SMT. JAYANTHI SEEMAN,,CHENNAI vs. ITO, NCW - 1 (2),, CHENNAI

आयकर अपीलीय अिधकरण “ए” Ɋायपीठ चेɄई मŐ।
IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI

ŵी एबी टी. वकŎ, Ɋाियक सद˟ एवं ŵी एस. आर.रघुनाथा, लेखा सद˟ के समƗ

BEFORE SHRI ABY T. VARKEY, HON’BLE JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, HON’BLE ACCOUNTANT MEMBER

आयकर अपील सं/.ITA Nos.: 770, 771, 772 & 773/Chny/2020
िनधाᭅ रणवषᭅ
/ Assessment Years: 2010-11, 2011-12, 2012-13 & 2013-14

Smt. Jayanthi Seeman,
C/o. Aparna Nandakumar,
Advocate & Tax Consultant,
J Nandakumar & Poojesh J
(Advocates)
No. 6, Ramakrishna Street,
T.Nagar, Chennai – 600 017. [PAN: ACYPJ-0739-K]

v.
Income Tax Officer,
Non-Corporate Ward -1(2),
Chennai.
(अपीलाथᱮ/Assessee) (ᮧ᭜यथᱮ/Respondent)

अपीलाथᱮकᳱओरसे/Assessee by : Shri. Y. Sridhar, FCA
ᮧ᭜यथᱮकᳱओरसे/Respondent by : Shri. R. Raghupathy, Addl.CIT

सुनवाईकीतारीख/Date of Hearing : 20.02.2025
घोषणाकीतारीख/Date of Pronouncement : 28.02.2025

आदेश/ O R D E R

PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:

These appeals filed by the assessee are directed against the separate orders passed by the learned Commissioner of Income Tax
(Appeals) - 2, Chennai, all dated 30.07.2020 for the assessment years 2010-11 to 2013-14. ITA No. 770/2020: Assessment Year: 2010-11

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ITA. Nos: 770 to 773/Chny/2020
1. The ld. CIT (A) has erred in sustaining the order of the ld. AO as the notice for reassessment was barred by limitation and the reassessment was initiated without any fresh tangible material/evidence available to support the reassessment proceedings.
2. The ld.CIT (A) has erred in affirming the order of the ld. AO u/s.69 of the Act amounting to Rs.1,01,59,959/- without considering the confirmation letters issued by the landlords, cash deposits out of prior withdrawals, capital contribution and agricultural income.
3. The ld. CIT (A) has further erred in rejecting the interest amount of Rs.7,48,842/-, which is nothing but interest paid on loan availed from M/s GE Capital, wholly and exclusively incurred for the purpose of business which is evident from rate of interest charged.

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ITA. Nos: 770 to 773/Chny/2020
The assessment was completed and order u/s.143(3) r.w.s.147 of the Act on 29.12.2017 for the A.Y. 2010-11, wherein the following additions were made:
Sl.No.
Details
Amount Rs.

Income admitted in return of income
2,08,400

Additions:
1
Disallowance of Rent payment
18,00,000
2
Difference in cash flow statement treated as unexplained u/s. 69 of the Act
1,01,59,959
3
Disallowance of interest payment
7,48,842

Assessed Income
1,29,17,201

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Therefore, the ground of disallowance of rent payment is dismissed as not pressed.
4.3. Difference in cash flow statement treated as unexplained u/s. 69 of the Act:
In support of Cash inflow of Rs.92,29,509/- (Disallowance of Rs.1,01,59,959/- Minus Rs.9,30,450/- agricultural income allowed by the Ld.CIT(A)) the assessee had submitted the following details of source which were not considered by the AO as well as the ld.
CIT(A). Aggrieved, the assessee is before us.
(a) Rent advance received back: Rs.41,15,000/-:
The ld.AR submitted that during the year under consideration, the assessee received back rent advance of Rs.41,15,000/- from the following landlords in the manner specified below:
Name of the parties
Rs.
Mode of Repayment
Remarks
P.Saroja
10,00,000 Cash
The Ld.CIT(A) had not considered the confirmation (Refer Page
1 of Paper Book) as the same did not specify the mode of repayment.
However, from the perusal of the bank statement in June 2009,
(Refer Page 13 to 15 of Paper Book) there is no evidence of a credit for Rs.10 lacs in the month of :-5-:
ITA. Nos: 770 to 773/Chny/2020
June 2009. Thus, Ld.CIT(A) erred in not considering the same as cash inflow.

R Malathy
15,00,000 Rs.7.50
lacs vide two cheques
(Refer
957925
for Rs.5,00,000/-
&
Rs.2,50,000/-
) and the balance
Rs.7.50
lacs by way of cash as clearly mentioned in the confirmation letter.
The Ld.CIT(A) wrongly construed from the confirmation letter Page
3 of Paper Book) the entire amount of Rs.15.00
lacs 957926 was received by way of two cheques.
Copy of relevant page of the bank statement is enclosed vide Page 15 of paper book (highlighted for easy reference)
Thus, the CIT(A) ought to have allowed cash received to an extent of Rs.7,50,000/- as cash inflow.

Sathurappan

5,00,000
Rs.8,74,000/- vide two cheques viz.,
Chg no.
44959
and 187162
of Rs.4,37,000/- each and the balance
Rs.1,26,000/- by way of cash as clearly
Mentioned in the The Ld.CIT(A) erred in not considering the cash portion of rental advance received back which has been clearly mentioned in the confirmation letter
(Refer Page 5 of Paper
Book)

Rukmani
Sathurappan

5,00,000

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ITA. Nos: 770 to 773/Chny/2020
confirmation letter.
K.Balaraman

6,11,500/-
Cash

The assessee had submitted the cancelled rental agreement (Refer
Page 7 to 11 of Paper
Book) along with date of cancellation being
16.07.2009. However, from the perusal of the bank statement, there is no evidence of a credit for Rs.6,11,500/- in the month of July 2009. The Ld.CIT(A) erred in not considering the same as cash inflow.
Total
41,11,500

From the above submissions, the ld.AR humbly prayed that the cash portion of the rent advance received back which works out to Rs.24,87,500/- ought to be considered as cash inflow and to that extent there is no unexplained cash credit as alleged by the AO.
(b)Cash withdrawn from bank by Bharath: _Rs.18,50,000/-:
The ld.AR stated that the AO has not considered the withdrawal of Rs.18,50,000/- from bank by assessee's son Mr.Bharath, who is assisting the assessee in managing the hostel activities, from Bank of India a/c.No.80192010002063
standing in the name of Saraswathi Bhavanam, viz, a ladies hostel run by the assessee, in spite of furnishing confirmation letter from Bank of India) for the :-7-:
ITA. Nos: 770 to 773/Chny/2020
withdrawal of Rs.18,50,000/- by way of bearer cheques on 02/04/09 (Rs.2,50,000); 03/04/09 (Rs.8,00,000); and 08/04/09
(Rs.8,00,000) (Refer Page 21 of Paper book).
The ld.AR further submitted that the amount drawn from the bank a/c. of Saraswathi Bhavanam was through bearer cheques and the amount was used for hostel purpose only. Hence, this cash inflow may kindly be treated as explained source and delete the additions made by the AO.
(c) Cash withdrawal:Rs.28,64,163/-;
Further, the Ld.AR submitted that the staff of ‘Saraswathi
Bhavanam’ withdrew cash to the tune of Rs.28,64,163/- for making various payments, which was confirmed by Bank of India vide letter dated 02/01/2019. However, the AO did not consider the bearer cheques given by the assessee to their staff for various expenses.
These bearer cheques should also be considered as cash withdrawal for the purpose of cashflow, as these amounts are drawn by the staff as per instructions of the assessee. The statement showing cash withdrawals made along with bank statement for the year is enclosed in Page 23 to Page 36 of Paper book.
The withdrawn amount of Rs.28,64,163/- was also not considered into the cash inflow by the AO while recasting the cash flow

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ITA. Nos: 770 to 773/Chny/2020
statement and hence the ld.AR prayed for consider the same as source of cash and delete the additions accordingly.
(d) Capital Contribution: Rs.4,00,346/-:
The ld.AR for the assessee explained to the AO as well as the ld.CIT(A) the amount received from her husband Mr.P.Seeman who has made drawings from his proprietary concern in the earlier years. In this regard, the assessee has furnished the copies of Inocme tax returns of Mr.P.Seeman for the AY 2001-02, 2002-03 &
2003-04 and 2007-08. Further, the assessee received pin money from her husband for family maintenance over a period of time and the same was used for the cash outflows mentioned above.
From the above, the ld. AR submitted that no addition on cash deposits can be made u/s.69 once the assessee has duly explained the cash flow statement as discussed by the Tribunal in the case of Smt.Renukaben Umedsinh Parmar, vs. The Income Tax Officer,
Ward-3, Navsari, ITAT Surat Bench (ITA No.2493/AHD/2015) dated
08.03.2021. It is further submitted by the ld.AR that the addition towards the difference in cash flow statement made by the AO is merely on the basis of whims and fancies. The AO has made the additions without

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ITA. Nos: 770 to 773/Chny/2020
any justified reasoning and cogent basis. The opinion of the AO is required to be formed objectively with reference to the material on record. The genuineness of the transaction can be decided only on merits not on prejudices. The evidence produced by the assessee cannot be brushed aside in a casual manner.
4.4 Per contra, the ld.DR stated that the difference in Cash Flow
Statement treated as unexplained u/s 68 of the Act: Addition made of Rs.1,01,59,959/-:
In the Assessment Order, the Assessing Officer in page 4 & 5 has put forth his discussion as under:
"In the Register maintained for receipt/payment of cash, it was found that Rs.6,000/- was credited on each day during the period from 01.04.2009
to 31.03.2010 with the narration "Cash from R.M". When the assessee was asked to explain the above credits, it was replied that "They are canteen owners they supply eatables to mansions. And they are the cooks of the hotel. As cooks are always unstable, we got a hold by holding their money. They also asked us to keep the amount and return it as lump sum". In the course of business, only the buyers of commodity/service will advance amount to the suppliers/service providers. The assessee's statement that she had retained the money owed to the cooks is not acceptable. No details such as name and address etc. of the cooks were furnished to examine the assessee's contention. There were no debit entries in the name of "R.M" in order to prove that the above credits were repaid in lump sum as claimed by the assessee.
Cash deposits into Bank account as per the register maintained by the assessee for receipt/ payment of cash was Rs.97,40,000/- whereas the actual amount deposited in the Bank of India, Usman Road Branch maintained in the name of Saraswathi Bhavanam was only Rs.72,55,156/-
. Further in the "Receipt and Payment Abstract" furnished by the assessee, only Rs.46,94,717/- is cash deposit into bank account. When this discrepancy was pointed out to the assessee, the assessee had not furnished any reply.

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The following defects/discrepancies were found in the cash register:
1. On 09.07.2009, actual closing cash balance should be Rs.7,59,974/- whereas the assessee has arrived at a closing balance of Rs.1,59,974/-.
2. On 31.07.2009, actual Opening cash balance should be Rs.82,464/- whereas the assessee has arrived at an opening balance of Rs.94,646/-
3. On 01.08.2009, actual total of credits to Rs.1,11,664/- whereas the total of credits arrived at the by the assessee was in Rs.4,67,664/-.
4. On a number of pages, entries struck down with pencil, only monthly abstract given in ledger account etc.
In view of the above facts, the authenticity/correctness of the books of account produced itself is under question…)"
Accordingly, the AO has made addition of Rs.1,01,59,959/- towards unexplained cash credit u/s.68 of the Act.
The ld.CIT(A) in his Order dated 30.07.2020 vide para 7.6 has stated that the assessee did not explain the defects pointed out by the Assessing Officer in the Remand Report with supporting evidences. Hence the ld.CIT(A) has rightly rejected the claim of the assessee that the rental advance received back as the source for cash credit and upheld the decision of the AO in making addition in this regard.
(a) Rent advance received back: Rs.41,15,000/-:
It is pertinent to mention that in the confirmation letters attached with the paper book for the respective year does not contain vital detail such as Door No. to demonstrate proper address, date of :-11-:
ITA. Nos: 770 to 773/Chny/2020
issue of letter and place with proof of identity viz. Aadhaar
Number/PAN/Voter ID. In the absence of above important details the authenticity and genuineness of the confirmation could not be verified. Hence the rental advance received back amounting to Rs.41,15,000/- cannot be considered as source for cash deposits.
(b) Cash withdrawn from bank by Bharath: Rs.18,50,000/-:
The CIT(A) in his Order dated 30.07.2020 vide para 8.5 has rejected the ground stating that the assessee did not bring any material on record to establish the link between the amount withdrawn by Shri.
Bharath from Bank and the cash credits and upheld the addition made by the Assessing Officer. Even in the written submission made before the Hon'ble ITAT which is under consideration, the assessee has failed to establish the nexus between the cash withdrawn and deposited in the bank account. The same cannot be considered as source for the cash deposit.
(c) Cash withdrawal : Rs.28,64,163/-:
The assessing officer in page 5 of the assessment order has discussed as under:
"The assessee has mentioned in the "Receipt and payment abstract that Rs.28,64,183/- was deposited into bank account out of cash withdrawal. The assessee has not furnished details such as name of the bank, date and amount of withdrawal etc. As per statement of Bank of India, Usman Road and Cumbum
Branches, there was no such withdrawals. Hence, the assessee's statement that source for cash deposit of Rs.28,64,183/- was out of earlier withdrawal cannot be accepted."

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ITA. Nos: 770 to 773/Chny/2020
The CIT(A) in his Order dated 30.07.2020 vide para 10.5 has dismissed this ground stating that the Assessing Officer in the Remand
Report has stated that the cash withdrawal of Rs.28,64,163/- from Bank of India had already been taken into account.
In view of the above the ground of appeal the ld.DR stated that it does not require any specific comments.
(d) Capital Contribution: Rs.4,00,346/-:
The ld.CIT(A) in his Order dated 30.07.2020 vide para 11 has discussed as under and upheld the addition made by the assessing officer.
"11. Ground No. 7- Capital Contribution
11.1 Assessing Officer asked the assessee to explain the sources for capital of Rs.4,00,436/- introduced during the year in cash. Assessee explained that source was out of earlier drawings. Assessing Officer noticed that there were no withdrawals in earlier years as per the Note
Book containing receipt and payment of cash and hence added the same as unexplained cash credit u/s 68. 11.2 In the grounds of appeal the assessee contested that the amount introduced as capital contribution was out of her drawings during previous years and current years.
11.3 During the appeal proceedings the A.R stated that the sources for the capital of Rs.4,00,436/- were earlier drawings and gift from Shri. P.
Seeman.
11.4 In the Remand Report the Assessing Officer stated that the Assessee did not furnish any evidence regarding another source of capital contribution of Rs.4,00,436/-. Regarding the gift from Shri P Seeman the A.R filed copies of returns of income of Shri P. Seeman for A. Y.2001-02
to 2003-04 and 2007-08. The returns of income contain the details of drawings made by Shri P.Seeman from his Proprietary concern. The AR

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ITA. Nos: 770 to 773/Chny/2020
did not furnish any other evidence to substantiate claim of receipt of gift from P.Seeman.
11.5 In the reply to the Remand Report the A.R stated that it is natural that as per our Indian culture the drawings are given to the wife for savings or investments and hence the explanation of gift of Rs.4,00,436/- from Shri. P. Seeman should have been accepted.
11.6 However the assessee did not furnish any evidence in support of the earlier year’s drawings by Shri P. Seeman and to establish the claim that Shri P. Seeman gave earlier years drawings as gift to the assessee.
Hence the addition of unexplained capital contribution u/s.68 is upheld. "
The ld.DR submitted that in the paper book, the assessee has not submitted any fresh evidence or new document apart from the details furnished before the AO during the course of assessment proceedings. Hence 'comments' on this ground has not been submitted.
4.5 We have heard the rival contentions perused the material available on record and gone through the orders of lower authorities. It is admitted fact that the assessee is running a ladies'
hostel under the name and style "Saraswathi Bhavanam" and is also engaged in agricultural activities.
During the assessment proceedings the assessee has furnished the details of income and expenditure along with the cash flow have been submitted. We note that the AO has accepted the income of the assessee from the business of running a ladies hostel. Further, the AO has allowed the expenditure of Rent paid to the tune of Rs.18.00 Lakhs as business expenditure, after the case was remanded by the Ld.CIT(A). We

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ITA. Nos: 770 to 773/Chny/2020
have observed that the AO has accepted that the assessee has made a repayment of ‘Caution deposit’ collected from the occupants of the hostel to the tune of Rs.60.00 Lakhs, and thereby sought the source of such cash outflows, which has been confirmed by the Ld.CIT(A). The AO cannot have two different approaches while dealing with receipts and payments separately. Therefore, the plea of the assessee to consider the amounts collected from landlords towards refund of rent advances in cash should be accepted as source, once the repayment of caution deposit to the occupants of the hostel has been accepted. We note that the assessee has given evidence in support of the refunds received both in the form of cash and by crediting to the bank accounts of the assessee. Therefore, we are of the opinion that the assessee has proved the source to the extent of Rs.24,87,500/- on account of refund of rent advances from the following parties in cash:
- P.Saroja

Rs.10,00,000/-
- R.Malathy

Rs. 7,50,000/-
- Sathurappan & Rukmani

Rs. 1,26,000/-
- K.Balaraman

Rs. 6,11,500/-
TOTAL

Rs.24,87,500/-

Since, the balance amount of Rs.26,24,000/- has been received through banking channel, the same cannot be treated as inflow for cash used towards application of funds.

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4.6 Further, the assessee has explained that the source to the tune of Rs.18,50,000/- has been drawn by herself from the bank account of the business through the self cheques drawn by his son for regular business expenditure of the hostel. We note that the said amount has been drawn from Bank of India a/c.
No.80192010002063
standing in the name of Saraswathi
Bhavanam, viz, a ladies hostel run by the assessee and the confirmation from the said bank also has been furnished by the assessee for having drawn the cash. Therefore, we are of the view that the AO and that of ld.CIT(A) has erred in rejecting the evidences for the source of Rs.18,50,000/- and inclined to delete the addition to the extent of Rs.18,50,000/-.
4.7 Further, the assessee has also claimed that the staff of ‘Saraswathi Bhavanam’ withdrew cash of Rs.28,64,163/- for various payments during the impugned assessment year, which was confirmed by Bank of India vide letter dated 02.01.2019. However, the AO did not consider the bearer cheques given by the assessee to their staff for various expenses. We note that these bearer cheques are issued for cash withdrawal and are drawn by the staff based on the instructions of the assessee. The revenue has not brought out any other evidences to show that, these cash withdrawals have been invested otherwise. In the peculiar facts and circumstances of :-16-:
ITA. Nos: 770 to 773/Chny/2020
the case, we do not countenance the action of AO in rejecting the source to the tune of Rs.28,64,163/-, which has been drawn by the staff from the bank. Thus, we are of the considered view that the assessee has explained the source to the extent of Rs.28,64,163/- and direct the AO to delete the addition.
4.8 Further, the assessee has claimed that Rs.4,00,436/- has been introduced as capital contribution during the year, stating that the same has been given as Gift by her husband Sri.P.Seeman. We note that the assessee has not furnished any cogent evidence for the same. Further, during the assessment proceedings the assessee has claimed the same as her savings of earlier years from Pin money and later the same has been stated as gift from her husband.
Therefore, the action of the AO and that of ld.CIT(A) cannot be treated as erroneous and we are of the view that the addition of Rs.4,00,436/- made by the AO is sustained and ground of the assessee on this issue is dismissed.
4.9 As discussed supra, the assessee’s ground in respect of ‘difference in cash flow statement’ treating as unexplained money u/s.69 of the Act is adjudicated as detailed below:
i. Addition as per AO’s order

Rs.1,01,59,959/- ii. Allowed by Ld.CIT(A)

Rs. 9,30,450/- Agrl. Income iii. Allowed in this appeal as discussed (supra)
Rs. 72,01,663/-

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Balance additions sustained

Rs. 20,27,846/-

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From the above, it is clear that the building was in need of repair works and the purpose of the loan was to renovate the hostel building.
The ld.AR stated that considering the above facts, it is evident that the loan was utilized for the purpose of business and hence ought to be allowed.
It is worthwhile to mention here that as per the Section 36 of Income Tax Act, 1961,
"if any interest paid for the business purpose, the same has to be allowed as business expenditure " as held in the cases of -
The DCIT, Cir. 1(1)(1), Ahmedabad v. Applitech Solution Ltd. (ITAT
Ahmedabad B Bench) in ITA no.248/4hd/2020 pronounced on 19/05/2023; and Vodafone India Ltd. vs. Additional Commissioner of Income Tax,
(ITAT
Mumbai) in pronounced on 16/03/2023. Further, the ld.AR also stated that the ld.CIT(A) in his Order dated
30.07.2020 vide para 13 has discussed as under and upheld the addition made by the assessing officer.
"13. Ground No.9 - Interest Paid- Rs.7,48,842/-
13.1 Assessing Officer asked the assessee to explain the nexus between the borrowings and its utility in the business assets. Assessee explained

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that the amount was borrowed for repayment of caution deposit.
Assessing Officer concluded that the caution deposit received will be available with the assessee either in cash or in bank and hence there is no need to borrow funds to repay the caution deposit.
Assessing Officer concluded that that the interest-bearing borrowed funds were utilized in non-business activities such as investment in properties at Sadullah Street, Dhandapani Street, Burkit Road, agricultural land at Theni etc. and hence disallowed interest u/s.36(1)(iii).
13.2 In the grounds of appeal the assessee stated that the said loan was taken during the year 2004-05 for paying rental advance for hostel premises and was disclosed in the IT return filed for year 31.03.2005. 13.3 In the Remand Report the Assessing Officer stated that the assessee in her letter dated 27.09.2017 admitted that properties at Sadullah Road and Burkit Road, T.Nagar, Chennai were kept vacant to run Saraswathy
Bhavanam Women Hostel but due to dilapidated condition of the building, it was kept unused. Building not used for business cannot be treated as business asset and other assets such as Dhandapani Street property and agricultural land also cannot be treated as business asset. Hence the interest claim cannot be allowed.
13.4 In the reply to the Remand Report the A.R stated that the assessee's claim is reasonable which ought to have been allowed by the assessing officer.
13.5 As stated by the Assessing Officer, the caution deposit received will be available with the assessee either in cash or in bank and hence there is no need to borrow funds to repay the caution deposit. Moreover, the assessee did not bring any material on record to establish that the related loan was utilized for payment of rental advance and refund of caution deposit. Hence the disallowance of interest on the same is upheld."
Before us, the ld. AR further stated that during the course of assessment proceedings the assessee has explained that the above amount was borrowed for repayment of caution deposit. Hence the assessing officer has concluded that the caution deposit would be available with the assessee either in cash or in bank and as such there is no need to borrow funds to repay the caution deposit.
Accordingly, the assessing officer has made addition since the :-20-:
ITA. Nos: 770 to 773/Chny/2020
interest-bearing borrowed funds were utilized in non-business activities. Later in the grounds of appeal the assessee has stated that the said loan was taken during the year 2004-05 for paying rental advance for hostel premises and was disclosed in the IT return filed for year 31.03.2005. In the written submission under consideration the assessee has provided definition for 'dilapidated'
as per Legal Law Lexion as below: "State of bad repair, falling into decay. A wasteful destroying, or letting of Building run to ruin and decay, for want of reparation" (emphasis supplied). From the above, it is clear that the building was in need of repair works and the purpose of the loan was to renovate the hostel building. The ld.AR prayed that considering the above facts, it is evident that the loan was utilized for the purpose of business and hence ought to be allowed.

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4.12 We have heard rival contentions and perused the material available on records and gone through the orders of the authorities.
The assessee has claimed an expenditure of Rs.7,48,842/- as interest on borrowed fund of Rs.52.50 lakhs from M/s.GE Money
Financial Services Ltd and the same has been utilized for the business purposes, i.e., for running hostel (Refer Page 37 to 42 of Paper book). The assessee has furnished a sanction letter to show that the rate of interest charged by Mis.GE Money Financial Services
Limited was at 14.5%, which is the interest rate for a mortgage loan.
Further, the Ld.AO and Ld.CIT(A) denied the claim of interest under the pretext that the hostel building was kept vacant as it was in a dilapidated condition and not used for the purpose for business.
We note that the building used for business was in need of repair works and the purpose of the loan was to renovate the hostel building, hence considering the above facts, it is evident that the loan was utilized for the purpose of business. In light of the above discussion and by relying on the decisions of the Tribunal(supra), we are of the considered view that the interest expenditure is an allowable expenditure, as the assessee has used loan borrowed for business and direct the AO to allow the interest expenditure to the :-22-:
ITA. Nos: 770 to 773/Chny/2020
tune of Rs.7,48,842/-. Thus, we allow this ground of appeal of the assessee.
4.13 In the result the appeal of the assessee is partly allowed.

ITA No. 771/2020: Assessment Year: 2011-12
5. The assessee filed the following concise Grounds of Appeal
1. The ld. CIT (A) has erred in sustaining the order of the ld. AO as the notice for reassessment was barred by limitation and the reassessment was initiated without any fresh tangible material/evidence available to support the reassessment proceedings.
2. The ld. CIT (A) has erred in affirming the order of the AO u/s.69 of the Act amounting to Rs.44,60,849/- without considering the gift received from spouse, capital contribution and agricultural income.
3. The ld. CIT (A) has further erred in rejecting the interest amount of Rs.6,10,002/-, which is nothing but interest paid on loan availed from M/s GE Capital, wholly and exclusively incurred for the purpose of business which is evident from rate of interest charged.

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ITA. Nos: 770 to 773/Chny/2020
Additions:
1
Unexplained Cash Deposits u/s 68
44,60,849/-
2
Disallowance of interest
6,10,002/-
3
Disallowance of Rent payment
12,39,300/-
Assessed Income
65,55,231/-

During the course of assessment proceedings, the assessee filed cash flow statement which was not accepted by the AO and the same was recast as given below:
In support of cash inflow of Rs.39,82,084/-, the assessee submitted the details which were not considered by the AO as well as the ld.CIT(A).
The source for the cash inflow statement for the above items, is explained as under:
7.1 Gift received from Mr.P.Seeman: Rs.25,00,000/- :
During the year under consideration, the assessee received cash gifts from her husband Mr.P.Seeman on various occasions and the total amount has been shown as inflow in the statement of cash flow of the assessee. The assessee has furnished a confirmation letter from Mr.P.Seeman to this effect (Refer Page 1 of Paper book). Further, Mr.P.Seeman was having a capital account balance

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of Rs.8.00 Crores during the year, which proves the capacity of Mr.P.Seeman to gift such amount to the assessee.
7.2 Own Source: Rs.14,82,084/-
As far as the capital contribution of Rs.14,82,084/- in cash is concerned, the source for the same is out of prior years' drawings.
Further, the assessee received pin money from her husband for family maintenance over a period of time and the same was used for the cash outflows mentioned above.
From the above, the ld.AR of the assessee submitted that no addition on cash deposits can be made u/s.69 of the Act once the assessee has duly explained with cash flow statement as discussed in the case of Smt. Renukaben Umedsinh Parmar vs. The Income
Tax
Officer,
Ward-3,
Navsari,
ITAT
Surat
Bench
(ITA
No.2493/AHD/2015) dated 08.03.2021. Further, ld.AR submitted that the addition towards the difference in cash flow statement made by the AO is merely on the basis of whims and fancies. The AO made the addition without any justified reasoning and cogent basis. The opinion of the AO is required to be formed objectively with reference to the material on record. The genuineness of the transaction can be decided on merits and not on :-25-:
ITA. Nos: 770 to 773/Chny/2020
prejudices. The evidence produced by the assessee cannot be brushed aside in a casual manner.
In view of the above submission, the ld.AR of the assessee prayed that the addition towards cash flow is not sustainable in law.
7.3 Per contra, the ld.DR stated that the ld.CIT(A) has rightly confirmed the Unexplained Cash Deposits u/s.68 of the Act to the tune of Rs.44,60,849/-. Further, the ld.DR stated that vide earlier report submitted on 04.08.2022, the assessing officer has reported as under:
"From the documents filed, the assessee has proved that, she has earned agricultural income and in respect of A.Ys. 2010-11 & 2011-12, the agricultural income admitted by the assessee appears to be fair and correct and can be considered."
Gift received from Mr.P.Seeman: Rs.25,00,000/-:
The ld.DR stated that on examination of the documents attached in the paper book it is noticed that the assessee has furnished only a confirmation letter from her husband Shri P.Seeman in respect of receipt of Rs.25,00,000/- as gift on 20.06.2010. But the assessee has failed to substantiate the above claim with authentic evidence of document such as gift deed and copy of capital account for the respective Assessment Year. Hence the claim of the assessee is only an afterthought and does not deserve any merit for consideration.

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ITA. Nos: 770 to 773/Chny/2020
Own Source: Rs.14,82,084/-:
In respect of the above, the ld. DR stated that the ld.CIT(A) in his
Order dated 30.07.2020 vide para 7 has discussed as under and rejected the assessee's ground in respect of source for capital of Rs.39,82,084/-.
"7. Ground No.3- Capital contribution:
7.1 Assessing Officer asked the assessee to explain the sources for capital of Rs.39,82,084/- introduced during the year in cash. Assessee explained that source was out of earlier drawings. Assessing Officer noticed that there were no withdrawals in earlier years as per the Note
Book containing receipt and payment of cash and hence the Assessing
Officer did not accept the same as source for the unexplained cash credits in the Bank account.
7.3 During the appeal proceedings the A.R stated that the sources for the capital of Rs.39,82,084/- were earlier drawings and gift from Shri.P.Seeman.
7.4 In the Remand Report the Assessing Officer stated that there were no withdrawals in earlier years as per the Note Book containing receipt and payment of cash. Regarding the gift from Shri P. Seeman the A.R filed copies of returns of income of Shri P.Seeman for AY 2001-02 to 2003-04 and 2007-08. The returns of income contain the details of drawings made by Shri.P.Seeman from his proprietary concern. The A.R did not furnish any other evidence to substantiate claim of receipt of gift from Shri.P.Seeman.
7.5 In the reply to the Remand Report the A.R stated that it is natural that as per our Indian culture the drawings are given to the wife for savings or investments and hence the explanation of gift of Rs.25,00,000/- from Shri. P. Seeman should have been accepted.
7.6 However, the assessee did not furnish any evidence in support of the earlier years drawings by Shri.P.Seeman and to establish the claim that Shri.P.Seeman gave earlier years drawings as gift to the assessee.
Hence not accepting the addition to capital as source for the cash deposits in the bank is upheld."

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It is worthwhile to mention that in the paper book the assessee has not submitted any fresh evidence or new document apart from the details furnished before the assessing officer during the course of assessment proceedings. Hence 'comments' on this ground has not been submitted.

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i.e. Rs.7,41,042/- is deleted as explained and sustain the balance amount of Rs.7,41,042/- as unexplained sources.
The assessee’s ground of difference in cash flow statement treating as unexplained u/s.69 of the Act is allowed as given below and directed the AO to delete the additions accordingly.
Gift received from spouse
Rs.25,00,000/-
Own sources

Rs. 7,41,042/-

Total

Rs.32,41,042/-

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Further, the AO and Ld.CIT(A) denied the claim of interest under the pretext that the hostel building was kept vacant as it was in a dilapidated condition and not used for the purpose for business. In this regard, the assessee wishes to reproduce the definition of 'dilapidated' as per Legal Law Lexion as below:
"State of bad. repair, falling into decay. "A wasteful destroying, or letting of Building run to ruin and decay, for want of reparation" (emphasis supplied).
From the above, it is clear that the building was in need of repair works and the purpose of the loan was to renovate the hostel building.
Considering the above facts, it is evident that the loan was utilized for the purpose of business and hence ought to be allowed.
It is worthwhile to mention here that as per the Section 36 of Income Tax Act, 1961,
“if any interest paid for the business purpose, the same has to be allowed as business expenditure" as held in the cases of -
The DCIT, Cir. 1(1(1), Ahmedabad v. Applitech Solution Ltd. (/TAT
Ahmedabad B Bench) in ITA no.248/4hd/2020 pronounced on 19/05/2023; and Vodafone India Ltd. vs. Additional Commissioner of Income Tax, (/TAT Mumbai) in ITA no.216/Chandi/2011
pronounced on 16103/23. :-31-:
ITA. Nos: 770 to 773/Chny/2020
8.1 Per contra, the ld.DR stated that the ld.CIT(A) in his Order dated 30.07.2020 vide para 9 has discussed as under and rejected the assessee's ground in respect of claim of interest.
9. Ground No.5 - Disallowance of interest on Rs.60,00,000/-:
9.1 Assessing Officer asked the assessee to explain the nexus between the borrowings and its utility in the business assets. Assessee explained that the amount was borrowed for repayment of caution deposit.
Assessing Officer concluded that the caution deposit received will be available with the assessee either in cash or in bank and hence there is no need to borrow funds to repay the caution deposit.
Assessing Officer concluded that that the interest-bearing borrowed funds were utilized in nonbusiness activities such as investment in properties at Sadullah Street, Dhandapani Street, Burkit Road, agricultural land at Theni etc and hence disallowed interest u/s 36(1)(iii).
9.2 In the grounds of appeal, the assessee contested the related loan was obtained for payment of rental advance and for refund of caution deposit and hence the interest on the same should have been allowed.
9.3 In the Remand Report the Assessing Officer stated that the assessee in her letter dated 27.09.2017 admitted that properties at Sadullah Road and Burkit Road, T. Nagar, Chennai were kept vacant to run Saraswathy
Bhavanam Women's Hostel but due to dilapidated condition of the building, it was kept unused. Building not used for business cannot be treated as business asset and other assets such as Dhandapani Street property and agricultural land also cannot be treated as business asset.
Hence the interest claim cannot be allowed.
9.4 In the reply to the Remand Report the A.R stated that the assessee's claim is reasonable which ought to have been allowed by the Assessing
Officer.
9.5 As stated by the Assessing Officer, the caution deposit received will be available with the assessee either in cash or in bank and hence there is no need to borrow funds to repay the caution deposit. Moreover, the assessee did not bring any material on record to establish that the related loan was utilized for payment of rental advance and refund of caution deposit. Hence the disallowance of interest on the same is upheld."

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ITA. Nos: 770 to 773/Chny/2020
Initially, during the course of assessment proceedings the assessee has explained that the above amount was borrowed for repayment of caution deposit. Hence the assessing officer has concluded that the caution deposit would be available with the assessee either in cash or in bank and as such there is no need to borrow funds to repay the caution deposit. Accordingly, the assessing officer has made addition since the interest-bearing borrowed funds were utilized in non-business activities. Later in the grounds of appeal the assessee has stated that the said loan was taken during the year
2004-05 for paying rental advance for hostel premises and was disclosed in the IT return filed for year 31.03.2005. In the written submission under consideration the assessee has provided definition for 'dilapidated' as per Legal Law Lexion as below: "State of bad repair, falling into decay. "A wasteful destroying, or letting of Building run to ruin and decay, for want of reparation" (emphasis supplied). From the above, it is clear that the building was in need of repair works and the purpose of the loan was to renovate the hostel building. Considering the above facts, it is evident that the loan was utilized for the purpose of business and hence ought to be allowed. However, the assessee has failed to substantiate that the amount borrowed were utilized for the renovation of hostel building

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with authentic evidence such as bills/vouchers in respect of expenditure incurred in this regard.
In view of the above the ld.DR prayed that the ground does not deserve any merit for consideration.
8.2 We have heard the rival contentions and gone through the orders of the lower authorities and perused the material on record.
The assessee has claimed an expenditure of Rs. 6,10,002/- as interest on borrowed fund of Rs.52.50 lakhs from M/s.GE Money
Financial Services Ltd and the same has been utilized for the business purposes, i.e., for running hostel (Refer Page 3 to 8 of Paper book). The assessee has furnished a sanction letter to show that the rate of interest charged by Mis.GE Money Financial Services
Limited was at 14.5%, which is the interest rate for a mortgage loan.
Further, the Ld.AO and Ld.CIT(A) denied the claim of interest under the pretext that the hostel building was kept vacant as it was in a dilapidated condition and not used for the purpose for business.
We note that the building used for business was in need of repair works and the purpose of the loan was to renovate the hostel building, hence considering the above facts, it is evident that the loan was utilized for the purpose of business. In light of the above

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discussion and by relying on the decisions of the Tribunal(supra), we are of the considered view that the interest expenditure is an allowable expenditure, as the assessee has used loan borrowed for business and direct the AO to allow the interest expenditure to the tune of Rs.6,10,002/-. Thus, we allow this ground of appeal of the assessee.
9. Disallowance of Rent payment: Addition -Rs.12,39,300/-
The ld.AR submitted that during the course of appellate proceedings before the ld.CIT(A), the assessee submitted all the details in respect of rent payment. The ld.CIT(A) in his order directed the AO to verify the genuineness of the payment towards rent and allow the same, if the same is genuine, vide his order in ITA no.169/CIT(A)-
2/2017-18 dated 30/7/2020. Subsequently, the AO has considered the rent payment while passing the giving effect order dated
07/07/2021 (Refer Page 9 to 14 of Paper book). Hence, in the aforesaid submission the ld. Counsel has not pressed this ground.
Therefore, the ground of disallowance of rent payment is dismissed as not pressed.
10. In the result the appeal of the assessee is partly allowed.

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ITA No. 772/2020: Assessment Year: 2012-13
11. The assessee filed the following concise Grounds of Appeal: