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TMI Blog2017 (9) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... is against the order of CIT(A) confirming the adhoc disallowance made by AO on account of Conveyance, Telephone and sundry expenses at 20% in the absence of verifiable vouchers. For this assessee has raised following ground No.1: - "1. Under the facts and circumstances of the case and in law CIT(A) has erred in confirming the adhoc disallowance of Rs. 29,028/- out of conveyance, telephone and sundry expenses without appreciating the fact that no disallowance was warranted in absence of any infinity, brought on record from an audited account." 3. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee has claimed conveyance expenses at 48,431/-, telephone expenses at Rs. 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment made to parties specified u/s 40A (2)(b) were reasonable looking to the terms and nature of advances received by the appellant and also effect thereof is tax neutral. (c) Under the facts and circumstances of the case in law the CIT(A) has erred in making the alleged enhancement without appreciating the fact that proceedings u/s 154 were already tinder way and hence order of enhancement passed by the CIT(A) should be annulled and in such a case the addition of notional interest made by the AO be also deleted. (d) In case if the enhancement made by the CIT(A) be deleted, as a consequence it is also prayed that notional income being interest changed on consequence it is also prayed that notional income being interest changed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "7.1 I have duly considered the above submission of the appellant and find that it is not disputed that the appellant has taken loan from family members viz. Neetu Mehta & Manish Mehta and paid interest @18% to them, whereas to Tasneem Contractor, Mrs. Kanta P Parmar and Omkar Jewellers he has paid interest @ 12% and to Shubham Dev @ 15%. Interest @ 18% has been paid only to one party, viz: Monaco Export. Neetu Mehta is appellant's brother's wife and Manish Mehta is his brother. Therefore, these two persons fall tinder the purview of sec. 40A (2)(b) of the Act. The appellant has merely stated that interest has been paid to them as per the agreement with them and he was under contractual obligation to pay them higher rate of interest. I do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be charged rather interest can be disallowed on the loan taken and that also on the amount which has been diverted for interest free advances. Secondly, the CIT(A) was of the view that interest paid to family Members @ 18%, is higher and he restricted the interest @ 12% and enhance the assessment from Rs. 3,77,342/- to Rs. 9,47,460/-. We find that the CIT(A) has not given any reason for enhancing the income and there is no indication as to how he has applied the provision of section 40A(2)(b) of the Act. We find that this issue is covered by the decision of Hon'ble Bombay High Court in the case of CIT vs. Indo Saudi Services (Travel) (P.) Ltd. [2009] 310 ITR 306 (Bombay), wherein it is held as under: - "4. We have heard the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come assessed for the asst. yr. 1991-92 is Rs. 9,38,510 and for asst.yr. 1992-93 is Rs. 14,65,880 and the said assessment orders have been placed on record. (vi) Under the CBDT Circular No. 6-P, dated 6th July, 1968 it is stated that no disallowance is to be made under section 40A(2) in respect of the payments made to the relatives and sister concerns where there is no attempt to evade tax. 5. In view of the aforesaid admitted facts we are of the view that the Tribunal was correct in coming to the conclusion that the CIT(A) was wrong in disallowing half per cent commission paid to the sister concern of the assessee during the asst. yrs.1991-92 and 1992- 93. The learned advocate appearing for the appellant was also not in a position to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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