SHRI DEEPAK GOPALRAO PATIL, MALKAPUR V. I.T.O. WARD, Khamgaon

ITA 59/NAG/2017

AI Insights

The case involves Deepak Gopalrao Patil, who appealed against the order of the Commissioner of Income-tax (Appeals)-1, Nagpur, concerning the assessment year 2007-08. The primary issues in the appeal were the disallowance of interest payments deemed excessive by the AO and the disallowance of salary paid to the assessee's wife, Smt. Vaishali Deepak Patil. The AO had restricted the interest payment to 12%, disallowing the excess, and had also disallowed the salary payment, questioning the necessity and justification of the payment to a family member. The Tribunal decided to set aside the interest disallowance and restore the matter to the AO, while it allowed the deduction for the salary paid to Smt. Vaishali Patil, accepting the assessee's justification of her involvement in the business.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 124087 (ITAT-NAGPUR)
• Duration Of Justice: 17 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 04-12-2022
• Assessment Year: misc
• Appeal Filed On: 16-02-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, NAGPUR (AT e-Court, PUNE) BEFORE SHRI R.S. SYAL, VICE PRESIDENT आयकर अपील सं. /ITA No.59/NAG/2017 नधा रण वष / Assessment Year : 2007-08 Deepak Gopalrao Patil, Buldhana Road, Malkapur 443 101 Dist. Buldhana ABOPP1478Q Vs. ITO, Khamgaon- 444 303 Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP: This appeal by the assessee emanates from the order dated 28-11-2016 passed by the Commissioner of Income-tax (Appeals)-1, Nagpur in relation to the assessment year 2007-08. 2. The first ground raised herein is against the confirmation of addition of Rs.1,57,168/- towards excessive interest. 3. Briefly stated, the facts of the case are that the assessee is engaged in the business of retail and wholesale trading of seeds, Assessee by None Revenue by Shri G.J. Ninawe Date of hearing 05-12-2022 Date of pronouncement 05-12-2022 ITA No. 59/NAG/2017 Deepak Gopalrao Patil 2 insecticides and fertilizers. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee paid interest to relatives on borrowings at rates ranging between 12% to 18%. On being called upon to explain the reasons for paying interest at more than 12%, the assessee submitted that the terms of loans were negotiated at the respective time without giving any collateral security, which is usually the demand by the banks and further no processing charges etc., were paid which have to be borne by the borrower while availing credit facilities from the bank. Not satisfied, the AO restricted the interest payment to 12% and made the disallowance for the excessive amount of Rs.1,57,168/-. The assessee remained unsuccessful before the ld. CIT(A) who observed that on similar facts disallowance of interest of Rs.61,170/- was made by the AO for the immediately preceding assessment year 2006-07 and the said disallowance also came to be affirmed in the first appeal. 4. I have heard the ld. DR and gone through the relevant material on record. There is no appearance from the side of assessee despite notice. It is seen that the ld. CIT(A), while affirming the disallowance, has relied on his order for the ITA No. 59/NAG/2017 Deepak Gopalrao Patil 3 assessment year 2006-07 in which disallowance of interest at Rs.61,170/- was sustained in the first appeal. There is no information available on record as to the fate of such order for the preceding year before the Tribunal. Under these circumstances, I am satisfied that it would be in the fitness of the things if the impugned order on this score is set-aside and the matter is restored to the file of the AO. I order accordingly and direct the AO to decide this issue afresh in the light of final decision taken in the appeal for the immediately preceding assessment year 2006-07. Needless to say, the assessee will be allowed reasonable opportunity of hearing. 5. The only other ground which survives in this appeal is against the confirmation of addition of Rs.24,000/-, being salary paid to Smt. Vaishali Deepak Patil. The AO found during the course of assessment proceedings that salary was paid to Smt. Vaishali Deepak Patil, who happened to be the assessee’s wife. On being called upon to justify the deduction, the assessee submitted that he was partner in a firm and was also having a proprietorship concern in the name of Deepak Agro Agencies. His wife was looking after the affairs of the proprietorship concern. ITA No. 59/NAG/2017 Deepak Gopalrao Patil 4 Not satisfied, the AO made the disallowance, which came be sustained in the first appeal. 6. After hearing the ld. DR and going through the relevant material on record, it is seen that the assessee specifically stated before the AO that Smt. Vaishali Patil was engaged in handling the proprietorship business of the assessee. He himself was a working partner in the firm, M/s. Prerna Paper Products. Considering the magnitude of the amount of salary of Rs.2,000/- per month given to Smt. Vaishali Patil and the extent of services rendered by her, I am satisfied that the payment deserves to be allowed. I order accordingly and overturn the impugned order on this score. This ground is allowed. 7. In the result, the appeal is partly allowed. Order pronounced in the Open Court on 05 th December, 2022 - Sd/- (R.S.SYAL) VICE PRESIDENT प ु णे Pune; दनांक Dated : 05 th December, 2022 Satish ITA No. 59/NAG/2017 Deepak Gopalrao Patil 5 आदेश क त ल प अ े षत/Copy of the Order is forwarded to: 1. अपीलाथ / The Appellant; 2. यथ / The Respondent; 3. The CIT(A)-1, Nagpur 4. 5. The Pr.CIT-1, Nagpur िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, Nagpur / DR, Nagpur 6. गाड फाईल / Guard file आदेशान ु सार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune Date 1. Draft dictated on 05-12-2022 Sr.PS 2. Draft placed before author 05-12-2022 Sr.PS 3. Draft proposed & placed before the second member -- JM 4. Draft discussed/approved by Second Member. -- JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *