Shri Pawan Kumar V. Commissioner of Income Tax-II, Rishi Nagar, Ludhiana

ITA/269/2012

AI Insights

The case involves Shri Pawan Kumar, the appellant, who appealed under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chandigarh. The Tribunal had confirmed additions to the appellant's income and disallowed certain interest payments on loans. The appellant contested the Tribunal's decision, arguing that the additions were made arbitrarily and without proper consideration of the audited books and scientific reports. The High Court found no merit in the appellant's arguments, noting that the Tribunal's decisions were based on factual findings and proper legal reasoning.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 676115 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 10-01-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: S K MUKHI
• Keywords: Audit; Commercial expediency; Income Tax; Interest disallowance; Yield Assessment
• Section: 260-A

Judgement Text

"1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: January 10, 2013 ITA No. 269 of 2012 Shri Pawan Kumar …Appellant Versus Commissioner of Income Tax-II, …Respondents Rishi Nagar, Ludhiana CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON’BLE MS. JUSTICE RITU BAHRI Present: Mr. S.K. Mukhi, Advocate for the appellant. 1 To be referred to the Reporters or not? 2 Whether the Judgment should be reported in the Digest HEMANT GUPTA, J. (ORAL) The appellant is in appeal under Section 260-A of the Income Tax Act, 1961 (for short 'the Act') against an order dated 17.05.2012 (A-3) passed by the Income Tax Appellate Tribunal Bench-A, Chandigarh (for short 'the Tribunal') in ITA No. 1119/CHD/2011 in respect of the assessment year 2008-09. The appellant has raised the following substantial questions of law: “(i) Whether under the facts and circumstances of the case, the ITAT is justified in confirming addition of ` 3,00,000/- on estimate basis by arbitrarily rejecting the books being duly audited, ignoring report of National Analytical Laboratory, ignoring that assessee is using old machinery and oil cakes have has to contain appreciable amount of oil for sale in market towards animal feed? (ii) Whether under the facts and circumstances of the case, the ITAT is justified in confirming addition of ` 2 2,89,220/- on account of interest on business loan to M/s Shri R.R.Foods, a business firm of the son of the appellant having given out of commercial expediency?” Learned counsel for the appellant has vehemently argued that the assessee sought report from the National Analytical Laboratory, Nabha in respect of yield for the cotton seeds but in spite of said report, the Tribunal has assessed the yield @ 11% as against 9.85% declared by the assessee in respect of oil from cotton seeds. The Assessing Officer has adopted the yield at 11% and made addition of ` 8,68,800/- in income. The said addition was reduced by the Commissioner of Income Tax(A) to ` 2 lacs but the Tribunal accepted the appeal of the Revenue and increased the yield and made addition to the extent of ` 3 lacs. We do not find any merit in the arguments raised by learned counsel for the appellant. A perusal of the order passed by the Tribunal shows that in the previous year, the appellant has given the quantity of cotton seed, mustard and ground nut crushed separately but in the year in question, the yield of oil and oil cakes have been given in consolidated form. The sales of oil and oil cakes have been shown in the manufacturing account in consolidated form although there is wide variation in the market price in these products. The Tribunal also noticed the fact that assessee has preferred to put up a consolidated account of different types of oil seeds for the reasons best known to him. The Tribunal also noticed the fact that there was wide variation in the percentage of yield of oil, sale rates of oil and oil cakes in the market, but keeping in view the yield disclosed by the appellant in 3 the consolidated form not only the books of account were rejected but also the yield was assessed in a particular manner. The order passed by the Tribunal is based upon pure findings of fact. We find that first substantial question of law does not arise for consideration. In respect of the second substantial question of law, the assessee has advanced two advance interest free loan of ` 1,60,000/- and ` 10 lacs to the firm of his son from his cash credit account. The appellant paid interest on the amount overdrawn. The Assessing Officer disallowed interest amounting to ` 2,89,270/- @ 15% paid by the assessee on such amount. Since the assessee has advanced loan from his cash credit account on which the interest was paid by the appellant, therefore, such interest has been rightly disallowed as expenditure. The plea of the assessee the amount being advance interest free loan has rightly been not accepted. In view of the findings recorded, we do not find any merit in the present appeal. Dismissed. (HEMANT GUPTA) JUDGE (RITU BAHRI) JUDGE 10.01.2013 Atul/Vimal "