The ITO, Ward-5(1), Surat V. Shri Arun Kumar Jain, Surat

ITA 3492/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76701 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 20-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 30-12-2010
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained expenditure; Depreciation
• Section: 69C; 131

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD 0 00 0 0 00 0 , , , , !'# !$ !'# !$ !'# !$ !'# !$0 00 0! !! !0 00 0 %$ %$ %$ %$, , , , &' ( &' ( &' ( &' ( & & & & BEFORE SHRI G.C. GUPTA, VICE-PRESIDENT AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO. 3492/AHD/2010 ASSESSMENT YEAR 2006-07 INCOME TAX OFFICER, WARD-5(1), SURAT. VS SHRI ARUN KUMAR JAIN, PRO. A.K. ENTERPRISE, 1/1194-95 ,NEW TEXTILE MARKET, RING ROAD, SURAT. PAN: AAGPJ8438D )*/ APPELLANT ,-)* / RESPONDENT REVENUE BY : SHRI P.L. KUREEL, SR. DR ASSESSEE(S) BY : SHRI RASESH SHAH, AR $'. / 0'/ // / DATE OF HEARING : 20/05/2014 123 / 0' / DATE OF PRONOUNCEMENT : 23/05/2014 &4 &4 &4 &4/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IV, SURAT DATE D 28.09.2010. 2. GROUND NO. 1 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE A DDITION OF RS 10,81,573/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT. ITA NO. 3492/AHD/2010 SHRI ARUN KUMAR JAIN, SURAT. FOR A.Y. 2006-07 - 2 - 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER OBSERVED FROM THE QUANTITATIVE DETAILS THAT THE ASSESSEE HAD SHOW N EXCESS YIELD. HE OBSERVED THAT THE ASSESSEE HAS CLAIMED BENEFIT OF LONGEVITY AT TWO STAGES: ONE, AT THE STAGE OF PROCESSING OF CLOTH AND TWO, DURING SALES. ACCO RDING TO HIM, THIS WAS IN CONTRAST TO THE SHRINKAGES OBSERVED ON PROCESSING OF CLOTH. THE TOTAL LONGEVITY CLAIMED WAS 28,045.25 METRES. THE ASSESSEE EXPLAINED THAT HE D EALT IN NYLON FABRICS WHICH HAVE A TENDENCY OF ELONGATION ON PROCESSING. IT WA S SUBMITTED THAT THIS IS PROVED BY THE GATE PASSES RECEIVED FROM MILLS. IT WAS FURTHER CLAIMED THAT THE FABRIC AT THE TIME OF SALE WAS MEASURED TIGHT AND THIS RESULT S IN ABOUT 2% EXCESS YIELD. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD HONESTLY S HOWN HIS EXCESS YIELD IN ITS BOOKS OF ACCOUNT AND THROUGH SALES HAVE BEEN RECORD ED INCREASING ITS PROFITS. THE ASSESSING OFFICER DISBELIEVED THIS EXPLANATION OF T HE ASSESSEE ON THE GROUND THAT THIS WOULD AMOUNT TO CHEATING CUSTOMERS AND AGAINST BUSINESS ETHICS AND ENQUIRIES WITH M/S. PIONEER SYNTEX PRIVATE LIMITED, THROUGH W HOM 80% PROCESSING OF THE ASSESSEE WAS DONE, REVEALED THAT THERE WAS ACTUAL S HRINKAGE OF 1.31% ON PROCESSING. THE ASSESSING OFFICER, THEREFORE, CONC LUDED THAT THE ASSESSEE MADE SALES OUT OF UNACCOUNTED PURCHASES. HE CONSIDERED THE AVERAGE SALE PRICE AND BOOK GROSS PROFIT TO DETERMINE THE INVESTMENT IN UN ACCOUNTED PURCHASES WHICH WORKED OUT AT RS 10,81,573/- AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT. 4. ON APPEAL FILED BY THE ASSESSEE AGAINST THIS OR DER OF THE ASSESSING OFFICER, THE COMMISSIONER OF INCOME TAX (APPEALS) O BSERVED THAT THE ASSESSEE HAS BEEN ABLE TO SHOW ON THE BASIS OF EVIDENCE THAT THE RE WAS LONGEVITY YIELD ON PROCESSING OF NYLON CLOTH AND THAT THE ANALYSIS MAD E BY THE ASSESSING OFFICER ON INFORMATION OBTAINED FROM M/S. PIONEER SYNTEX PRIVA TE LIMITED WAS NOT CORRECT AS IT DID NOT CONSIDER OPENING AND CLOSING STOCK WITH THE SAID CONCERN. THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERV ED THAT EVEN OTHERWISE THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F UNACCOUNTED PURCHASES WAS NOT CORRECT. THE CONCLUSION OF THE ASSESSING OFFIC ER IS THAT BECAUSE THERE WAS EXCESS SALE IT HAD TO BE OUT OF UNRECORDED PURCHASE S. THE SALES, HOWEVER, ARE FULLY RECORDED IN THE BOOKS. THE ASSESSEE, THEREFORE, ON ITS OWN HAS OFFERED THE FULL VALUE OF SALES AS INCOME AND NOT CLAIMED PURCHASES AGAINST THEM IN THE BOOKS. SUCH A SITUATION WOULD NORMALLY NOT EXIST, BUT IF I T IS ASSUMED TO BE TRUE, THEN THE ITA NO. 3492/AHD/2010 SHRI ARUN KUMAR JAIN, SURAT. FOR A.Y. 2006-07 - 3 - ADDITION ON ACCOUNT OF PURCHASES IS UNWARRANTED AS THE ASSESSEE HAS ALREADY SHOWN EXCESS PROFIT TO THE EXTENT OF CORRESPONDING PURCHASES NOT RECORDED. THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT WHET HER WE LOOK AT THE EVIDENCES GIVEN BY THE ASSESSEE TO SHOW THAT THERE WAS LONGEV ITY YIELD OR THE CONCLUSION OF THE ASSESSING OFFICER, THE ADDITION MADE ON ACCOUNT OF OUT OF BOOK PURCHASES IS NOT TENABLE. THEREFORE, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSEE IS ENGAGED IN MANUFACTURING AND TRADING OF SYNTHETIC C LOTH. DURING THE YEAR UNDER CONSIDERATION, IN THE QUANTITATIVE DETAILS THE ASSE SSEE HAD SHOWN EXCESS YIELD OF 28045.25 METRES. THE ASSESSEE DEALS IN NYLON FABRI CS WHICH HAVE A TENDENCY OF ELONGATION. THE ASSESSING OFFICER ON AN INQUIRY FR OM M/S. PIONEER SYNTEX PRIVATE LIMITED, WITH WHOM 80% PROCESSING OF THE ASSESSEE W AS DONE, OBSERVED THAT THE SAID PARTY STATED THAT IN FACT THERE WAS SHRINKAGE OF 1.31% IN THE PROCESSING. IN VIEW OF THIS, THE ASSESSING OFFICER OBSERVED THAT T HE ASSESSEE HAS CHEATED THE CUSTOMERS WHICH IS AGAINST BUSINESS ETHICS. HE WAS OF THE OPINION THAT THE ASSESSEE SOLD 28045.25 METRES OF SYNTHETIC CLOTH OU T OF UNDISCLOSED PURCHASES. HE ESTIMATED THE VALUE OF UNDISCLOSED PURCHASES AT RS 10,81,573/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 6. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPE ALS) DELETED THE ABOVE ADDITION BY OBSERVING THAT THE ENTIRE SALE VA LUE WAS SHOWN BY THE ASSESSEE AS ITS INCOME AND EVEN WHEN THE VIEW OF THE ASSESSI NG OFFICER IS TAKEN AS CORRECT, THEN ALSO AS THE ASSESSEE HAD NOT CLAIMED ANY DEDUC TION IN RESPECT OF ALLEGED PURCHASES, THE ASSESSEE HAS SHOWN MORE INCOME, AND THEREFORE, QUESTION OF MAKING FURTHER ADDITION DOES NOT ARISE. 7. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE SUPP ORTED THE ORDER OF THE ASSESSING OFFICER BUT COULD NOT POINT OUT ANY SPECI FIC ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). WE FIND THAT NO MATERIAL COULD BE BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE ASSESSEE HAD ACTUALLY MADE ANY ITA NO. 3492/AHD/2010 SHRI ARUN KUMAR JAIN, SURAT. FOR A.Y. 2006-07 - 4 - INVESTMENT IN PURCHASES WHICH WAS NOT RECORDED IN I TS BOOKS OF ACCOUNT. IN ABSENCE OF ANY SUCH MATERIAL, WE DO NOT FIND ANY GO OD REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). IT IS CONFIRMED. THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. GROUND NO. 2 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE A DDITION OF RS 2,02,129/- ON ACCOUNT OF UNACCOUNTED STOCK FOUND DURING THE COURS E OF SURVEY. 9. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER OBSERVED THAT A SURVEY WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 31.01.2006. NO DAY-TO-DAY STOCK REGISTER WAS MAINTAINED BY THE ASSESSEE. PHY SICAL STOCK WAS FOUND TO BE RS 4,74,760/- FURNISHED GOODS AND STOCK OF GREY CLOTH LYING AT MILL WAS STATED TO BE RS 2,56,021/-. THEREFORE, THE TOTAL STOCK ON PHYSICAL VERIFICATION WAS RS 7,30,782/-. THE SURVEY PARTY PREPARED TRADING ACCOUNT OF THE AS SESSEE AND DETERMINED BOOK CLOSING STOCK OF RS 5,28,652/-. THE DIFFERENCE OF RS 2,02,129/- WAS EXPLAINED BY SHRI PRATIK JAIN, SON OF THE ASSESSEE WHO WAS PRESE NT AT THE SHOP DURING THE COURSE OF SURVEY, TO BE ON ACCOUNT OF RETURNED GOODS LYING IN THE SHOP AND GODOWN. THE ASSESSEE SHRI ARUN KUMAR JAIN WAS NOT PRESENT DURIN G THE COURSE OF SURVEY AS HE WAS AT DELHI. IN HIS STATEMENT RECORDED U/S. 131, SHRI ARUN KUMAR JAIN ON RETURN FROM DELHI EXPLAINED DIFFERENCE IN STOCK WAS BECAUS E OF EXPENSES OF JOB CHARGES NOT FULLY DEBITED IN TRADING ACCOUNT AND IF THIS WA S CONSIDERED, THE STOCK AS PER BOOKS WOULD BE RS 7,21,094/- WHICH WOULD LEAVE UNRE CONCILED DIFFERENCE OF RS 9,688/- ONLY. THIS EXPLANATION DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER. ACCORDING TO HIM, THIS WAS AN AFTERTHOUGHT AS IT WA S TOTALLY DIFFERENT FROM WHAT THE ASSESSEES SON HAD STATED. THE ASSESSING OFFICER C ONSIDERED THE DIFFERENCE OF RS 2,02,129/- AS UNACCOUNTED STOCK INVESTMENT AND ADDE D THE SAME TO THE INCOME OF THE ASSESSEE. 10. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) OBSERVED THAT THE ASSESSEE WAS NOT PRESENT AT THE TIME OF SURVEY. AT THE FIRST OPPORTUNITY WHICH WAS THE STATEMENT U/S. 131, THE ASSESSEE RECONCILED THE DIFFERENCE IN THEIR PHYSICAL STOCK FOUND ON THE DATE OF SURVEY AND BOOK STOCK ON THAT DATE. FROM THE TRIAL ITA NO. 3492/AHD/2010 SHRI ARUN KUMAR JAIN, SURAT. FOR A.Y. 2006-07 - 5 - BALANCE AS ON 31.01.2006, THE DATE OF SURVEY, M/S. SHREE JALARAM PROCESSORS APPEARED AS DEBTOR OF RS 1,26,889/-. IF WE FOLLOW THE ACCOUNTING ENTRIES, IT BECOMES CLEAR THAT M/S. SHREE JALARAM PROCESSORS WO ULD APPEAR AS A DEBTOR IF PAYMENT HAS BEEN MADE TO HIM BUT THE SAID EXPENSE H AS NOT BEEN DEBITED IN THE TRADING ACCOUNT. THIS SHOWS THAT THE STATEMENT OF THE ASSESSEE U/S. 131 WAS NOT AN AFTERTHOUGHT AS IS SUPPORTED BY THE EVIDENCE WHI CH WAS PRESENT AT THE TIME OF SURVEY ITSELF. AS REGARDS JOB CHARGES TO M/S. PION EER SYNTEX PRIVATE LIMITED, THESE CLAIMS WERE ALSO MADE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF STATEMENT ITSELF WITHIN A FEW DAYS OF SURVEY ON ARRIVAL FROM DELHI. THEREFORE, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT IN HIS OPINION THE STATEMENT OF THE ASSESSEE U/S. 131 OF THE ACT WHICH WAS ALSO SUPPORTED BY EVIDENCE OUGHT TO HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER AS AG AINST THE STATEMENT OF A REPRESENTATIVE. ACCORDING TO THE COMMISSIONER OF I NCOME TAX (APPEALS), IT WAS NOT OPEN TO THE ASSESSING OFFICER TO REBUT THE CLAIM AN D SHOW BY WAY OF ENQUIRIES THAT THE STATEMENT MADE OR EVIDENCES PRODUCED IN SUPPORT THEREOF WERE FALSE. THE ASSESSING OFFICER CHOSE TO RELY ON THE STATEMENT OF THE ASSESSEES REPRESENTATIVE TO THE EXCLUSION OF ASSESSEES OWN STATEMENT AND EVIDE NCES. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT IN VIEW OF THE D ISCUSSIONS MADE, IT IS HELD THAT THE STOCK DIFFERENCE IS RECONCILED AND THERE WAS NO EXCESS STOCK WITH THE ASSESSEE. THEREFORE, HE DELETED THE ADDITION. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, DURING THE COURSE OF SURVEY CONDUCTED ON 31.01.2006, STOCK OF RS 7,30 ,782/- WAS FOUND ON PHYSICAL VERIFICATION. AS PER THE TRADING ACCOUNT PREPARED AT THE TIME OF SURVEY, VALUE OF STOCK AS PER BOOKS WAS ARRIVED AT RS 5,28,652/-. T HUS, THERE WAS EXCESS STOCK OF RS 2,02,129/- WHICH WAS EXPLAINED BY THE SON OF THE ASSESSEE AS RETURN OF GOODS AT THE TIME OF THE SURVEY. THE ASSESSEE WAS NOT IN TH E STATION AT THE TIME OF THE SURVEY. ON HIS RETURN, A STATEMENT OF THE ASSESSEE WAS RECORDED U/S. 131 OF THE ACT AND IN THAT STATEMENT, THE ASSESSEE POINTED OUT THAT CERTAIN JOB CHARGES OF RS 1,92,442/- WERE NOT PROPERLY ACCOUNTED FOR AND THER EFORE, NOT CONSIDERED IN PREPARING TRADING ACCOUNT AT THE TIME OF THE SURVEY AND ON CONSIDERATION OF THE SAME, THE STOCK AS PER BOOKS COMES TO RS 7,21,094/- WHICH IS ALMOST EQUAL TO THE PHYSICAL STOCK FOUND DURING THE COURSE OF SURVEY WI TH A DIFFERENCE OF A MEAGRE ITA NO. 3492/AHD/2010 SHRI ARUN KUMAR JAIN, SURAT. FOR A.Y. 2006-07 - 6 - AMOUNT OF RS 9,688/-. THE ASSESSING OFFICER IN THE ASSESSMENT REJECTED THE STATEMENT OF THE ASSESSEE BY BRANDING IT AS AFTERTH OUGHT AND MADE THE ADDITION OF RS 2,02,129/- TO THE INCOME OF THE ASSESSEE. 12. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) DELETED THE ABOVE ADDITION BY OBSERVING THAT THE ASSESSING OFFI CER WAS NOT JUSTIFIED IN REJECTING THE STATEMENT OF THE ASSESSEE WHICH WAS RECORDED AT THE EARLIEST OPPORTUNITY AFTER RETURN OF THE ASSESSEE TO THE STATION AND WITHOUT T AKING INTO CONSIDERATION THE OTHER MATERIALS LIKE DEBIT BALANCE IN THE ACCOUNT OF M/S. SHREE JALARAM PROCESSORS FROM WHOM THE ASSESSEE GOT JOB WORK DONE. 13. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE SUP PORTED THE ORDER OF THE ASSESSING OFFICER AND THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 14. WE FIND THAT THE STATEMENT OF THE ASSESSEE WHI CH WAS RECORDED U/S. 131 OF THE ACT WAS REJECTED BY THE ASSESSING OFFICE R WITHOUT MAKING ANY ATTEMPT TO VERIFY THE GENUINENESS OF THE SAME. NO MATERIAL WA S BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THERE WAS ANY ERROR IN THE STATEMENT OF THE ASSESSEE RECORDED U/S. 131 BY MAKING DUE INQUIRY. IN OUR CO NSIDERED VIEW, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING A PLAUSIBLE EXPLANATION WITHOUT MAKING NECESSARY INQUIRY. THE DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY ERROR IN THE FINDING OF THE COMMISSIONER OF INCOME TAX (A PPEALS) WHICH WAS TO THE EFFECT THAT THE TRIAL BALANCE PREPARED AT THE TIME OF THE SURVEY ITSELF SHOWS THAT SOME JOB WORK CHARGES WHICH WERE ALSO ACTUALLY PAID BY THE A SSESSEE BEFORE SURVEY WERE NOT PROPERLY RECORDED IN THE BOOKS OF ACCOUNT. IN THE ABOVE CIRCUMSTANCES, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). IT IS CONFIRMED. THE GROUND OF APPEAL OF REVENUE IS DISMISSED. 15. GROUND NO. 3 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE A DDITION OF RS 1,03,836/- MADE ON ACCOUNT OF INTEREST EXPENSES U/S. 40A(2)(B) OF T HE ACT. ITA NO. 3492/AHD/2010 SHRI ARUN KUMAR JAIN, SURAT. FOR A.Y. 2006-07 - 7 - 16. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER OBSERVED THAT THE INTEREST WAS PAID AT THE RATE OF 12% TO PERSONS MENTIONED U/S. 40A(2)(B) OF THE ACT. HE CONSIDERED IT AS UNREASONABLE BECAUSE CASH CREDITS WERE AVAILABLE AT 9% TO 10%. IN REPLY TO SHOW CAUSE NOTICE, THE ASSE SSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT BANK LOAN RATES RANGE FROM 1 5% TO 18% AND INVOLVED FURTHER EXPENSES IN THE NATURE OF INSURANCE PREMIUM, VISIT CHARGES, VALUATION CHARGES, DOCUMENT CHARGES, STAMP DUTY ETC. AND THEREFORE, UN SECURED LOAN ON 12% INTEREST WAS REASONABLE. IT WAS ALSO SUBMITTED THAT THIS DO ES NOT CREATE ANY CHARGE ON THE ASSESSEE. THE REPLY DID NOT FIND FAVOUR WITH THE A SSESSING OFFICER. ACCORDING TO HIM, CASH CREDIT LIMITS FROM NATIONALIZED BANKS WER E AVAILABLE AT 9% TO 10% RATE OF INTEREST AND THEREFORE, HE CONSIDERED 9% AS THE REA SONABLE MARKET RATE AND RESTRICTED THE INTEREST CLAIMED BY THE ASSESSEE TO THAT EXTENT AND MADE ADDITION FOR THE BALANCE AMOUNT OF INTEREST OF RS 1,03,836/-. 17. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) OBSERVED THAT BANK LOANS WHICH ARE AGAINST SECURITY AND ENTAIL AD DITIONAL EXPENSES ARE NOT COMPARABLE TO UNSECURED LOANS AND THEREFORE, CANNOT BE A BASIS FOR DETERMINING REASONABLE MARKET RATE FOR UNSECURED LOANS. 12% RA TE OF INTEREST, ACCORDING TO HIM, WAS REASONABLE AND THEREFORE HE DELETED THE AD DITION OF RS 1,03,836/- MADE U/S. 40A(2)(B) OF THE INCOME TAX ACT, 1961. 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSEE CLAIMED DEDUCTION FOR INTEREST PAYMENT OF RS 4,15,3 56/- TO FIVE PARTIES ON LOANS TAKEN FROM THEM AT THE RATE OF 12%. ACCORDING TO T HE ASSESSING OFFICER, THE RATE OF INTEREST PAID BY THE ASSESSEE AT THE RATE OF 12% WA S MUCH HIGHER AND ACCORDING TO HIM, THE RATE OF INTEREST AT 9% WAS REASONABLE. T HEREFORE, HE RESTRICTED THE CLAIM FOR INTEREST EXPENDITURE AT THE RATE OF 9% AND THER EBY DISALLOWED INTEREST PAYMENT OF RS 1,03,836/- AND MADE ADDITION OF THE SAME TO T HE INCOME OF THE ASSESSEE. 19. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) DELETED THE DISALLOWANCE BY OBSERVING THAT THE ASSESSING OFFICE R WAS NOT JUSTIFIED IN HOLDING ITA NO. 3492/AHD/2010 SHRI ARUN KUMAR JAIN, SURAT. FOR A.Y. 2006-07 - 8 - THAT 9% INTEREST ON LOANS TAKEN BY THE ASSESSEE WAS REASONABLE ON THE GROUND THAT DURING THE PERIOD, MAXIMUM BANK FDR INTEREST RATE W AS AROUND 6% TO 8% AND THE INTEREST RATE ON CASH CREDIT LIMITS WAS AROUND 9% T O 10% INASMUCH AS FOR OBTAINING BANK LOAN, THE ASSESSEE HAD TO PROVIDE SECURITY AND ALSO HAD TO INCUR ADDITIONAL EXPENSES AND THEREFORE, THE INTEREST CHARGED BY THE BANK WAS NOT COMPARABLE TO THE INTEREST OF UNSECURED LOANS OBTAINED FROM PRIVA TE PARTIES BY THE ASSESSEE. HE, THEREFORE, DELETED THE DISALLOWANCE MADE BY THE ASS ESSING OFFICER. 20. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDER OF THE ASSESSING OFFICER AND THE AUTHORIZED REPRESENTA TIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S). 21. WE FIND THAT THE INTEREST PAID BY THE ASSESSEE AT THE RATE OF 12% WAS QUITE REASONABLE AS THE INCOME TAX DEPARTMENT ITSEL F PAYS INTEREST AT THE RATE OF 15% PER ANNUM ON THE REFUND GRANTED TO THE ASSESSEE AFTER THE COMPLETION OF THE ASSESSMENT U/S. 244 OF THE ACT. THEREFORE, WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). IT IS CONFIRMED. THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 22. GROUND NO. 4 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTING TH E ADDITION OF RS 46,670/- MADE ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES OF R S 93,340/-. 23. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER MADE ADDITION OF RS 93,340/- ON ACCOUNT OF DISALLOWANCE OUT OF VA RIOUS EXPENSES LIKE TELEPHONE EXPENSES, PETROL EXPENSES, VEHICLE REPAIR AND MAINT ENANCE EXPENSES, CAR INSURANCE, CAR DEPRECIATION AND OFFICE EXPENSES. A CCORDING TO THE ASSESSING OFFICER, NO LOG BOOK/REGISTER IS MAINTAINED BY THE ASSESSEE FOR USAGE OF VEHICLE. OFFICE EXPENSES RELATED TO COFFEE/TEA, COLD DRINK ETC. FOR WHICH NO VOUCHERS HAD BEEN PREPARED. THE ASSESSING OFFICER DISALLOWED 20% OF THE EXPENSES AS BEING NON- BUSINESS IN NATURE. ITA NO. 3492/AHD/2010 SHRI ARUN KUMAR JAIN, SURAT. FOR A.Y. 2006-07 - 9 - 24. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) OBSERVED THAT THE ASSESSEE HAS NOT BEEN ABLE TO DISLODGE THE FIND INGS OF THE ASSESSING OFFICER THAT NOT ALL EXPENSES ARE INCURRED FOR THE PURPOSES OF B USINESS. AT THE SAME TIME, SUCH EXPENSES ARE REQUIRED TO BE INCURRED FOR THE PURPOS ES OF BUSINESS. ACCORDINGLY, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT IN HIS OPINION ENDS OF JUSTICE WILL BE MET IF THE DISALLOWANCE WAS RESTRICTED TO 1 0% AND DIRECTED THE ASSESSING OFFICER TO GIVE RELIEF ACCORDINGLY. 25. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSING OFFICER DISALLOWED RS 93,340/- BEING 20% OF VARIOUS EXPENSES LIKE TELEPHONE EXPENSES, PETROL EXPENSES, VEHICLE REPAIR AND MAINT ENANCE EXPENSES, CAR INSURANCE, CAR DEPRECIATION AND OFFICE EXPENSES ON THE GROUND THAT THE ASSESSEE DID NOT MAINTAIN ANY LOG BOOK/REGISTER FOR USAGE OF VEH ICLES AND THAT OFFICE EXPENSES RELATED TO COFFEE/TEA, COLD DRINK ETC. FOR WHICH NO VOUCHERS HAD BEEN PREPARED. 26. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) RESTRICTED THE DISALLOWANCE TO 10% OF THE EXPENSES CLAIMED BY THE ASSESSEE. 27. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT THE DISALLOWANCE OF 20% OF THE EXPENSES MADE BY THE ASS ESSING OFFICER WAS QUITE REASONABLE AND THEREFORE, THE SAME SHOULD BE CONFIR MED AND ON THE OTHER HAND THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 28. WE FIND THAT THE ASSESSING OFFICER MADE AN EST IMATED DISALLOWANCE OF 20% OUT OF THE VARIOUS EXPENSES CLAIMED BY THE ASSE SSEE WHICH WAS RESTRICTED TO 10% BY THE COMMISSIONER OF INCOME TAX (APPEALS). N O MATERIAL WAS BROUGHT ON RECORD BY THE DEPARTMENTAL REPRESENTATIVE TO SHOW T HAT THE ESTIMATION MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS) FOR DISALL OWANCE OF EXPENDITURE AT 10% WAS UNREASONABLE AND THAT ACTUALLY AN AMOUNT MORE T HAN 10% OF THE EXPENDITURE DISALLOWED BY THE COMMISSIONER OF INCOME TAX (APPEA LS) WAS REQUIRED TO BE ITA NO. 3492/AHD/2010 SHRI ARUN KUMAR JAIN, SURAT. FOR A.Y. 2006-07 - 10 - DISALLOWED. THEREFORE, WE DO NOT FIND ANY GOOD AN D JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSE D. 29. GROUND NO. 5 AND 6 ARE GENERAL IN NATURE AND H ENCE DO NOT REQUIRE ANY SEPARATE ADJUDICATION BY US. 30. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 23 RD OF MAY, 2014 AT AHMEDABAD. SD/- SD/- (G.C. GUPTA) VICE PRESIDENT ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 23/05/2014 GHANSHYAM MAURYA, SR. P.S. TRUE COPY &4 / ,5 6&53 &4 / ,5 6&53 &4 / ,5 6&53 &4 / ,5 6&53/ COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 2. ,-)* / THE RESPONDENT. 3. ## 7 / CONCERNED CIT 4. 7() / THE CIT(A)-III, AHMEDABAD 5. 5': ,$ , , / DR, ITAT, AHMEDABAD 6. ;< =. / GUARD FILE. &4$ &4$ &4$ &4$ / BY ORDER, / // / # # # # ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD