SRINIVAS REDDY KOMATIREDDY ,HYDERABAD vs. DEPUTY COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE-2(2), HYDERABAD

It could be seen from the record that there is a delay of 106 days in preferring these appeals and the reason attributed for the delay in filing the appeals to the pandemic. As a matter of fact, though the learned DR does not concede to condone the delay, there is no denial of the fact that the Hon'ble Supreme Court in the Suo Motu proceedings in the case of M.A.No. 21/2022 in M.A.No. 665/2021 in SMW(C) No.3 of 2020 by order dated 10/01/2022 held that in cases, where the limitation would have expired during the period between 15/03/2020 and 28/02/2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01/03/2022, and in the event of actual balance period of limitation remaining with effect from 01/03/2022 is greater than 90 days, that longer period shall apply. The limitation period applicable to these appeals is covered by the above decision and, therefore, the shall be treated as filed within the period of limitation. We, therefore, now shall proceed to hear the appeals.

During the course of search, a document marked as A/KSR/R/01 was seized and the contents thereof revealed to the learned Assessing Officer that the assessee borrowed loans to the extent of Rs. 2,03,25,000/- and the assessee acknowledged the same in his statement recorded on 21/07/2016. Assessee, however, contended that such amounts were borrowed from relatives and friends for the purpose of marriage of daughter and construction of house and, therefore, with an understanding to repay the same in a short period and without interest.

Learned Assessing Officer was of the opinion that in the seized documents, the rate of interest was clearly mentioned and no confirmation was filed from the creditors to show that there was no interest charged. Learned Assessing Officer, therefore, took the rate of interest at Rs. 1.50/- per cent per mensem which comes to Rs. 37,95,300/- , 331 & 332/Hyd/2021 and added the same to the income of the assessee treating it as an un- accounted expenditure.

Before the learned CIT(A), assessee pleaded that the entries in the seized documents were not properly considered by the learned Assessing Officer, as a matter of fact no amount was borrowed nor any interest was paid during the years under consideration, and that the borrowed amounts were for the purpose of the marriage of the daughter. Assessee further pleaded that the maximum amount outstanding was only Rs. 76.45 lakhs and out of this amount, only few are interest bearing loans.

While admitting the seized document and taking of loans, the assessee pleaded before the learned CIT(A) that the seized documents contains three papers, wherein the loans taken were mentioned in an overlapping manner and in the absence of any material to establish that the assessee borrowed amounts from certain creditors repeatedly, the learned Assessing Officer is not justified in taking the aggregate amount mentioned in all the three papers, instead of eliminating the repeated entries.

Insofar as the charging of interest is concerned, on a perusal of the seized documents, learned CIT(A) granted relief to the assessee in deleting the repeated entries and found that the amount borrowed was only Rs. 1,30,05,000/- but not Rs. 2,03,25,000/- as adopted by the learned Assessing Officer. Learned CIT(A) directed that interest has to be calculated with reference to this amount only and on that score, he granted relief to the tune of Rs. 14.54 lakhs was deleted. 9. Assessee is in these appeals before us contending that the confirmation of the addition to the tune of Rs. 23,40,900/- by the learned CIT(A) is contrary to the facts because the amount borrowed was available with the assessee for payment of interest and, therefore, addition under section 69 of the Act is not sustainable. , 331 & 332/Hyd/2021 10. Per contra, it is contended by the Learned DR that when the amount was borrowed for a particular purpose, it is not open for the assessee to say that such borrowed amount could be utilized for repayment of interest. He further submitted that this plea was not taken before the learned CIT(A) and the assessee has been changing versions from stage to stage. 11. We have gone through the record in the light of the submissions made on either side. It is an admitted fact that in the search and seizure operations conducted in the case of M/s. Sushee Group document in Annexure-A/KSR/01 was seized and it contains three leaves with certain names and amounts indicating that the assessee borrowed certain amounts from the persons whose names are contained in such papers. Assessee does not dispute either the documents or his borrowing the amounts. It is not in dispute that against the names of certain persons, the amount borrowed and rate of interest were mentioned and in one paper, the date upto which the interest was paid was also mentioned. 12. It is not as though the loans taken from five persons mentioned at page No.1 of the Annexure alone were interest bearing because, the entries in the subsequent documents clearly establish that the interest was charged and paid in respect of all the loans. Now it is not open for the assessee to contend that there is no material to show that other than the five persons, against whose names, the rate of interest is mentioned – all other loans are interest free loans. The record is otherwise.

According to the assessee, the loans were contracted for the purpose of marriage of the daughter and construction of a house. When a loan is taken for a particular purpose, and such purpose is accomplished, the assessee cannot contend that such borrowed funds were utilized for repayment of interest. No one borrows the amounts for the purpose of repayment of interest. We are not inclined to believe this explanation of the assessee, because, if it is true, it would not have missed the mention , 331 & 332/Hyd/2021 in the first appellate stage. When once the seized documents establish that the assessee paid interest on all the loans mentioned in page Nos. 2 and 3, the presumption is that so long as the loans remain unpaid, the payment of interest continued.

For these reasons, we do not find anything illegality or irregularity in the findings of the learned CIT(A) and as a matter of fact, the learned CIT(A) has taken the most pragmatic view in the circumstances of the case and granted the possible relief. We, therefore, decline to interfere with the well-reasoned order of the learned CIT(A).

In the result, all these appeals are dismissed.