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Facts
The assessee had given a loan to his HUF and earned interest income. He then withdrew funds from the HUF to purchase an immovable property. The Assessing Officer estimated notional interest income on the funds withdrawn and invested, which was confirmed by the CIT(A).
Held
The Tribunal held that the addition of notional interest income was baseless, as it was the assessee's money, and he had the discretion to invest it in immovable property rather than for earning interest.
Key Issues
Whether the Assessing Officer can estimate notional interest income on funds withdrawn by the assessee and invested in an immovable property.
Sections Cited
143(3)
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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Shri Sanjay Garg
आदेश/ORDER
The present appeal has been preferred by the assessee against the order passed by Commissioner of Income Tax (Appeals), Addl/JCIT(A)-12 Mumbai [hereinafter referred to as “CIT(A)’] dated 30-08-2024 arising out of the order passed u/s. 143(3) of of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2017-18.
Adjournment application has been filed on behalf of the ld. D.R. stating that she was not well. Identical type of application has been filed in all the cases fixed for today. It will not be appropriate to adjourn all the matters. Since there is not any complicated issue involved in this appeal and the matter can be decided after going through the records and after hearing the ld. A.R., therefore, I proceed to adjudicate upon this appeal.
The assessee is aggrieved by the action of the lower authorities in making/confirming the addition on account of notional interest income amounting to Rs. 8,79,631/-.
The brief facts of the case are that the assessee had given loan to his HUF and was earning interest income. The assessee decided to purchase some immovable property. He therefore, got back some of the amount from his HUF and invested the same in the immoveable property. The Assessing Officer observed that had the assessee not invested the amount in immoveable property, he would have earned interest income. He, therefore, estimated the notional interest income of the assessee on this account and made the impugned addition. Ld. CIT(A) confirmed the addition so made by the Assessing Officer.
I have heard the ld. Authorized Representative and gone through the record. This type of addition in my view is absolutely baseless and rather abuse of the powers by the Assessing Officer. It was the assessee’s money. It was upto the assessee as to whether he has to invest the same for earning the interest or to invest in immovable property. Further, it is upon the assessee whether he wants to invest his money for the purpose of earning of income or not and even he may spend the same as per his wishes. The assessee with his conscious decision had made investment of his money into Chandrakant Kantilal Patel, A.Y. 2017-18 immovable property and there was no authority to the Assessing Officer to question his decision relating to application/investment of his money. The reason given by the Assessing Officer for making the impugned addition is totally baseless. The impugned addition is hereby ordered to be deleted.
In the result, the appeal filed by the assessee is hereby allowed.