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2008 (5) TMI 651 - AT - Income TaxDisallowance of net interest paid and brokerage expenses - trading additions - Disallowance on interest and brokerage - disallowance on account of telephone expenses, vehicle expenses and depreciation on account of personal use - Interest under s. 234B. Application for condonation of delay under s. 5 of Limitation Act - delay for about 43 months - sufficient cause for delay present or not - HELD THAT:- No presumption can be made that the delay has been occasioned deliberately or on account of culpable negligence or on account of mala fides. The litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. Therefore, Following the decisions of Hon'ble Supreme Court of India in the case of Collector, Land Acquisition vs. Katiji & Ors. [1987 (2) TMI 61 - SUPREME COURT] and in the case of N. Balakrishnan vs. M. Krishnamurthy [1998 (9) TMI 602 - SUPREME COURT], we are satisfied that sufficient cause exists for delay in the present case and therefore delay in filing the appeal before us is condoned. Estimation of income - GP rate of 34 per cent on the estimated turnover - Trading addition - income from sale of milk, curd, sweets, namkeens etc. - HELD THAT:- Assessee has declared better results as compared to the preceding years in assessee's own case and there is no comparable case on record which could suggest the disturbance in the GP declared by the assessee. Therefore, In view of the decision in CIT vs. Gotan Lime Khanij Udhyog [2001 (7) TMI 19 - RAJASTHAN HIGH COURT], we are of the view that no trading addition is required to be made by the AO. Therefore the addition confirmed by the learned CIT(A) is directed to be deleted. Disallowance on interest and brokerage - business purposes - investment in personal immovable properties consisting of agricultural land, residential plot, etc - HELD THAT:- There is no nexus of the loans raised and the investment in properties. Assessee has purchased the properties in the preceding years out of the interest-free funds and there is nothing on record that the loans raised in M/s Chawala Sweets have been utilized for the purpose of purchasing the properties in the personal name of the assessee - Since, properties have been purchased in the preceding years since 1990-91 to 1998-99 and no disallowance of interest u/s 36(1)(iii) of the Act has ever been made in those years and also thereafter till date. Our views find support from the decisions of Hon'ble Madras High Court in the case of CIT vs. Hotel Savera[1997 (11) TMI 37 - MADRAS HIGH COURT], Hon'ble Supreme Court of India in the case of Munjal Sales Corporation vs. CIT & Anr. [2008 (2) TMI 19 - SUPREME COURT] - Therefore, AO is not justified in disallowing the interest claimed by the assessee - disallowance confirmed by the learned CIT(A) is directed to be reversed and addition made is directed to be deleted. Disallowance @ 20 per cent on account of telephone expenses, vehicle expenses and depreciation on account of personal use - rejected books of account - HELD THAT:- Since the books of account of the assessee have been rejected and no explanation with regard to the said expenses to the satisfaction of the authorities below or even before us have been placed on record that all the expenses have been incurred wholly and exclusively for the purpose of business. The non-business purpose in such expenditures cannot be ruled out has rightly been observed by the authorities below but the disallowance appears to be on the higher side looking into the turnover, business and facts of the assessee. The AO is directed to restrict the disallowance to 10 per cent of the expenditure on account of telephone, vehicle and the depreciation as claimed by the assessee. The assessee gets the part relief accordingly. Interest under s. 234B - HELD THAT:- The charging of interest under s. 234B is mandatory and is consequential in nature - the issue is general in nature and therefore does not require any adjudication. In the result, the appeal of the assessee is partly allowed.
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