MEASAGE SHYAM LALL AND COMPANY, SRINAGAR V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE, SRINAGAR

ITA 330/ASR/2019

AI Insights

The case involves M/s Shyam Lal and Co. Petrol Pump, which appealed against the order of the Commissioner of Income Tax (Appeals), Jammu, concerning the assessment year 2015-16. The primary issue was the disallowance of interest paid on unsecured loans from family members, which was initially assessed at a lower rate by the Assessing Officer and subsequently by the CIT(A). The Tribunal examined the interest rates applied to similar loans and the general trend of interest rates over the years. The Tribunal found that the interest rate of 17% claimed by the assessee was consistent with the rates charged by local banks for unsecured loans and thus justified.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 114982 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-12-2022
• Assessment Year: misc
• Appeal Filed On: 06-06-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No.330/Asr/2019 Assessment Year: 2015-16 M/s Shyam Lal and Co. Petrol Pump, Nund Rishi Colony, Bemina Bye Pass Road Srinagar. J & K. [PAN: AAEFS7789N] (Appellant) Vs. Asstt. Commissioner of Income Tax, Circle, Srinagar. (Respondent) Appellant by None. Respondent by Smt. Ratinder Kaur, Sr. DR Date of Hearing 06.12.2022 Date of Pronouncement 08.12.2022 ORDER Per:Anikesh Banerjee, JM: The instant appeal of the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals),Jammu, [in brevity the CIT(A)] bearing appeal No.CAJ/10360/2017-18, date of order 23.01.2019, the order passed u/s I.T.A. No.330/Asr/2019 Assessment Year: 2015-16 2 250(6) of the Income Tax Act 1961, [in brevity the Act] for A.Y. 2015-16.The impugned order was emanated from the order of the ld. ACIT, Circle-3, Srinagar(in brevity the AO) order passed u/s 143(3)of the Act date of order 20.11.2017. The assessee took the following grounds which are extracted as below: “1 The Learned CIT(A)has erred on facts and law. On facts no disallowance out of interest paid was called for. 2. The learned CIT(A) has erred in allowing interest paid by appellant firm on deposits of family members of the Partnersof the firm@ 15% PA as against paid by the firm @17% andsustained addition ofRs.384580.00 It is requested that the Appellant firm be allowed interest paid todepositors as claimed i.e. at 17% PA. 3 Other grounds will be taken up at the time of hearing.” 2. Brief fact of the case is that the assessee debited interest @ 17% on unsecured loan, received from family members u/s 40A(2)(b) of the Act. During assessment the ld. AO presumed this interest as higher one and restricted the interest on unsecured loans @ 12%. Aggrieved assessee filed an appeal before the ld. CIT(A) and the ld. CIT(A) after a detailed discussion restricted the interest I.T.A. No.330/Asr/2019 Assessment Year: 2015-16 3 @15% which is worked the addition amount of Rs.3,84,580/- with total income of assessee. Being aggrieved assessee filed an appeal before us. 3. When the appeal was called for hearing, no one appeared on behalf of assessee to represent his case. There is no application for seeking adjournment either. On perusal of record, we find that the hearing is scheduled on 06/12/2022. Previously the dates were fixed number of times. In view of the above and considering the nature of dispute, we proceed to dispose the appeal ex-parte qua of the assessee after hearing the learned DR and on the basis of material available on the record. The ld. Sr. DR relied on the order of the ld. CIT(A) in page no. 4 para 2.3 is reproduced as below: “2.3 I have considered the facts of the case and the order of the AO I have also considered the written submissions of the Authorized Representative and the appellate orders for earlier assessment years. I find that Ground relating to disallowance of interest u/s 40A(2)(b) was decided by my predecessor by restricting the interest @18% which was claimed by the assessee @24% which was considered excessive. In the year under consideration, the same is claimed @17% but restricted I.T.A. No.330/Asr/2019 Assessment Year: 2015-16 4 at 12% by the A.O. Considering the past history of the case and overall fall in the interest rates over the past few years, I consider it appropriate to allow interest @ 15% in place of 17% claimed by the assessee. The A.O. is directed to work out the disallowance and provide consequential relief to the appellant. This Ground is partly allowed.” 5. We heard the submission of the revenue and considered the orders of both the revenue authorities. The revenue has taken plea that the Jammu Kashmir Bank is charging interest @ 13% of the loan amount. On the other side the assessee is paying interest @ 17% on the unsecured loan received from relatives r.w.s 40A(2)(b) of the Act. The rate of interest of the assessee similar in different years. The ld. CIT(A) is restricted @ 15% interest on the loan. But both revenue authorities were unable to clarify the issue in proper comparison or unable to bring any substantial evidence related charging the interest as per their rate. There is no such specific comparison or any reason in reduction of the interest rate of the assessee by the revenue authorities. The loan is in nature of unsecured. So, the interest rate will be higher than the secured loan. We find that the charging interest I.T.A. No.330/Asr/2019 Assessment Year: 2015-16 5 @ 17% on the unsecured loan is quite practical, no reason for reduction the same. Accordingly, the addition made by the ld. AO liable to be quashed and the interest rate is restricted @ 17% as assessee charged to their parties. 6. In the result, the appeal of the assessee bearing ITA No. 330/Asr/2019 is allowed. Order pronounced in the open court on 08.12.2022 Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE ) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By Order