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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Shri Amarjit Singh
आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
These two appeals filed by assessee for A.Y. 2013-14, arise from order of the CIT(A)-6, Ahmedabad dated 21-03-2018, in proceedings under section 263 of the Income Tax Act, 1961; in short “the Act”.
1745/Ahd/2019 A.Y. 2013-14 Page No 2 M/s. Isha Corporation vs. Pr. CIT
In this appeal, the assessee has contested two grounds of appeal: (i) Addition of Rs. 52 lacs on account of unsecured loan taken from Shri Deelip L. Patel u/s. 68 of the Act and (ii) Addition of Rs. 4,02,448/- on account of disallowance on interest u/s. 36(1)(iii) of the I.T.
The fact in brief is that assessee has filed return of income on 20th 3. Sep, 2013 declaring total income of Rs. 16,13,790/- order, u/s. 143(3) of the Act was passed on 29th Feb, 2016 assessing the total income at Rs. 16,94,100/-. Subsequently, ld. Pr. CIT has passed order u/s. 263 of the Act on 21st March, 2018 and set aside the assessment order of the Assessing Officer to be framed de-novo. Assessment order u/s. 143(3) r.w.s. 263 of the act was finalized on 21st December, 2018. The remaining facts pertaining to the issue contested in this appeal are discussed while adjudicating the grounds of appeal of the assessee as follows:-
Ground No. 1 (Addition of Rs. 52 lacs on account of unsecured loan taken from Shri Deelip L. Patel u/s. 68 of the Act) 4. During the course of assessment u/s. 143(3) r.w.s. 263 of the act, the Assessing Officer stated that assessee has purchased an immovable property for a consideration of Rs. 3.20 crores. The assessee has shown part of the payment towards aforesaid property to the amount of Rs. 52 lacs from the unsecured loan obtained from Shri Dilip L. Patel. During the course of assessment, the assessee was asked to explain the transaction of aforesaid unsecured loan. In this regard, the assessee has submitted copy of ledger account of Dilip L. Patel from the books of assessee, bank account, statement of assessee reflecting the credit and debit entry of unsecured loan 1745/Ahd/2019 A.Y. 2013-14 Page No 3 M/s. Isha Corporation vs. Pr. CIT obtaining from Dilip L. Patel by account payee cheque dated 9th October, 2012. The Assessing Officer has not accepted the explanation of the assessee stating that Rs. 52 lacs which was claimed to be unsecured loan was nothing but assessee’s own funds which were circulated, therefore, the aforesaid amount was added to the total income of the assessee as unsecured credit.
The assessee has filed appeal before the ld. CIT(A). the ld. CIT(A) has dismissed the appeal of the assessee.
During the course of appellate proceedings before us, the ld. counsel has contended that assessee has purchased property from Shri Dilip L. Patel and part of the payment was made out of the loan of Rs. 52 lacs obtained by the assessee from Shri Dilip L. Patel. He has further submitted that during the course of assessment and appellate proceedings the assessee has furnished relevant supporting documents i.e. copies of ledger account, copies of bank account, loan confirmation letter in support of genuineness of the transaction. However, the lower authorities have unreasonably made the addition without controverting the supporting documents and evidences furnished by the assessee. In this regard, the ld. counsel has referred page no. 55 of the paper book comprising copy of bank statement of the assessee showing loan obtained from Shri Dilip L. Patel by cheque on 16th May, 2012 and 21st May, 2012. He also referred page no. 56-57 of the copy of bank statement and page no. 69 to 70 of the paper book comprising copies of bank statement showing transaction of loan obtained and repayment of loan made by the assessee. Then, he referred the various pages of paper book showing 1745/Ahd/2019 A.Y. 2013-14 Page No 4 M/s. Isha Corporation vs. Pr. CIT copies of ledger account of Dilip L. Patel showing the transaction of obtaining of loan and repayment of loan along with payment of interest on the loan amount obtained. On the other hand, ld. Departmental Representative has supported the order of lower authorities.
Heard both the sides and perused the material on record. During the course of assessment, the Assessing Officer asked the assessee to explain the unsecured loan of Rs. 52 lacs obtained from Shri Dilip L. Patel. In this regard, the assessee has submitted the copies of ledger accounts of Shri Dilip L. Patel, bank account statement of assessee reflecting credit and debit entry in support of obtaining loan and repayment of unsecured loan from Shri Dilip L. Patel. With the assistance of ld. authorized representatives, we have perused the copies of bank statement of the assessee placed in the paper book. In the bank statement, the detail of transaction of unsecured loan obtained and repaid are reproduced as under:-
Dilip L. Patel has given unsecured loan to Appellant as under:
Amount Cheque Number Bank Date Rs.25,00,000/- 671483 Dena Bank 01/08/2012 Rs.27,00,000/- 671484 Dena Bank 09/08/2012 Unsecured Loan was given at Interest rate of 15% p.a. The above cheque are reflected in bank statement of Dilip L Patel as well as in bank statement of appellant.(EXHIBIT B and C above)
Appellant repaid the amount of unsecured loan of Rs.52,00,000/- alongwith interest 1745/Ahd/2019 A.Y. 2013-14 Page No 5 M/s. Isha Corporation vs. Pr. CIT Amount Cheque Number Bank Date Rs.25,00,000/- 002327 HDFC Bank 09/10/2012 Rs.27,00,000/- 002328 HDFC Bank 11/10/2012 The Appellant has paid interest of Rs.1 ,28,638/- (Net of TDS) to Dilip Patel. The said amount is reflected in appellant bank statement as well as Dilip Patel's bank statement. Shri Dilip Patel has also offered the said interest income at Rs 1,42,932 alonqwith TDS of Rs 14,293 in his return of income for A.Y 2013-14 The assessee has also filed copies of ledger account of Shri Shri Dilip L. Patel showing the transaction of receiving of unsecured loan and payment of unsecured loan along with payment of interest on the loan amount. The assessee has also filed copies of income tax return of the lender, Shri Dilip L. Patel showing total income at Rs. 82,80,479/- and also showing detail of interest received on the unsecured loan along with income from long term capital gain on the property sold. In support, the assessee has also filed copy of ledger account, copy of bank statement, copy of income tax return of the lender to substantiate the genuineness of the transaction. After perusal of the aforesaid facts and material on record, it is observed that Assessing Officer has made the addition of unsecured loan obtained by the assessee on the basis of general observation that unsecured loan was nothing but assessee’s own fund which were circulated. The finding of the Assessing Officer was not supported with the relevant material and evidences, the Assessing 1745/Ahd/2019 A.Y. 2013-14 Page No 6 M/s. Isha Corporation vs. Pr. CIT Officer had also failed to controvert the supporting documents and relevant materials and the copies of bank statement of the lender and the assessee demonstrating that transaction of loan were routed through bank account and same were repaid during the year under consideration. The Assessing Officer has neither made any investigation and verification from the lender nor brought any relevant material on record to prove that the unsecured loan was not genuine. Therefore, we are not inclined with the decision of ld. CIT(A). Accordingly, the appeal of the assessee on this ground is allowed.
Ground No. 2 (Addition of Rs. 4,02,448/- on account of disallowance on interest u/s. 36(1)(iii) of the I.T.)
During the course of assessment, the Assessing Officer noticed that assessee has paid interest @ 12%/15% on the unsecured loan obtained during the year under consideration as compared to interest received by the assessee on FDR maintained with the bank @ 8% per annum. The Assessing Officer was of the view that assessee had paid excess interest to the extent of Rs. 5 to 7% on the unsecured loan obtained during the year under consideration. Therefore, the Assessing Officer has disallowed the interest expenses of Rs. 4,02,448/- and added to the total income of the assessee.
Heard both the sides and perused the material on record. During the course of assessment, the Assessing Officer has compared the 1745/Ahd/2019 A.Y. 2013-14 Page No 7 M/s. Isha Corporation vs. Pr. CIT payment of interest @ 12%/15% on the unsecured loan obtained by the assessee with the interest amount received by the assessee @ 8% on FDR made with the HDFC bank. In this regard, the assessee explained that it had kept fund received on booking deposit towards sale of flats in the FDR mode temporary with bank on which it had earned interest instead of keeping the funds in the current account without fetching any interest. After taking into consideration the above facts and circumstances, we are of the view that earning of interest on surplus fund maintained in FDR cannot be compared with the unsecured loan obtained by the assessee because both are of different nature as the interest on fixed deposit is specified by the bank in the form of automatic switched off fixed deposit account whenever surplus fund was available in current year, the same was transferred to fix deposit account otherwise the current account did not fetch any interest. On the other hand, the definite amount of interest paid on unsecured loan used to be on higher side compared to the interest charged on secured loan, therefore, we do not find any justification in the decision of ld. CIT(A) in sustaining the disallowance of interest payment made by the Assessing Officer. Therefore, this ground of appeal of the assessee is also allowed.
In the result, the appeal of the assessee is allowed.
1745/Ahd/2019 A.Y. 2013-14 Page No 8 M/s. Isha Corporation vs. Pr. CIT
This appeal is directed against the order of ld. CIT(A) made u/s. 263 of the act for setting aside the order passed by the Assessing Officer on 29th Feb, 2016. Since the assessee has not pressed this appeal, therefore, the same stands dismissed.
In the result, appeal ITA 1745/Ahd/2019 is allowed and appeal ITA 862/Ahd/2018 is dismissed.
Order pronounced in the open court on 07-10-2021 Sd/- Sd/- (MAHDUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 07/10/2021 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद