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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI NARENDRA KUMAR BILLAIYA & SHRI KUL BHARAT
O R D E R PER KUL BHARAT, JM:
This appeal, by the Revenue, is directed against the order of the learned CIT(Appeals), Meerut, dated 16.02.2016 pertaining to the assessment year 2011-12. The Revenue has raised following grounds of appeal:
“1. Whether in the facts and circumstances of the case, the Id. Commissioner of Income Tax (Appeals) has erred in law and fact in deleting the addition of Rs. 1.34 Crs made by the AO u/s 68 of the Act by treating the cash advance received from various parties against sale of property as unexplained ignoring the fact that the advance received by the assessee did not appear in the audited balance-"sheet and further, the assessee could not establish the identity, credit worthiness and genuineness of the parties who had advanced these cash payments.
Whether in the facts and circumstances of the case, the Id. Commissioner of Income tax (Appeals) has erred in law and fact in deleting the addition of Rs. 3,21,967/- which has been made by the AO due to disallowance of proportionate interest on loans and advances given by the assessee on which no interest had been charged.
3. Whether in the facts and circumstances of the case, the Ld. Commissioner of Income tax (Appeals) has erred in law and fact in deleting the addition of Rs. 45,469 and Rs. 66,246/- made by the AO on account of personal use of car and likewise 10% disallowance of depreciation claimed on car respectively. 4. Whether in the facts and circumstances of the case, the Ld. Commissioner of Income tax (Appeals) has erred in law and fact in deleting the addition of Rs. 99,41,000/- made by the AO towards unproved alleged unsecured loans ignoring the fact that creditworthiness of so called lenders and genuineness of transaction was not proved and the onus for which clearly was upon the assessee in which it had totally failed. 5. Whether in the facts and circumstances of the case, the order of the Id. Commissioner of Income tax (Appeals) may be set aside and that of the A.O. be restored. 6. That the appellant craves leave to add, modify and or delete any ground(s) of appeal.” 2. Facts giving rise to the present appeal are that in this return of income was filed on 28.09.2011 declaring total income of Rs. 13,02,090/-. The case was selected for scrutiny assessment and the assessment u/s 143(3) of the income-tax Act, 1961, hereinafter referred to as the “Act”, was framed vide order dated 27.03.2014. The Assessing Officer while framing the assessment made disallowance in respect bad debt written off amounting to Rs. 50,00,000/-; disallowance of advance received amounting to Rs. 1,34,00,000/-; disallowance of earth filling expenses amounting to Rs. 12,72,400/-; addition of unsecured loans amounting to Rs. 1,06,41,000/-; disallowance out of vehicle running expenses amounting to Rs. 45,469/-; disallowance out of depreciation on car expenses amounting to Rs. 66,246/-; and disallowance of proportionate interest amounting to Rs. 3,21,967/-. Thus he assessed income at Rs. 3,20,49,170/- against the returned income of Rs. 13,02,090/-.
Aggrieved against this, the assessee preferred appeal before the learned CIT(Appeals), who after considering the submissions partly allowed the appeal. Thereby the learned CIT(Appeals) deleted the addition of Rs. 1,34,00,000/-; restricted the addition of Rs. 12,72,400/- to the extent of Rs. 12,22,400/-; in respect of addition of Rs. 1,06,41,000/- made on account of unsecured loan, the learned CIT(Appeals) restricted it to Rs. 7,00,000/-; and in respect of ad hoc disallowances made by the AO, the learned CIT(Appeals) deleted the additions of vehicle running expenses, proportionate interest.
Aggrieved against this the Revenue is in appeal before us.
Ground No. 1 is against deleting the addition of Rs. 1,34,00,000/-.
Learned DR vehemently argued that the Assessing Officer had given a finding that during the year the assessee had received advances of Rs. 1,34,00,000/- and submitted that the learned CIT(Appeals) was not justified in deleting the addition. He submitted that the advances did not reflect in the audited balance sheet. Further, identity and creditworthiness of creditors and genuineness could not be proved.
On the other hand, learned counsel for the assessee submitted that before the learned CIT(Appeals) the assessee had provided all relevant evidences that the amount in question was not received during the year under consideration and the learned CIT(Appeals) was perfectly justified in deleting the addition. The impugned advances related to earlier years.
We find that the learned CIT(Appeals) in deleting the addition has given a finding of fact that the amount of Rs. 1.34 crore was received by the assessee in F.Y.
2008-09. Accordingly, considering the fact that since the advances were not received in the year under consideration, the learned CIT(Appeals) deleted the addition of Rs. 1.34 crore. This finding of fact is not rebutted by the Revenue. Therefore, we do not find any reason to interfere with the finding of the learned CIT(Appeals), same is hereby affirmed.
Ground no. 1 is rejected.
Ground No. 2 is against deleting the addition of Rs. 3,21,967/- being the disallowance of proportionate interest on loans and advances on which the assessee had not charged any interest.
The learned DR submitted that the AO has disallowed the interest on the basis that the assessee had claimed bank interest amounting to Rs. 30,98,158/-. On the other hand he has given interest free loan amounting to Rs. 26,83,056/-. Therefore, he made disallowance of interest @ 12% and made addition of Rs. 3,21,967/-. However, learned CIT(Appeals) deleted the same. Learned DR submitted that the learned CIT(Appeals) has wrongly applied the case laws as the Assessing Officer has categorically given a finding that the assessee has not charged any interest on the advances given to the various persons.
On the other hand, learned counsel for the assessee supported the order of the learned CIT(Appeals) in deleting the disallowance in question. He submitted that the assessee was having sufficient interest free funds available with him. The AO was therefore, not justified for making disallowance of proportionate interest.
We have heard rival submissions and perused the material available on record. We find that the learned CIT(Appeals) has given a finding of fact that the advances were given out of interest free funds. Learned CIT(Appeals) in the impugned order has stated t4hat the assessee was having non-interest bearing funds amounting to Rs. 4,84,34,694.81. This fact is not rebutted by the Revenue. We find no infirmity in the action of the learned CIT(Appeals), which is hereby affirmed. Ground of appeal is rejected.
12. Ground no. 3 is against deleting the addition of Rs. 45,469/- and Rs. 66,246/- made on account of personal use of car and 10% disallowance of depreciation on car.
Learned DR supported the order of the Assessing officer.
On the other hand, learned counsel for the assessee submitted that the law is well settled. The Assessing Officer is required to give a specific finding about the disallowance. Disallowance cannot be merely on ad hoc basis and based on the conjectures and surmises of the assessing authority.
We have heard rival contentions. There is no dispute with regard to the fact that the disallowance was made purely on ad hoc basis without pointing out as to what expenditure was not supported with evidence. Therefore, we do not see any reason to interfere with the finding of the learned CIT(Appeals) on this issue, the same is hereby affirmed. Ground raised by the Revenue is rejected.
Ground No. 4 is against deletion of addition of Rs. 99,41,000/- made by the Assessing Officer towards unproved alleged unsecured loans. Learned DR submitted that in respect of the unsecured loans the assessee had not placed any evidence before the Assessing Officer. The assessee failed to prove the genuineness of the transaction and creditworthiness of the lenders.
On the contrary learned counsel for the assessee submitted that all evidence is placed before the lower authorities and the Assessing officer failed to consider the evidences in right perspective. Moreover, the lenders have confirmed the unsecured loans and proved it by furnishing supporting evidences.
We have heard rival submissions and perused the material available on record.
The learned CIT(Appeals) in arriving its conclusion has given a finding of fact by observing as under:
“Considering the facts of the case, it is clear that loan was taken by assessee against the FDRs of family members/relatives of the assessee. Copy of bank FDR, confirmation/ITR of the persons are filed by the assessee. In remand proceeding assessing officer has given name wise comment on unsecured loan on which assessee has also submitted his further comment. In his submission assessee submitted that Rs. 7,00,000/- received from Bharti Sood though received through banking channel but to purchase piece of mind offer Rs. 7,00,000/- for making the addition in the income.
While examining these issue of unsecured loans the AO in the remand proceedings recorded statements of all the loan creditors except Bharti sood and Manoj Kalra in these statements all the creditors filed copies FDRs and confirmed that they have given the s. In the statements all these loan creditors have stated that in the current the FDRs got matured and were given as loan. A perusal of the Remand report shows that the A.O has not realized that the loan creditors were clearly stating that the loan has been given on the maturity of FDRs. Instead in the statements recoded in remand the AO has focused on the source of the funds which has been already explained that these FDRs were not purchased in the current year. Thus, the question of applying section 68 of the FT Act would not lie even as the FDRs were not purchased by the loan creditors in this year and the source of funds would not be relevant to this financial year. These facts have not been correctly appreciated by the AO even in Remand when he has recorded the statements of the loan creditors. The purchased FDRs which pertain to Fyr 2007-08 got matured this year, this fact could have been verified from the copies of FDRs submitted which give the details of purchase and maturity date thereafter the Bank credited the maturity' proceeds in the OD account of the appellant who credited the maturity proceeds of the FDRs as individual loans of the respective creditors. So the source of funds that were credited as loans lay in the year/s when the FDRs were purchased by respective loan creditors. Thus, despite the issue being remanded the AO he did not appreciate the facts of the matter and followed a wrong trail of investigation to draw an incorrect conclusion. Further, as regards, Manoj Kalra the loan creditor had given loan of Rs 1,41,000/- in the Fyr 2008-09 the AO had added this under sec 68 of the FT act in the current year, The issue was also remanded but the A.O did not inquire or comment in the Remand report. The counsel has stated that these facts were also before the A.O and can be evidenced from the statement of affairs for fys 2008-09, 2009-10,20010-11 which were filed and show the amount of loan credited in the name of Manoj Kumar in this year was the opening balance. Thus the AO did not examine the issue in Remand and on facts and accounting principles the impugned addition could not have been made. In all above cases, assessee had discharged his onus by satisfying the requisite conditions stipulated under section 68 of the Act. Assessing officer failed to appreciate that the source of loans lay in the FDRs which were purchased in the earlier years, for the portion of loan that emanated from FDRs purchased by the loan creditors in the earlier years and what stood credited this year was only the maturity' proceeds of the FDRS in question. Thus AO failed bring on record any material suggesting that amount is unexplained cash credit of assessee, except Rs. 7,00,000/- in the name of Bharti Sood which is confirmed as AR has offered it for taxation remaining addition of RS. 99,06,41,000/- ( Rs. 1,06,41,000/- minus Rs. Rs. 7,00,000/-) is hereby deleted.”
The above finding of fact is not rebutted by the learned DR by placing any contrary material on record. The learned CIT(Appeals) has categorically stated that the advances were made out of the maturity of the FDRs of the concerned persons and the evidences are duly enclosed in the paper book filed by the assessee. Therefore, we do not see any infirmity in the order of the learned CIT(Appeals) on the issue in question.
Moreover, the AO has not brought any contrary material to rebut the finding of learned CIT(Appeals). Thus, ground no. 4 of Revenue lacks on merit, same is rejected.
Ground nos. 5 & 6 are general in nature, need no separate adjudication.
Appeal of the Revenue is dismissed.
Order pronounced in open court on 16th February, 2023.