ITO, New Delhi V. M/s. JallandharJewellery House, New Delhi

ITA 4870/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7352 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 13-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: Y K SUD
• Keywords: Commercial expediency
• Section: 263

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI R.S. SYAL , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 4870 /DEL/ 2012 (ASSESSMENT YEAR: 2009 - 10 ) ITO, WARD - 33(2), ROOM NO.206B C.R. BUILDING, I.P. ESTATE, NEW DELHI VS. JALLANDHAR JEWELLERY HOUSE 2637, BANK STREET, KAROL BAGH, NEW DELHI PAN:AAAFJ2039A (APPELLANT) (RESPONDENT) APPELLANT BY : DR. B.R.R. KUMAR, SR. DR RESPONDENT BY : Y. K. SUD, CA O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS APPEAL ARISES FROM AN ORDER OF THE LD CIT(A), XXVI DATED 25 TH JUNE 2012 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE SOLITARY ISSUE RAISED BY THE REVENUE RELATES TO ADDITION OF RS.70,74,708/ - U/S 40A(2)(B) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF BULLION I.E. GOLD AND MANUFACTURING OF DIAMOND JEWELLERY. THE ASSESSEE FILED ITS RETURN DECLARING A TOTAL INCOME OF RS.13,63,752/ - ON 14.09.2009. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, VIDE ORDER SHEET ENTRY DATED 09.12.2011 THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY INTEREST PAID TO PERSONS COVERED U/S 40A(2)(B) OVER 15% SHOULD NOT BE DISALLOWED. IN RESPONSE TO THE SAME VIDE, SUBMISSION DATED 16.12.2011, THE ASSESSEE SUBMITTED THAT IT PAID 21% INTEREST PER ANNUM ON THE LOANS TAKEN IN THE EARLIER YEARS. THE ASSESSEE ALSO STATED THAT IF IT HAD TAKEN LOAN ON AN OVERDRAFT FACILITY UNDER CC LIMIT FROM THE BANK, IT WOULD HAVE TO FURNISH GUARANTEES/ SECURITIES OF MORE THAN THE AMOUNT OF CC LIMIT. IT WAS ALSO FURTHER CONTENDED BY THE ASSESSEE THAT APPROVAL AND SANCTION OF CC LIMIT FROM BANK AND ITS HEAD OFFICER WAS TIME CONSUMING. THE ASSESSEE ALSO CONTENDED PAGE 2 OF 3 IF THE LOANS WERE TAKEN FROM PRIVATE PERSONS OTHER THAN TH E PERSONS COVERED U/S 40A(2)(B), THE RATE OF INTEREST WOULD HAVE BEEN MORE. FURTHER, THE ASSESSEE ALSO STATED THAT BY TAKING LOANS FROM RELATIVES, THE PROCESSING CHARGES WERE AVOIDED. FURTHER, THE ASSESSEE STATED THAT ALMOST ALL THE LENDERS PAY MORE OR LES S TAX AT THE SAME RATE AS PAID BY THE ASSESSEE FIRM AND THERE WAS NO LOSS TO THE REVENUE. 4. THE REPLY OF THE ASSESSEE WAS EXAMINED BY THE AO WHO HELD THAT CONTENTION OF THE ASSESSEE ARE BEREFT OF MERIT AND DISALLOWANCE OF INTEREST PAID ABOVE 15% TO SPEC IFIED PERSONS U/S 40A(2)(B) OF RS.70,74,708/ - WAS WARRANTED AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. THE LD CIT(A) HAS HOWEVER DELETED THE SAID ADDITION. THEREFORE THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD DR SUBMITTED THE ORDER OF THE AO DISALLOWING THE INTEREST ABOVE 15% WAS JUST AND PROPER AND MERE FACT THAT SUCH DISALLOWANCE HAS BEEN ALLOWED IN THE EARLIER YEAR CANNOT BE THE GROUND TO ALLOW INTEREST AT EXCESSIVE RATE. 7. THE LD COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE ORDER DATED 07 TH AUGUST 2014 IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2005 - 06 FOR ASSESSMENT YEAR 2010 - 11, WHEREBY THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT INVOKING OF ACTION UNDER SECTION 263 FOR ASSESSMENT YEAR 2005 - 06 AND 2010 - 11 WAS NOT PROPER. AND HE FUR THER SUBMITTED THAT FOR THE SAID YEAR ACTION U/S 263 WAS INITIATED ON IDENTICAL GROUNDS AS IS IN THE INSTANT YEAR WHEREBY INTEREST PAID BEYOND 15% WAS HELD TO BE EXCESSIVE, IN TERMS OF SECTION 40A(2)(B) OF THE ACT. 8. RIVAL SUBMISSION HAVE BEEN CONSIDERE D. IN THE ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2005 - 06 AND 2010 - 11 WE FIND IT HAS BEEN HELD BY THE CO - ORDINATE BENCH AS UNDER: - PAGE 3 OF 3 SO FAR AS PAYMENT OF INTEREST @ 21% TO THE RELATED PERSONS COVERED U/S 4 0A(2)(B) OF THE ACT IS CONCERNED, WE NOTE THAT THE ASSESSEE HAS ALSO PAID INTEREST RANGING FROM 15% TO 24%. IT IS EQUALLY NOTED THAT NO PRABHASH MOTOR FINANCE CO. PVT. LTD, INTEREST WAS PAID @ 21% TO 24%. EVEN OTHERWISE UNSECURED LOANS AND SECURED LOANS CANNOT BE COMPARED. FOR OBTAINING SECURED LOANS, THER E IS A POSSIBILITY OF LOTS OF PAPER WORK, GUARANTEES, SECURITIES ETC. WHEREAS NO SUCH PROBLEMS EXISTING IN THE CASE OF UNSECURED LOANS. EVEN OTHERWISE BUSINESSMAN KNOWS HIS INTEREST BEST OF COMMERCIAL EXPEDIENCY SOMETIMES HIGHER RATE IS PAID. THE WISDOM OF BUSINESSMAN MAY BE SUSPECTED UNLESS AND UNTIL IT IS CONTRARY TO LAW. IN VIEW OF THESE FACTS THE REVISIONAL JURISDICTION INVOKED AGAINST THE ASSESSEE U/S 263 CANNOT BE SET TO BE JUSTIFIED. SINCE, THE FACTS ARE IDENTICAL IN BOTH THE YEARS UNDER CONSIDERATIO N THE APPEALS ARE ALLOWED. 9. THE LD DR IN THE COURSE OF HEARING HAS NOT BEEN ABLE TO PERSUADE US TO FORM A DIFFERENT VIEW AND AS SUCH WE RESPECTFULLY CONC UR WITH THE FINDING OF THE CO - ORDINATE BENCH AND DISMISS THE APPEAL OF THE REVENUE. 10. IN TH E RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 . 10 .2014. SD/ - SD/ - ( R.S. SYAL ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 / 10 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI