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Income Tax Appellate Tribunal, ‘C’ SMC BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN
आदेश /O R D E R
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -5, Chennai, dated 27.09.2018 and pertains to assessment year 2013-14.
The first issue is with regard to deletion of addition on notional interest of ₹20,82,480/-.
Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the advance was given to related parties from interest-free funds. The Ld.counsel placed reliance on the judgment of Madras High Court in CIT v. Hotel Savera (1999) 239 ITR 795. The Ld.counsel submitted that since more than ₹3 Crores were available with the assessee as interest-free funds, the CIT(Appeals) is not justified in confirming the order of the Assessing Officer.
Referring to the second issue with regard to addition of ₹4,00,000/- under Section 68 of the Income-tax Act, 1961 (in short 'the Act'), the Ld.counsel for the assessee submitted that the debit balance against M/s Vijay Shanti Builders was shown as ₹54,00,000/- as against ₹50,00,000/-, therefore, the difference of ₹4,00,000/- was treated as unexplained credit. According to the Ld. counsel, the difference of ₹4,00,000/- is due to wrong posting as Uttam Kumar Jain ₹3,00,000/- and Chuitra Jain ₹1,00,000/- in the ledger account. The Ld.counsel submitted that this may be verified.
Coming to the third issue with regard to assessment of rental income in respect of godown let out by the assessee, the Ld. counsel submitted that the assessee constructed a godown on a lease hold land and the rental income was disclosed under the head “income from house property”. However, according to the Ld. counsel, the Assessing Officer made addition of ₹54,000/- as income under the head “income from other sources”.
On the contrary, Shri B. Sahadevan, the Ld. Departmental Representative, submitted that the assessee is in the business of money lending, therefore, it is not correct to say that the advance was given without any interest. The assessee, according to the Ld. D.R., in order to reduce the taxable income, claims that the advance was given without interest. Moreover, no material is available on record to suggest that the assessee has so much interest-free funds for the purpose of giving advance. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.
With regard to the addition of ₹4,00,000/-, the Ld. D.R. 7. submitted that after the queries raised by the Assessing Officer, the assessee adjusted the books of account, therefore, the claim of the assessee that the difference of ₹ 4,00,000/- occurred due to wrong posting cannot be accepted. Referring to income from letting out of godown, the Ld. D.R. submitted that the assessee has constructed godown on the lease hold land, therefore, the income has to be assessed under the head “income from other sources”.
I have considered the rival submissions on either side and perused the relevant material available on record. The assessee claims that interest-free funds were available for giving advance to various related persons, therefore, the addition of ₹20,82,480/- towards notional interest is not justified. But, no material is available on record to suggest that the assessee has interest-free funds for the purpose of giving advance. Since the assessee claims that more than ₹3 Crores was available, this Tribunal is of the considered opinion that the matter needs to be re-examined. Accordingly, orders of both the authorities below are set aside and the addition of ₹20,82,480/- is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter on the basis of balance sheet and other financial statements of the assessee and thereafter decide the issue afresh, in accordance with law, after giving a reasonable opportunity to the assessee.
Now coming to disallowance of ₹4,00,000/-, the assessee 9. claims that it is a wrong posting in the names of two different persons. However, the Assessing Officer claims that it is only adjustment. This Tribunal is of the considered opinion that since the main addition of ₹20,82,480/- is remitted back to the file of the Assessing Officer, the addition of ₹4,00,000/- also needs to be re- examined. The Assessing Officer shall re-examine whether the assessee has really made wrong posting and wrong entry or it is only adjustment to avoid tax and thereafter decide the issue afresh, in accordance with law, after giving a reasonable opportunity to the assessee.
Similarly, the addition of ₹54,000/- with regard to rental 10. income also needs to be examined by the Assessing Officer on the basis of material that may be produced by the assessee. Accordingly, orders of both the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue in accordance with law and decide after giving a reasonable opportunity to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 18th April, 2018 at Chennai.