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TMI Blog1997 (12) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses ? Question in R.A. No. 29: Whether, on the facts and in the circumstance, of the case, the ITAT was right in law in deleting the penalty of Rs. 55,862 on sole reason that in quantum appeal the additions which formed the basis have been deleted when Department has not accepted the ITAT's decision in quantum ?" 2. Being of the considered view that no referable question of law arises out of the order of the Tribunal as prayed for by the ld. Commissioner, we decline to accede to his request and give our reasons and the related facts as under. 3. The assessee is a sole proprietor of three different concerns dealing in purchase and sale of liquor and also partner in several firms dealing in sale of country liquor as well as IMFL. The assessee has been borrowing money and paying interest therein. The Assessing Officer disallowed interest claimed at Rs. 1,45,165 on the ground that there was no evidence that the borrowed funds were utilised in the business of proprietary concerns or the firms in which the assessee was a partner. Besides, the above disallowance, the claim of secret commission of Rs. 1,06,400 paid by the assessee to employees of M/s Vinod Kumar & Co. was also di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning earlier loans raised for the purpose of business. As such, it cannot be said that the loans raised by the assessee were not for the purpose of business. It is also pertinent to note that the Assessing Officer has himself allowed deduction of much larger amount, namely, Rs. 3,36,963 in assessment year 1990-91 in an order passed under section 143(3) on account of interest paid on borrowings utilised for the purpose of business as against Rs. 1,45,165 claimed in the assessment year under consideration. As such, we are of the opinion that the departmental authorities were not justified in disallowing the amount of Rs. 1,45,165 paid as interest on the borrowings which were utilised by the assessee for the purpose of business. Accordingly, the addition of Rs. 1,45,165 is directed to be deleted.' 5. From the above it is clear that the deletion of interest disallowed by the revenue authorities is on the basis of finding of facts that borrowings were used for the purpose of business and there was no finding by the Assessing Officer or the CIT(Appeals) to the effect that the borrowed money was used by the assessee for non-business purposes or for acquiring any personal assets. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for the assessee to produce the payees from Kangra to Solan which is about 400 kms. in such a short notice. Even otherwise, as appears from the subsequent enquiries, the employees of M/s Vinod Kumar were not working in any of the vends in Kangra District in the month when the assessment was taken up for finalisation and as such it was not possible for the assessee to produce the employees. However, the fact remains that similar commission paid has been allowed by the Assessing Officer in the subsequent assessment year and as such the payment of such type of commission has been recognised as a business necessity by the Assessing Officer himself. Accordingly, we will hold that since the quantum of payment in the assessment year under consideration in absolute terms as well as the percentage of the total turnover in the wholesale L-1 vend in the name of M/s Gupta Associates is less than the commission claimed and allowed in the subsequent year by the Assessing Officer, there was no justification for disallowing the commission claim which is directed to be deleted." The Tribunal also took note of the fact that higher rate of commission has been allowed by the Assessing Officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am of the opinion that the two questions sought by the revenue in R.A. No. 28 and one question in R.A. No. 29 do arise and deserves to be referred for the opinion of the Hon'ble High Court of Himachal Pradesh at Shimla, under section 256(1). ORDER UNDER SECTION 255(4) 1. The Revenue in R.A. No. 28/Chandi/1997 has asked for the reference of the following two questions to the Hon'ble High Court: "1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in deleting the addition of Rs. 1,15,165 after obtaining additional evidence but without establishing nexus between the borrowings and interest-bearing advances ? 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in allowing Rs. 1,06,400 paid on account of secret commission to the employees of another firm when the assessee has not been able to substantiate its claim for expenses ?" Similarly the question sought for reference in R.A. No. 29/Chandi/ 1997 is as under: "Whether, on the facts and in the circumstances of the case, the ITAT was right in law in deleting the penalty of 55,862 on sole reason that in quantum appeal the additions which formed the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have also gone through the orders passed by the learned Members. At the outset, I unhesitatingly hold that this is a case where the 'difference' has arisen because of the intention to create such a 'difference' irrespective of the facts of the case and its merits as well as the position of law. The ld. Accountant Member has passed a detailed order setting out the three questions arising in two reference applications and referring to the observations in the Tribunal order in quantum appeal opined that the two questions raised in R.A. No. 28 of 1997 are purely of facts. He has also decided likewise in respect of the solitary question in R.A. No. 29 of 1997 on the ground that the penalty under section 27 1 (1)(c) would meet the same fate as it is consequential to the decision in the quantum proceedings deleting the addition on account of secret commission. It is rather strange that the learned Judicial Member in his dissenting order clearly overlooked the findings of fact recorded in the quantum order of the Tribunal to which he was a party. The observations in para 2 of the dissenting order conclusively prove this as this is what the learned Judicial Member observes: "2. The revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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