Shri Pradip N. Desai, Ahmedabad V. The Dy.CIT.,Circle-7, Ahmedabad

ITA 2472/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2057 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K P SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C. AGRAWAL, AM) ITA NO.2472 AND 2473/AHD/2010 A. Y.: 2005-06 AND 2007-08 PRADIP NATVARLAL DESAI, 3 RD FLOOR, ARUN COMPLEX, STTAR TALUKA SOCIETY, NAVRANGPURA, AHMEDABAD 380 014 VS THE D. C. I. T., CIRCLE -7, AHMEDABAD PA NO. AAQFD 0142 A (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI K. P. SHAH, AR DEPARTMENT BY SHRI DARSI SUMAN RATNAM, DR O R D E R PER BHAVNESH SAINI: BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XV I, AHMEDABAD DATED 17 TH MAY,2010 FOR ASSESSMENT YEAR 2005-06 AND 2007-08, CHALLENGING THE ORDER OF THE LEARNED CIT(A) IN CONF IRMING THE ACCRUED INTEREST OF RS.2,62,823/- AND RS.2,45,823/- FROM LA BH CONSTRUCTION LTD. CALCULATED @17% IN BOTH THE ASSESSMENT YEARS. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT IN ASSES SMENT YEAR 2005- 06, THE AO MADE ADDITION OF ACCRUED INTEREST OF RS. 2,62,823/- FROM LABH CONSTRUCTION LTD. @18% BESIDES MAKING OTHER AD DITIONS IN THE ASSESSMENT YEAR. THE ADDITION WAS CONFIRMED BY THE LEARNED CIT(A) AND THE MATTER WENT IN APPEAL BEFORE THE ITAT AHMED ABAD BENCH WHO VIDE ORDER DATED 27-02-2009 HELD THAT INCOME TAX AUTHORITIES ITA NO.2472 AND 2473/AHD/2010 PRADIP NATVARLAL DESAI VS DCIT, CIR-7, AHMEDABAD 2 WERE JUSTIFIED IN HOLDING THAT THE INTEREST ACCRUED ON THE DEBT DUE FROM LABH CONSTRUCTION LTD. HOWEVER, TH E AO WAS DIRECTED TO ASCERTAIN THE RATE OF INTEREST FROM THE ASSESSEE AND MAKE SUITABLE ADDITION INSTEAD OF ASSUMING INTE REST RATE OF 18%. THE OPERATIVE PORTION OF THE ORDER OF THE TRIBUNAL IS REPRODUCED IN THE IMPUGNED ORDER. 3. THE AO PASSED THE APPEAL EFFECT ORDER AND HELD T HAT INTEREST BEING CHARGED BY THE ASSESSEE VARIES FROM 15% TO 18 %. FROM THE SISTER CONCERN INTEREST RATE OF 17% CHARGED. ACCORD INGLY, THE AO HELD THAT INTEREST RATE OF 17% IS FAIR MARKET RATE OF AD VANCE GIVEN TO LABH CONSTRUCTION LTD. AND ADDITION WAS ACCORDINGLY MADE . ON THE SIMILAR LINE, THE AO ASSESSED ACCRUAL OF INTEREST IN ASSESS MENT YEAR 2007-08 AND MADE THE ADDITION ACCORDINGLY. BOTH THE ADDITIO NS WERE CHALLENGED BEFORE THE LEARNED CIT(A) AND IT WAS SUB MITTED THAT M/S. LABH CONSTRUCTION LTD. HAS EXPRESSED INABILITY TO P AY INTEREST AND FURTHER THAT THE COMPANY HAS GONE IN BIFR, THEREFOR E, NO ADDITION SHOULD BE MADE. THE LEARNED CIT(A) NOTED THAT THE T RIBUNAL HAS REFERRED THE ISSUE OF RATE OF INTEREST TO THE FILE OF THE AO AND IN PRINCIPLE ADDITION HAS BEEN CONFIRMED ON ACCRUED BA SIS. THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 WAS ACC ORDINGLY DISMISSED. SINCE THE FACTS WERE SIMILAR IN ASSESSME NT YEAR 2007-08, THEREFORE, ADDITION WAS ALSO CONFIRMED IN THAT YEAR AND APPEAL OF THE ASSESSEE WAS ACCORDINGLY DISMISSED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND R EFERRED TO PB-11 ITA NO.2472 AND 2473/AHD/2010 PRADIP NATVARLAL DESAI VS DCIT, CIR-7, AHMEDABAD 3 AND PB-19 WHICH ARE THE LETTERS OF LABH CONSTRUCTIO N LTD. TO SHOW THAT NO INTEREST HAS BEEN CHARGED. HE HAS, THEREFOR E, SUBMITTED THAT TOKEN ADDITION MAY BE MADE AND FURTHER SUBMITTED TH AT SINCE NO INTEREST IS CHARGED, NO DIRECTION WAS ISSUED BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2007-08, THEREFORE, ADDITION MAY BE DELETED. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND MATERIA L AVAILABLE ON RECORD. IN THE ASSESSMENT YEAR 2005-06 THE MATTER W ENT BEFORE THE TRIBUNAL AND IN PRINCIPLE THE ADDITION ON QUANTUM W AS CONFIRMED BY HOLDING THAT AUTHORITIES BELOW WERE JUSTIFIED IN HO LDING THAT INTEREST ACCRUED ON DEBT DUE FROM LABH CONSTRUCTION IS JUSTI FIED. THE MATTER WAS RESTORED TO THE FILE OF THE AO TO ASCERTAIN SUI TABLE RATE OF INTEREST AND THE AO WAS DIRECTED TO MAKE SUITABLE ADDITION. THE AO NOTED THAT INTEREST CHARGED BY THE ASSESSEE VARIES FROM 1 5% TO 18% BUT APPLIED 17% AS WAS CHARGED FROM THE SISTER CONCERN. IN OUR VIEW, INTEREST CALCULATED BY THE AO IS STILL ON EXCESSIVE SIDE. THE ASSESSEE PRODUCED LETTER TO SHOW THAT NO INTEREST WAS CHARGE D, HOWEVER, THE ADDITION ON PRINCIPLE IS ALREADY CONFIRMED BY THE T RIBUNAL. THEREFORE, SUCH LETTER CAN BE TAKEN IN TO CONSIDERATION TO FIX REASONABLE RATE OF INTEREST. THE LOWEST INTEREST CHARGED BY THE ASSESS EE IS 15%, THEREFORE, WE DIRECT THE AUTHORITIES BELOW TO CHARG E INTEREST @15% INSTEAD OF 17% CHARGED. THE ADDITIONS WOULD ACCORDI NGLY BE MODIFIED BY THE AO BY CALCULATING INTEREST @ 15%. THE FACTS ARE SIMILAR IN ASSESSMENT YEAR 2007-08. THE ORDER OF THE TRIBUNAL SQUARELY APPLIES TO THAT CASE ALSO. THE LETTER PB-19 IS DATED 31-03- 2010 ISSUED BY ITA NO.2472 AND 2473/AHD/2010 PRADIP NATVARLAL DESAI VS DCIT, CIR-7, AHMEDABAD 4 M/S. LABH CONSTRUCTION & INDUSTRIES LTD. WOULD NOT APPLY TO THE ASSESSMENT YEAR UNDER APPEAL. THEREFORE, FOLLOWING THE ORDER IN ASSESSMENT YEAR 2005-06, WE DIRECT THE AO TO CALCUL ATE INTEREST @15% INSTEAD OF 17% AS IS DIRECTED ABOVE. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 18-02-2011 AT 2PM SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 18- 02-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD