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TMI Blog2012 (11) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... pay for the purchases made for that company - assessee has not established the commercial expediency - uphold the disallowance of interest made against the outstanding interest free loan - disallowance on this account in the asstt years 2005-06 and 2007-08 has been made @ 13.5% by the AO - disallowance @ 21% does appear to be very steep and is not supported by showing that this was the cost of the funds borrowed by the assessee - direct the AO to recomputed and to limit the disallowance on account of interest for interest free loan given - rate of interest is required to be reduced to 10% Notice – limitation – appellant contended that the assessment order was passed on 01.01.2007. It was contended by the appellant that since the assessment order was received by it on 01.01.2007, it was also passed on the same date – Held that:- Assessment order was signed on 18-12-2006 and the mere fact that a copy was received personally by some person on 1-1-2007 does not detract from this fact - In the remand report the AO has no where stated that the order was passed on 31-12-2006. What she had stated is that the order was passed " by 31-12-2006" since the same had been served on 1-1-2007. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in law and facts in deleting addition of Rs.5,97,861/- made by the Assessing Officer on account of disallowance of job work expenses ignoring the fact that the liability to pay has been disputed by the assessee itself. The expenses have neither been actually incurred nor ascertained. 5. Ld. 'DR' placed reliance on the order of the AO. The AO, in his order dated 18.12.2006 u/s 143(3) of the Act disallowed the impugned amount, on the ground of stopping payment of such cheques by the assessee. The AO, was not convinced with the reasons for non-encashment of cheques. The assessee informed the AO that cheques were given to a party, as payment for job work. However, quality of the job work was found inferior. In view of this, bankers were given instruct ions to stop payment of such cheques. The AO, made the impugned addition on the ground that the liability to pay such expenses was in dispute. 6. Ld. CIT(A) allowed the impugned expenses, as is evident from the findings recorded hereunder: 8. Ground No.8 of appeal memo and ground No. 4 of additional ground of appeal dated 10-8-2007 pertain to the addition of Rs. 5,97,861/- made by the AO on the ground that these were the cheq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings of the ld. CIT(A) are upheld and ground of appeal of the revenue is dismissed. 8. Ground Nos. 2 3 are general in nature and need no separate adjudication. 9. In the result, appeal of the revenue is dismissed. ITA No.1010/Chd/2010 (assessee's appeal) 10. First three grounds of appeal of the assessee pertain to disallowance of interest upheld by the CIT(A) . 11. The AO, was of the view that the money was advanced by the assessee to M/s Girnar Fabrics Ltd., knowing fully well that the financial posit ion of M/s Girnar Fibres was not good and the partners of the assessee firm, being Director in the company, were aware of the financial posit ion of the company. The assessee contended that the amount was given as security deposit, so as to get the product at lower cost than the market rates and not to pay interest on the credit purchases made by it, as was being charged till then. I t was also contended that the company had become sick. AO, relied on the decision of the Hon'ble jurisdictional High Court in the case of Abhishek Industries 286 ITR 1 (P H) whereas the appellant placed reliance on certain other decisions for the proposition that it was necessary for the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchases against the outstanding has been submitted by the appellant. The appellant's contention is that a suit has been filed for recovery of the amount from M/s Girnar Fibers Ltd. This suit has apparently been filed only in the year 2007. The assessee continued to make payments to M/s Girnar Fibres Ltd. even during the FY 2003-04 against purchases made from that company without attempting to recover the interest free loan through adjustment of the purchases. The appellant had also not led any evidence to show how the funds advanced by it to Gimar Fibers Ltd had been used by that company. The balance sheet of M/s Girnar Fibres Ltd. for financial year 2003-04 shows loans and advances amounting to Rs. 2.56 crores which indicates that the company had advanced funds to others also. The business expediency of such advances has not been explained. The assessee has submitted that Ms Girnar Fibers Ltd had become sick and had been referred to B1FR. In this connection the AO's contention that the company gave interest free loan to Ms Girnar Fibers Ltd knowing that the company's financial situation was not good and without adjusting the purchases against the interest free loan/deposit doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate order, passed by him. The CIT(A), has admitted the additional grounds, being legal in nature. The issue related to the denial of natural just ice and limitation, in respect of assessment order in quest ion. The appellant, contended that the assessment order was passed on 01.01.2007. It was contended by the appellant that since the assessment order was received by it on 01.01.2007, it was also passed on the same date. However, the AO, has contended that since the order has been served on 01.01.2007, it had been passed before the date, i.e. on or before 31.12.2006. The CIT(A), perused the relevant assessment record and found that there is a signature of some person, on the copy of the notice of demand and the penalty notice, dated 01.01.2007, apparently, in receipt of these documents. Ld. CIT(A), further observed that there is a report of Notice Server dated 30.12.2006, informing that he had gone to serve the documents on 30.12.2006 to the assessee, but the owner was out and that, some employee had put up the date of service, of 01.01.2007. He, therefore, informed the office clerk about the same and the order was dispatched through post, on the same date. Acknowledgemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t notice of demand and the assessment order were dispatched on 30- 12-2006 by speed post. I think that there is sufficient evidence on record to show that the assessment order was signed on 18-12-2006 and the mere fact that a copy was received personally by some person on 1-1-2007 does not detract from this fact. In the remand report the AO has now here stated that the order was passed on 31-12-2006. What she had stated is that the order was passed " by 31-12-2006" since the same had been served on 1-1-2007. The Act requires the assessment order to be passed by the date of limitation. In the present case, the documents in record show that the order was passed on 18-12- 2006 and was dispatched on 30-12-2006 by speed post, in addition to being served by hand on 1-12007. Hence, the appellant s contention that the assessment is barred by limitation is rejected. The additional ground No.1 filed by the appellant vide letter dated 2.12.2008 is, therefore, rejected. 15. In view of the above legal and factual discussions, ground No.4 raised by the assessee is dismissed. 16. Ground No. 5 is general in nature, hence, needs no separate adjudication. 17. In the result , appeal of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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