M/s. National Transport Co., Baroda V. The ACIT,Circle-2(2), Baroda

ITA 1744/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0352 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 27-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHI C K MISHRA
• Assessee Lawyers: G S PATEL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND D.C. AGRAWAL, ACCOUNTANT MEMBER) ITA.NO. 1744/AHD/2009 [ASSTT.YEAR : 2005-2006] NATIONAL TRANSPORT G-19, FATEHSAGAR COMPLEX FATEHGUNJ, BARODA. PAN : ACBFN 3260 C VS. ACIT, CIR.2(2) AHMEDABAD. ASSESSEE BY : SHRI G.S.PATEL, AR REVENUE BY : SHI C.K.MISHRA, DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, BARODA IN APPEAL NO.CAB/II-243/07-08 DATED 6-2-2009 . THE ASSESSMENT WAS FRAMED BY THE ACIT, CIR.2(2), BARODA UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FO R THE ASSESSMENT YEAR 2004- 2005 VIDE ORDER DATED 26-11-2007. 2. THE FIRST ISSUE RAISED IN THIS APPEAL OF THE ASS ESSEE IS RAISED BY WAY OF GROUND NO.1 IS AS UNDER: 1.0 THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE ON ACCOUNT OF VEHICLE EXPENSES AND TEL EPHONE EXPENSES TO RS.27,098/- BEING 1/10 TH OF THE TOTAL EXPENDITURE. 3. AT THE OUTSET, THE LEARNED COUNSEL OF THE ASSESS EE HAS NOT PRESSED THIS ISSUE AND ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 4. SECOND ISSUE IN THIS APPEAL OF THE ASSESSEE IS W ITH REGARD TO THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION MADE BY TH E AO ON ACCOUNT OF INTEREST PAID ON UNSECURED LOAN BY INVOKING PROVISIONS OF SE CTION 40A(2)(B) OF THE ACT. 5. BRIEF FACTS LEADING TO THE ABOVE ISSUES ARE THAT THE AO HAS NOTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT TH E ASSESSEE HAD PAID INTEREST TO THE FOLLOWING TEN DEPOSITORS AT THE RAT E OF 18% AS UNDER: PAGE - 2 ITA.NO.1744/AHD/2009 -2- I) SMT.DINABEN N. PATEL RS.16,767/- II) SHRI ATMARAM KALIDAS RS.60,843/- III) SHRI NALINBHAI M. PATEL RS.14,691/- IV) SMT. SUBHADRABEN M. PATEL RS.31,559/- V) SHRI RAGIN N. PATEL RS.41,750/- VI) SMT. BELABEN SHAH RS.3,151/- VII) SHRI HIMANSHU SHAH RS.3,151/- VIII) SMT.PREETIBEN SHAH RS.3,151/- IX) SMT.DHARMISHTABEN SHAH RS.3,151/- X) SHRI ARVINDBHAI SHAH RS.1,81,345/- THE AO NOTED THAT THE PREVAILING BANK RATE WAS AT 12% AND THE ASSESSEE HAS MADE PAYMENT AT THE RATE OF 18% WITHOU T ANY REASONS. ACCORDINGLY, THE AO DISALLOWED EXCESS INTEREST PAID TO THE EXTENT OF RS.60,448/- AND ADDED BACK TO THE RETURN OF INCOME OF THE ASSESSEE APPLYING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. AG GRIEVED ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) ALSO CONFIRME D THE ACTION OF THE AO BY GIVING FOLLOWING FINDING IN PARA-4.3 OF THE APPELLA TE ORDER AS UNDER: 5.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHO RISED REPRESENTATIVE AND THE ORDER OF THE AO WHILE SUBMI TTING THAT IT IS DIFFICULT TO GET LOANS FROM THE BANK, NO EVIDENCE H AS MADE FORWARDED BY THE AUTHORISED REPRESENTATIVE TO SHOW THAT TAKIN G OF SUCH LOANS WAS MANDATORY AND IMMEDIATELY REQUIRED TO EXPLAIN L OAN @ 18%. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE ASSESSI NG OFFICER U/S.40A(2)(B) IS JUSTIFIED AND IS CONFIRMED. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE VERY CATEGORICALLY STATED THAT THE ASSESSEE BEING IN THE TRANSPORT BUS INESS HAS TAKEN THE LOAN FROM PRIVATE FINANCIERS AND OTHER FINANCE COMPANIES WHOSE RATE OF INTEREST WORKED OUT TO BE NOT LESS THAN 24%. BUT IT WAS CON TENDED THAT THE ASSESSEE HAS TAKEN LOAN AT THE RATE OF 18% FROM PARTIES MENT IONED ABOVE WHO ARE RELATIVES. THE LEARNED COUNSEL FURTHER STATED THAT THE AO WITHOUT ANY REASONS OR RHYME DISALLOWED THE EXCESS INTEREST BY TAKING T HE INTEREST AT RATE OF 12%. 7. ON THE OTHER HAND, LEARNED DR SUPPORTED THE ORDE R OF LOWER AUTHORITIES. PAGE - 3 ITA.NO.1744/AHD/2009 -3- 8. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE ALSO PERUSED THE CAS E RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS ORDER OF THE CIT(A). W E FIND THAT THE ASSESSEE HAS TAKEN LOAN FROM PARTNERS OR THE RELATIVES AS NA RRATED ABOVE AT THE RATE OF 18%. THIS WAS THE ASSESSMENT YEAR 2005-2006 AND IT WAS THE CLAIM OF THE REVENUE THAT THE BANK INTEREST WAS AT THE RATE OF 1 2%, WHICH IS NOT THE CORRECT POSITION. THE PREVALENT MARKET RATE OF CASH CREDIT LIMIT OR OVERDRAFT LIMIT IS ABOUT 14% TO 15%. IN CASE THE ASSESSEE OBTAINS LOA N FROM THE PRIVATE FINANCIERS, THEN THE RATE PREVAILING FOR CHARGING O F INTEREST WILL BE 24%, WHILE THE ASSESSEE HAS TAKEN A LOAN AT THE RATE OF 18%. WE FEEL THAT THE ASSESSEE HAS TAKEN THE LOAN AT A RATE 18% WHICH IS REASONABL E, JUSTIFIED AND REQUIRED TO BE ALLOWED. ACCORDINGLY, WE DELETE THE IMPUGNED AD DITION MADE BY THE AO AND CONFIRMED BY THE CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE ON THIS ISSUE. 9. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS WITH REGARD TO THE CHARGING OF INTEREST UNDER SECTION 234B, 234C AND 2 34D OF THE ACT. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THE CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE, HENCE REQUI RES NO ADJUDICATION. ACCORDINGLY, WE HOLD THAT CHARGING OF INTEREST UNDE R THESE SECTIONS IS CONSEQUENTIAL. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 09/10/2009. SD/- SD/- (D.C. AGRAWAL) ACCOUNTANT MEMBER (MAHAVIR SINGH) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 09-10-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT PAGE - 4 ITA.NO.1744/AHD/2009 -4- 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER /TRUE COPY/ DR, ITAT, AHMEDABAD