9911796707
TMI Blog1986 (3) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... the four partners of the assessee-firm were partners of Prabhudayal Surajbhan. During the course of assessment proceedings the ITO found that deduction of Rs. 1,36,000 was very excessive and, therefore, he called upon the assessee to furnish the basis of the above deduction. Statements of one of the partners as well that of the accountant of the firm were also recorded by the ITO. On proper calculations, the ITO held that only a sum of Rs. 56,132 should be allowed as a deduction and the balance is to be treated as income of the assessee. On further appeal, certain reliefs were allowed to the assessee and ultimately addition of Rs. 68,638 was retained. After initiating penalty proceedings under section 271(1)(c) the ITO levied penalty under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as were raised before the Commissioner (Appeals), the learned departmental representative on the other hand, supported the order of the ITO and the Commissioner (Appeals) and argued that the levy of penalty is fully justified. 6. We have heard the parties and examined the record produced before us. As far as the first objection of the appellant is concerned, it was argued by the counsel for the assessee that limitation is to be reckoned from the date of order of assessment, i.e., from 22-3-1975 and when counted from that date the order passed by the ITO on 14-12-1981 was clearly barred by time prescribed under section 275 of the Act. He placed reliance on the decisions of the Madhya Pradesh High Court in the cases of Addl. CIT v. Nandkish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us to hold that any reference was made to the IAC by the ITO on 22-3-1975. Assuming for the sake of argument that such a reference was made to the IAC, in view of the amendment of the provisions with effect from 1-4-1976, vesting the jurisdiction with the ITO, the IAC could send the matter back to the ITO and the ITO was fully competent to impose the penalty. Decisions of the Madhya Pradesh High Court cited by the learned authorised representative of the assessee in fact go against the assessee. In the case of Ramprakash Saraf, his Lordship held as follows: "The plain language of the proviso to sub-clause (iii) of clause (c) of sub-section (1) of section 271 indicates that the point of time indicated thereby is the time when the order imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee before the Tribunal against the order of the Commissioner under section 263 was that period of limitation had already expired and, therefore, the Commissioner could not issue directions to the ITO to impose penalty. The above said contention of the assessee was rejected by the Tribunal as per the discussion in paragraph 13 of the order. The said order as already stated has become final and, therefore, the above question stands finally determined against the assessee. In the order under appeal, the Commissioner has also held that period of limitation applies only to the initial order of penalty and not to an order passed with reference to the directions of the higher authorities like the one given by the Commissioner under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the assessee-concerned showed a total turnover of about Rs. 90 lakhs when its own capital was only Rs. 1 lakh. To reach the above turnover it had no choice but to borrow capital at the dictated terms of the lender. Because of limited capital of its own the assessee-firm was not able to raise loans from banks and was compelled to take loan from sister-concern, Prabhudayal Surajbhan. It was further argued that interest had been disallowed under section 40A(2) of the Act as the income-tax authorities considered the rate to be excessive or unreasonable. But as to what is reasonable is a matter of subjective opinion and when the assessee on the facts and in the circumstances of the case considered the payment of interest at a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is seen from the record that the sister-concern, Prabhudayal Surajbhan, even after showing receipt of Rs. 1,36,000 had no taxable income. The claim of the assessee that payment of interest to the sister-concern did not make any difference was specifically rejected by the Tribunal in IT Appeal Nos. 161 and 503 and it held that the assessee had tried to save firm's tax liability. The other contentions raised before us justifying the payment of interest as a measure of business expediency were also rejected by the Tribunal. It is pertinent to note that after admitting before the ITO that rate of interest was to be calculated at 1 1/4 per cent per month and that there was some mistake in the calculation at Rs. 1,36,000, the assessee never t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
