Shri Hari Chand Goel, Ambala City V. DCIT, Ambala

ITA 1450/CHANDI/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1375 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 27-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Business income; Fair market value
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1450/CHD/2010 ASSESSMENT YEAR: 2007-08 SHRI HARI CHAND GOEL, VS. THE DCIT, THROUGH L/H SHRI SATISH KUMAR GOEL, AMBALA PROP M/S NAND LAL & SONS AMBALA CITY PAN NO. AANPG7938E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH / SHRI D.K.GUPT A RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), PANCHKULA DATED 25.10.2010 RELATING TO ASSESSMENT Y EAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. A CT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE DISALLOWANCE OF INTEREST OUT OF INTEREST CLAIMED ON RS. 3,12,318/- HOLDING IT TO BE EXCESSIVE TO THE EXTENT OF 3% AGAINST THE CLAIM OF APPELLANT AT 18% REDUCING IT TO 15% INVOKING THE PROVISIONS OF SECTION 40A(2) OF THE ACT WHICH IS ARBITRARY AND UNJUSTIFIED. 2. THAT THE INTEREST AT 18% HAS BEEN CONSISTENTLY PAID IN THE EARLIER WHICH HAS BEEN ALLOWED TO THE DEPOSITS WITHOUT APPRECIATING THE WRITTEN SUBMISSIONS OF THE APPELLANT IN CORRECT PERSPECTIVE. 2 3. THAT THE LD. CIT(A) HAS FURTHER ERRED IN UPHOLDING THE DISALLOWANCE OF CAR EXPENSES TO THE EXTENT OF 1/10 TH IN SPITE OF BRINGING IT TO THE NOTICE OF THE LD. CIT(A) THAT THE PROPRIETOR OF THE BUSINESS, THE APPELLANT, BEING 90 YEARS OF AGE HARDLY HAS ANY USE OF THE VEHICLE FOR HIS PERSONAL PURPOSES AND AS SUC H THE TOTAL CAR EXPENSES ARE ALLOWABLE FOR BUSINESS PURPOSES. 4. THAT THE LD. CIT(A) HAS FURTHER ERRED IN UPHOLDING THE TELEPHONE EXPENSES TO THE EXTENT OF 1/10 TH OF THE CLAIM HOLDING THE SAME FOR USER FOR NON BUSINESS PURPOSES WHICH IS AGAIN ARBITRARY AND UNJUSTIFIED. 5. THAT THE LD. CIT(A) HAS FURTHER ERRED IN UPHOLDING THE CHARGING OF INTEREST UNDER SECTION 234B AND 234 C OF THE ACT WHICH IS NOT CHARGEABLE IN THE INSTANT C ASE. 3. THE PRESENT APPEAL WAS INSTITUTED BY SHRI HARI C HAND GOEL, WHOSE DEMISE TOOK PLACE ON 28.1.2011 LEAVING BEHIND THE L EGAL HEIR SHRI SATISH, CHANDER GOEL, SHRI KULBHSHAN GOEL AND SHRI PARDEEP GOEL, SONS . THE LEGAL HEIRS HAD FURNISHED THE AFFIDAVITS FOR BEING BROUGHT ON RECORD WHICH WAS FORWARDED TO THE ASSESSING OFFICER, WHO HAS NO OBJECTION TO THE SAID LEGAL HEIRS BEING BROUGHT ON RECORD. THE LD. AR FO R THE LEGAL HEIRS APPEARED FOR THE LEGAL HEIRS AND ISSUE OF FRESH NOT ICE TO THE LEGAL HEIRS IS WAVED. 4. THE GROUND NOS. 1 & 2 RAISED IN THE PRESENT APPE AL IS AGAINST THE DISALLOWANCE OF INTEREST OUT OF THE TOTAL INTEREST CLAIMED BY HOLDING THE SAME TO BE EXCESSIVE AFTER INVOKING THE PROVISIONS OF SECTION 40A(2) OF THE ACT. 5. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN UNSECURED LOAN S TO THE TUNE OF RS. 56,67,601/- FROM FAMILY AND FRIENDS, ON WHICH AN IN TEREST OF RS. 9,36,956/- @ 18% PER ANNUM WAS PAID. DURING THE C OURSE OF ASSESSMENT 3 PROCEEDINGS THE ASSESSEE WAS REQUISITIONED TO GIVE JUSTIFICATION FOR PAYING INTEREST IN EXCESS OF 12% ON THE AFORESAID LOANS. T HE CLAIM OF THE ASSESSEE WAS THAT THE SAID INTEREST PAID ON THE UNSECURED LO ANS BELONGING TO THE FAMILY MEMBERS WAS IN CONFORMITY WITH MARKET RATES AND ACCEPTED HISTORY. FURTHER, IT WAS POINTED OUT THAT THE BANK CHARGED I NTEREST AT THE RATE OF 13% TO 15% COMPOUND, WHICH WORKS OUT TO MORE THAN T HE SIMPLE INTEREST PAID AT THE RATE OF 18%. THE REPLY OF THE ASSESSEE IS INCORPORATED AT PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INTEREST AT THE RATE OF 18% ON UNSECURED LOANS TAKEN BY THE ASSESSEE FROM IMMEDIATE FAMILY AND FRIEND FALLS UNDER SECTIO N 40A(2)(B) OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT U/ S 40A(2) OF THE ACT, THE INTEREST TO PARTNERS OF THE PARTNERSHIP FIRM AR E TO BE ALLOWED AT 12%, WHICH AS PER ASSESSING OFFICER PROVIDED THE GUIDELI NES FOR THE FAIR MARKET VALUE OF THE SIMILAR RATE TO BE APPLIED. THE ASSES SING OFFICER THUS ALLOWED DEDUCTION TO THE EXTENT OF 12% AND BALANCE OF RS. 3,12,318/- WAS ADDED TO THE INCOME OF THE ASSESSEE. THE CIT(A) W AS OF THE VIEW THAT THE INTEREST AT THE RATE OF 15% WAS REASONABLE IN VIEW OF THE BANK CHARGING INTEREST AT THE RATE OF 13% TO 15% FOR SECURED LOAN S. THE ASSESSEE IS IN APPEAL AGAINST THE SAME. 6. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE INTEREST EXPENDITURE WAS PARTLY DISALLOWED IN VIEW OF THE SI MILAR DISALLOWANCE BEING MADE IN THE CASE OF SHRI DEVINDER KUMAR GUPTA & SONS HUF, WHICH HAS BEEN ALLOWED BY THE TRIBUNAL IN ITA NO.1225/CH D/2010 RELATING TO ASSESSMENT YEAR 2007-08 VIDE ORDER 8.12.2010. THE LD. AR ALSO SUBMITTED THAT SIMILAR INTEREST EXPENDITURE AT THE RATE OF 18% WAS BEING ALLOWED IN THE EARLIER YEARS. 4 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD PA ID INTEREST @ 18% ON UNSECURED LOANS RAISED FROM PARTIES WHO ARE SPECIFI ED PERSONS COVERED UNDER THE PROVISIONS OF SECTION 40A(2)(B) OF THE AC T. DEDUCTION OF SIMILAR INTEREST EXPENDITURE AT THE RATE OF 18% ON UNSECURED LOANS WAS BEING ALLOWED TO THE ASSESSEE FOR THE PRECEDING YEA RS. THE BANKS ARE ALSO CHARGING INTEREST VARYING BETWEEN 13 % TO 15 % COMP OUND. IN THE ABOVESAID FACTS, WE FIND NO MERIT IN RESTRICTING TH E RATE OF INTEREST IN THE HANDS OF THE ASSESSEE TO 15% AS AGAINST 18% CLAIMED BY THE ASSESSEE. WE FIND THAT SIMILAR ISSUE OF THE RATE TO BE APPLIE D AROSE BEFORE THE TRIBUNAL IN SHRI DEVINDER KUMAR GUPTA & SONS (HUF) RELATING TO ASSESSMENT YEAR 2007-08 AND VIDE ORDER DATED 8.12.2 010, THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE HOLDING AS UN DER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. IN THE ENTIRETY OF FACT AND CIRCUMSTANCES OF THE CASE THE ASSESSEE WAS PAYING INTEREST TO THE AFORESAID P ARTIES STARTING FROM FINANCIAL YEAR 2001-02 AT THE RATE OF 18%. THE SAID PARTIES ARE SPECIFIED PERSONS COVERED UNDER TH E PROVISIONS OF SECTION 40A (2) OF THE ACT. THE SAI D INTEREST EXPENDITURE AT THE RATE OF 18% HAS BEEN ALLOWED VID E ORDER PASSED U/S 143(3) OF THE ACT IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2002-03 AND 2006-07 BY THE ASSE SSING OFFICER HIMSELF. FOLLOWING THE PRINCIPLE OF CONSI STENCY, WE FIND NO MERIT IN THE SAID DISALLOWANCE BEING MADE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALL OW THE CLAIM OF THE ASSESSEE IN RESPECT OF INTEREST EXPEND ITURE PAID TO THE SAID PERSONS U/S 40A(2) OF THE ACT IN ENTIRE TY. THE GROUND NOS 1 TO 3 RAISED BY THE ASSESSEE ARE ALLOWE D. 8. IN THE ABOVE SAID FACTS WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE IN ENTIRETY. THE GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE ARE THUS ALLOWED. 5 9. THE ISSUE IN GROUND NOS. 3 & 4 RAISED BY THE ASS ESSEE IS AGAINST DISALLOWANCE OF OUT OF CAR AND TELEPHONE EXPENSES T O THE EXTENT OF 1/10 OF THE CLAIM ON ACCOUNT OF PERSONAL USAGE. THE ASSESS EE IS CARRYING ON BUSINESS OF MANUFACTURING AND TRADING OF COTTON SEE D OIL AND KHAL, CATTLE FEED ETC AND HAD DECLARED HIS BUSINESS INCOME. THE ASSESSING OFFICER HAD DISALLOWED 1/5 TH OUT OF CAR & SCOOTER EXPENSES AND TELEPHONE EXPEN SES FOR PERSONAL USE. THE CIT(A) HAS RESTRICTED THE DISALLOWANCE TO 1/10 TH . THE CLAIM OF THE ASSESSEE IS THAT THE SAID DISALLOW ANCE WAS EXCESSIVE AS ASSESSEE WAS 90 YEARS OF AGE. WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE AND CONFIRMING THE ORDER OF CIT(A), WE DIS MISS THE GROUND NOS. 3 & 4 RAISED BY THE ASSESSEE. 10. THE ISSUE VIDE GROUND NO.5 IS AGAINST CHARGING OF INTEREST U/S 234B & 234C OF THE ACT, WHICH IS CONSEQUENTIAL IN NATURE AND HENCE THE SAME IS DISMISSED. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF MARCH, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : MARCH, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 6