ITO, NEW DELHI vs. SH. ANIL GUPTA, NEW DELHI

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ITA 2199/DEL/2014Status: DisposedITAT Delhi05 August 2016AY 2010-115 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that no interest is payable on interest-free loans, upholding the deletion of the notional interest addition. Regarding the unsecured loan, the Tribunal found that the AO did not consider all relevant documents, thus upholding the CIT(A)'s deletion.

What were the facts?

The Assessing Officer (AO) made additions to the assessee's income, including Rs. 91,37,430/- on account of notional interest on loans and Rs. 10,20,000/- as unsecured loan under Section 68. The CIT(A) deleted these additions, and the Revenue appealed to the ITAT.

What were the issues?

Whether notional interest on interest-free loans is taxable and whether the AO properly considered documents for unsecured loan additions.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Before: SHRI R. S. SYAL & SMT SUCHITRA KAMBLE

Hearing: 28.07.2016Pronounced: 05.08.2016

ORDER PER SUCHITRA KAMBLE, JM

This appeal is filed by the Revenue against the order dated 06/01/2014 passed by CIT(A), XXVI, New Delhi. 2. The grounds of appeal are as follows:-

“1. On the facts and circumstances of the case, the Ld.CIT(A) has erred in deleting the addition to the tune of Rs.91,37,430/- made by A.O ignoring the quantum of interest free loan. It is note worth that in the relevant assessment year the new loan of Rs.6,53 crores was given during the year to 7 entities and amount of Rs.8.78 crores was received from 15 entities. Clearly the assessee is in the business of lending of money on interest. Therefore, the addition on account of charging notional interest made by A.O is justifiable and correct.

2.

On the facts and circumstances of the case, the Ld.CIT(A) has erred in deleting the addition of Rs.10,20,000/- as undisclosed income u/s 68 of the I.T Act, 1961. As per para 3 of the assessment order Rs.4,80,000/- was disclosed by the assessee as loan from Ms. Promilla Gupta and as per HDFC Bank statement (A/c. NO. 00031000309133) Rs. 15,00,000/- were given by Smt. Promilla Gupta, B-67, Defence Colony, New Delhi. The Ld.CIT(A) has completely discreet loan issue and given relief and not treated the same as undisclosed income.”

3.

The assessee filed his return of income on 29/7/2010 showing income of Rs. 3,35,240/-. The case was scrutinized and the assessment was completed on 20/3/2013. The Assessing Officer made addition income of Rs.10,20,000/- as unsecured loan u/s 68 of the Act, Rs.91,37,430/- on account of notional interest @ 15% per annum on loan and advances of Rs.6,09,16,205/- given to various persons. Thus total addition of Rs. 1,04,92,670/- was made.

4.

Aggrieved by this, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.

5.

The Ld. DR submitted that the Assessing Officer rightly held that merely furnishing particulars is not enough and correctly disallowed Rs.10,20,000/- u/s 68 of the Act. The Ld. DR further submitted that the interest income paid during the year amounts to unsecured loans and hence Assessing Officer rightly worked out Rs.91,37,430/- and added it to the total income of the assessee. Therefore, CIT(A) was wrong in allowing the appeal of the assessee.

6.

The Ld. AR relied on the order of the CIT(A) and submitted that all the records were brought before the Assessing Officer. As relates to Ground No. 1, the Ld. AR submitted that when the assessee has secured interest free loans and advances and while returning the same he has not obligation to pay interest thereon. In respect ground No. 2 that of loan given to Promilla Gupta, the Ld. AR submitted that all the documents were before the Assessing Officer .and thus it cannot be treated as unaccounted loan. Thus, the CIT(A) rightly set aside the order of the Assessing Officer .

7.

We have heard both the parties and perused all the records. As regards Ground No. 1 related to interest free loan, when the party takes a loan or advances without any interest only the principal amount has to be repaid at the estimated time. It is not necessary to pay interest when there is no such arrangement as such. Thus, the CIT(A) was right in deleting this addition. As regards to Ground No. 2, after going through the assessment order, the ledger account of Promilla Gupta and computation of income of the assessee, it is seen that the Assessing Officer has not taken cognizance of all the relevant documents as to on what basis disallowance u/s 68 of the Act for Rs.10,20,000/- was made. The CIT(A) for both the grounds has correctly arrived at the conclusion and allowed the appeal of the assessee.

8.

In result, the appeal of the Revenue is dismissed.

The order is pronounced in the open court 05th of August, 2016.

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