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TMI Blog2014 (7) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 6,17,878/- on excess interest u/s 40A(2)(b), thereby ignoring the case of CIT vs. M/s. Abhishek Industries (P) Ltd. (P&H) (286 ITR 1) (iii) deleting the addition of Rs. 7,59,236/- on account of low yield of rice and ignoring the comparable case of Shri Jai Ram Rohida Prop. M/s. Subh Laxmi Industries, Bundi for the same assessment year, quoted by the AO. (iv) the appellant craves liberty to raise additional ground and to modify/ amend the ground of appeal at the time of hearing. 2.1 The ground no (iv) of the Revenue is general in nature which needs no adjudication. 3.1 Apropos Ground No. (i) in respect of claim of interest on personal loan. The ld. DR relied on the order of the AO . 4.1 Apropos Ground No. (ii), the ld. DR c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable at just 6% then why interest payment will be made at three times that rate of interest. The assessee neither justified interest payment to Shri Bhagat Ram Darak much below the fair market value nor justified interest payment to persons covered u/s 40A(2)at the more the fair market value. Therefore, interest payment @ 18% is considered to be excessive and unreasonable. Payment is allowed @ 15% and balance amount of Rs. 6,17,878/- is added to total income of the assessee.'' The ld. DR contends that the AO was more than reasonable inasmuch as the comparable case of payment of interest in assessee's case was at 6%. Therefore, application of the provision of Section 40A(2) as to interest payment to related parties should have been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the assessee as vague and non-specific and thus he made the disallowance by following observation. ''It is submitted that yield depends on many factors like quality of paddy, production conditions, quality of infrastructure, nature of rice production etc. He submitted that each year paddy is different . However, apart from counting the reasons attributable to different yield, the assessee failed to specify the reasons in this case which resulted in lower yield in his case. The onus is on the assessee to justify the lower yield. However, he has not specified which factors are different in the year under consideration from that of the last year. How quality of paddy is different this year that of the last year. This is not verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC Limit. The ld. CIT(A) has deleted the addition of Rs. 57,330/- vide para 4.52 of his order. The ld. DR has not disputed this aspect. The assessee is an individual/ proprietor and loan has been raised on CC limit. The loan has been utilized for assessee business and it cannot be regarded as interest on personal loan. 7.1 Apropos Ground No. 2 relating to rate of interest, the ld. Counsel for the assessee contends that in previous years also the interest to relatives have been allowed. It is a known fact that outsider can insist for repayment of loan at any time whereas the relatives deposits are for long term. Therefore, higher payment of rate of interest is justified. 8.1 Apropos Ground No. 3 i.e. addition on account of low yield, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of addition to the closing stock, the assessee would have been entitled to take the same as opening stock in the earlier year. It would have been the revenue neutral exercise comparing both the years and at the most assessment of postponement of profit may arise. In any case, the AO has not adopted this course and made the addition on account of yield which is not justified. However, the order of the ld. CIT(A) is relied on this issue.. 9.1 We have heard the rival contentions and perused the materials available on record. From the fact, it emerges that there was no payment of interest on personal account. The interest of Rs. 57,330/- was paid on C.C. Limit utilization for assessee's business. Therefore, the ld. CIT(A) has rightly del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO has recorded a finding that assessee's books are examined on test check basis. When the books are accepted then the yield cannot be estimated without any material. It is a known fact that depending upon the machinery, quality of the seeds, moisture in paddy, monsoons etc. marginal fluctuation in yield is allowable. Therefore in the absence of rejection of books of account, the yield cannot be estimated. Besides, the AO at the most could have considered the addition on account of valuation of stock in case it was found that qualitywise day-to-day production was not maintained by the assessee deliberately. This is not met out by the AO. In view thereof, we find no infirmity in the order of the ld. CIT(A) deleting the addition in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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