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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri B. Ramakotaiah
Per Bench.
All these are assessee’s appeals for the A.Ys 2007-08 to 2010-11 against the common and consolidated order of the CIT (A)-12, Hyderabad, dated 31.03.2015.
There is a delay of 73 days in filing of the appeals for all the years before the Tribunal. The assessee has filed an application for condonation of delay stating that the appellate order was served on her on 10.04.2015 and since she is aged about 67 years and was not keeping good health, being bed ridden, was not in a position to move out of her residence and hence the appeal could not be prepared on time and filed before the Tribunal resulting in delay of 73 days. The assessee has also
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ITA Nos 1091 1092 1095 and 1096 T Annapurna Guntur.
annexed the medical certificate in support of her contention. Taking the same into consideration, the delay in filing of the appeals before the Tribunal of 73 days is hereby condoned in all the appeals.
The common ground of appeal raised by the assessee in all these appeals is that the CIT (A) has erred in upholding the interest estimated by the AO for the loans given by the assessee to private parties. In addition to the above ground, the assessee has also raised an additional ground of appeal against the validity of the proceedings u/s 153C of the Act on the ground that the AO of the assessee did not record reasons for issuance of notice u/s 153C of the Act. This being a legal ground of appeal, the same was admitted and the learned DR was directed to produce the satisfaction recorded for issuance of notice u/s 153C of the Act. The learned DR produced the records today, in which, the satisfaction of the AO is recorded before issuance of notice u/s 153C of the Act. Taking the same into consideration, the additional ground of appeal raised by the assessee for all the A.Ys is rejected.
As regards the merits of the issue of estimation of interest income, brief facts are that there was a search and seizure operation in the case of M/s. Ammapurna Business Solutions and Sri T. Jaganmohan Rao, assessee’s husband on 16.09.2010, during the course of which, some papers belonging to the assessee were found and seized. Consequently, notices u/s 153C were issued for the respective A.Ys. The papers found
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ITA Nos 1091 1092 1095 and 1096 T Annapurna Guntur.
indicated that the assessee has received interest @ 15-21% on the amounts has advanced by her but the assessee only shown 10% as interest. Therefore, the AO grossed the income and estimated the additional interest income @ 8% and brought it to tax. Aggrieved, the assessee preferred appeals before the CIT (A) who granted partial relief to the assessee. Against the order of the CIT (A), in confirming the estimation of interest @ 15% for the A.Ys 2007-08 to 2009-10 and against the direction to estimate the interest income @ 18% on the interest received from M/s. Surya Teja for the A.Y 2010-11, the assessee is in second appeal before us.
The learned Counsel for the assessee submitted that similar issue had arisen in the case of assessee’s husband Shri T. Jagan Mohan Rao and the Coordinate Bench of this Tribunal has set aside the issue to the file of the AO for reconsideration. A copy of the said order is also filed before us.
The learned DR however, supported the orders of the authorities below and submitted that the CIT (A) has granted partial relief to the assessee which is more than reasonable and therefore, no further interference was called for.
Having regard to the rival contentions and the material on record, we find that the AO had estimated the interest income in the hands of the assessee’s husband as well and this Tribunal had considered the issue at length and has held that the rate of interest was mentioned in only one document and applying the
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ITA Nos 1091 1092 1095 and 1096 T Annapurna Guntur.
same in the case of other parties as well is not reasonable and therefore, has set aside the issue to the file of the AO for reconsideration. The relevant paragraph is reproduced hereunder for ready reference: “9. Considered the rival submissions and perused the material facts on record. AO and CIT (A) have presumed and extrapolated that the assessee would have charged @ 15% interest from the private parties instead of declared interest income. No doubt, the documents seized were relating to FY 2009-10 and the letter dated 10/11/2009 in which the assessee has lent Rs.20 lakhs to M/s Modern Agro Chemical Industries @ 1.25% per month, which amounts to 15% of interest per annum. Apart from these documents, neither AO nor CIT (A) has brought on record any other evidence to prove that the assessee has in fact earned interest more than declared by him. In our considered view, AO/CIT (A) should have investigated further and collected the information from other parties u/s 133(6) of the Act. Lending of money is on contract between two parties mutually agreeing to lend the money at the agreed rate of interest, is a highly risky business in which documentation is very very important. In case of default, the documents will be used as evidence. It is natural to enter into an agreement with the terms of agreement agreed between both the parties. During search operation, they found only one document in which assessee has entered into the agreement with M/s Modern Agro Chemical Industries. As per the document, the agreed interest was 15% and the same may be applied only In the case of M/s Modern Agro Chemical Industries and cannot be applied to other parties or for the previous AYs. In view of the above discussion, for the sake of justice, we remit these cases back to the file of the AO to verify the documents signed by the respective parties and adopt the rate as per the documents. In case of oral agreement, AO to collect information u/s 133(6) from the other parties and the rate declared by the parties should be adopted. Needless to say, the assessee may be given proper opportunity of being heard in the matter”.
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ITA Nos 1091 1092 1095 and 1096 T Annapurna Guntur.
Respectfully following the decision of the Coordinate Bench, to which the J.M is a signatory, these appeals of the assessee are also remitted to the file of the AO with similar directions.
In the result, assessee’s appeals are partly allowed for statistical purposes. Order pronounced in the Open Court on 6th April, 2018.
Sd/- Sd/- (B. Ramakotaiah) (P. Madhavi Devi) Accountant Member Judicial Member
Hyderabad, dated 6th April 2018. Vinodan/sps Copy to: 1 Shri S.Rama Rao, Advocate, Flat No.102, Shriya's Elegance, 3-6- 643, Street No.9, Himayatnagar, Hyderabad 500029 2 DCIT Central Circle 3, Hyderabad 3 CIT (A)-12 Hyderabad 4 Pr. CIT – Central, Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File
By Order
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