TMI Blog2015 (11) TMI 1280X X X X Extracts X X X X X X X X Extracts X X X X ..... ady considered the identical facts and circumstances of the case in assessee’s own case in A.Y. 2006-07 and 2007-08 and dismissed the revenue’s appeal. - Decided against revenue. disallowance of interest - CIT(A) deleted the addition - Held that:- The partners of the firm had sufficient interest free funds including profit earned during the year. Therefore, no notional interest disallowance can be made by the Assessing Officer in absence direct nexus between the interest bearing fund and interest free advances. Thus, we confirm the order of the ld CIT(A). - Decided against revenue. Addition on excessive interest payment to the persons covered by Section 40(A)(2)(b) - CIT(A) deleted the addition - Held that:- Disallowance under the provisions of Section 40A(2)b) cannot be made out of interest payment to family members without establishing excessiveness or unreasonableness of the rate of interest. The assessee paid interest to the close person covered U/s 40(A)(2)(b) of the Act @ 18% confirmed - Decided against revenue. - ITA No. 997/JP/2013 - - - Dated:- 1-10-2015 - Shri T. R. Meena, AM And Shri Laliet Kumar, JM For the Petitioner : Shri Raj Mehra (JCIT) For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consumption of old gold/silver purchased and that of new one. On the basis of above discrepancy, the ld Assessing Officer proposed to reject the books of account U/s 145(3) of the Act, which was replied by the assessee after considering the assessee s reply. He held that the assessee had shown huge amount of URD purchases (Unregistered Dealer), however, they were not supported by proper bills. No details of sellers, their address and PAN had been maintained on such vouchers. In absence of these basic primary details, these purchases remained unverifiable and unauthentic. The assessee had not been maintaining quantitative and qualitative details of diamonds and precious and semi precious stones. Considering the fact that quality of stones and diamonds makes huge variation in prices, no qualitative details leaves stock nothing but mere estimation. Moreover, the assessee was not maintaining even quantitative detail of diamonds and stock. The assessee had followed LIFO method which was not acceptable as per accounting standards. Mere plea of the assessee that he was regularly following certain method, did not justify any method which is not acceptable as per accounting standa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR vehemently supported the order of the Assessing Officer and reiterated the arguments made in his assessment order that the assessee had not maintained qualitative and quantitative details of stock. There was URD purchases for which no addressee, confirmation, PAN number have been furnished by the assessee during the course of assessment proceedings. Therefore, ld Assessing Officer rightly applied Section 145(3) of the Act and rejected the book result. He was also fair to apply G.P. rate of 14% as disclosed by the assessee @ 13.2%. Therefore, he prayed to confirm the order of the Assessing Officer. 5. At the outset, the ld AR of the assessee has argued that it is a covered issue as identical additions were made by the ld Assessing Officer in A.Y. 2006-07 and 2007-08. The Hon ble ITAT Jaipur Bench, Jaipur in ITA No. 426/JP/2009 for A.Y. 2006-07, ITA No. 375/JP/2010 for A.Y. 2007-08 ITA No. 627/JP/2010 for A.Y. 2007-08 order dated 30/09/2010 has allowed the appeal by observing that, it is not necessary that rejection of books is made by the Assessing Officer, there must be some additions in the income of the assessee. 6. We have heard the rival contentions of both the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his assessment order. At the outset, the ld AR of the assessee relied upon the finding of the ld CIT(A). The total advance given to Shri Satish Kumar Khandaka of ₹ 3 lacs, the assessee is having much higher interest free funds available with it. The opening capital of partner was ₹ 1,10,07,513/- and the closing capital was ₹ 2,11,28,032/-. As per terms and conditions of the partnership deed, interest has been paid to the partner Shri Sant Kumar Khandaka and Smt. Suman Agarwal on an amount of ₹ 10 lacs only and whatever amount available in excess of ₹ 10 lacs is interest free. During the year under consideration, the assessee firm had earned book profit at ₹ 33,64,115/- which is much more than the interest free amount of ₹ 3 lacs. The ld Assessing Officer has not established any nexus between the interest bearing borrowings and interest free advances. Therefore, he prayed to confirm the order of the ld CIT(A). 9. We have heard the rival contentions of both the parties and perused the material available on the record. The partners of the firm had sufficient interest free funds including profit earned during the year. Therefore, no notion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 18% to family members and the Assessing Officer disallowed interest in excess of 6.75% on which rate loan was taken from the bank. A disallowance of ₹ 7,65,855/- was made. The ld CIT(A) had deleted the disallowance against which an appeal was preferred by the department before the Hon ble ITAT and the Hon ble Tribunal vide their order dated 30/09/2010 held that there was no infirmity in the order of the ld CIT(A) and interest @ 18% was held to be justified. He placed reliance on the decision of Hon ble Rajasthan High Court in the case of CIT Vs. Udaipur Distillery Company Limited reported in 316 ITR 426 wherein it has been held by the Hon'ble High Court that where lower authorities have allowed deduction in respect of disallowance made U/s 40(A)(2)(b) of the Act on the ground that in earlier years deduction has been allowed and in order to maintain consistency, no interference was required to be made in allowing deduction. The disallowance which was made U/s 40(A)(2)(b) of the Act which was deleted by the CIT(A) and ITAT was held to be justified. Therefore, he prayed to confirm the order of the ld CIT(A). 13. We have heard the rival contentions of both the parties an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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