Jalandhar Jewellery House, New Delhi V. CIT, New Delhi

ITA 1329/DEL/2014

• Counselvise Citation: 132920114 RSA 2014
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-09-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SULEKHA VERMA
• Assessee Lawyers: Y K SUB DA
• Keywords: Commercial expediency
• Section: 143(3); 142(1); 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. S. V. MEHROTRA, AM AND SH. JOGINDER SIN GH, JM ITA NO. 1329/DEL/2014 : ASS TT. YEAR : 2005-06 ITA NO. 2672/DEL/2014 : ASS TT. YEAR : 2010-11 JALANDHAR JEWELLERY HOUSE 2637, BANK STREET, KAROL BAGH, NEW DELHI-110005 VS COMMISSIONER OF INCOME TAX, DELHI XI NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAAFJ2039A ASSESSEE BY : SH. Y. K. SUB, DA REVENUE BY : MS. SULEKHA VERMA , DR DATE OF HEARING : 6.8.2014 DATE OF PRONOUNCEMENT : 7.8.2014 ORDER PER JOGINDER SINGH, JM: BOTH THESE APPEALS ARE BY THE ASSESSEE FOR ASSESSME NT YEAR 2005-06 AND 2010-11 CHALLENGING THE ORDER OF THE LD. CIT(A) U/S 263 OF THE ACT CANCELLING THE ASSESSMENT ORDERS. 2. AT THE TIME OF HEARING WE HAVE HEARD SHRI Y. K. SUD, LD. COUNSEL FOR THE ASSESSEE AND MS. SULEKHA VERMA, LD. DR. THE CRU X OF ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE RAISED UNSECURED LOANS FROM RELATIVES AND PAID INTEREST @ 21%. OUR ATTENTION WA S INVITED TO THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2007-08 IN THE CAS E OF SISTER CONCERN WHEREIN THE RATE OF 21% WAS FOUND TO BE REASONABLE. THE CRUX OF ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSMENT OR DER IS WELL REASONED, NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE. IT WAS ITA NO. 1329 & 2672/DEL/2014 JALANDHAR J EWELLERY HOUSE 2 CONTENDED THAT WHILE CANCELLING THE ASSESSMENT THER E WAS NO MATERIAL WITH THE LD. CIT(A) THAT THE MARKET RATE FOR UNSECURED L OAN WAS 15% RATHER THE LD. CIT(A) HAS CITED SECURED LOANS. IT WAS ALSO CON TENDED THAT THE LD. COMMISSIONER WHILE INVOKING REVISIONAL JURISDICTION U/S 263 CANNOT SUBSTITUTE HIS OPINION, MORE SPECIFICALLY WHEN THER E IS NO LOSS TO THE REVENUE. ON THE OTHER HAND, THE LD. DR CONTENDED TH AT THE INTEREST PAID TO THE FAMILY MEMBERS IS HIGHLY EXCESSIVE AND PLACED R ELIANCE UPON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS SPORTS STATION (INDIA) PVT. LTD.(2012) 23 TAXMANN.COM 40 ( DELHI). IN REPLY THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT SECURED AND UNSECURED LOANS CANNOT BE COMPARED. IT WAS ALSO CONTENDED THAT THE INTEREST @ 21% AND 24% WAS GIVEN TO PRABHASH MOTOR FINANCE CO. PVT. LT D. FOR WHICH THE DETAILS OF INTEREST PAID ON UNSECURED LOANS FOR FIN ANCIAL YEAR 2011-12 WERE PRODUCED BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF ARE THAT TH E ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND TRADING OF GOLD AND D IAMOND JEWELLERY, DECLARED SALES INCLUDING JOB WORK CHARGES OF RS. 2, 99,48,895/- SHOWN GROSS PROFIT OF RS. 1,06,78,108/-. THE ASSESSEE TOO K UNSECURED LOANS OF RS. 3,16,60,097/- ON WHICH PAID INTEREST TO THE TUNE OF RS. 54,52,632/-. ON PERUSAL OF THE AUDIT REPORT IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE INTEREST AMOUNTING TO RS. 54,52,632/- WAS MADE TO PERSONS SPECIFIED U/S 40A(2)(B) OF THE ACT. THE ASSESSEE WAS ASKED TO JUSTIFY THE PAYMENT OF ITA NO. 1329 & 2672/DEL/2014 JALANDHAR J EWELLERY HOUSE 3 INTEREST @ 21%. AS PER THE ASSESSING OFFICER PAYMEN T OF INTEREST WAS HIGHLY EXCESSIVE. 4. THE LD. COMMISSIONER INVOKED REVISIONAL JURISDIC TION U/S 263 ON THE PLEA THAT THE ASSESSMENT SO FRAMED IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THUS, THE ASSESSMENT FRAMED U/ S 143(3) WAS CANCELLED AND DIRECTED TO BE FRAMED AFRESH. THE AGGRIEVED ASS ESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT PROCEEDINGS U/S 1 47 OF THE ACT WERE INITIATED AGAINST THE ASSESSEE AS THE ASSESSEE PAID INTEREST TO RELATED PERSONS COVERED U/S 40A(2)(B) OF THE ACT, WHICH AS PER THE DEPARTMENT, WAS EXCESSIVE AND UNREASONABLE. IN RESPONSE TO THE NOTI CE ISSUED U/S 148 AND 142(1) OF THE ACT THE ASSESSEE ATTENDED THE PROCEED INGS AND FURNISHED THE DETAILS. THE PAYMENT OF INTEREST @ 21% HAS BEEN DUL Y CONSIDERED BY THE ASSESSING OFFICER. THE COPIES OF INCOME TAX RETURNS AND COMPUTATION OF INCOME OF ALL THE PERSONS FROM WHOM UNSECURED LOANS WERE OBTAINED WERE ALSO EXAMINED BY THE ASSESSING OFFICER WHILE FRAMIN G THE ASSESSMENT. THE REPLY OF THE ASSESSEE, AS CONTAINED IN PARA 4 OF TH E ASSESSMENT ORDER, HAS BEEN DULY EXAMINED BY THE ASSESSING OFFICER. THE CA SE OF SISTER CONCERN I.E M/S GUJRANWALA JEWELLERS ON SIMILAR ISSUE FOR A SSESSMENT YEAR 2007-08 BY THE AMRITSAR BENCH OF THE TRIBUNAL ORDER DATED 2 0.6.2011 AND THE DECISION CITED BY THE LD. DR, BOTH HAVE BEEN CONSID ERED BY THE ASSESSING OFFICER. THE TOTALITY OF FACTS CLEARLY INDICATES TH AT IT IS NOT THE CASE OF THE ITA NO. 1329 & 2672/DEL/2014 JALANDHAR J EWELLERY HOUSE 4 REVENUE THAT THE ASSESSMENT ORDER WAS FRAMED IN SLI P SHOT MANNER OR WITHOUT MAKING ANY INQUIRY OR INVESTIGATION. 6. FOR INVOKING REVISIONAL JURISDICTIONAL U/S 263 B Y THE LD. COMMISSIONER THERE MUST BE TWO PRE-REQUISITES I.E T HE ORDER MUST BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E IF THE ORDER IS ERRONEOUS AND NOT PREJUDICIAL TO THE INTEREST OF RE VENUE THE COMMISSIONER CANNOT EXERCISE THE REVISIONAL JURISDICTION AS WAS HELD IN H. H. MAHARAJA RAJA PAWER DEWAS 138 ITR 518 (MP) AND NAZIR SINGH V S CIT 252 ITR 820 (MP), MEANING-THEREBY, THE COMMISSIONER IS EXPE CTED TO POINT OUT EXACT ERROR IN THE ASSESSMENT AND ALSO TO AFFORD OP PORTUNITY TO THE ASSESSEE QUA SUCH ERROR. THE HONBLE DELHI HIGH COURT IN ADD ITIONAL CIT VS J. K. DSCOSTA 133 ITR 7 (DELHI) EVEN WHEN TO THE EXTENT THAT ASSESSMENT MUST NOT BE SET ASIDE FOR MINOR OMISSION. IF THE TOTALIT Y OF FACTS AND THE JUDICIAL PRONOUNCEMENT BROUGHT TO OUR NOTICE ARE CONSIDER TH E LD. COMMISSIONER U/S 263 HAS POWER TO REVISE THE ORDER ONLY WHEN THE ASSESSMENT SO FRAMED IS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVE NUE. IN VIEW OF THESE FACT WE FIND NO JUSTIFICATION IN INVOKING THE REVISIONAL JURISDICTION WHEN A WELL REASON ASSESSMENT HAS BEEN FRAMED BY THE ASSESSING OFFICER THAT TOO AFTER MAKING DUE INVESTIGATION AND INQUIRIES. SO FAR AS P AYMENT OF INTEREST @ 21% TO THE RELATED PERSONS COVERED U/S 40A(2)(B) OF THE ACT IS CONCERNED, WE NOTE THAT THE ASSESSEE HAS ALSO PAID INTEREST RA NGING FROM 15% TO 24%. IT IS EQUALLY NOTED THAT TO PRABHASH MOTOR FINANCE CO. PVT. LTD., INTEREST WAS PAID @ 21% AND 24%. EVEN OTHERWISE UNSECURED LO ANS AND SECURED ITA NO. 1329 & 2672/DEL/2014 JALANDHAR J EWELLERY HOUSE 5 LOANS CANNOT BE COMPARED. FOR OBTAINING SECURED LOA NS, THERE IS A POSSIBILITY OF LOTS OF PAPER WORK, GUARANTEES, SECU RITIES ETC. WHEREAS NO SUCH PROBLEMS EXISTING IN THE CASE OF UNSECURED LOA NS. EVEN OTHERWISE BUSINESSMAN KNOWS HIS INTEREST BEST FOR COMMERCIAL EXPEDIENCY SOMETIMES HIGHER RATE IS PAID. THE WISDOM OF BUSINESSMAN MAY NOT BE SUSPECTED UNLESS AND UNTIL IT IS CONTRARY TO LAW. IN VIEW OF THESE FACTS THE REVISIONAL JURISDICTION INVOKED AGAINST THE ASSESSEE U/S 263 C ANNOT BE SET TO BE JUSTIFIED. SINCE, THE FACTS ARE IDENTICAL IN BOTH T HE YEARS UNDER CONSIDERATION THE APPEALS ARE ALLOWED. 7. FINALLY APPEALS OF THE ASSESSEE ARE ALLOWED. 8. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN T HE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 6.8.2014. SD/- SD/- (S. V. MEHROTRA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7/8/2014 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR