ITO, Jaipur V. KHANDAKA JAIN JEWELLERS, Jaipur

ITA 997/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99329 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 19-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: MADHUKAR GARG CA DHK
• Keywords: Opportunity of being heard; Notional interest
• Section: 143(3); 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NO. 997/JP/2013 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR. CUKE VS. M/S KHANDAKA JAIN, JEWELLERS, HALDIYON KA RASTA, JOHARI BAZAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAEFK 1438 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MADHUKAR GARG (C.A.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15/09/2015. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 01/10/2015. VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 05/09/2013 OF THE LEARNED C.I.T.(A)-I, JAIPUR FOR A. Y. 2008-09. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN REDUCING THE TRADING ADDITION TO RS. 5,60,827/- EVE N AFTER UPHOLDING REJECTION OF BOOKS U/S 145(3). 2 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) WAS JUSTIFIED IN DELETIN G DISALLOWANCE OF INTEREST OF RS. 9000/- MADE BY THE A.O. (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) WAS JUSTIFIED IN DELETIN G THE ADDITION OF RS. 7,68,872/- MADE ON ACCOUNT OF EXCESSIVE INTEREST PAYMENT TO THE PERSONS COVERED B Y SECTION 40(A)(2)(B), WHICH WAS MADE AFTER RECORDING COGENT REASONS. 2. THE FIRST GROUND OF THE REVENUES APPEAL IS AGAI NST REDUCING THE TRADING ADDITION OF RS. 5,60,827/- EVEN AFTER UPHOL DING THE REJECTION OF BOOKS U/S 145(3) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED AS THE ACT). THE ASSESSEE FIRM IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING AND TRADING OF GOLD AND SILVER ORNAMENTS. THE ASSESS EE FILED RETURN OF INCOME ON 31/10/2008 DECLARING TOTAL INCOME OF RS. 13,09,040/-. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE ACT. THE ASSES SEE HAS PRODUCED BOOKS OF ACCOUNT AND DETAILS AS DESIRED BY THE ASSE SSING OFFICER, WHICH WAS EXAMINED BY HIM. THE LD. ASSESSING OFFICER HAS OB SERVED AS UNDER:- 3 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN 1. ASSESSEE HAS SHOWN PURCHASE OF RS. 2,25,38,086/- FROM URD (UNREGISTERED DEALERS) OUT OF TOTAL PURCHASE OF RS. 4,47,89,444/-. SUCH URD PURCHASE IS NOT HAVING PROP ER BILLS, ONLY SELF MADE VOUCHERS ARE AVAILABLE. PAN, ADDRESS OF SUCH SELLERS IS ALSO NOT AVAILABLE. 2. QUANTITATIVE & QUALITATIVE STOCK OF DIAMOND & PR ECIOUS STONES ARE NOT MAINTAINED. 3. ASSESSEE FOLLOWING LIFO METHOD WHICH IS NOT ACCEPT ABLE AS PER ACCOUNTING STANDARD. 4. REGARDING STOCK REGISTER FOR GOLD, NO BIFURCATIO N OF FINISHED AND UNFINISHED GOODS AND COST THEREON IS MENTIONED. 5. SCHEDULE OF AUDIT REPORT SAYS THAT ASSESSEE HAS NOT MAINTAINED VOUCHERS OF SOME OF THE EXPENDITURE BUT LOOKING TO THE NATURE OF BUSINESS AS EXPLAINED BY THE ASSES SEE. 6. ASSESSEE IS NO MAINTAINING RECORD FOR CONSUMPTIO N OF OLD GOLD/SILVER PURCHASED AND THAT OF NEW ONE. ON THE BASIS OF ABOVE DISCREPANCY, THE LD ASSESSING OFFICER PROPOSED TO REJECT THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT, WHICH WAS REPLIED BY THE ASSESSEE AFTER CONSIDERING THE ASSESSEES REPLY . HE HELD THAT THE ASSESSEE HAD SHOWN HUGE AMOUNT OF URD PURCHASES (UN REGISTERED DEALER), HOWEVER, THEY WERE NOT SUPPORTED BY PROPER B ILLS. NO DETAILS OF 4 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN SELLERS, THEIR ADDRESS AND PAN HAD BEEN MAINTAINED ON SUCH VOUCHERS. IN ABSENCE OF THESE BASIC PRIMARY DETAILS, THESE PURCH ASES REMAINED UNVERIFIABLE AND UNAUTHENTIC. THE ASSESSEE HAD NOT B EEN MAINTAINING QUANTITATIVE AND QUALITATIVE DETAILS OF DIAMONDS AN D PRECIOUS AND SEMI PRECIOUS STONES. CONSIDERING THE FACT THAT QUALITY OF STONES AND DIAMONDS MAKES HUGE VARIATION IN PRICES, NO QUALITATIVE DETA ILS LEAVES STOCK NOTHING BUT MERE ESTIMATION. MOREOVER, THE ASSESSEE WAS NOT MAINTAINING EVEN QUANTITATIVE DETAIL OF DIAMONDS AND STOCK. THE ASSES SEE HAD FOLLOWED LIFO METHOD WHICH WAS NOT ACCEPTABLE AS PER ACCOUNTIN G STANDARDS. MERE PLEA OF THE ASSESSEE THAT HE WAS REGULARLY FOLL OWING CERTAIN METHOD, DID NOT JUSTIFY ANY METHOD WHICH IS NOT ACCEPTABLE A S PER ACCOUNTING STANDARDS. FURTHER THE ASSESSEE WAS NOT MAINTAINING PROPER RECORDS/DETAILS FOR EXPENSES. AS AUDITOR HAS ALSO P OINTED OUT THE FACT THAT THE ASSESSEE HAS FAILED TO MAINTAINED PROPER RECORD FOR EXPENDITURE. IN VIEW OF THE ABOVE FINDING OF THE ASSESSING OFFICER, EXPENDITURE CLAIMED BY THE ASSESSEE REMAINED UNVERIFIABLE. ACCORDINGLY HE APPLIED SECTION 145(3) OF THE ACT AND REJECTED THE BOOK RESULT. HE RELIED ON THE FOLLOWING CASE LAWS:- (I) AMIYA KUMAR ROY & BROTHERS VS. CIT 206 ITR 306 ( CAL.) (II) RAM CHANDRA SINGH RAMNIK LAL VS. CIT (PATNA) 4 2 ITR 780. (III) RATAN LAL OM PRAKASH 132 ITR 640. 5 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN (IV) RAM KRISHAN POONGALIA 184 CTR 448 (RAJ.) (V) NAVASIVAYAM CHETTIAR (S.N.) VS. CITY (1960) 38 ITR 579 (SC). LD ASSESSING OFFICER FURTHER OBSERVED THAT ONCE THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS REJECTED THE PROFIT OF THE ASSESSEE WAS TO BE ESTIMATED, HOWEVER, THIS ESTIMATION SHOULD HAVE THE BASIS WHICH IS FAIR AND SCIENTIFIC. ONE SUCH BASIS FOR ESTIMATION OF PROFIT CAN BE TRAD ING RESULTS SHOWN BY THE ASSESSEE IN THE PRECEDING YEAR. HOWEVER, PAST HI STORY OF THE CASE HAS BEEN THAT OF REJECTION OF BOOKS OF ACCOUNT, THEREBY CANNOT BE ADOPTED AS BASIS FOR ESTIMATION. CONSIDERING THE FACTS AND CIR CUMSTANCES OF THE CASE AS MENTIONED ABOVE BY THE ASSESSING OFFICER, HE APP LIED G.P. RATE @ 14% AGAINST THE DECLARED G.P. RATE OF 13.20%. THUS HE MA DE ADDITION OF RS. 5,60,827/- IN THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD ALLO WED THE APPEAL BY OBSERVING AS UNDER:- THE FIRST TO FOURTH GROUNDS OF APPEAL ARE AGAINST T HE TRADING ADDITION OF RS. 5,60,827/- MADE BY INVOKING THE PRO VISIONS OF SECTION 145(3) AND HOLDING THAT IN RESPECT OF URD P URCHASES THEY ARE NOT SUPPORTED BY PROPER BILLS. THIS GROUND OF APPEAL ARE SQUARELY COVERED IN FAVOUR OF THE APPELLANT BY VIRTUE OF THE ORDER OF THE HONBLE ITAT, JAIPUR BENCH, JAIPUR IN A PPEAL NO. 6 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN 426/JP/2009, ITA NO. 375/JP/2010 & ITA NO. 627/JP/2 010 DATED 30/09/2010 IN THE APPELLANTS OWN CASE FOR A.Y . 2006-07 & 2007-08 WHEREIN SIMILAR ADDITIONS WAS DELETED. THERE BEING NO CHANGE IN THE MATERIAL FACTS AND THE LEGAL POSIT ION. THIS DISALLOWANCE IS DELETED ON THE BASIS OF THE SAID ORD ER OF THE HONBLE ITAT, JAIPUR. THE APPELLANT SUCCEEDS ON THIS GROUND. 4. NOW REVENUE IS IN APPEAL BEFORE US. THE LD DR VEHE MENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND RE ITERATED THE ARGUMENTS MADE IN HIS ASSESSMENT ORDER THAT THE ASSESSEE HAD NOT MAINTAINED QUALITATIVE AND QUANTITATIVE DETAILS OF STOCK. THERE WAS URD PURCHASES FOR WHICH NO ADDRESSEE, CONFIRMATION, PAN NUMBER HAVE BE EN FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEE DINGS. THEREFORE, LD ASSESSING OFFICER RIGHTLY APPLIED SECTION 145(3) OF THE ACT AND REJECTED THE BOOK RESULT. HE WAS ALSO FAIR TO APPLY G.P. RATE OF 14% AS DISCLOSED BY THE ASSESSEE @ 13.2%. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE ASSESSING OFFICER. 5. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS ARG UED THAT IT IS A COVERED ISSUE AS IDENTICAL ADDITIONS WERE MADE BY TH E LD ASSESSING OFFICER IN A.Y. 2006-07 AND 2007-08. THE HONBLE ITAT JAIPUR BENCH, JAIPUR IN ITA NO. 426/JP/2009 FOR A.Y. 2006-07, ITA NO. 375/J P/2010 FOR A.Y. 2007-08 & ITA NO. 627/JP/2010 FOR A.Y. 2007-08 ORDE R DATED 30/09/2010 7 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN HAS ALLOWED THE APPEAL BY OBSERVING THAT, IT IS NOT NECESSARY THAT REJECTION OF BOOKS IS MADE BY THE ASSESSING OFFICER , THERE MUST BE SOME ADDITIONS IN THE INCOME OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESS EE HAS SHOWN G.P. RATE @ 13.2% ON TOTAL SALE OF RS. 6.86 CRORES AS AGA INST THE G.P. RATE @ 13% ON SALE OF RS. 6.82 CRORES IN IMMEDIATE PRECEDI NG YEAR. THE ASSESSEE HAS MAINTAINED DAY TO DAY STOCK REGISTER O F GOLD AND SILVER ORNAMENTS BUT NOT MAINTAINED THE STOCK REGISTER FOR DIAMOND JEWELLERY, THIS CONSTITUTES 5.6% OF TOTAL TURNOVER. THE ASSESSE E HAD NOT MADE ANY PURCHASE FROM URD BUT MADE PURCHASE FROM CUSTOMER WH O ARE BRINGING THEIR OLD ORNAMENTS FOR SALE AT ASSESSEES SHOP AND NORMALLY THE JEWELLERY IS EITHER BEING CONVERTED/REMADE OR NEW JEWELLERY IS BEING PURCHASED BY THEM. THE ASSESSEE HAS ONLY FINISHED GOODS, THEREFOR E, THE ASSESSEE IS NOT REQUIRED TO MAINTAIN STOCK REGISTER OF UNFINISH ED STOCK. THE ASSESSEE HAD FOLLOWED LIFO METHOD OF CLOSING STOCK SINCE NUM BER OF YEARS AND NO ADDITION HAD BEEN MADE BY THE LD ASSESSING OFFICER IN PAST ON THIS GROUND AND SAME HAS BEEN FOLLOWED BY THE ASSESSEE CONSISTEN TLY. THE COORDINATE BENCH HAD ALREADY CONSIDERED THE IDENTICAL FACTS AN D CIRCUMSTANCES OF THE CASE IN ASSESSEES OWN CASE IN A.Y. 2006-07 AND 2007 -08 AND DISMISSED 8 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN THE REVENUES APPEAL. THEREFORE, WE FIND NO REASON TO INTERVENE IN THE ORDER OF THE LD CIT(A), ACCORDINGLY, WHICH IS UPHELD. 7. THE SECOND GROUND OF THE REVENUES APPEAL IS AGAI NST DELETING THE DISALLOWANCE OF INTEREST OR RS. 9000/-. THE LD ASSES SING OFFICER OBSERVED THAT THE ASSESSEE HAD PROVIDED INTEREST FREE ADVANC E TO SHRI SATISH KUMAR KHANDAKA AT RS. 3 LACS. THE ASSESSEE FIRM HAS TAKEN SECURED AND UNSECURED LOAN AND CLAIMED INTEREST EXPENSES ON IT. THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH HAS AVAILED BY THE ASSESSEE. AS PER ASSESSING OFFIC ER, THE ASSESSEE COULD NOT EXPLAIN SATISFACTORILY THE REASON THAT WHY IT HA D NOT CHARGED INTEREST ON THE ADVANCES OF RS. 3 LACS AFTER RELYING ON VARI OUS CASES OF HON'BLE HIGH COURT. HE DISALLOWED 12% INTEREST ON DAY TO DAY BASIS AND ADDITION OF RS. 9 LACS WAS MADE, WHICH WAS DELETED BY THE LD CI T(A) THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER IN A ROUTINE END PERFUNCTORY MANNER WITHOUT BRINGING ON RECORD ANY MA TERIAL TO JUSTIFY THE ADDITION. 8. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD DR HAS SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND REITERATED T HE ARGUMENTS GIVEN BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER. AT T HE OUTSET, THE LD AR OF THE ASSESSEE RELIED UPON THE FINDING OF THE LD CIT(A ). THE TOTAL ADVANCE 9 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN GIVEN TO SHRI SATISH KUMAR KHANDAKA OF RS. 3 LACS, THE ASSESSEE IS HAVING MUCH HIGHER INTEREST FREE FUNDS AVAILABLE WITH IT. TH E OPENING CAPITAL OF PARTNER WAS RS. 1,10,07,513/- AND THE CLOSING CAPITA L WAS RS. 2,11,28,032/-. AS PER TERMS AND CONDITIONS OF THE P ARTNERSHIP DEED, INTEREST HAS BEEN PAID TO THE PARTNER SHRI SANT KUM AR KHANDAKA AND SMT. SUMAN AGARWAL ON AN AMOUNT OF RS. 10 LACS ONLY AND W HATEVER AMOUNT AVAILABLE IN EXCESS OF RS. 10 LACS IS INTEREST FREE . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FIRM HAD EARNED BOOK PR OFIT AT RS. 33,64,115/- WHICH IS MUCH MORE THAN THE INTEREST FRE E AMOUNT OF RS. 3 LACS. THE LD ASSESSING OFFICER HAS NOT ESTABLISHED A NY NEXUS BETWEEN THE INTEREST BEARING BORROWINGS AND INTEREST FREE ADVANC ES. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LD CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE PA RTNERS OF THE FIRM HAD SUFFICIENT INTEREST FREE FUNDS INCLUDING PROFIT EAR NED DURING THE YEAR. THEREFORE, NO NOTIONAL INTEREST DISALLOWANCE CAN BE M ADE BY THE ASSESSING OFFICER IN ABSENCE DIRECT NEXUS BETWEEN TH E INTEREST BEARING FUND AND INTEREST FREE ADVANCES. THUS, WE CONFIRM THE ORDER OF THE LD CIT(A). 10 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN 10. THE THIRD GROUND OF THE REVENUES APPEAL IS AGAI NST DELETING THE ADDITION OF RS. 7,68,872/- MADE ON ACCOUNT OF EXCES SIVE INTEREST PAYMENT TO THE PERSONS COVERED U/S 40(A)(2)(B) OF THE ACT. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PAID INTERES T @ 18% TO THE PERSONS SPECIFIED U/S 40(A)(2)(B) OF THE ACT, WHICH IS FOUND EXCESSIVE TO THE ASSESSING OFFICER AND HELD THAT REASONABLE RATE OF INTEREST @ 12%. THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE. AFTER CONSIDERING THE ASSESSEES REPLY, HE DISALLOWED THE INTEREST OF RS. 7,68,872/- AND PAID TO THE RELATIVE COVERED U/S 40(A)(2)(B) OF THE ACT. 11. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD ALLO WED THE APPEAL BY OBSERVING AS UNDER:- THE SIXTY GROUND OF APPEAL ARE AGAINST THE ADDITION OF RS. 7,68,872/- U/S 40(A)(2)(B). THIS GROUND OF APPEAL AR E SQUARELY COVERED IN FAVOUR OF THE APPELLANT BY VIRT UE OF THE ORDER OF HONBLE ITAT, JAIPUR BENCH, JAIPUR IN APPEA L NO. 426/JP/2009, ITA NO. 375/JP/2010 AND ITA NO. 627/JP/2010 DATED 30/09/2010 IN THE APPELLANTS OWN CASE FOR A.Y. 2006-07 AND 2007-08 WHEREIN SIMILAR ADDITIO NS WAS DELETED. THERE BEING NO CHANGE IN THE MATERIAL F ACTS AND THE LEGAL POSITION. THIS DISALLOWANCE IS DELETED ON THE 11 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN BASIS OF THE SAID ORDER OF THE HONBLE ITAT, JAIPUR. THE APPELLANT SUCCEEDS ON THIS GROUND. 12. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. AT TH E OUTSET, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE BURDEN U/S 40(A )(2)(B) OF THE ACT IS ON THE REVENUE TO PROVE THAT EXPENDITURE INCURRED B Y THE ASSESSEE IS NOT REASONABLE FOR WHICH HE RELIED ON THE DECISION OF H ONBLE ITAT, JAIPUR BENCH IN THE CASE OF ITO VS. VIMAL KUMAR JAIN REPOR TED IN XXXVII TAX WORLD 63 AND IN THE CASE OF GOVERDHAN PRASAD SINGHA L VS. ITO REPORTED IN XXXX TAX WORLD 175 WHEREIN THE HONBLE ITAT HAS HE LD THAT THE INTEREST RATE OF 18% TO BE REASONABLE IN RESPECT OF ASSESSMENT YEARS 2004-05 AND 2005-06. THE SIMILAR ADDITIONS WERE MADE IN A.Y. 2006-07 BY THE ASSESSING OFFICER WHEREIN THE ASSESSEE HAD PA ID INTEREST @ 18% TO FAMILY MEMBERS AND THE ASSESSING OFFICER DISALLOWED INTEREST IN EXCESS OF 6.75% ON WHICH RATE LOAN WAS TAKEN FROM THE BANK. A D ISALLOWANCE OF RS. 7,65,855/- WAS MADE. THE LD CIT(A) HAD DELETED THE DIS ALLOWANCE AGAINST WHICH AN APPEAL WAS PREFERRED BY THE DEPARTMENT BEFOR E THE HONBLE ITAT AND THE HONBLE TRIBUNAL VIDE THEIR ORDER DATED 30/09/2010 HELD THAT THERE WAS NO INFIRMITY IN THE ORDER OF THE LD C IT(A) AND INTEREST @ 18% WAS HELD TO BE JUSTIFIED. HE PLACED RELIANCE ON THE DECISION OF 12 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. UDAIPUR DISTILLERY COMPANY LIMITED REPORTED IN 316 ITR 426 WHEREIN IT HA S BEEN HELD BY THE HON'BLE HIGH COURT THAT WHERE LOWER AUTHORITIES HAVE ALLOWED DEDUCTION IN RESPECT OF DISALLOWANCE MADE U/S 40(A)(2)(B) OF THE ACT ON THE GROUND THAT IN EARLIER YEARS DEDUCTION HAS BEEN ALLOWED AND IN ORDER TO MAINTAIN CONSISTENCY, NO INTERFERENCE WAS REQUIRED TO BE MADE IN ALLOWING DEDUCTION. THE DISALLOWANCE WHICH WAS MADE U/S 40(A)(2 )(B) OF THE ACT WHICH WAS DELETED BY THE CIT(A) AND ITAT WAS HELD TO BE JUSTIFIED. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LD CIT(A). 13. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AS SESSEE PAID INTEREST TO THE CLOSE PERSON COVERED U/S 40(A)(2)(B) OF THE ACT @ 18%, WHICH WAS RESTRICTED BY THE ASSESSING OFFICER @ 12%. IN A.Y. 2007-08 SIMILAR DISALLOWANCES WERE MADE AND ASSESSEE CHALLENGED THE A PPEAL BEFORE THE LD CIT(A), WHO HAD ALLOWED THE APPEAL, WHICH WAS CHALLE NGED BY THE REVENUE BEFORE THE ITAT. THE COORDINATE BENCH VIDE OR DER DATED 30/09/2010 PASSED IN ITA NOS. 426/JP/2009, 375/JP/2 010 AND ITA NO. 627/JP/2010 FOR A.Y. 2006-07 AND 2007-08 HAS OBSERV ED AS UNDER:- AFTER HEARING THE RIVAL CONTENTIONS AND ON PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, WE NOTED THAT FOR PAY ING LOWER 13 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN RATE OF INTEREST TO THE BANK, THERE WAS SEVERAL TYPE S OF CHARGES AND COST INCURS IN RESPECT OF BANK LOANS. TH E BANK IS GIVING LOAN ONLY ON SECURITY WHICH INVOLVES FORMALIT IES LIKE HYPOTHECATION AND PLEDGE OF GOODS. THUS THE LD. CIT(A ) HAS RIGHTLY CONSIDERED THE RATE OF INTEREST OF 18% AS R EASONABLE AND AS PER PREVAILING MARKET CONDITIONS. THEREFORE, INTEREST PAID TO THE FAMILY MEMBERS OF THE PARTNERS IS REASO NABLE AND IN THIS REGARD RELIANCE IS PLACED ON THE DECISI ON OF ITAT JAIPUR BENCH IN THE CASE OF ITO VS. VIMAL KUMAR 37 TW 63 WHEREIN IT HAS BEEN HELD THAT DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40A(2)B) CANNOT BE MADE OUT O F INTEREST PAYMENT TO FAMILY MEMBERS WITHOUT ESTABLISH ING EXCESSIVENESS OR UNREASONABLENESS OF THE RATE OF IN TEREST. RELIANCE HAS FURTHER BEEN PLACED ON THE ORDER OF TH IS BENCH IN THE CASE OF GOVERDHAN PRASAD SINGHAL VS. ITO 40 TW 175. IN THE SAID CASE, THE TRIBUNAL HAS HELD THE INTEREST RATE OF 18% TO BE REASONABLE IN RESPECT OF ASSESSMENT YEARS 2004- 05 AND 2005-06. THEREFORE, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN T HE ORDER OF THE LD CIT(A). THUS GROUND NO. 2 OF THE REVENUE IS DISMISSED. THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SIMILAR TO A.Y. 2006-07 AND 2007-08, THEREFORE, BY RESPECTFULLY FOLLOWING THE OR DER OF THE COORDINATE BENCH ON IDENTICAL ISSUE, WE DISMISS THE REVENUES A PPEAL ON THIS GROUND. 14 ITA NO. 997/JP/2013 ACIT VS M/S KHANDAKA JAIN 14. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 01/10/2015. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 01 ST OCTOBER, 2015 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE-2, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S KHANDAKA JAIN, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.997/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR