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TMI Blog2013 (6) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Mahendra Gargieya on 24-08-2011 at Jaipur which was subsequently handed over to the employee of the assessee. Since the impugned order of the respective assessee was mistakenly left at the house of employee of the assessee, therefore, it could not be communicated to the assessee in time. After lapse of sometime when the assessee asked his employee about the impugned order received from the counsel, he realized that the same was left at his house and accordingly the assessee took necessary steps for filing the present appeals. 3.2 Having considered the rival submissions and the facts and circumstances of the case, we are satisfied that the assessee has explained the sufficient cause for not filing the appeals within the period of limitation. The reasons explained by the assessee are not found as malafide or a devise to cover the ulterior motive. Therefore, in the interest of justice, we condone the delay of 32 days in filing these appeals by the assessee. 4.1 Since the common grounds are raised in these appeals, therefore, the grounds raised in ITA No. 1023/JP/2011 for the assessment year 2007-08 in the case of Shri Mukesh Kumar Jain are reproduced as under:- ''1. The impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case, kindly be deleted in full 5. The ld. CIT(A) erred in law as well as son the facts of the case in making the disallowance out of the following expenses. S.N. Head of expenses Exp. Claimed by the assessee 10% disallowed by the AO Sustained by the ld. CIT(A) 5.1 Factory expenses Rs. 88,752/- Rs. 8,875/- Rs. 8,875/- 5.2 Telephone expenses Rs. 76,797/- Rs. 7,680/- Rs. 7,680/- 5.3 Depreciation on vehicle exp. Rs. 75,508/- Rs. 7,551/- Rs. 7,551/- Total expenses disallowed Rs. 24,106/- Rs. 24,106/- The disallowance so made by the ld AO and confirmed by the ld. CIT(A) is being totally contrary to the provisions of law and facts of the case, kindly be deleted in full. 6. The ld. AO erred in law as well as on the facts of the case in charging interest u/s 123A(3), 234B, 234D. The appellant totally denies its liability of charging of any such interest. The interest so charged and the withdrawal of interest being contrary to the provisions of law and facts, kindly be deleted in full. 5.1 During the course of hearing, the ld. AR of the assessee has stated that the assessee does not press the Ground No. 1. Therefore, the same is dismissed being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he factory. Therefore, verification of consumption of power and fuel in the production activity was not possible. 6.6 Having considered the rival submissions and carefully gone through the relevant material on record, we find that the AO has pointed out certain defects and deficiencies in the record of the assessee as the assessee is not maintaining stock register and production register separately for different qualities of seeds. Further, the assessee is also not maintaining monthwise consumption of fuel and power for running the plant and machinery/ factory. Therefore, the AO expressed that verification of consumption of power and fuel in production activity was not possible. We find that non-maintenance of proper stock register and production register as well as the records showing monthwise consumption of fuel and power is certainly the defects in the books of account maintained by the assessee and therefore, in our view the AO was justified in rejecting the books of account by invoking the provision of Section 145(3) of the Act which has been confirmed by the ld. CIT(A). 6.7 As regards the addition made on account of lower yield in comparison to earlier years and applying g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to non-related parties is considerably less than the interest paid to the related parties. Therefore, the AO is justified in disallowing the interest which is excessive in comparison to the fair interest rate prevailing in the market. 7.6 Having considered the rival submissions and carefully gone through the relevant material on record, we are of the view that the bank rate cannot be applied in the case of loan taken from related parties because of the reason that in case of bank loan, the assessee has to furnish guarantee as well as security whereas in the case of loan taken from related parties, the guarantee and physical security are not required. Accordingly, there is a difference in the rate of interest when the loan is taken without guarantee or security. In our view, the interest on the loan taken from relatives which is without guarantee and security as against bank loan is always higher and therefore, the reasonable rate of interest in such a case is justified @ 18%. Accordingly, we direct the AO to apply the fair market rate of interest at 18% while applying the provision of Section 40A(2)(b) of the Act. 8.1 Ground No. 4 of the assessee is regarding disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hicle expenses on account of personal use/ element. 9.3 On appeal, the ld. CIT(A) has confirmed the disallowances so made by the AO. 9.4 We have heard the ld. AR as well as ld. DR and considered the relevant materials on record. The authorities below have disallowed 10% of the expenses on account of factory expenses, telephone expenses and depreciation on vehicle because the assessee failed to maintain proper records and made cash payment supported by self prepared vouchers. Therefore, the authorities below found that the element of personal use of such facilities was not ruled out. The findings of the ld. CIT(A) in para 5.3 are as under:- ''5.3 I have gone through the basis of the AO for making the adhoc additions in respect of the above expenditures and also rebuttal made by the ld. AR on these accounts. Main reasons for the opting for such partial disallowance are to cover up the findings of non-availability of proper records, cash payments towards self prepared vouchers and involvement of personal usage of such facilities on the part of the AO. Regarding the partial disallowance of factory expense is concerned, the issue of self prepared vouchers and cash payments thereof ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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