JESWANI LIQUORS,NAGPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX-4, NAGPUR

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ITA 25/NAG/2021Status: DisposedITAT Nagpur22 November 2023AY 2014-15Bench: SHRI PARTHA SARATHI CHAUDHURY (Judicial Member), SHRI G.D. PADMAHSHALI (Accountant Member)4 pages
AI SummaryRemanded

What did the Tribunal hold?

The tribunal found that the NFAC's order was not a speaking order as it merely confirmed the AO's addition without independent application of mind or verification. Therefore, the matter was remanded back to the NFAC for a fresh adjudication.

What were the facts?

The assessee, a liquor wholesaler, paid 18% interest to related parties, while the market rate was 13-15%. The AO disallowed the excess interest of Rs. 11,32,388/- under Section 40A(2)(b) for lack of documentary evidence supporting the higher rate.

What were the issues?

Whether the NFAC's order confirming the addition made by the AO was a speaking order, and if the assessee had provided sufficient evidence for paying higher interest to related parties.

Which sections of the Income-tax Act were involved?

Section 40A(2)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, NAGPUR BENCH :: NAGPUR

For Appellant: Shri Vijay Chandak, Advocate
For Respondent: Shri Abhay Y. Marathe, Sr.DR
Hearing: 21/11/2023Pronounced: 22/11/2023

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH :: NAGPUR BEFORE SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER & SHRI G.D. PADMAHSHALI, ACCOUNTANT MEMBER (Through virtual hearing) (A.Y. 2014-15) Jeswani Liquors, 2nd Floor, vs ACIT, Circle-4, Nagpur. Pushpak Vihar, Above Dr. Mukesh Chandak Dental Clinic, Near Darodkar Chowk, Nagpur-440 002. PAN: AAJFJ 3247 P Appellant Respondent Assessee by : Shri Vijay Chandak, Advocate Revenue by : Shri Abhay Y. Marathe, Sr.DR Date of hearing : 21/11/2023 Date of pronouncement : 22/11/2023 ORDER Per PARTHA SARATHI CHAUDHURY, JM:

This appeal preferred by the assessee emanates from the order of National Faceless Appeal Centre [NFAC], Delhi, dated 27.02.2021 for A.Y.2014-15 as per the grounds of appeal on record.

2. The relevant facts are that assessee is a wholesaler in country liquor, filed its return of income on 25/09/2014 declaring total income at Rs. 1,11,47,977/-. The case of the assessee was selected for scrutiny and assessment was completed u/sec. 143(3) at Rs.1,22,80,370/- by making addition of Rs. 11,32,388/- u/sec. 40A(2)(a) of the Act. During the course of assessment proceedings,

Jeswani Liquors Assessing Officer (AO) noticed that assessee had shown an excess interest of Rs. 11,32,388/- i.e. being difference of 18% interest paid minus 15% interest be considered reasonable. The assessee had not filed documentary evidence regarding its claim of payment of higher interest @ 18% to related parties mentioned u/sec. 40A(2)(b) of the Act, whereas market rate was 13% - 15% p.a. The AO held that assessee had not been able to offer any proper and reasonable explanation for paying highest interest rate to related parties. Accordingly, the AO disallowed the higher payment of interest @3% (18% - 15%) to its relatives u/sec. 40A(2)(b) of the Act of Rs.11,32,388/- and added it back to the total income of the assessee.

3.

We observe from the order of NFAC specifically at para 4 where the findings have been given. The NFAC has simply accepted the version of the AO without giving any independent finding on the facts of the case. There is no adjudication at all done by the NFAC and it is not a speaking order. That as a quasi judicial authority, the ultimate conclusion and decision should be reflected in the thought process and how verification and examination has been done and accordingly, reaching the final conclusion. In the present case, the order of NFAC, there is no reflection as to the application of mind and ultimately when the finding of the AO is confirmed, then on what basis the said addition was confirmed, nothing is emanating from the decision of NFAC. The NFAC writes “Therefore, I found that the submission of the appellant is Jeswani Liquors general in nature without any documentary evidence. Hence, the appellant’s argument on this issue is not accepted and the addition made by the Assessing Officer on a/c of excessive interest to related parties u/sec. 40A(2)(b) is hereby confirmed.’. That, in the instant finding of NFAC, it is clearly evident that there is no verification of facts conducted, there has been no independent application of mind and it is simply upholding the order of the AO without giving any rational basis for such decision. We are of the considered view, therefore, in the interest of justice, that the matter should be remanded back to the file of NFAC to come out with a speaking order after conducting necessary enquiry and verification and giving reasons specifically in the order as to why a particular decision has been taken, while complying with the principles of natural justice. We order accordingly. In view thereof, the order of the NFAC is set aside and is remanded back to their file as per aforestated direction. The grounds of appeal stands allowed for statistical purposes.

4.

In the result, appeal of the assessee is allowed for statistical purposes.

Order pronounced in open Court on 22nd November, 2023.

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