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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI B.P. JAIN, & SHRI SUDHANSHU SRIVASTAVA
PER B.P. JAIN, ACCOUNTANT MEMBER,
This appeal filed by the assessee is directed against the order dated 03.03.2014 passed by the CIT(A), Muzaffarnagar, for the A.Y. 2009-10.
The assessee has raised the following grounds of appeal:
“1. That the order of Ld. Lower Authority is bad in law as well as is against the facts and circumstances of the case.
2. That learned CIT (A) grossly erred in making enhancements of Rs. 11,26,600/- & of Rs. 6,97,400/- by disallowing the very incurrence of said expenditures, being incurred wholly in connection to transfer of property and improvement of same u/s 48 of the Act, without rejecting accounts, without conducting any direct enquiry or finding any material against the assessee and despite accepting the accounts and verification of said exp. by Ld. AO, hence enhancement is inherently illegal.
That in addition to above, learned CIT (A) further erred in disallowing the expenditure Rs. 11,26,600/-, being payment of stamp duty , thereby making an enhancement of Rs. 11,26,600/- after not sustaining the attraction of 50C and consequent addition made by AO (2,77,335+8,49,265) , in whole disregard of the fact on the record like the same is specifically stated in the regd. Sale deed/recorded in accounts etc. by taking an untenable view that , appellant can’t get advantage of stamp duty both at the time of purchase and sale land, hence enhancement is illegal.
4. That learned CIT(A) also erred in disallowing the expenditure Rs. 6,97,400/- incurred for development of plot by rejecting the incurrence of total expenses merely on imaginative grounds, hence enhancement is arbitrary.
5. That learned CIT (A) grossly erred in sustaining the addition of Rs. 10,58,434/-, being interest on borrowed funds capitalized as per the settled law and claimed in the return, though Ld. AO rejected the claim as part of interest was mistakenly claimed/allowed in the earlier years but Ld. CIT(A) misdirected on the issue and sheerly confirmed the addition without writing any speaking order on the issue which is wholly illegal.
6. That, in addition to above , addition of said Rs. 10,58,434/- is a case double taxation in as much as after disallowing the said amount, Ld. AO disallowed the mistaken claim of interest in the earlier years which was the sole basis of disallowance , hence disallowance is against all the cannons of law.”
3. Briefly stated, the facts of the case are that assessment for the A.Y. 2008-09 was completed u/s 143(3) on 30.12.2010 by making an addition of Rs. 24,98,769/-, Out of additions Rs. 11,63,000/-, assessee had not filed any appeal and on balance addition of Rs. 13,35,769/-, which was contested before CIT(A) Rs. 2,77,335/- on account of applicability of Section 50C was deleted by the CIT(A). Balance addition of Rs. 10,58,434/- being interest on borrowed funds capitalized is made by AO. AO disallowed interest on bank loan taken for property as the same is not allowable u/s 48, beside assessee claimed deduction of interest U/s 24 in AY 05-06/06-07. This addition is contested by assessee in terms of his ground 2 before first appellate authority in which he also relied on 99 ITR 148 (DEL) which was sustained by the first appellate authority. However ld. CIT(A) dismissed this ground without discussed this ground summarily without passing any speaking order in as much as incorrect facts are mentioned.
Further first appellate authority enhanced a sum of Rs. 11,26,600/- and 6,97,400/- to the income by disallowing expenses incurred for purchase of stamp papers for execution of sale deed amounting to Rs. 11,26,600/- and expenses incurred for the development of property amounting to Rs, 697400/-. Enhancement of Rs. 11,26,600/- was made mainly on the ground that there is no agreement between parties in this respect and copy of a/c does not substantiate availability of cash in the absence of cash flow statement. Another enhancement of Rs. 6,97,400/- was made indicating deficiencies in some bills like no specification/printed and further doubting the same as property is rented since long.
Ground No. 1 is general and in support of Ground No. 2, 3 & 4 of the appeal of the assessee, the ld. AR submitted that the Payment of Rs. 11,26,600/- for purchase of stamp papers is accepted by AO after examining accounts and Payment is evidenced by registered Sale deed which is a registered agreement between parties. Stamp papers in the name of assessee is also a primary evidence of purchase of stamp papers by assessee. Payment is also as per audited accounts, which was accepted by AO. Payment of development expenses is supported with bills/vouchers with giving sufficient details and no enquiry from parties/assessee was conducted in case of doubt. Allegation of rented building wrong, which was on record.
In support of Ground No. 4 & 5 of the appeal of the assessee, the ld. AR submitted that the interest paid on housing loan is part of cost of acquisition and same should be allowed U/s 48 of the Act, Further, in earlier two years i.e. AY – 2005-06 & 2006-07 assessee claimed interest U/s 24(b) wrongly and the same was offered for taxation and ultimately disallowed by the authorities, hence addition of Rs. 10,58,434/- is also a case of double taxation.
The ld. DR on the other hand, argued in support of enhancement on the basis that payments are made in cash and no proper evidences were filed before ld. CIT(A). He placed reliance on the orders of the authorities below for disallowance of interest.
We have heard and considered the arguments advanced by the parties in view of the orders of the authorities below material available on record and the decisions relied upon. At the time of hearing ld. counsel of the assessee draw our attention towards Pg No. 03-51 of the paper book which is a registered sale deed dated 24.01.2008 and on Pg No. 45 of the paper book it is specifically mentioned in the said sale deed that all the expenses on sale deed are borne by the seller. It is also evident from the back of page no. Further it was also seen from the back page no. 51 are purchased by assessee as the same is in the name of assessee. Pg No. 52 of the paper book is the account of the property mentioning payment of Rs. 11,26,600/- in cash for the purchase of stamp papers on the sale of the property. Said account is from regular book of audited accounts, which are examined and accepted by the A.O. and no adverse remark regarding book of accounts, availability of cash etc. was found by the A.O. who in fact specifically accepted such payment. Hence payment is as per the registered agreement which is a sale deed and there is no requirement of any cash flow statement when payment is from cash book maintained in the ordinary course of business. In fact addition for doubting source is to be made U/s 69 and not for the disallowance of expenditure and in fact ld. CIT(A) raised only doubts but has not denied that payment has been made.
As per Page No. 53-57 of the paper book Ld A.R had submitted the bills and vouchers of the expenses incurred for the development of the property which are sufficient evidence for incurrence of said expenses. All the bills are bearing name/address/phone no. of the supplier and most of the bills are bearing printed numbers as well as item supplied like rodi, cement etc. Beside AO has not rejected accounts and specifically accepted these expenses. In any case in case of any doubt ld. CIT(A) had to conduct inquiry from the suppliers or at least had to enquire from the assessee about his doubts as onus was on him to prove expenses bogus. His observation about rented property is wrong on the record. The ld. A.R has placed reliance on the various decisions in support of claim of expenditure of Rs. 11,26,600/- and 6,97,400/- which are found relevant to the issues:-
Abdul Qayume V CIT [1990] 50 TAXMAN 171 (ALL) Sunrise Tooling System (P.) Ltd.* [2014] 47 taxmann.com 20 (Delhi) CIT V Anil Kumar & Co. [2016] 67 taxmann.com 278 (Karnataka) CIT V Swaraj Cold Storage (P.) Ltd. [2013] 36 taxmann.com 428 (ALL)
As per above discussions enhancement made by ld. CIT(A) is without any material and ground 2,3 & 4 are allowed and accordingly, above additions are hereby deleted.
The other addition of Rs. 10,58,434/- being ground no. 5 & 6 ld. AR argued that the interest paid against housing loan is part of cost of acquisition U/s 48 of the Act and relied several cases for the proposition. Ld. AR also drew our attention on the page no. 75 and 83 of paper book being part of order of ld. CIT(A) for AY- 05-06 & 06-07 in support of contention that deduction claimed by assessee in those years has been withdrawn and accepted by revenue. He also argued that notwithstanding with claim U/s 24(b) assessee was entitled to interest of loan as part of cost as held in case of C. Ramabrahman reported in 27 taxmann.com 104 (Chennai- Trib) but after withdrawn of claim disallowance of the interest resulted into double taxation. Ld. A.R has placed reliance on the various below decisions :
CIT v Sri Hariram Hotels (P.) Ltd.* 325 ITR 136:188 TAXMAN170 (KAR.) CIT V Mithlesh Kumari [1973] 92 ITR 9 (Delhi) ACIT v C. Ramabrahmam (2012) 27 taxmann. Com 104 (Chennai)
After considering the settled position of law about the allowance of interest on loan taken for the purchase of house property as part of cost more so when assessee has also not taken any other advantage of said interest and incurrence of interest expenditure is not under doubt, claim of interest of Rs. 10,58,434/- is fully allowable against the sale consideration and ground 5 & 6 allowed.
In the result, the appeal of the assessee is allowed.
The order is pronounced in the open court on 20.11.2017.