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TMI Blog2015 (4) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... and the assessee fails. The bank rate is not strictly comparable, and some leverage would have to be allowed between the interest rate to the bank and that to the private parties, which is on an unsecured basis, even though in the instant case the same stands given by related parties to their own concerns, so that it serves a common purpose or mutual interest. That is, the said rate yet cannot form a suitable basis to arrive at the fair market value of the interest rate for unsecured loans. In our view, on the balance, a premium of 25% (on the bank rate) would be more than adequate. Accordingly, the excess interest rate be worked out by applying a factor of 1.25 to the average bank interest rate, i.e., for term finance, as obtaining for the relevant years. A bank rate of 12% p.a. (say) would accordingly yield an excess interest rate of 6% p.a. (21 - 12 x 1.25). We decide accordingly, and the assessee gets part relief. - Decided partly in favour of assessee. - I.T.A. Nos. 7477/Mum/2010 & 4210/Mum/2012 - - - Dated:- 25-3-2015 - Shri Joginder Singh And Shri Sanjay Arora JJ. For the Appellant : Shri Nishit Gandhi For the Respondent : Shri Neil Philip ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the excess stock of 2.7 MT of copper, valued at its cost of ₹ 319 per kg., i.e., at ₹ 8,61,300/-, being confirmed thus, the assessee is in second appeal. 3. We have heard the parties, and perused the material on record. 3.1 We were during the course of the hearing taken through the details of the stock furnished to the bank (PB pg. 48); the details of the stock as per the balance-sheet as on 31.03.2007 (PB pgs. 33-34); the comparative statement between the two (PB pg. 50); the monthly plant reports for the months of February, March and April, 2007 (PB pgs. 52- 54); and the audit confirmation under excise license (PB pg. 72). The assessee s explanation before the Revenue authorities, i.e., the A.O. and the ld. CIT(A) (at PB pgs. 49, 73-83), has also been perused by us. The assessee case is that the submission of the stock statement (to the bank) cannot form the basis for inferring excess stock with it as on the relevant date. The same is considered as a formality for the purpose of obtaining the bank finance, so that the figures furnished are on a provisional basis, liable to correction, i.e., with reference to its books of account, and toward which it also c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank. Further, the verification could only be with reference to the assessee s internal records, and which brings us back to the assessee s accounts and stock records. It is only for the assessee to specify the said verification and/or validation processes. It was thus open and, in fact, incumbent on the assessee to show, with reference to its accounts, that though initially reflecting a balance of 5.7 MT, the same, upon correction - showing its basis, was finally determined at 3 MT, while the assessee in the present case has throughout omitted to disclose its excise record, which in fact would be audited by both - its excise auditors as well as the statutory auditors, as it indeed claims and purports to exhibit. True, its auditors state that the balance-sheet is in agreement with the books of account (refer annual accounts at PB pgs. 3-32), but then the moot question is: Are they in agreement with the excise records, which we understand to be the only stock record maintained by the assessee? Why, if so, the assessee has not produced the excise records before the Revenue authorities, or even before us? This is puzzling indeed; more so, when the same is debilitating of its case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account. In sum, true, it is open for the assessee to show that the stock furnished by it to the bank is not a correct statement. But then, it is equally incumbent on it to illustrate the purpose for which the said wrong statement is given, which we have found as missing. Further, it is equally incumbent on it to, then, state the basis of its correct stock. 3.4 The assessee has also relied on case law. The matter, as would be apparent from the foregoing, is purely factual, adjudicated by us by considering the assessee s explanation with reference to the material on record. In a given case, an assessee may satisfactorily explain the difference in the stock figure/s furnished to the bank and that disclosed by its final accounts, in which case no case for addition would arise. Why, in the instant case the assessee has even failed to show that the same, i.e., the stock as disclosed, actually matches with that reflected by its books. Reliance on case law would thus be of little moment; our decision being based on firm findings of fact, based on the material on record, as it ought to be. It would, therefore, all depend on the facts of the case - the question to be decided is whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. Rather, it gets refuted on the basis that there is a wide variation in the interest (allowed at the same rate) from year to year, so that there is thus no constancy as to the principal amount borrowed, only with reference to which could there be an agreement. Rather, the borrowings, on a long term basis tend to depress the interest rate as the borrower commits himself over an extended period, even as future in inherently uncertain, bearing thus a higher risk, while at the same time ensuring a steady income to the creditor. Further on, the plea has no legs to stand in-as-much as interest rates vary over time, so that what is relevant is the prevailing rate; the recent years witnessing a sharp decline in the interest rates, so that the interest rates across time are hardly comparable; more so, that obtaining a decade back, on the basis of which argument the first appellate authority allowed relief to the assessee for A.Y. 2004-05. The assessee contending that the Revenue has not shown that any excessive payment to or that any benefit stands derived by the payees, being related parties, which is the sine qua non for the application of s. 40A(2)(a), is misconceived. What else, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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