Shri Anand Prakash Garg, Indore V. The ITO wd-4(1), Indore

ITA 167/IND/2014

• Counselvise Citation: 16722714 RSA 2014
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: K C AGRAWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO.167/IND/2014 A.Y. : 2009-10 SHRI ANAND PRAKASH GARG, ITO, WARD 4(2), INDORE. VS. INDORE APPELLANT RESPONDENT PAN NO.ABOPG9119M A PPELLANT S BY : SHRI K.C. AGRAWAL , C. A. RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-II, INDORE, DATED 28.11.2013 FOR THE ASS ESSMENT YEAR 2009-10. DATE OF HEARING : 14. 10 .2015 . DATE OF PRONOUNCEMENT : 02.11 .2015 SHRI ANAND PRAKASH GARG, INDORE VS. ITO, INDORE, I. T.A.NO. 167/IND/2014 A.Y. 2009-10. 2 2 2. GROUND NO.1 RELATES TO THE ADDITION OF RS. 48,083/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST PAID TO FAMILY MEMBERS. 3. THE AO FOUND THAT THE ASSESSEE IS PAYING INTEREST @ 15 % TO ONE SMT. MONA GARG WHEREAS THE FAMILY MEMBERS WERE BEING PAID INTEREST @ 18%. FURTHER, THE AO HAS BROU GHT OUT CLEARLY THAT THE BANK INTEREST RATE DURING THE PERI OD RANGED BETWEEN 12 % TO 14%. THE ASSESSEE HAS CONTENDED BEF ORE THE REVENUE AUTHORITIES THAT THE ASSESSEE HAS PAID HIGH INTEREST ON THE GROUND THAT FOR THE SAKE OF CONVENIENCE, EAS Y PROCESS AND BUSINESS EXPEDIENCY. AFTER CONSIDERING THIS, TH E AO HAS RESTRICTED THE INTEREST AT 15%. 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS CONFIRMED THE ACTION OF THE AO. 5. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. I FIND THAT THE AO HAS DISALLOWED INTEREST OF RS. 4 8,083/- AND OBSERVED THAT THE ASSESSEE HAS PAID INTEREST TO FAM ILY MEMBERS AT 18 %. HOWEVER, 15% INTEREST WAS PAID TO SMT. MONA GARG. THE AO HAS DISALLOWED INTEREST PAID AT 1 8% TO SHRI ANAND PRAKASH GARG, INDORE VS. ITO, INDORE, I. T.A.NO. 167/IND/2014 A.Y. 2009-10. 3 3 FAMILY MEMBERS AND RESTRICTED THE INTEREST @ 15 % A ND HE DISALLOWED THE INTEREST PAID OVER AND ABOVE 15%. I FIND THAT FINANCES ARE AVAILABLE IN THE MARKET FROM MINIMUM 3 TO 4 MONTHS, BUT HERE IN THIS CASE THE ASSESSEE HAS ALSO PAID INTEREST @ 18% TO OUTSIDER AND IF THE INTEREST IS P AID TO OUTSIDER, PROVISIONS OF SECTION 40(A)(2)(B) SHOULD NOT BE APPLICABLE. I FIND THAT DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSEE HAS PRODUCED THE EVIDENCE TO SHOW THAT DURING THAT PERIOD, THE BANK WAS ALSO CHARGING 16% INTEREST ON THE LOAN. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, I RESTRICT THE DISALLOWANCE TO 17% ONLY. THEREFORE, 1% IS DISALLOWED. 6. SECOND GROUND RELATES TO DISALLOWANCE MADE AT RS. 25,000/- ON ACCOUNT OF AD HOC DISALLOWANCE OF HAMMA LI EXPENSES, OUT OF TOTAL EXPENSES PAID AT RS. 5,81,45 8/-. 7. THE AO HAS MADE THE ADDITION OF RS. 40,000/-. THE A O HELD THAT THAT VERY SPECIFIC DEFECTS IN MAINTENANCE OF RECORDS AND VOUCHERS WERE FOUND AND THE ENTIRE PAYMENT IS M ADE IN SHRI ANAND PRAKASH GARG, INDORE VS. ITO, INDORE, I. T.A.NO. 167/IND/2014 A.Y. 2009-10. 4 4 CASH. THEREFORE, HE HAS MADE ADDITION OF RS. 40,000 /-. THE LD. CIT(A) HAS RESTRICTED TO RS. 25,000/-. 8. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. DURING THE COURSE OF HEARING, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT ALL THE VOUCHERS WERE FILED AND HAMMALI IS PAID ON WEEKLY BASIS, BUT SOME OF THE VO UCHERS WERE MISSING. THEREFORE, LOOKING TO THE BUSINESS OF THE ASSESSEE AND ALL THE ACCOUNTS ARE BEING AUDITED, I RESTRICT THE ADDITION TO RS. 12,500/- INSTEAD OF RS. 25,000/-. 9. THIRD GROUND RELATES TO AD HOC DISALLOWANCE OF RS. 30,000/- OUT OF TOTAL EXPENSES OF RS. 2.15 LAKHS UN DER THE HEAD SALARY. 10. THE AO HAS HELD THAT THE ASSESSEE HAS SHOWN SALARY EXPENSES AT RS. 2,15,250/-. LAST YEAR, THE EXPENSES WERE RS. 88,000/- ONLY. HOWEVER, THE ASSESSEE HAS PAID THE S ALARY TO HIS BROTHER FOR THE FIRST TIME AT RS. 52,000/-. THE REFORE, DISALLOWANCE U/S 40A(2)(B) IS ATTRACTED. 11. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS RESTRICTED THIS DISALLOWANCE TO RS. 15,000/-. SHRI ANAND PRAKASH GARG, INDORE VS. ITO, INDORE, I. T.A.NO. 167/IND/2014 A.Y. 2009-10. 5 5 12. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. I FIND THAT THE ASSESSEES BROTHER IS ENGAGED FOR A CCOUNTING WORK AND HE WAS LOOKING AFTER THE AFFAIRS OF THE BU SINESS. THE ASSESSEE PAID EVER YEAR NOMINAL RS. 4,000/- PER MON TH. THEREFORE, THIS YEAR, THE SALARY WAS PAID TO HIS BR OTHER AND IF THE SALARY IS NOT ALLOWED, THEN NOBODY WILL BE ABLE TO SURVIVE. CONSIDERING THE SUBMISSION OF THE ASSESSEE, I FIND THAT THE ASSESSEES TURNOVER WAS INCREASED TO DOUBLE. THEREF ORE, THE ASSESSEE HAS TO PAY THE SALARY TO HIS BROTHER AND I .E. RS. 52,000/- PER YEAR IS NOT EXCESSIVE OR UNREASONABLE. MOREOVER, THE REVENUE HAS NOT BROUGHT ANY EVIDENCE THAT SERVI CE OF HIS BROTHER IS NOT ESSENTIAL AND IN LIEU OF THAT SALARY SUCH SERVICE CAN BE AVAILABLE IN THE MARKET. THEREFORE, WE ALLOW THIS CLAIM. 13. FOURTH GROUND RELATES DISALLOWANCE MADE AT RS. 7,672/- BEING 20% OF TOTAL EXPENSES CLAIMED UNDER T HE HEAD TELEPHONE AT RS. 15,860/- AND VEHICLE AT RS. 11,512 /- AND TRAVELLING AT RS. 10,992/-. 14. THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED TELEPHONE EXPENSES OF RS. 15,860/- VEHICLE RUNNING AND SHRI ANAND PRAKASH GARG, INDORE VS. ITO, INDORE, I. T.A.NO. 167/IND/2014 A.Y. 2009-10. 6 6 MAINTENANCE EXPENSES AT RS. 11,512/- AND TRAVELLING EXPENSES AT RS. 10,992/- TOTALING TO RS. 38,364/-. 15. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) CONFIRMED THE ACTION OF THE AO AND THE ADDITION AT RS. 7672/- WAS SUSTAINED. 16. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. I HAVE PERUSED THE RECORDS. THE PERSONAL ELEMENT IN USAGE OF TELEPHONE AND VEHICLE CANNOT BE RULED OUT. IN THE I NTEREST OF JUSTICE AND FAIR PLAY, I RESTRICT THE DISALLOWANCE AT 15% FROM 20%. 17. FIFTH GROUND RELATES TO THE ADDITION OF RS. 30,000/ - MADE ON ACCOUNT OF ESTIMATION OF HOUSE HOLD EXPENSE S. 18. THE LD. AO HAS ESTIMATED ADDITIONAL HOUSE HOLD EXPENSES OF RS. 40,000/- BY OBSERVING THAT THE ASSE SSEE HAS WITHDRAWN RS. 77,600/- FOR HOUSE HOLD EXPENSES FROM HIS CAPITAL ACCOUNT. THE AO FOUND WITHDRAWALS TO BE VER Y LOW. ON QUESTIONING , THE ASSESSEE EXPLAINED THAT HIS WIFE, FATHER AND MOTHER HAVE ALSO WITHDRAWN RS. 1,20,000/- FROM THEI R CAPITAL SHRI ANAND PRAKASH GARG, INDORE VS. ITO, INDORE, I. T.A.NO. 167/IND/2014 A.Y. 2009-10. 7 7 ACCOUNT. THE FAMILY CONSISTS OF SIX MEMBERS AND LI VING JOINTLY. THE AO WAS NOT SATISFIED AND MADE ADDITION AT RS. 4 0,000/-. 19. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS RESTRICTED IT TO BE AT RS. 30,000/- WITHOUT ASS IGNING ANY REASONS. 20. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. IN THE INTEREST OF JUSTICE AND FAIR PLAY, IT WOULD MEET THE ENDS OF JUSTICE, IF THE AMOUNT OF RS. 30,000/- IS RESTRI CTED TO RS. 15,000/-. THEREFORE, I RESTRICT THE AMOUNT TO RS. 15,000/- FROM RS. 30,000/-. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 2 ND NOVEMBER, 2015. SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 2 ND NOVEMBER, 2015. CPU* SHRI ANAND PRAKASH GARG, INDORE VS. ITO, INDORE, I. T.A.NO. 167/IND/2014 A.Y. 2009-10. 8 8 1421