ACIT Cir.-1, Aurangabad V. Shri Sarda Nandkishor Balram, Parbhani

ITA 189/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49963 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 189/PN/2010 : A.Y. 2006-07 ASSTT. CIT CIR. 1, AURANGABAD APPELLANT VS. SHRI SARDA NANDKISHOR BALRAM GANESH KRISHI VIKAS KENDRA NEW MONDHA PARBHANIPAN AMFPS 2456 M RESPONDENT C.O. NO. 06/PN/2011 ARISING OUT OF I.T.A. NO. 189/PN/2010 A.Y. 2006-07 SHRI SARDA NANDKISHOR BALRAM GANESH KRISHI VIKAS KENDRA NEW MONDHA PARBHANI PAN AMFPS 2456 M CROSS OBJECTOR VS. ASSTT. CIT CIR. 1, AURANGABAD APPELLANT IN APP EAL ASSESSEE BY: NONE DEPARTMENT BY: SMT ANN KAPTHUAMA ORDER PER SHAILENDRA KUMAR YADAV, JM THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION B Y THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) AURANGABAD DATED 21-10-2009 FOR A.Y. 2006-07. 2 ITA NO. 189/PN/2010 AND CO 6/PN/2011 SARDA NANDKISHORE BALRAM A.Y. 2006-07 2. THE REVENUE IN ITS APPEAL HAS RAISED THE FOLLOWI NG GROUNDS: 1. WHETHER SALARY PAID TO SON OF THE ASSESSEE IS N OT COVERED U/S 40A(2)(B) AND WAS NOT EXCESS CONSIDERIN G THE FACTS OF THE CASE AND RELYING ON THE DECISION MURARILAL KHANDELWAL VS. CIT (2003) 263 ITR 642 (RA J) AND AMRITSAR TRANSPORT CO. (P) LTD. VS. CIT (1986) 161 ITR 18 (P & H). 2. WHETHER INTEREST PAYMENT @ 18% WAS NOT ATTRACTED BY SECTION 40A(2)(B) BEING EXCESS IN COMPARISON OF FAIR MARKET VALUE OF INTEREST CHARGED BY VARIOUS BANKS? 3. WHETHER LD. CIT(A) WAS RIGHT ON DELETING THE ENHANCED GROSS PROFIT MADE BY A.O IGNORING THE FACT THAT QUANTITATIVE DETAILS OF STOCKS WAS NOT MAINTAI NED BY THE ASSESSEE? 3. GROUND NO. 1 IS AGAINST THE ASSESSING OFFICERS ACTION OF DISALLOWING AND ADDING BACK RS. 1,52,000/- ON AC COUNT OF EXCESS SALARY PAID BY THE ASSESSEE TO HIS SON. T HE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PA ID SALARY TO SHRI SHAMSUNDAR N. SARDA, SON OF THE ASSE SSEE AT RS. 3,05,000/-. ACCORDING TO THE ASSESSING OFFICER NO OTHER EMPLOYEE HAS BEEN PAID SUCH A HUGE SALARY. A S SUCH, HE DISALLOWED 50% OF SALARY BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. ON APP EAL, THE CIT(A) FOUND THAT SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER IN A.Y. 2005-06 CAME TO BE DELETE D BY THE CIT(A) BY OBSERVING THAT SAID SHRI SHYAMSUNDAR SARD A WAS WORKING FULL TIME AND WAS ALSO HANDLING ALL THE BUS INESS NEEDS OF THE ASSESSEE. FOLLOWING THE REASONED ORDE R OF THE 3 ITA NO. 189/PN/2010 AND CO 6/PN/2011 SARDA NANDKISHORE BALRAM A.Y. 2006-07 CIT(A) FOR A.Y. 2005-06, HE HAS DELETED THE IMPUGNE D ADDITION MADE ON ACCOUNT OF EXCESS SALARY PAID BY T HE ASSESSEE TO HIS SON FOR THE YEAR UNDER CONSIDERATIO N. 3.1. BEFORE US, THE LEARNED DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. NOTHING CONTRARY WAS BROUGHT ON RECORD TO ESTABLISH THAT THE SALARY PAID TO THE SON OF THE ASSESSEE WAS EXCESSIVE IN ANY WAY OR OTHERWISE. IN THIS VIE W OF THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE O RDER OF THE CIT(A) ON THIS ISSUE. THE SAME IS UPHELD. 4. GROUND NO. 2 IS WITH REGARDS TO ACTION OF THE AS SESSING OFFICER IN MAKING DISALLOWANCE AND ADDING BACK RS. 2,80,166/- ON ACCOUNT OF EXCESSIVE INTEREST EXPENSE S. THIS ISSUE WAS ALSO THE SUBJECT MATTER OF APPEAL BEFORE THE CIT(A) FOR A.Y. 2005-06 WHEREIN THE DISALLOWANCE ON ACCOUNT OF EXCESSIVE INTEREST EXPENSES CAME TO BE D ELETED. WHILE SUPPORTING THE ORDER OF THE ASSESSING OFFICER , THE LEARNED DR DID NOT BRING ANYTHING ON RECORD TO THE CONTRARY. SINCE IDENTICAL ADDITION CAME TO BE DELE TED FOR THE A.Y. 2005-06, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE AS WELL FOR THE Y EAR UNDER CONSIDERATION. THE SAME IS UPHELD. 4 ITA NO. 189/PN/2010 AND CO 6/PN/2011 SARDA NANDKISHORE BALRAM A.Y. 2006-07 5. GROUND NO. 3 IS WITH REGARDS TO DELETION OF ENHA NCED GROSS PROFIT MADE BY THE ASSESSING OFFICER. WE FIND THAT THE ASSESSING OFFICER HAS MADE THE ESTIMATION OF GROSS PROFIT ON THE HIGHER RATE MERELY ON CONJECTURE WITHOUT ANY BASIS AND WITHOUT MAKING ANY INQUIRY AND ANALYZING COMPAR ABLE CASES. THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAVE NOT BEEN REJECTED BY THE ASSESSING OFFICER BEFORE MAKIN G ESTIMATION OF GROSS PROFIT. IT IS WELL SETTLED PRO POSITION THAT WITHOUT REJECTING THE BOOKS OF ACCOUNTS AND WI THOUT INVOKING THE PROVISIONS OF SECTION 145, THE ASSESSI NG OFFICER HAS NO JURISDICTION TO INTERFERE WITH THE G ROSS PROFIT RAT DISCLOSED BY THE ASSESSEE. 5.1. IN THE PRESENT CASE, THE LEARNED DR HAS NOT BR OUGHT ANY MATERIAL ON RECORD TO INDICATE THAT THE BOOKS O F ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT RELIAB LE. FURTHER, THE ASSESSING OFFICER HAS NOT MADE ANY ATT EMPT TO ANALYZE THE GROSS PROFIT RATE OF THE ASSESSEE IN EA RLIER YEARS. THE ASSESSING OFFICER HAS ACCEPTED THE GROS S PROFIT DECLARED IN EARLIER YEARS INSPITE OF THE FACT THAT THE RETURN WAS SCRUTINIZED FOR A.Y. 2005-06 WHERE THE GROSS PR OFIT RATE DECLARED WAS 1.99% AS AGAINST 2.27% FOR THE YE AR UNDER CONSIDERATION. THIS FACT CLEARLY INDICATES TH AT THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON WHIMS ICAL 5 ITA NO. 189/PN/2010 AND CO 6/PN/2011 SARDA NANDKISHORE BALRAM A.Y. 2006-07 MANNER WITHOUT GATHERING SUPPORTING MATERIAL AND ANALYZING THE FACTS OF THE CASE AS ALSO WITHOUT EST ABLISHING THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE. IN VIEW OF THIS, THE CIT(A) WAS JUSTIFIED IN DELETI NG THE ADDITION OF RS. 5,55,660/- MADE BY THE ASSESSING OF FICER BY ESTIMATING GROSS PROFIT @ 2.5% WHICH DOES NOT CA LL FOR ANY INTERFERENCE AT OUR HANDS. 6. COMING TO THE CROSS OBJECTION FILED BY THE ASSES SEE, THE GROUNDS RAISED BY THE ASSESSEE ARE SUPPORTIVE T O THE DECISION OF THE CIT(A) IN DELETING (I) THE ADDITIONS ON ACCOUNT OF EXCESS SALARY PAID TO THE SON OF THE ASSESSEE; (II) INTEREST PAID TO VARIOUS PERSONS SPECIFIED U/S 40A(2)(B); AND (III) THE ADDITION OF RS. 5,55,660/- BY ESTIMATING GROSS PROFIT @ 2.5%. SINCE WE HAVE DECIDED ALL THESE GROUNDS TAKEN BY TH E REVENUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE, THE CROSS OBJECTION FILED BY THE ASSESSEE GOES INFR UCTUOUS. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011 SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV JUDICIAL MEMBER PUNE DATED THE 29 TH JULY 2011 ANKAM 6 ITA NO. 189/PN/2010 AND CO 6/PN/2011 SARDA NANDKISHORE BALRAM A.Y. 2006-07 COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT - 2. THE RESPONDENT 3. THE CIT(A)- V PUNE 4. THE CIT V PUNE 5. THE D.R, ITAT PUNE BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL