M/s Shri Balaji Industris, Burhanpur V. The C I T, Khandwa

ITSSA 246/IND/2008

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7371 (ITAT-INDORE)
• Duration Of Justice: 4 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-06-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 12-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DARSHAN SINGH
• Assessee Lawyers: S N AGRAWAL
• Keywords: Fair market value
• Section: 143(3); 153A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI R.C. SHARMA , ACCOUNTANT MEMBER ITA NO.246 AND 247/IND/2008 A.YS. 1999-00 & 2000-01 M/S SHRI BALAJI INDUSTRIES BURHANPUR PAN AAKFS5879H :: APPELLANT VS DCIT KHANDWA :: RESPONDENT APPELLANT BY SHRI S.N. AGRAWAL AND SHRI PANKAJ MOGRA RESPONDENT BY SHRI DARSHAN SINGH DATE OF HEARING 7.11.2012 DATE OF PRONOUNCEMENT 31.12.2012 O R D E R PER SHRI R.C. SHARMA, AM THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE LEARNED CIT(A) DATED 26.8.2008 FOR THE ASSESSMENT YEARS 1999-00 AND 2000-01 IN THE MATTER OF ORDER PASSED U/S 153A READ WITH SECTION 143(3) OF T HE ACT. 2 2. THE COMMON GRIEVANCE OF THE ASSESSEE IN BOTH THE YEARS RELATES TO DISALLOWANCE MADE BY THE ASSESSING OFFICER OF ROUTINE NATURE WHICH IS NOT COVERED IN T HE PROCEEDINGS COMPLETED U/S 153A OF THE ACT. 3. ON MERIT, THE ASSESSEE HAS CONTENDED THAT THE DISALLOWANCE OF RS. 1,17,897/- AND RS. 2,56,696/- O UT OF INTEREST PAID BY INVOKING THE PROVISIONS OF SECT ION 40A(2)(B) OF THE ACT WAS NOT JUSTIFIED. 3. WITH REGARD TO THE LEGAL GROUND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SEARCH WAS CONDUCTED ON 20 TH DECEMBER, 2004. THE RETURN FOR THE ASSESSMENT YEAR 2000-01 WAS FILED ON 27.10.2000. TI ME TILL WHICH THE NOTICE U/S 143(2) COULD HAVE BEEN IS SUED WAS 31.10.2001. THUS, AS PER THE LEARNED COUNSEL F OR THE ASSESSEE, THE ASSESSMENT FOR THE A.Y. 2000-01 W AS NOT PENDING AS ON THE DATE OF ISSUE OF 153A NOTICE. HE REFERRED TO VARIOUS DECISIONS OF THE COORDINATE BEN CH AND CONTENDED THAT IN CASE OF NON-ABATE ASSESSMENT, THE ASSESSING OFFICER HAS NO POWER TO FRAME ASSESSM ENT U/S 153A OF THE ACT 3 4. ON MERIT, IT WAS ARGUED THAT PREVAILING MARKET R ATE OF INTEREST DURING THESE YEARS WAS RANGING BETWEEN 18% TO 24%. THEREFORE, THERE WAS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO DISALLOW INTEREST PAID TO THE PERSONS SPECIFIED U/S 40A(2)(B) OF THE ACT WHICH WA S IN EXCESS OF 18%. 5. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND ONLY CONTENDED THAT SINCE NO ORIGINAL ASSESSMENT WAS FRAMED AND INTIMAT ION WAS ISSUED U/S 143(1)(A), THE ASSESSING OFFICER WAS NOT JUSTIFIED IN COMPLETING THE ASSESSMENT U/S 153A OF THE ACT. HE ALSO SUPPORTED THE DISALLOWANCE MADE BY INVOKING THE PROVISIONS OF SECTION 40A(2) OF THE AC T. 6. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECOR D PERUSED. FROM RECORD WE FIND THAT THE ASSESSEE HAS TAKEN LOANS FROM VARIOUS PERSONS/INSTITUTIONS TO WH OM INTEREST WAS PAID RANGING BETWEEN 18 TO 24% WHILE FRAMING THE ASSESSMENT U/S 153A, THE ASSESSING OFFI CER DISALLOWED INTEREST PAYMENT IN EXCESS OF 18% TO THE PERSONS FALLING U/S 40A(2)(B) OF THE ACT. AS PER O UR 4 CONSIDERED VIEW, THE DISALLOWANCE U/S 40A(2)(B) OF THE ACT CAN BE MADE ONLY IF ASSESSING OFFICER FINDS THA T EXCESSIVE OR UNREASONABLE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICES OR FACILITIES FOR WHIC H THE PAYMENT IS MADE. THE INTEREST ON LOAN DEPENDS UPON SO MANY FACTORS WITH REGARD TO THE NATURE OF LOAN, THE SECURITY PROVIDED FOR SECURING THE LOAN, MORTGAGE O R HYPOTHECATION GIVEN, IF ANY, FOR THE LOAN. IF THE L OAN IS TAKEN WITHOUT ANY COLLATERAL GUARANTEE OR SECURITY, THE NORMAL RATE OF INTEREST WILL BE HIGHER WHEREAS ON L OAN TAKEN WITH SUFFICIENT COLLATERAL SECURITY OR HYPOTHECATION OF GOODS, THE RATE OF INTEREST WILL B E COMPARATIVELY LOWER. WE FIND THAT THE RATE OF INTE REST PAID BY THE ASSESSEE TO THE LOAN CREDITORS WAS REASONABLE DURING THE YEARS UNDER CONSIDERATION HAV ING REGARD TO THE MARKET CONDITIONS OF LOAN AVAILABILIT Y AND THE TERMS AND CONDITIONS ON WHICH THE LOAN WAS OBTAINED. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES IN DECLINING THE IN TEREST 5 PAID ABOVE 18% WITHOUT BRINGING COGENT MATERIAL ON RECORD TO SEE THAT IT WAS EXCESSIVE OR UNREASONABLE . WE, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO DE LETE THE ADDITION MADE U/S 40A(2)(B) OF THE ACT. AS WE HAVE ALREADY DECIDED THE ISSUE ON MERIT, WE DO NOT TOUCH THE LEGAL GROUND RAISED BY THE ASSESSEE FOR FRAMING THE ASSESSMENT U/S 153A OF THE ACT BY MAKING ROUTINE DISALLOWANCES. 7. IN THE RESULT, THE APPEALS STAND ALLOWED IN PART . THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 14 TH SEPTEMBER, 2012. SD SD (JOGINDER SINGH) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31.12. 2012 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-1414 6