GULSHAN MALIK,NEW DELHI vs. ACIT CIRCLE-62(1), NEW DELHI

This appeal by the assessee is directed against the order of the ld. CIT (Appeals)-20, New Delhi for the assessment year 2016-17. 2. The grounds of appeal read as under :- “1. On the facts and circumstances of the case, the order passed by the leaned Commissioner of Income Tax (Appeal) [CIT(A)] is bad both in the eye of law and on facts.

Brief facts of the case are that during the year under consideration, the assessee has earned income from house property, business of timber, capital gains and interest income from various sources. The assessee has declared loss of Rs.52,206/- on total sales of Rs.1,17,054/-. During the year under consideration, the assessee has declared Income from Other Sources at Rs.36,32,290/-. The income is from FDRs and loans given to M/s Vatika and IBMS. The assessee has claimed deduction of Rs.35,39,699/- on account of interest paid on loan taken. The net income under the head Income from Other Sources is declared at Rs.90,591/-. During the course of assessment proceedings, the assessee was asked to file details of interest received and paid.

The assessee’s response was noted by the AO as under :-

From the assessee’s response, AO gathered that assessee has obtained loan from bank for buying some property but has deposited the same and earned interest from FDRs. AO was of the opinion that this is contrary to normal prudence as loan was sanctioned @ 13.75% and FDR was made for earning interest @ 8%. Similarly, as regards interest income from M/s. Vatika and IBMS of Rs.21,58,530/-, AO noted that assessee has admitted that investments made was out of loan taken from Future Money/Capital First and that these loans were for purchase/ construction of property, Hence, AO was of the opinion that these expenditure were not related to earning of income.

Against the above order, assessee filed an appeal before the ld.CIT(A) who has confirmed the action of the AO.

Against the above order, assessee is in appeal before the ITAT. We have heard ld. DR for the Revenue and perused the records. None appeared on behalf of the assessee despite notices. Hence, we proceeded to decide the appeal after hearing the ld. DR for the Revenue and perusing the records. ./2020 8. We find that the sole reason taken by the authorities below for disallowing the interest expenditure claimed is that the FDR interest against which these interest expenditure are being adjusted, were taken for purchase of property at higher rate of interest and in the opinion of the authorities below, it is beyond prudence that loan taken for house construction etc. at a higher rate would be invested to earn FDR interest at a lower rate. We find that it is settled law that Revenue should not sit in the shoes of businessman and decide upon the prudence of the transaction. There is no case that transactions of the assessee are bogus and no findings are also there in this regard. If the assessee has obtained loan at a higher rate for purchase/construction of property but in the meanwhile he has invested the same for earning interest, there is no reason to deny the adjustment thereof. Hence, in our considered opinion, the findings of authorities below are not sustainable. Accordingly, we set aside the orders of the authorities below and decide the issue in favour of the assessee. 9. In the result, this appeal by the assessee is allowed. Order pronounced in the open court on this 9th day of November, 2022.