9911796707
TMI Blog2023 (4) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... the grounds are either general in nature or were not pressed before me. 3. As is evident from the above, solitary grievance of the assessee before me is against disallowance of interest of various amounts as mentioned in grounds of appeal. 4. I have heard both the parties; I have also gone through the orders of both the AO and the ld.CIT(A). 5. I may begin by stating that after hearing both the parties, and going through orders of the authorities below, I find that this is a classic case of orders passed by the Revenue officers i.e. both the AO and the CIT(A) in gross disregard to the principles of natural justice, totally ignoring the pleadings of the assessee before them, giving no reason for the same, and passing cryptic orders without any reasoning. The order of the ld.CIT(A) needs to be set aside for this reason alone and the assesses claims be allowed. Having said so, we shall now bring out the reasoning for the same from the orders of the authorities below. 6. As is evident from the grounds raised before me, the assessee has primarily challenged the disallowances of three types of interests viz. (i) Rs.9,195/- and Rs.21,295/- disallowed under section 40A(2)(b) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found not acceptable. The assessee has paid interest @ 18% to the above person, who falls under the category of section 40A(2)(b) of the Act. In other cases the assessee has paid interest only @ 12%. Accordingly, excess interest paid to its partner's HUF @ 6%, which comes to Rs.21,295/-, is disallowed and added to the total income of the assessee." Para-8 for the second issue as under: 8. Partner of the assessee Firm Shri Brijesh P Chandan has made withdrawals from the Firm and as per partnership deed it is required to charge interest @ 12%, however the assessee has not charged the same. On the other hand the assessee has claimed huge interest expenses including interest on partner's capital. Accordingly, the assessee vide this office notice dated 06.10.2016', has been asked that "Partner-of the Firm Shri Brijesh P Chandan has made withdrawals from the Firm, however, no interest has been charged, you are therefore requested to show cause as to why interest @ 12%, which comes to Rs.51,662/- should not be treated as income of the assessee Firm." In response to the above the assessee could not offered any satisfactory reply, Accordingly, Rs.51,662/- is disallowed out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in the appellate order for A.Y. 2012-13 dated 20-11-2015. The AO has given full justification for a disallowance in para 7 which is logical and specific provisions u/s 40A(2)(b) have been invoked. Proper show cause notice has been served by the AO on appellant before making addition. I am convinced that the disallowance is called for. Ground no. 2.1(c) is dismissed. Para-4.4 for the second issue as under: "4.4 Ground no. 2.1 (d) is regarding disallowance of Rs. 51,662/-. The issue is relating to charging of interest from the partner on capital account. The justification of the decision is contained in para 8 of assessment order. The partnership deed has been considered by the AO, hence the principle of expediency by the appellant is nothing but to defraud the revenue. Proper show cause notice has been served by the AO on appellant before making addition. The decision of the AO is found to be correct, therefore ground no. 2.1(d) is hereby dismissed. Para-4.5 for the third issue, as under: "4.5 Ground no. 2.1 (e) is regarding disallowance of Rs.7,84,957/-. The detail is in para 9 of assessment order. Huge funds have been advanced to Ashok Sales Corporation without charging a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory. What exactly was the reply, finds no mention in his assessment order. The AO straight-away arrives at a finding and conclusion that the reply was not satisfactory, without even giving any reasons and basis for rejecting the same. The ld.CIT(A) has nothing to say in the matter except that the assessment order is justified, and proper show cause notice has been given to the assessee. 12. Similarly, in the case of disallowance of interest of Rs.7,84,957/-, the same pertained to advances given to Ashok Sales Corporation without charging any interest on the same. The assessee had explained that the advances related to business transactions with Ashok Sales Corporation, which were rejected by the AO outrightly by stating that no prudent businessman would give advance without interest. The AO has not even cared to consider the assessee's statement of facts that the advance was in relation to business transactions carried out by the assessee and was purely commercial advance. On the contrary, the AO has gone to hold that no business transaction has been shown by the assessee, and it was only financial transaction. The ld.CIT(A) has again upheld order of the AO finding it to be to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to prove this contention. Say for example, the advance of RS. 10.80 lacs given on 23-5-2013, the bank balance was Rs.29,56,654, similarly Rs. 15 lacs given on 18-6-2013 there was opening bank Account of RS. 15,80,436 and further credits of sale proceeds of RS. 103000+723600+66970, say the advance of RS. 10 lacs given on 24-6-2013, there was credit balance with bank of RS. 17,42,348 and even after this advance there was credit balance of RS. 9,40,363. All other transactions can be verified accordingly with bank statement and it clearly proves that the appellant had not diverted interest bearing funds to interest free advance to this party. Hence the impugned disallowance of RS. 784,957/-should be deleted. 6.0 Disallowance of interest Exp. -Rs. 4,86,471/- 6.1 The next ground of appeal relates to the disallowance at pro-rata basis in respect of interest expenses at Rs.4,86,471/-. It is discussed in para-10 of the order. The AO has observed that though there were interest payments exceeding the limit, the appellant had accepted Forms 15G u/s 197A(1B) from the parties and not made TDS so that disallowance u/s 40(a)(ia) was made. 6.2 The appellant submits that the impugned disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mutually agreed rate. Therefore, there is no clause for charging interest on the withdrawals made by said partners.
(ii) Secondly, it is submitted that the said partner required funds for the purpose of his business and it was a commercial expediency of not charging interest on his withdrawals. He has returned the money immediately as it would be noticed from the ledger account. Refer to S A Builders (288 ITR 1)(SC).
(iii) Lastly, it is settled law that the AO cannot compel the assesse to earn income so that the addition made by AO in respect of such income is wholly illegal.
It is clear therefore that both the authorities below having passed orders in a very casual manner, totally ignoring the pleadings of the assessee and in complete disregard to the principles of natural justice. The orders are highly unjustified and are not sustainable in law
13. In view of the above, I set aside the order passed by the ld.CIT(A) being a cryptic and non-speaking order. Accordingly, the grounds raised by the assessee are allowed.
14. In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 24th March, 2023 at Ahmedabad. X X X X Extracts X X X X X X X X Extracts X X X X
|
