVE REVERSED THE DECISION OF LD. CIT(A) ON THIS ASPECT BUT IT HAS TO BE ACCEPTED THAT THIS ISSUE WAS VERY MUCH DEBATABLE TI LL THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF DAGA CAPITAL MANAGEMENT (P) LTD. AS REPORTED IN 119 TTJ 289 (SB) (MUM.). THEREAFTER ALSO, IN THE CASE OF RELIANCE PETRO PROD UCTS PVT. LTD. AS REPORTED IN 322 ITR 158, IT WAS HELD BY THE HONBLE APEX COURT THAT MERELY FOR THIS REASON THAT CERTAIN CLAIMS WERE MAD E BY THE ASSESSEE, PENALTY IS NOT JUSTIFIED. IN THAT CASE ALSO, PENAL TY U/S 271(1)(C) WAS IMPOSED IN RESPECT OF DISALLOWANCE MADE U/S 14A OF THE INCOME TAX ACT, 1961. UNDER THESE FACTS, THE MATTER WAS DECIDED BY THE HONBLE APEX COURT IN FAVOUR OF THE ASSESSEE AND THE RELEVANT PA RA IS PARA 12 OF THIS JUDGEMENT, WHICH IS REPRODUCED BELOW: IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF T HE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT WAS FURT HER POINTED OUT THAT HE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THEREFORE REITERATED BEFORE US THA T THE A.O. HAD CORRECTLY REACHED THE CONCLUSION THAT SINCE THE ASS ESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORRECT; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TW O FORMS; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY; (II ) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN EXAGGERATED AM OUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONES INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INC OME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL THE DETAIL S OF ITS EXPENDITURE A WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN T HEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS T HE CONCEALMENT I.T.A.NO3475 /AHD/2004 I.T.A.NO. 750/AHD/2007 C.O.NO.355/AHD/2004 & C.O. NO.262/AHD/2011 7 OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIE S TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASS ESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPT ED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT , IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271(21)(C). IF W E ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RET URN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE A.O. FOR ANY REAS ON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. 10. IN THE PRESENT CASE ALSO, IT IS NOT POINTED OUT BEFORE US THAT ANY DETAILS OF EXPENDITURE OR INCOME FILED BY THE ASSES SEE WAS INCORRECT. SINCE THE FACTS ARE SIMILAR, WE FIND THAT IN THE PR ESENT CASE, THIS JUDGMENT OF HONBLE APEX COURT IS SQUARELY APPLICABLE AND BY RESPECTFULLY FOLLOWING THE SAME, WE FEEL THAT NO PENALTY IS JUST IFIED IN RESPECT OF DISALLOWANCE MADE BY THE A.O. U/S 14A OF THE INCOME TAX ACT, 1961. THERE IS NO PENALTY ON ANY OTHER DISALLOWANCE AND H ENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. 11. IN THE RESULT, THE PENALTY APPEAL OF THE REVENU E IS DISMISSED. 12. NOW, WE TAKE UP THE CROSS OBJECTION OF THE ASSE SSEE IN QUANTUM PROCEEDINGS I.E. C.O. NO.355/AHD/2004. THE GROUNDS RAISED BY THE ASSESSEE IN THE C.O. ARE AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.72,000 FO R EXPENDITURE ON MATERIAL STORAGE AND HANDLING CHARGES ETC. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE CIT(A) HAS ERRED IN NOT ACCEPTING THE ASSESSEE'S CONTENTIO N THAT IT WAS NOT A FIT CASE FOR DISALLOWANCE OF ANY SUM OUT OF INTERES T. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE CIT(A) SHOULD HAVE ACCEPTED THE ASSESSEE'S CONTENTION THAT SINCE GROSS RECEIPTS OF INTEREST EXCEEDED GROSS OUTGO OF INTERE ST IN EFFECT THERE WAS NET INCOME FROM INTEREST RATHER THAN ANY CLAIM FOR DEDUCTION FOR EXPENDITURE ON INTEREST. 4. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN UPHOLDING THE ASSE SSING OFFICER'S CONTENTION THAT THE ASSESSEE ALLEGEDLY GAVE INTERES T FREE LOANS TO I.T.A.NO3475 /AHD/2004 I.T.A.NO. 750/AHD/2007 C.O.NO.355/AHD/2004 & C.O. NO.262/AHD/2011 8 CERTAIN PARTIES AND THAT WOULD RESULT IN PART DISAL LOWANCE OF INTEREST CLAIMED AS EXPENDITURE ON THE INTEREST BEARING LOAN S TAKEN. 5. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN NOT REDUCING THE R ATE OF INTEREST FOR QUANTIFICATION OF THE AFORESAID DISALLOWANCE TO 6.57% P.A. AS HE HAS DONE IN PARA 21 OF THE APPELLATE ORDER FOR QUAN TIFICATION OF DISALLOWANCE OF INTEREST PERTAINING TO PURCHASE PRI CE OF SHARES. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF DEMAT CH ARGES OF RS.23,832. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND WITHOUT PREJUDICE PARTICULARLY TO GROUNDS NO.2 & 3 ABOVE, T HE CIT(A) HAS ERRED IN UPHOLDING A PART OF DISALLOWANCE FOR INTER EST WHICH IS ALLEGEDLY ATTRIBUTABLE TO PURCHASE OF SHARES. 8. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN REJECTING THE ADDI TIONAL GROUNDS TAKEN IN REGARD TO THE LEVY OF INTEREST U/S.234B. T HE CIT(A) SHOULD BE HELD THAT IT WAS NOT AT ALL A FIT CASE FOR LEVY OF INTEREST U/S.234B. 9. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEF ORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 13. LD. A.R. OF THE ASSESSEE DID NOT MAKE ANY SERIO US ARGUMENTS REGARDING THIS C.O. FILED BY THE ASSESSEE. WE ALSO FIND THAT THE ORDER OF LD. CIT(A) IS REASONABLE WITH REGARD TO THE DISALLO WANCE CONFIRMED BY HIM AND HENCE, WE DO NOT FIND ANY MERIT IN THE C.O. FILED BY THE ASSESSEE. 14. IN THE RESULT, C.O. NO. 355/AHD/2004 OF THE ASS ESSEE IS DISMISSED. 15. NOW, WE TAKE UP THE REMAINING C.O. OF THE ASSES SEE IN C.O. 262/AHD/2011 REGARDING PART PENALTY CONFIRMED BY TH E LD. CIT(A). 16. LD. A.R. OF THE ASSESSEE SUBMITTED THAT NO PENA LTY SHOULD BE CONFIRMED WHEREAS THE LD. D.R. OF THE REVENUE SUPPO RTED THE ORDERS OF AUTHORITIES BELOW. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT PART PENALTY HAS BEEN CONFIRMED BY LD. CIT(A) IN RESPECT OF THE ADDITION/DISALLOWANCE OF RS.72,000/- UNDER THE HEAD MATERIAL STORAGE AND I.T.A.NO3475 /AHD/2004 I.T.A.NO. 750/AHD/2007 C.O.NO.355/AHD/2004 & C.O. NO.262/AHD/2011 9 HANDLING CHARGES AND OF RS.14,56,737/- BEING DISALL OWED OUT OF INTEREST EXPENDITURE. ON BOTH THESE ISSUES, THE ASSESSEE HA S FILED C.O. IN QUANTUM PROCEEDINGS ALSO BUT NO SERIOUS ARGUMENTS WERE MADE BY THE LD. A.R. IN QUANTUM PROCEEDINGS AND IN PENALTY PROCEEDING. HEN CE, IN THIS ORDER OF LD. CIT(A) IN PENALTY PROCEEDINGS ALSO, WE FEEL THA T NO INTERFERENCE IS CALLED FOR IN THE FACTS OF THE PRESENT CASE. IN TH E RESULT, THIS C.O. OF THE ASSESSEE IS ALSO DISMISSED. 18. IN THE COMBINED RESULT, QUANTUM APPEAL OF THE R EVENUE IS PARTLY ALLOWED AND THE REMAINING PENALTY APPEAL OF THE REV ENUE AND BOTH THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. 19. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 30/1 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 31/1.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.31/1 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 31/1 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.31/1 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31/01/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .