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2023 (4) TMI 1044 - ITAT AHMEDABADDisallowance of interest u/s 40A(2)(b) - HELD THAT:- Assessment order reveals that the assessee had furnished explanation for the same pointing out that the advance to Shailesh Patel was in the course of selling and purchase of goods, and it was not a commercial advance, whereas in the case of Brijesh Chauhan, the assessee has explained that the unsecured loans had been taken without any security, and hence interest at the rate of 18% was charged on the same. AO, has simply rejected both these contentions and explanation of the assessee by stating that they were not acceptable, and in case of Brijesh Chauhan, by merely mentioning that he falls in the category of person specified under section 40A(2)(b) of the Act and in other cases the assessee had paid interest at the rate of 12%. There is no further reasoning by the AO for rejecting the explanation of the assessee. The order of the ld.CIT(A) is nothing but cryptic who merely mentioned that the AO had given full justification for the disallowance and his order is logical and specific. Interest paid to partners disallowed - Addition made by the AO on the withdrawals made by one of the partners of the firm noting that as per the partnership deed, 12% interest was to be charged on the withdrawals, but the assessee had not charged the same - AO simply notes that the assessee furnished reply, but it was not satisfactory. What exactly was the reply, finds no mention in his assessment order. The AO straight-away arrives at a finding and conclusion that the reply was not satisfactory, without even giving any reasons and basis for rejecting the same. The ld.CIT(A) has nothing to say in the matter except that the assessment order is justified, and proper show cause notice has been given to the assessee. Addition of interest paid on fund advanced -The assessee had explained that the advances related to business transactions with Ashok Sales Corporation, which were rejected by the AO outrightly by stating that no prudent businessman would give advance without interest. The AO has not even cared to consider the assessee’s statement of facts that the advance was in relation to business transactions carried out by the assessee and was purely commercial advance. On the contrary, the AO has gone to hold that no business transaction has been shown by the assessee, and it was only financial transaction. The ld.CIT(A) has again upheld order of the AO finding it to be totally justified. The assessee had given detailed explanation to the ld.CIT(A) in appellate proceedings. Thus both the authorities below having passed orders in a very casual manner, totally ignoring the pleadings of the assessee and in complete disregard to the principles of natural justice. The orders are highly unjustified and are not sustainable in law - thus set aside the order passed by the ld.CIT(A) being a cryptic and non-speaking order. Accordingly, the grounds raised by the assessee are allowed.
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