M/s. Shivam Cotton Corporatin, Sendhwa V. The ADDL.CIT, Khandwa

ITA 29/IND/2014

• Counselvise Citation: 2922714 RSA 2014
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 09-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: PANKAJ SHAH CAS

Judgement Text

PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : ABIFS1918G I.T.A.NO. 29 /IND/201 4 A.Y. : 2008-09 M/S.SHIVAM COTTON CORPORATION, MAULANA AZAD ROAD, A.B.ROAD, SENDHWA VS. ADDL. CIT, KHANDWA. APPELLANT RESPONDENT APPELLANT BY : SHRI MANOJ GUPTA & SHRI PANKAJ SHAH, CAS RESPONDENT BY : SHRI R.A.VERMA, SR. DR DATE OF HEARING : 29.04.2014 . DATE OF PRONOUNCEMENT : 13.0 6. 201 4 O R D E R PER JOGINDER SINGH, J. M. THE ASSESSEE HAS CHALLENGED THE ORDER OF LD. CIT(A) DATED 31.10.2013. M/S.SHIVAM COTTON CORPN., SENDHWA I.T.A.NO.29/IND/2014 A.Y. 2008-09 2 PAGE 2 OF 5 THE FIRST GROUND PERTAINS TO CONFIRMING THE INTERES T DISALLOWANCE U/S 40A(2)(B) OF THE INCOME-TAX ACT, 1 961, AMOUNTING TO RS. 7,92,321/-. 2. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE IS IN THE BUSINESS OF GINNING AND PRESSING OF COTTON. THE ASSESSEE CLAIMED THAT THE ASSESSEE BORR OWED UNSECURED LOAN @ 18% FROM RELATED AS WELL AS UNRELA TED PARTIES. THEREFORE, THE RATE OF 18% CANNOT BE SAID TO BE EXCESSIVE. RELIANCE WAS PLACED UPON THE DECISION IN THE CASE OF BALKRISHNA GOYAL VS. DCIT, I.T.A.NO. 590/IND/2009, WHEREIN IT WAS HELD THAT 18 % INTEREST FROM THE RELATED PARTY IS NOT EXCESSIVE OR UNREASONABLE. ON THE OTHER HAND, THE L D. SR. DR DEFENDED THE ADDITION BY CONTENDING THAT FROM THE B ANK LOAN IS AVAILABLE AT THE LESSER RATE. 3. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF AR E THAT THE ASSESSEE DECLARED INCOME OF RS. 48,13,806/- ON 30.0 9.2008. THE ASSESSEE OBTAINED TOTAL LOAN FUNDS AMOUNTING TO RS. 5,63,54,055/- AS ON 31.3.2008 CONSISTING OF SECURED LOAN OF M/S.SHIVAM COTTON CORPN., SENDHWA I.T.A.NO.29/IND/2014 A.Y. 2008-09 3 PAGE 3 OF 5 RS. 1,72,72,838/- AND UNSECURED LOAN OF RS. 3,87,81 ,217/-. THE SECURED LOAN MAINLY CONSISTED OF BANK O.D. LIMI T AVAILED FROM STATE BANK OF INDIA. AGAINST MORTGAGE OF IMMOV ABLE PROPERTIES OF THE FIRM WHERE AS UNSECURED LOAN ARE MAINLY TAKEN FROM FRIENDS AND RELATIVES WITHOUT ANY SECURI TY AND ON FIXED REPAYMENT TERMS. THE ASSESSEE FIRM WAS ALSO H AVING FUNDS AMOUNTING TO RS. 2,47,81,199/- IN THE FORM OF PARTNERS CAPITAL. THE ASSESSING OFFICER ASKED THE ASSESSEE T O FURNISH INTEREST DETAILS ON UNSECURED LOANS. THE LD. ASSESS ING OFFICER COMPARED THE RATE OF INTEREST WITH RATE OF 15% COLL ECTED BY THE ASSESSEE ON LOAN GIVEN BY IT AND, THEREFORE, HE DIS ALLOWED INTEREST OF RS. 7,92,321/-. KEEPING IN VIEW THE TOT ALITY OF FACTS AND THE DECISION OF THE TRIBUNAL MENTIONED ABOVE IN THE CASE OF M/S. BALKRISHNA VS. DCITY ( I.T.A.NO. 590/IND/20 09) ON IDENTICAL FACTS, WHEREIN THE EFFECTIVE RATE OF BANK INTEREST HAS ALSO BEEN DISCUSSED AND WAS HELD THAT BURDEN IS ON THE REVENUE TO SHOW THAT WHATEVER AN ASSESSEE PAID TO T HE PERSONS SPECIFIED U/S 40A(2) IS MORE THAN THE PREVAILING MA RKET RATES. WE NOTE THAT WHATEVER FUNDS THE ASSESSEE HAVE ARRAN GED FROM M/S.SHIVAM COTTON CORPN., SENDHWA I.T.A.NO.29/IND/2014 A.Y. 2008-09 4 PAGE 4 OF 5 THE BANK, IT HAD ALREADY ARRANGED AND THE REMAINING FUNDS REQUIRED FOR BUSINESS WERE ARRANGED FROM OTHER SOUR CES. BANK LOANS ARE FOR THE YEAR JUST ON ASKING OR PERSONAL G UARANTEE AND OTHER COLLATERAL SECURITIES, BUT THE LOANS FROM FRIENDS AND RELATIVES ARE AVAILABLE ON PERSONAL RELATIONS. IN V IEW OF THESE FACTS, WE FIND NO JUSTIFICATION TO MAKE THE ADDITIO N. THUS, THIS GROUND OF THE ASSESSEE IS ALLOWED, MORE SPECIFICALL Y WHEN IT IS THE BUSINESSMAN, WHO HAS TO CONSIDER OTHER ATTENDAN T CIRCUMSTANCES AND BUSINESS EXIGENCIES. 4. SO FAR AS CONFIRMING THE DISALLOWANCE OUT OF GINNIN G AND PRESSING EXPENSES TO THE EXTENT OF 5 % OF THE T OTAL EXPENSES IS CONCERNED, WE NOTE THAT THE ASSESSEE CL AIMED RS. 15,12,480/- AS GINNING EXPENSES AND RS. 7,87,239/- AS PRESSING EXPENSES. THE ASSESSEE WAS ASKED TO EXPLAI N THE GENUINENESS OF SUCH CLAIM. IT WAS NOTICED BY THE AS SESSING OFFICER THAT OUT OF THESE EXPENSES, CASH WAS NOT PA ID ABOVE RS. 20000/- TO ANY SINGLE PERSON. HOWEVER, HE NOTED THA T MOST OF THE VOUCHERS WERE SELF-PREPARED AND SOME OF THEM WE RE NOT SIGNED BY THE BUYERS. WEEKLY CHARGES PAID TO MORE T HAN ONE M/S.SHIVAM COTTON CORPN., SENDHWA I.T.A.NO.29/IND/2014 A.Y. 2008-09 5 PAGE 5 OF 5 LABOUR IN THE REGISTER WAS ENTERED AS A SINGLE ENTR Y IN THE LABOUR ACCOUNT. SINCE THE PAYMENTS WERE ALSO MADE I N CASH TO LABOUR, THEREFORE, 10 % OF THE TOTAL AMOUNT I.E. RS . 22,99,719/-, THE AMOUNT OF RS. 2,29,000/- WAS DISAL LOWED AND ADDED TO THE TOTAL INCOME. ON APPEAL, THE LD. CIT(A ) CONFIRMED TO THE EXTENT OF 5% OF THE TOTAL EXPENDITURE TO TAK E CARE OF DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER. TOTALITY OF CIRCUMSTANCES AND THE MATERIAL AVAILABLE ON RECORD CLEARLY INDICATES THAT THE LD. CIT(A) IS JUSTIFIED IN CONFI RMING THE ADDITION TO THE EXTENT OF 5%. THIS GROUND OF THE AS SESSEE IS, THEREFORE, HAVING NO MERIT, THEREFORE, DISMISSED. 5. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 13.06.2014. SD/- SD/- ( R. C. SHARMA ) ( JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13.06.2014. CPU* 5.5.