Dasmesh Mechanical Works, Malerkotla V. JCIT, Ludhiana

ITA 420/CHANDI/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8248 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 21-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MITTALDR
• Keywords: Agreed addition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 420/CHD/2015 ASSESSMENT YEAR : 2010-11 M/S DASMESH MECHANICAL WORKS, VS THE JCIT, RAIKOT ROAD, RANGE IV, MALERKOTLA. LUDHIANA. PAN: AAAFD8311M (APPELLANT) (RESPONDENT) & ITA NO. 297/CHD/2016 ASSESSMENT YEAR : 2011-12 M/S DASMESH MECHANICAL WORKS, VS THE ADDL.CIT, RAIKOT ROAD, RANGE IV, MALERKOTLA. LUDHIANA. PAN: AAAFD8311M & ITA NO. 298/CHD/2016 ASSESSMENT YEAR : 2011-12 M/S DASMESH MECHANICAL WORKS P.LTD., VS THE AC IT, RAIKOT ROAD, RANGE IV, MALERKOTLA. LUDHIANA. PAN: AADCD5480B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ATUL GOYAL RESPONDENT BY : SHRI S.K.MITTAL,DR DATE OF HEARING : 15.02.2017 DATE OF PRONOUNCEMENT : 01.03.2017 2 O R D E R PER BHAVNESH SAINI,JM THIS ORDER SHALL DISPOSE OFF ALL THE APPEALS FILED BY THE ABOVE ASSESSEES ON COMMON QUESTIONS. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE AP PEALS ARE DECIDED AS UNDER. ITA 420/2015 ( A.Y. 2010-11) 3. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINS T THE ORDER OF LD. CIT(APPEALS)-2 LUDHIANA DATED 16.03.2015 FOR ASSESSMENT YEAR 2010-11 CHALLENGING THE ADDITION OF RS. 12 LACS UNDER SECTION 40A(2)(B) OF INCOME TAX ACT. 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND SALES OF AGRICULTURAL IMPLEMENTS. THE ASSESSING OFFICER NOTED THAT ASSES SEE HAD PAID INTEREST TO PERSONS COVERED UNDER SECTION 40A(2)(B)OF THE ACT @ 24%. THE DETAILS OF PERSONS TO WHOM INTEREST @ 24% HAD BEEN PAID ARE REPRODUCED ON PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSING OFFI CER WAS OF THE VIEW THAT INTEREST PAID TO THESE PERSONS IS EXCESSIVE. THE ASSESSING OFFICER ALSO POINTED OUT T HAT DURING THE IMMEDIATE PRECEDING YEAR, ADDITION OF RS . 10 3 LACS HAD BEEN MADE ON AGREED BASIS ON THIS ISSUE. THE ASSESSING OFFICER WAS OF THE VIEW THAT AT THE MOST, INTEREST @ 15% TO 16% CAN BE CONSIDERED TO BE REASONABLE. THE ASSESSING OFFICER POINTED OUT THAT IF INTEREST IS ALLOWED @ 16%, DISALLOWANCE COMES TO RS . 14,07,541/-. AFTER CONSIDERING THE FACTS OF THE CA SE, ASSESSING OFFICER CONSIDERED IT REASONABLE TO MAKE THE ADDITION OF RS. 12 LACS ON THIS POINT. 5. THE LD. CIT(APPEALS) NOTED THAT ITAT CHANDIGARH BENCH IN THE CASE OF YASHPAL GUPTA VS ACIT IN ITA 577/CHD/2012 HAS UPHELD THE DISALLOWANCE OF INTERES T IN EXCESS OF 15% UNDER SECTION 40A(2)(B) OF THE ACT . THE ORDER OF THE TRIBUNAL DATED 31.07.2012 IS REPRODUCE D IN THE ORDER. THE LD. CIT(APPEALS) ALSO NOTED THAT TH IS ORDER OF THE TRIBUNAL HAS BEEN CONFIRMED BY HON'BLE PUNJAB & HARYANA HIGH COURT. THE LD. CIT(APPEALS) FURTHER NOTED THAT ASSESSING OFFICER WAS MORE THAN FAIR AND REASONABLE IN ALLOWING THE INTEREST PAID TO THE PERSONS UNDER SECTION 40A(2)(B)OF THE ACT @ ALMOST 18%. FURTHER IN IMMEDIATELY PRECEDING ASSESSMENT YEAR, ASSESSEE AGREED FOR ADDITION OF RS. 10 LACS. THE L D. CIT(APPEALS), ACCORDINGLY, CONFIRMED THE ADDITION A ND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 6. AFTER CONSIDERING RIVAL SUBMISSIONS, WE DO NOT F IND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE MERELY CONTENDED THAT EVEN IF ASSESSEE AGREED FOR ADDITION IN PRECEDING ASSESS MENT 4 YEAR 2009-10, IS NO GROUND TO CONFIRM THE ADDITION. HE HAS SUBMITTED THAT ASSESSING OFFICER HAS NOT BROUGH T COMPARABLE CASE TO MAKE THE DISALLOWANCE AND FURTHE R SUBMITTED THAT ON ALL UNSECURED LOANS, INTEREST PAY ABLE IS 24%. THE TURNOVER IS PROGRESSIVE. THE PARTIES AR E SAME IN EARLIER YEAR TO WHOM INTEREST HAS BEEN PAID . ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE LD . CIT(APPEALS) AND FILED COPY OF THE ORDER OF THE TRI BUNAL IN THE CASE OF YASHPAL GUPTA VS ACIT (SUPRA) AND AL SO RELIED UPON ORDER OF ITAT CHANDIGARH BENCH IN THE C ASE OF ACIT VS M/S OCTAVE APPARELS IN ITA 1064/2012 DAT ED 25.09.2013 IN WHICH ALSO THE RATE OF INTEREST @ 18% WAS FOUND EXCESSIVE AND IT WAS DEEMED FIT TO REDUCE IT TO 15% PER ANNUM. 7. CONSIDERING FACTS OF THE CASE IN THE LIGHT OF AL L THE SUBMISSIONS OF THE PARTIES, NO INTERFERENCE IS CALL ED FOR IN THE MATTER. THE ASSESSING OFFICER NOTED THE DET AILS OF THE PERSONS TO WHOM INTEREST @ 24% WAS PAID IN PARA 3 OF THE ASSESSMENT ORDER WHICH WAS EXCESSIVE AS COMPARED TO THE MARKET RATE. IT IS NOT IN DISPUTE THAT THE INTEREST PAID TO THE SPECIFIED PERSONS ARE COVE RED UNDER SECTION 40A(2)(B)OF THE ACT. THE ASSESSING O FFICER ALSO NOTED THAT LAST YEAR ASSESSEE AGREED FOR SIMIL AR DISALLOWANCE IN A SUM OF RS. 10 LACS. IN ASSESSMEN T YEAR 2009-10, ASSESSING OFFICER IN THE ASSESSMENT O RDER NOTED NUMBER OF COMPARABLE CASES OF MALERKOTLA WHER E ASSESSEE IS RUNNING BUSINESS HAD PAID INTEREST @ 12 %. 5 THIS FACT WAS NOT DISPUTED BY THE ASSESSEE AND ASSE SSEE AGREED FOR ADDITION OF RS. 10 LACS. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(APPEALS) WHO HA S CONFIRMED THE ADDITION. THE ASSESSEE IN ASSESSMENT YEAR 2009-10 PREFERRED APPEAL BEFORE THE TRIBUNAL IN ITA 419/2015 WHICH HAVE BEEN DISMISSED AS WITHDRAWN VID E ORDER DATED 15.02.2017. THE ORDER IS REPRODUCED AS UNDER : THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-2 LUDHIANA DATED 20.02.2015 FOR ASSESSMENT YEARS 2009-10 CHALLENGING THE ADDITION OF RS. 10 LACS. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND SALES OF AGRICULTURAL IMPLEMENTS. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD PAID INTEREST OF RS. 30,35,960/- TO THE PERSONS COVERED UNDER SECTION 40A(2)(B) OF INCOME TAX ACT. THE ASSESSING OFFICER FURTHER NOTED THAT INTEREST TO ALL THESE PERSONS WERE PAID @ 24%. DETAILS OF PERSONS TO WHOM INTEREST HAD BEEN PAID AND THE AMOUNT OF INTEREST PAID IS REPRODUCED ON PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER WAS OF THE VIEW THAT RATE OF INTEREST PAID WAS EXCESSIVE AS COMPARED TO MARKET RATE. THE ASSESSING OFFICER COMPARED THE RATE OF INTEREST BEING PAID BY CERTAIN CASES IN MALERKOTLA, PLACE WHERE ASSESSEE IS ALSO RUNNING ITS BUSINESS AND NOTED THAT THE RATE OF INTEREST BEING PAID WAS 12%. THE DETAILS OF COMPARATIVE CASES HAVE BEEN REPRODUCED IN PARA 3.2 OF THE 6 ASSESSMENT ORDER. THE ASSESSING OFFICER POINTED OUT THESE FACTS TO THE ASSESSEE AND ASKED AS TO WHY EXCESSIVE INTEREST MAY NOT BE DISALLOWED. THE ASSESSEE AGREED TO THE ADDITION OF RS. 10 LACS TO COVER THIS POINT AND ALSO TO COVER ANY POSSIBLE LEAKAGES UNDER OTHER HEADS OF EXPENSES. THE ASSESSING OFFICER ACCORDINGLY DISALLOWED RS. 10 LACS AND MADE THE ADDITION. 3. THE LD. CIT(APPEALS) NOTED THAT IN SIMILAR CIRCUMSTANCES IN VARIOUS CASES, THE TRIBUNAL HAS DISALLOWED THE INTEREST IN EXCESS OF 15% AND FURTHER THE ASSESSEE AGREED FOR THIS ADDITION, THEREFORE, NO APPEAL LIES AGAINST AGREED ADDITION. THE LD. CIT(APPEALS), ACCORDINGLY, CONFIRMED THE ADDITION AND DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE AGREED TO ADDITION OF RS. 10 LACS BEFORE ASSESSING OFFICER, THEREFORE, HE HAS WITHDRAWN THE APPEAL. ENDORSEMENT TO THAT EFFECT IS MADE IN THE APPEAL PAPERS ITSELF. 5. IN THIS VIEW OF THE MATTER, SINCE ASSESSEE AGREED FOR ADDITION BEFORE THE AUTHORITIES BELOW, THEREFORE, APPEAL OF THE ASSESSEE WOULD NOT BE MAINTAINABLE. CONSIDERING THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE TO WITHDRAW THE APPEAL, THE APPEAL OF THE ASSESSEE IS DISMISSED AS WITHDRAWN. 8. IT IS ADMITTED FACT THAT PARTIES ARE SAME IN ASSESSMENT YEAR IN APPEAL TO WHOM INTEREST IS PAID @ 24% AND TO WHOM INTEREST @ 24% WAS PAID IN A.Y. 7 2009-10. ISSUE IS, THEREFORE, IDENTICAL ON FACTS. IT IS, THEREFORE, CLEAR THAT ASSESSEE HAS NOT BROUGHT SUFF ICIENT MATERIAL ON RECORD TO PROVE THAT INTEREST PAID BY ASSESSEE WAS PROPER AND RE ASONABLE AS COMPARED TO THE MARKET RATE AND AS COMPARED TO COMPARABLE CASES. T HE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PB-19 OF T HE PAPER BOOK TO SHOW THAT ASSESSEE HAS PROGRESSIVE TR END OF THE BUSINESS, HOWEVER, HE HAS AGREED THAT NET PR OFIT RATE IN ASSESSMENT YEAR UNDER APPEAL IS 0.30% WHICH IS LESSER AS COMPARED TO NP RATE OF PRECEDING ASSESSME NT YEARS 2008-09 AND 2009-10 IN WHICH ASSESSEE DECLARE D NP RATE OF 0.50% AND 0.44%. IT WOULD, THEREFORE, S HOW THAT THE ASSESSEE HAS BEEN SHOWING LESSER NET PROFI T RATE IN ASSESSMENT YEAR UNDER APPEAL AS COMPARED TO THE EARLIER YEARS. THE LD. DR ALSO RELIED UPON TWO OF THE DECISIONS IN THE CASES OF YASHPAL GUPTA (SUPRA) AND M/S OCTAVE APPARELS (SUPRA) IN WHICH EVEN THE LESSER INTEREST HAVE BEEN ALLOWED. THEREFORE, LD. CIT(APP EALS) WAS JUSTIFIED IN HOLDING THAT ALMOST 18% INTEREST H AVE BEEN ALLOWED BY THE ASSESSING OFFICER, THEREFORE, T HERE IS NO MERIT IN THE APPEAL OF THE ASSESSEE, SAME IS ACCORDINGLY, DISMISSED 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ITA 297/2016 & ITA 298/2016 (A.Y. 2011-12) 10. IN BOTH THE APPEALS, ASSESSEES HAVE CHALLENGED ADDITIONS OF RS. 7 LACS AND RS. 9 LACS ON ACCOUNT O F 8 DISALLOWANCE OF INTEREST UNDER SECTION 40A(2)(B) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT ISSUE IS SAME AS HAVE BEEN CONSIDERED IN ITA 420/20 15. HE HAS SUBMITTED THAT THESE ARE TWO APPEALS FILED F OR THE SAME YEAR BECAUSE IN PART OF THE PERIOD, ASSESS EE WAS A FIRM WHICH IS CONVERTED INTO THE COMPANY. HOWEVER, FACTS ARE SAME. THEREFORE, FOLLOWING THE REASONS FOR DECISION FOR ASSESSMENT YEAR 2010-11 (SUPRA), WE DISMISS BOTH THE APPEALS OF THE ASSESSE E. 11. IN THE RESULT, ALL APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( ANNAPURNA GUPTA) (BHAVNESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 ST MARCH,2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD