Sagar Chand Jain, Rewari V. CIT, Rohtak

ITA 1196/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77646 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 11-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH CHANDRA
• Assessee Lawyers: SAURABH SRIVASTAVA
• Keywords: Gift
• Section: 143(3); 263

Judgement Text

ITA NO.1196/DEL/13 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI S. V. MEHROTRA, ACCOUNTANT MEM BER AND SHRI A. T. VARKEY, JUDICIAL MEMBER I.T.A .NO. 1196 /DEL/2013(AY-2 008-09) SAGAR CHAND JAIN (THROUGH SURESH CHAND JAIN SON & L/H OF THE DECEASED APPELLANT) PROP. MS. JAIN FILLING STATION, OPP. BUS STAND, CIRCULAR ROAD,REWARI ADTPJ1828K (APPELLANT) VS CIT AAYAKAR BHAWAN, CIVIL LINES ROHTAK (RESPONDENT) APPELLANT BY SH. SAURABH SRIVASTAVA, ADV RESPONDENT BY SH. RAMESH CHANDRA, CIT DR ORDER PER S. V. MEHROTRA, AM THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER OF LD. CIT, ROHTAK DT. 28/12/12 PASSED U/S 263 FOR A. Y 2008-09. BRIEF FACTS OF THE CASE ARE THAT LD. CIT EXAMINED THE RECORDS OF ASSESSMENT IN ASSESSEES CA SE AND AFTER EXAMINING THE SAME ISSUED SHOW CAUSE NOTICE TO ASSESSEE DATED 15/22-10 -2012 WHICH IS CONTAINED AT PAGES 15 TO 17 OF PAPER BOOK. IN THE SHOW CAUSE NO TICE LD. CIT RAISED FOLLOWING ISSUES:- (I) INTEREST PAID TO THE PERSONS SPECIFIED U/S 40A(2)(B ) IS EXCESSIVE. (II) GIFTS OF RS.2 LACS AND RS. 3 LACS GIVEN TO SATISH C HAND JAIN AND SURESH CHAND JAIN, BOTH SONS IN TURN AND UNSECURED LOANS R ECEIVED FROM THEM. THUS, THE UNSECURED LOAN WAS ROTATED THROUGH GIFTS AND INTEREST PAID TO SONS ON THIS LOAN THEREBY REDUCING THE TAX LIABILIT Y. ITA NO.1196/DEL/13 2 (III) DOCUMENTARY EVIDENCE TO BE PRODUCED IN REGARD TO CL AIM FOR THE SHORTAGE IN THE HSD AND PETROL ACCOUNT. (IV) FRESH LOANS OF RS.3.5 LACS FROM WIFE SMT. RAVIA KAN TA JAIN AND RS. 1.10 FROM MRS. SUDHA JAIN. THE ASSESSEE WAS REQUIRE D TO FURNISH THE DOCUMENTS SUBSTANTIATING THE GENUINENESS OF THESE T RANSACTIONS LIKE CREDITWORTHINESS, SOURCE OF INCOME OF THESE PERSONS AND COPIES OF THEIR ITR IF ANY. (V) COMPLETE DETAILS OF VARIOUS EXPENSES ALONG WITH COR RESPONDING VOUCHERS. 2. THE ASSESSEE IN ITS REPLY DATED 30 TH OCTOBER 2012, CONTAINED AT PAGES 18 TO 22, EXPLAINED ALL THE QUERIES RAISED BY LD. CIT. AFTER CONSIDERING THE ASSESSEES REPLY. LD. CIT POINTED OUT THAT THE ASSESSMENT ORDER WAS E RRONEOUS IN SO FAR AS IT WAS CONSIDERED PRE JUDICIAL TO THE INTEREST OF THE REVE NUE AS AO HAD NOT APPLIED HIS MIND TO THE AFOREMENTIONED ISSUES. HE, THEREFORE, SET AS IDE THE SAME TO BE FRAMED AFRESH AFTER MAKING PROPER ENQUIRIES. 3. BEING AGGRIEVED WITH THE ORDER OF LD. CIT, THE A SSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT HAS ERRED IN LAW AND ON FACTS IN ASSUMING JURISDICTION U/S 263 OF THE I. TAX ACT, 1961, AND SET AIDE THE O RDER FRAMED U/S 143(3) OF THE I. TAX ACT, ON THE ERRONEOUS GROUND THT THE IMPUGNED ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL T O THE INTEREST OF THE REVENUE. 2. THAT THE LD. CIT GROSSLY ERRED IN NOT APPRECIATI NG THAT THE ORDER TO INVOKE S. 263, TWO CONDITIONS MUST BE FULFILLED VIZ . THE IMPUGNED ASSESSMENT ORDER MUST BE ERRONEOUS AND THAT ERROR M UST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ASSESSMENT OF THIS CASE WAS MADE BY THE ADDL. COMMISSIONER OF INCOME TAX, REWARI RANGE, REWARI, WHO HAD PROPERLY EXAMINED ALL THE ISSUE AT THE TIME OF ORIGINAL ASSESSMENT, AS IS EVIDENT FROM THE ASSESSMENT ORDER. THERE WAS ABSOLUTELY NO ERROR IN THE ASSESSMENT ORDER, SO AS TO JUSTIFY ACTION U/ S 263 OF THE ACT. THE ACTION OF THE LD. CIT IS ONLY ON PRESUMPTION, WHICH IS A DIFFERENCE OF ITA NO.1196/DEL/13 3 OPINION ONLY. NO WHERE, IN THE CITS ORDER, IT HAS BEEN HELD THAT THE ORDER OF THE A.O IS ERRONEOUS, AND ONLY ONE OF THE POSSIBLE VIEW DOES NOT JUSTIFY ACTION U/S 263 OF THE I. TAX ACT. HENC E THE ORDER OF THE LD. CIT, BEING ILLEGAL DESERVED TO BE QUASHED. 3. THAT THE LD. CIT HAS ERRED IN LAW AND ON FACTS I N SETTING ASIDE THE ORIGINAL ASSESSMENT MADE BY THE AO AND DIRECTING HI M TO MAKE FRESH ASSESSMENT AND INITIATE PENALTY PROCEEDINGS ON ALL THE THREE GROUNDS MENTIONED IN THE ORDER: (I) BY HOLDING THT THE INTEREST OF RS. 22,400/- SH OULD BE DISALLOWED ON OPENING BALANCE OF UNSECURED LOAN OF SURESH CHAN D JAIN & SONS. (II) BY HOLDING THAT THE LOAN OF RS. 1,10,000/- TA KEN FROM AN EXISTING INCOME TAX ASSESSEE, SMT. SUDHA JAIN (PAN: ADTPJ186 3E) REMAINED UNEXPLAINED. (III) BY HOLDING THAT THE INTEREST PAID ON UNSECUR ED LOANS @ 16% P.A IS EXORBITANTLY HIGH. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALT ER, AMEND, CHANGE MODIFY OR DELETE ALL OR ANY OF THE GROUND OR GROUNDS OF APPE AL. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT PASSED U/S 263 MAY BE CANCELLED AND NECESSARY RELIE F GRANTED. 4. IT IS WELL SETTLED LAW THAT BEFORE LD. CIT CAN I NVOKE JURISDICTION U/S 263, IT HAS TO BE CLEARLY DEMONSTRATED THAT THE ASSESSMENT ORDE R WAS ERRONEOUS AS WELL AS PRE- JUDICIAL TO THE INTEREST OF REVENUE. IT IS SETTLED LAW THAT IF ASSESSING OFFICER HAS EXAMINED THE ISSUE AND HAS TAKEN ONE POSSIBLE VIEW IN THE MATTER THEN THE ORDER CANNOT BE SAID TO BE ERRONEOUS EVEN THOUGH IT MAY B E PRE-JUDICIAL TO THE INTEREST OF REVENUE. 5. LD. DR POINTED OUT THAT ON 23 RD APRIL 2010 ASSESSEE HAD FILED THE DETAILS AND ON 28 TH APRIL 2010 THE ASSESSING OFFICER CONCLUDED THE ENQ UIRIES AND PASSED THE ORDER OF 19 TH MAY 2010. THUS, THE ORDER WAS PASSED WITH UNDUE HASTE. LD. DR SUBMITTED THAT ASSESSING OFFICER CONCLUDED THE PROC EEDINGS WELL BEFORE LIMITATION WITHOUT CONDUCTING BASIC ENQUIRIES WITH TEARING HU RRY FORGETTING THAT HIS ROLE WAS TO INVESTIGATE ALL THE RELEVANT ASPECTS OF CASE. HE, THEREFORE, SUBMITTED THAT IT IS A CLEAR CASE OF NON-APPLICATION OF MIND BY ASSESSING OFFICE R TO THE FACTS OF CASE BEFORE ITA NO.1196/DEL/13 4 COMPLETING THE ASSESSMENT. LD. DR SUBMITTED THAT L OWER WISDOM OF ASSESSING OFFICER SHOULD YIELD TO HIGHER WISDOM OF CIT. HE R ELIED ON THE DECISION OF ITAT IN THE CASE OF M/S GARUDA IMAGING & DIAGNOSTIC P. LTD VS. ASSISTANT COMMISSIONER CIRCLE 12(1), NEW DELHI ITA NO 5956/DEL/10 DT. 23/0 3/12 WHEREIN IT HAS BEEN POINTED OUT THAT IN THE CASE OF MALABAR INDUSTRIES 234 ITR 283 & CIT VS. GABRIEL INDIA LTD 203 ITR 108, IT HAS BEEN, INTER-ALIA, HE LD THAT IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. 6. WE WILL EXAMINE AND DECIDE ISSUE WISE AS TO WHET HER LD. CIT WAS RIGHT IN HOLDING THAT THE ASSESSMENT ORDER WAS ERRONEOUS IN SO FAR AS IT WAS PRE-JUDICIAL TO THE INTEREST OF REVENUE. 7. THE FIRST ASPECT ON WHICH LD. CIT HAS CONSIDERED THE ASSESSMENT ORDER AS ERRONEOUS IN SO FAR AS PRE-JUDICIAL TO THE INTEREST OF REVENUE IS REGARDING PAYMENT OF INTEREST TO VARIOUS CREDITORS WHO WERE COVERED U/S 40A(2)(B). THE PAYMENT OF INTEREST WAS TO FOLLOWING FIVE PERSONS:- NAME INTEREST PAID BALANCE MAYANK JAIN 72800/- 5,20,301/- SURESH CHAND JAIN 64362 2,92,733/- RAVI KANTA JAIN 89953/- 8,09,953/- SUDHA JAIN 1,57,282/- 11,51,082/- SURESH CHAND JAIN & SONS 22,400/- 1,60,093/- 8. LD. CIT OBSERVED FROM THE CAPITAL ACCOUNT OF ASS ESSEE THAT ASSESSEE HAD MADE GIFTS OF RS. 3 LAC EACH TO SATISH KUMAR AND SURESH CHAND JAIN & SONS RESPECTIVELY. IN EARLIER YEARS ALSO, THE ASSESSEE ALSO ADOPTED T HE SAME PRACTICE OF GIVING GIFTS TO HIS RELATIVES. HE NOTED THAT IN ASSESSMENT YEAR 20 06-07 ALSO GIFT OF RS. 2 LACS AND 3 LACS HAD BEEN GIVEN TO SATISH CHAND JAIN AND SURESH CHAND JAIN RESPECTIVELY, BOTH ASSESSEES SONS. HE POINTED OUT THAT ASSESSES HAD RECEIVED UNSECURED LOANS FROM THEM AND, THEREFORE, CONCLUDED THAT IT WAS ASSESSEE S OWN CAPITAL BEING ROTATED THROUGH GIFTS AND THEN RECEIVED BACK, IN THE FORM O F UNSECURED LOAN ON WHICH ITA NO.1196/DEL/13 5 LIABILITY OF INTEREST WAS BEING CREATED. HE, THERE FORE, OBSERVED THAT ON ONE HAND, THE ASSESSEE WAS TRANSFERRING FUNDS BY WAY OF GIFTS TO HIS RELATIVES AND AT THE SAME TIME INTEREST WAS BEING PAID TO THE SAME PERSONS ON UNSE CURED LOANS TO REDUCE THE INCIDENCE OF TAX. HE POINTED OUT THAT IN VIEW OF T HESE FACTS, IT WAS EVIDENT THAT EXCESSIVE INTEREST OF RS.72,800/- HAD BEEN TO PAID TO MAYANK JAIN ON OPENING BALANCE OF RS.4,47,801/- AND SIMILARLY IN THE CASE OF SURESH CHAND JAIN TO WHOM EXHORBITANT INTEREST HAD BEEN PAID AT RS.64,362/- O N BALANCE OF RS.2,28,100/-. 8.1 THE ASSESSEE IN ITS REPLY POINTED OUT THAT GIFT WAS GIVEN TO SURESH CHAND JAIN AND SONS ON 17/12/2007 AND NO LOAN WAS TAKEN FROM H IM AFTER THAT. THE INTEREST AMOUNTING TO RS.22,400/- TO HIM WAS ON OUTSTANDING BALANCE OF LOAN FROM HIM. LD. CIT POINTED OUT THAT NO DOUBT, NO FRESH LOAN WAS TA KEN FROM GIFTED AMOUNT BY THE ASSESSEE BUT IT IS BEYOND COMPREHENSION AS TO WHY A PERSON WOULD GIFT TO A PERSON AGAINST WHOM HE HAS OUTSTANDING LIABILITY IN THE FO RM OF UNSECURED LOAN. HE, THEREFORE, HELD THAT THE INTEREST OUTLAY OF RS.22,4 00/- SHOULD BE DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 8.2 FROM THE AFOREMENTIONED OBSERVATIONS OF LD. CI T IT IS EVIDENT THAT HE HAS POINTED OUT THAT THE ASSESSMENT ORDER WAS PRE-JUDIC IAL TO THE INTEREST OF REVENUE AS ASSESSEE HAD REDUCED THE INCIDENCE OF TAX. LD. CIT HAS DRAWN A CONCLUSION THAT MODUS OPERANDI ADOPTED BY ASSESSEE WAS SUCH THAT WA S BEYOND ONES COMPREHENSION BUT AT THE SAME TIME, WHETHER THERE W AS ANY LEGAL IMPEDIMENT TO THE SAID ACTION OR NOT HAS NOT BEEN CONSIDERED BY LD. C IT. WE FIND THAT THE INTEREST HAS BEEN PAID ON OPENING BALANCES OF UNSECURED LOAN AND NO FRESH LOAN WAS TAKEN BY THE ASSESSEE FROM THE PERSONS TO WHOM AMOUNT WAS GIFTED . THERE IS NO PROHIBITION IN LAW TO GIFT THE AMOUNT TO A PERSON TO WHOM LIABILIT Y IS TO BE DISCHARGED BY DONOR. BOTH TRANSATIONS WERE SEPARATE AND, THEREFORE, LIAB ILITY FOR PAYMENT OF INTEREST COULD NOT BE QUESTIONED. THEREFORE, THE ORDER OF AO TO T HIS EXTENT COULD NOT BE HELD TO BE ITA NO.1196/DEL/13 6 ERRONEOUS, THOUGH AO HAD NOT RAISED ANY QUERY TO TH IS EFFECT. THEREFORE, LD. CIT WAS WRONG IN INVOKING JURISDICTION ON THIS ISSUE. 9. THE SECOND ISSUE RAISED BY LD. CIT IS REGARDING FRESH LOANS RECEIVED BY ASSESSEE FROM HIS WIFE SMT. RAVI KANTA JAIN RS. 3.4 5 LACS AND SMT. SUDHA JAIN WIFE OF SHRI SURESH CHAND JAIN RS. 1.10 LAC. LD. CITS CONTENTION IS THAT FROM THE DOCUMENTS FURNISHED BY ASSESSEE, IT WAS CLEAR THAT SMT. SUDHA JAIN DEPOSITED CASH IN HER BANK ACCOUNT JUST BEFORE ISSUING CHEQUES TO THE ASSESSEE FOR ADVANCING UNSECURED LOAN RS. 1.10 LACS. THUS, LD. CIT HELD THE SOURCE OF UNSECURED LOAN OR RS. 1.10 SHOWN TO BE RECEIVED FROM SMT. SUDHA CHAND JAIN REM AINED UNEXPLAINED. HE CONCLUDED THAT ASSESSMENT ORDER WAS ERRONEOUS IN SO FAR AS PRE-JUDICIAL TO THE INTEREST OF REVENUE AS ASSESSING OFFICER HAD NOT CO NDUCTED ANY ENQUIRY IN THIS REGARD. LD. COUNSEL REFERRED TO PAGE 7 & 8 OF THE SECOND PAPER BOOK WHEREIN THE CERTIFIED COPY OF ORDER-SHEET IS CONTAINED AND POI NTED OUT THAT ASSESSING OFFICER HAD SPECIFICALLY REQUIRED VIDE ORDER-SHEET ENTRY DATED 23 RD APRIL 2010 COPY OF FRESH UNSECURED LOAN FROM MRS. SUDHA JAIN (1.10 LACS) AND RAVI KANTA JAIN (3.45 LACS) WITH PAN AND AOS DESIGNATION. LD. COUNSEL FURTHER REFERRED TO PAGE 21 OF PAPER BOOK WHEREIN FOLLOWING REPLY WAS FILED:- THAT FRESH LOANS OF RS.3,45,000/- (175,000+ 1,70, 000/-) WERE RECEIVED FROM SMT. RAVI KANTA JAIN, WHO WAS AN EXISTING INCOME TA X ASSESSEE, FILLING HER INCOME TAX RETURN WITH ITO WARD-1, REWARI, SINCE LO NG, HOLDING PAN: ADXPJ0650K. THESE LOAN CHEQUES WERE ISSUED BE HER OUT OF THE BANK FDR MATURITY AMOUNT RECEIVED ON 8/9/2007. COPY OF BANK STATEMENT REFLECTING THE ABOVE RECEIPT & LOAN PAYMENTS, COPY OF I.T.R ACKNOW LEDGEMENT AND COPY OF PERSONAL CAPITAL A/C & STATEMENT OF AFFAIRS FOR THE YEAR ENDING ON 31/3/2008 ARE ENCLOSED. FURTHER, SMT. RAVI KANTA JAIN LEFT T O HEAVENLY ABODE ON 18/82010, COPY OF DEATH CERTIFICATE IS ALSO ENCLOSE D. THAT FRESH LOANS OF RS. 1,10,000/- (80,000/-+ 30,0 00/-) WERE RECEIVED DURING THE A.Y 2008-09, FROM SMT. SUDHA JAIN, WHO I S AN EXISTING INCOME TAX ASSESSEE FILLING HER INCOME TAX RETURN WITH ITO WAR D-1, REWARI, SINCE LONG, ITA NO.1196/DEL/13 7 HOLDING PAN : ADTPJ1863E, COPY OF BANK STATEMENT RE FLECTING THE ABOVE LOAN PAYMENTS, COPY OF I.T.R. ACKNOWLEDGEMENT AND C OPY OF PERSONAL CAPITAL A/C & STATEMENT OF AFFAIRS AS ON 31/3/2007 & 31/3/2 008 ARE ALSO ENCLOSED. 10. WITH REFERENCE TO ABOVE REPLY, LD. COUNSEL POIN TED OUT THAT ALL THE NECESSARY DETAILS WERE FURNISHED BEFORE ASSESSING OFFICER AND AFTER MAKING DUE ENQUIRY THE ASSESSMENT ORDER WAS PASSED. LD. COUNSEL FURTHER S UBMITTED THAT LD. CIT HAS WRONGLY OBSERVED THAT CASH OF 1.10 LACS WAS DEPOSIT ED WHERE AS ACTUALLY ONLY RS. 30,000/- WAS DEPOSITED IN CASH AND SUM OF RS.80,000 /- WAS PAID FROM THE BALANCE LYING IN SUDHA JAINS BANK ACCOUNT AS EVIDENT FROM PAGE NOS. 24 & 25 OF PAPER BOOK. HE, THEREFORE, SUBMITTED THAT LD. CIT HAS NOT CORRE CTLY APPRECIATED THE FACTS BEFORE PASSING THE ORDER. 11. LD. DR REITERATED THAT ON THIS ISSUE ALSO THE A SSESSING OFFICER HAS NOT EXAMINED THE ISSUE IN DEPTH AND ACCEPTED THE GENUIN ENESS OF THESE LOANS WITHOUT PROPER VERIFICATION. 12. HAVING HEARD BOTH THE PARTIES, WE FIND THAT ASS ESSING OFFICER HAD MADE DUE ENQUIRIES IN THIS REGARD AND AFTER CONSIDERING THE ASSESSEES EXPLANATION AND THE DOCUMENTS FURNISHED BY IT, CONCLUDED THAT NO ADDITI ON WAS CALLED FOR. LD. CIT HAS ALSO ONLY OBJECTED TO THE LOAN TAKEN FROM SUDHA JAI N ON ACCOUNT OF CASH DEPOSIT IN HER ACCOUNT. HE HAS DIRECTED FOR ADDITION OF RS.1, 10,000/- ON THIS BASIS THOUGH THE CASH DEPOSIT WAS ONLY RS.30,000/- IN THE SAID ACCOU NT. THEREFORE, LD. CITS CONCLUSIONS HAVE NO BASIS. ONCE THE ASSESSING OFFI CER WAS SATISFIED ABOUT THE GENUINENESS OF LOANS AFTER DUE VERIFICATION, LD. CI T COULD NOT SUBSTITUTE HIS OPINION PARTICULARLY WHEN THE CORRECT FACTUAL POSITION WAS NOT APPRECIATED BY LD. CIT. WE, THEREFORE, DO NOT FIND ANY ERROR IN THE ASSESSMENT ORDER ON THIS ISSUE AND, THEREFORE, HOLD THAT LD. CIT WAS NOT RIGHT IN INVOKING JURISDI CTION U/S 263. ITA NO.1196/DEL/13 8 13. THE THIRD ISSUE RAISED IN THE ORDER PASSED U/ S 263 IS REGARDING INTEREST PAID@ 16%. THE LD. CIT WAS OF THE OPINION THAT A REASONA BLE AND RATIONAL INTEREST COULD BE UPTO 12% AND NOT 16%. HE CALCULATED EXCESS PAYME NT OF INTEREST AT RS.1,20,100/- AND DIRECTED THE ASSESSING OFFICER TO ADD THE SAME. LD. COUNSEL POINTED OUT THAT THIS ISSUE WAS NOT RAISED IN THE SHOW CAUSE NOTICE AND, THEREFORE, COULD NOT BE SUBJECT MATTER OF REVISION U/S 263 IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASHISH RAJPAL (2010) 320 ITR 67 4 . LD. COUNSEL FURTHER POINTED OUT THAT ASSESSEE HAD REGULARLY PAID INTEREST AT TH ERE RATES IN EARLIER YEARS ALSO WHICH HAD BEEN ALLOWED, AND THEREFORE, THE INTEREST COULD NOT BE CONSIDERED AS EXCESSIVE IN THIS YEAR ALONE. LD. COUNSEL POINTED OUT THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS CLEARLY OBSERVED THAT THE REAS ONABLENESS OF PAYMENTS MADE TO PARTIES COVERED U/S 40A(2)(B) AND THE ADEQUACY OF H OUSEHOLD WITHDRAWAL HAS BEEN EXAMINED. HE SUBMITTED THAT WHEN THE REASONABLENES S OF PAYMENT (WHICH ALSO INCLUDES INTEREST PAYMENT) PAID TO RELATIVES COVERE D U/S 40A(2)(B) HAD ALREADY BEEN EXAMINED AND FOUND CORRECT BY THE AO THEN LD. CIT C OULD NOT QUESTION AGAIN ABOUT THE REASONABLENESS OF THE INTEREST RATE. 14. LD. DR REITERATED HIS SUBMISSIONS MADE EARLIER , AND POINTED OUT THAT ON ACCOUNT OF NON-APPLICATION OF MIND BY ASSESSING OFF ICER, THE ORDER WAS ERRONEOUS AND SINCE EXCESSIVE RATE OF INTEREST WAS PAID, THE SAME WAS PRE-JUDICIAL ALSO TO THE INTEREST OF REVENUE. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE PERUSED THE RECORDS OF THE CASE. WE ARE NOT IN AGREEMENT WITH LD. COUNSEL FO R THE ASSESSEE THAT IN SHOW CAUSE NOTICE, LD. CIT HAD NOT RAISED THIS ISSUE. AS A MAT TER OF FACT LD. CIT HAD POINTED OUT THAT EXCESSIVE INTEREST OF RS.72,800/- HAD BEEN PAI D TO MAYANK JAIN & RS. 64,362/- TO SURESH CHAND JAIN WHICH WAS EXHORBITANT. IT IS TRUE THAT LD. CIT HAD NOT SPECIFICALLY MENTIONED ABOUT THE RATE OF INTEREST B UT POINTED OUT THAT THE INTEREST ITA NO.1196/DEL/13 9 PAYMENT WAS EXCESSIVE. THUS, THE PLEA RAISED BY LD. COUNSEL FOR THE ASSESSEE ON THIS BASIS IS NOT ACCEPTABLE. NOW, COMING TO THE SECO ND PLEA OF ASSESSEE THAT IN EARLIER YEARS THE INTEREST PAYMENT HAD BEEN ALLOWED BY ASSE SSING OFFICER. WE ARE OF THE OPINION THAT THERE IS NO RES JUDICATA APPLICABLE TO INCOME TAX PROCEEDINGS AND, THEREFORE, THE PLEA OF ASSESSEE THAT THE INTEREST H AD BEEN ALLOWED IN EARLIER YEARS CANNOT BE A BASIS FOR INVOKING REVISIONAL JURISDICT ION U/S 263 BY CIT, IS NOT ACCEPTABLE. HOWEVER, ON MERIT, WE FIND FORCE IN TH E SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE THAT CONSIDERING THE RATE OF BANK INTE REST, PAYMENT OF SIMPLE FLAT INTEREST @ 16% IS REASONABLE SPECIFICALLY WHEN THERE IS NO S ECURITY PROVIDED BY THE ASSESSEE. CONSIDERING THE RISING INTEREST IN THE MARKET, WE A RE OF THE OPINION THAT ASSESSING OFFICER DID NOT ERR IN ALLOWING INTEREST @ 16% AND, THEREFORE, THE ASSESSMENT ORDER CANNOT BE HELD TO BE PREJUDICIAL TO THE INTEREST OF REVENUE THOUGH ERRONEOUS AS AO HAD NOT SPECIFICALLY EXAMINED THIS ISSUE. WE, TH EREFORE, SET ASIDE THE ORDER OF LD. CIT AND QUASH THE PROCEEDINGS INITIATED IN CONSEQUE NCE TO THE ORDER U/S 263. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 11 TH APRIL 2014. SD/- SD/ - (A. T. VARKEY) (S.V.MEHROTRA) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED: 11 /04/2014 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTA NT REGISTRAR ITAT NEW DELHI ITA NO.1196/DEL/13 10