TMI Blog2013 (11) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... ound 31 lakhs. CIT(A) has restricted the disallowance to Rs. 50,000/- which appears to be reasonable considering the disallowances made in the past. Accrual of income - interest on sundry debtors – Held that:- Amount has been classified as “other debtors” the same are not in the nature of debtors. The transactions with the aforesaid parties are not with respect to the sales but are with respect to financial transactions - Assessing Officer has worked out the interest at 12% on the total outstanding of Rs. 1,65,65,363/-. Since the Assessee has already charged interest from Sarojben Shah and Shah Investments as evident from the copy of ledger placed on record, the charging of interest from those parties again would amount to duplication - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) vide order dated 31.03.2010 granted partial relief to the assessee. Aggrieved by the aforesaid order of CIT(A), Assessee is now in appeal before us and the effective ground reads as under: 1. Disallowance on account of shortage / rate difference restricted to the extent of Rs. 50,000/- by the learned CIT(A) may kindly be deleted. 2. Addition on account of interest of Rs. 19,87,843/- computed on sundry debtors of Rs. 1,65,65,363/- @ 12% p.a. confirmed by the learned CIT(A) may kindly be deleted. 1st ground is with respect to addition on account of shortage. 4. During the course of assessment proceedings, Assessing Officer noticed that Assessee has debited in his profit and loss account shortage and rate difference of Rs. 31,17,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998-99 and 1999-00 is confirmed by the ITAT. I, therefore, restrict the disallowance to an amount of Rs.50,000/-. The assessee gets a relief of Rs.9,63,891/-. 5. Aggrieved by the order of CIT(A), the Assessee is now in appeal before us. 6. Before us, the learned A.R. submitted that the Assessee is engaged in the business of transportation of chemicals and there is bound to be shortage in this type of business and this loss is normal feature of the business. He further submitted that shortage of material is inherent in business due to evaporation loss of highly inflammable materials, weigh bridge differences etc. He further submitted that the disallowance made by the Assessing Officer is on the basis of surmises and conjectures. He thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho were close relatives of the Assessee from whom also the Assessee has not charged any interest. The Assessee was asked to explain as to why interest at 12% should not be charged at Rs. 1,65,65,363/-. The assesse interalia submitted that he was having capital of Rs. 2.1 Crore on which no interest paid. The submissions made by the Assessee was not found acceptable to the Assessing Officer. He noticed that the debtors included close relatives of the Assessee but had not paid any interest to those persons. He was of the view that the payment of interest to H.M. Shah was to reduce the tax burden. He accordingly worked out interest @ 12% on the total sundry debtors of Rs. 1,65,65,363/- and accordingly made an addition of Rs. 19,87,843/-. Aggrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived from Shri Kiritbhai Patel and the same was advanced to the latter and therefore no interest has been charged on this too. The Id. A.R. however, was unable to submit the business expediency and necessity of such advances given to Shri Hasmukhbhai Shah totalling Rs.1,49,33,686/-. 5.3 I have considered the submissions of the Id. A.R. and the facts of the case and find that the assessee has no explanation for not recovering interest from Shri Hasmukh Shah out of sundry debtors which are actually advances to the assessee's relatives when interest payment of Rs.36,02,805/- is claimed as an expenditure. As regards, the advances to others, the same have been justified. In the absence of any explanation the disallowance made by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of carrying on business dealings. He further submitted that from Sarojben Shah interest @ 12% has already been charged and reflected in the accounts. He placed on record the copy of ledger account of Sarojben Shah at page 160 of the paper book. Similarly with respect to Shah Finance and Investment, he submitted that the Assessee has already charged interest at 12%. He further submitted that the Assessing Officer has considered the total outstanding balance for charging interest but has not granted credit for the interest which the Assessee has already recovered. The learned D.R. on the other hand supported the order of Assessing Officer. 12. We have heard the rival submissions and perused the material on record. From the cop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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