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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI ASHWANI TANEJA (ACOUNTANT MEMBER)
O R D E R Per ASHWANI TANEJA, AM This appeal has been filed by the revenue against the order of Commissioner of Income-tax (Appeals) [hereinafter called CIT(A)] dt 25-10-2013 against the assessment order u/s 143(3) dt 26-12- 2012 for A.Y. 2010-11 on the following grounds: “1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.26, 76,997/-- made u/s 68 of the IT Act without appreciating that the addition was made by the AO on the ground that the creditworthiness of the cash creditor could not be proved by the assessee as there was meager balance of Rs.10,000/- in bank account of the cash creditor and her monthly earning also was not significant.
2 On the facts and in the circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the disallowance of interest expenditure of Rs. 12,02,633/-- made u/s 24(b) of the IT Act without appreciating that the loan was obtained on mortgage of the house property and not for the purchase of house property, hence cannot be allowable as a deduction as per the provision of section 24(b)of the I.T Act.”
Ground 1 : The revenue has challenged the action of the Ld.CIT(A) in deleting the addition of Rs.26,76,997/- made u/s 68 of the Act.
The brief facts are that during the course of assessment proceedings it was noted by the AO that assessee had taken unsecured loan of Rs.27,76,997/- from one Ms. Aanchal Mehtani. The AO confronted the assessee to justify this loan and simultaneously also obtained a loan confirmation from the said Ms. Aanchal Mahtani in respect of the said loan. He also obtained the copy of income tax return along with all annexure/schedules and bank statements highlighting concerned entries. The AO, further, directly obtained copy of ledger account, copy of bank statement copy of return of income along with computation of total income and balance sheet from the said Ms. Aanchal Mahtani u/s 133(6) of the Act. The AO inferred that earlier Ms. Aanchal Mahtani was earning meager salary income of Ps. 10,613/- and interest income of Ps. 2,41,902/- and the creditworthiness of the said Ms. Aanchal Mahtani was not accepted by the AO. He, therefore, taxed the said unsecured loan as unexplained cash credit u/s 68 of the Act.
Being aggrieved, assessee filed appeal before ld.CIT|(A) and made detailed submissions explaining that the assessee had discharged its onus u/s 68 of the Act. The assessee also filed further additional evidence in the form of Bank statement of the lender to explain the creditworthiness and source in the hands of the lender. The evidences were sent to the AO for remand report. The AO examined the evidences and sent the remand report. The Ld.CIT(A) deleted the addition by observing as under:
“5.2.1. Undisputed facts are that the appellant raised unsecured loans of Rs. 26,76,997/- from one Ms. Aanchal Mahtani, b/o. Mr. Amrit Mahtani in the F.Y. 2009-10 relevant to A.Y. 2010-11. The appellant furnished the loan confirmation from the said Ms. Aanchal Mahtani before the LAO. The appellant further furnished copy of income tax return alongwith all annexures /schedules and bank statements highlighting the relevant entries. In addition to these details, the LAO issued notice u/s. 133(6) of the Act to the said Ms. Mahtani asking for copies of ledger accounts, copy of bank statement, copy of return of income along with computation of total income and her balance sheet. These details were furnished by the said Ms. Mahtani before the LAO. The LAO examined the balance sheet of Ms. A. Mahtani and observed that she had capital account of 1s. 18,17,612.61 and unsecured loan of Rs. 16,43,342/- from one Mr. Gaurov Sakrani. He doubted the creditworthiness of Ms. A. Mahtani in view of various loans/gifts received by Ms. A Mahtani from her relatives and friends. Therefore, he taxed unsecured loon of Rs. 26,66,997/- received from the said Ms. A. Mahtani u/s. 68 of the Act for the reasons given on pages 2 and 3 of the relevant assessment order.
5.2.2. The LAP explained that the said Ms. Aanchal Mahtani, PAN AMTPM1090M is regularly assessed to tax as the capital balance of Rs. 18,17,612/-, is from a reputed family and her father Mr. Amrit Mahtani has a capital balance of Rs. 6.22 crores as on 31.03.2002. Her gross income for F.Y. 2009-10 was recorded at Rs. 2,52,515/- and the net income was disclosed at 1,91,896/-. The appellant had also furnished additional evidences under rule 46A in the form of copy of I.T. acknowledgement, copy of bank statement and balance sheet of Ms. A. Mahtani, sources of loans and gifts received by the said Ms. A. Mahtani from her grandmother and one Mr. Gaurav Sakrani and confirmation from Ms. A. Mahtanis grandmother and also from Mr. Gourav Sakrani confirming the loan given by Mr. Gaurov Sakroni to the said Ms. A. Mahtani. The LAO has not objected to admission of additional evidences under rule 46A. She has submitted a remand report vide report no. ITO 2(1)(1)/Additional evidence/2013-14 dated 14.10.2013, the relevant port of which reads .......Now the assessee is filing the details such as the capital a/c., gift deed, bank statement after making the addition by the Assessing Officer. In view of the above, the ground of assessee may be disposed off on merit"
5.2.3. The LAR rejoinded that the appellant had furnished additional evidences in the form of confirmation from the parties from whom loans were received by Ms. A. Mahtani. Capital account of the parties, balance sheet of the parties, copy of return of income of the loaner (Mr. Gaurav Kamlesh
Sakhrani, PAN: BFAP5541E) from whom loans were received by Ms. A. Mahtani and gift deed from her grandmother, Mrs. Shashi Poopchand Mahtani, PAN : AABPM9683J on the occasion of her birthday. The said gift deed was prepared on the requisite quasi judicial stamp paper. The LAP, vehemently contended that the appellant has explained the source of cash credit of Rs. 26,76,997/-, it has explained the source of source, it has also explained the source of source of source. The appellant has furnished confirmations, PAN, income tax return details, balance sheets, capital accounts, bank accounts of the cash creditors, namely, Ms. A. Mahtani. Further, various deposits, gifts, loans, received by Ms. A Mahtani have also been fully explained by furnishing such other persons confirmations, PAN, income tax return details, balance sheets, capital accounts, bank accounts. He concluded that the appellant has discharged the onus and there is no case for making addition u/s. 68 of the Act.
5.2.4. I have carefully and dispassionately considered the facts and circumstances of the case. The appellant has successfully explained the source of cash credited in its books of accounts, the source of cash credit in the books of accounts of its cash creditors and all necessary details including, inter alia, confirmations, PAN, income tax return details, balance sheets, capital accounts, bank accounts have been furnished during assessment proceedings or remand proceedings before the LAO. In CIT vs. Tania Investments (P) Ltd. (2010) 322 ITR 394 (Born), Hon'ble Bombay High Court held that the Tribunal was right in deleting the addition made by the AO towards unexplained, cash credits as the books of accounts itself indicate the capacity to advance loan, the parties are identified and there is no further need to prove the creditworthiness of the creditors. In CIT vs. P.S. Jain Co. Ltd. (2010) 322 ITP 320 (Del), it was held that the addition made by the AO on account of unexplained cash credit also opportunity to AO to examine additional evidence. The burden cast on the assessee stands discharged the moment the assessee proves the identity of the creditor, his capacity to lend and the genuineness of the transaction. The assessee cannot be further required to prove the source of the source of the money out of which loan was given [S. Hastimal vs. CIT (1963) 49 ITR 273 (Mad). Under the circumstances the impugned addition of Rs.26,76,997/- u/s 68 of The Act is not sustainable and hence reduced to Nil.”
It is noted by us that assessee has submitted requisite evidences in the form of capital account / balance-sheet, copy of return and bank statement as well as confirmation of the lender. The lender is duly assessed. The Assessing Officer during the course of remand proceedings also made complete verification of all the facts and so much so, even the sources in the hands of the lender have been analysed in detail and nothing wrong has been found therein. We find that there were no basis to make the addition in the hands of the assessee as the assessee had discharged its complete onus u/s 68 of the Act. Thus, Ld. CIT(A) has rightly deleted the addition. The ground raised by the revenue in this regard is dismissed.
In Ground No 2, the revenue has challenged the action of Ld.CIT(A) in deleting the disallowance of interest expenditure of Rs.12,02,633 made u/s 24(b) of the Act. During the course of assessment proceedings, the Assessing Officer disallowed interest of Rs.1,20,263 u/s 24(b) on the ground that the said interest was paid to City Bank Ltd
against the Property No.1 and not for purchase of property No.2. The assessee submitted that the assessee had taken the loan from Citi Bank to pay the earlier loan which was taken to acquire the property and thus it was a case of switching over loans whereby the original loan borrowed from Mahtanis were utilized in buying property No.2 and subsequently, these loans were repaid by borrowing housing loan from Citi Bank Ltd. Before the Ld.CIT(A), requisite submissions were made to justify the claim which are found to be acceptable by the Ld.CIT(A) and, therefore, the claim was allowed by the Ld.CIT(A) with following observations:
“5.3.1. Undisputed facts are that the appellant raised loan of Rs. 1.04 crores from one A Amrit Mahtani and invested the same for purchase of a house property for a consideration Rs. 1,10,72,991/-. Subsequently, the appellant raised a loon of Ps. 99.99 lakhs on the basis mortgage of the said property from Citibank Ltd vide loan sanction dated 18.12.2008 and said loan was used for repaying the housing loan raised from Ms. Amrit Mahtani. The appellant has furnished the copies of relevant bank statements explaining the loan taken from Ms. Amrit Mahtani which was actually used for purchase of the house property, copy of bank loan sanction details and ledger copy of Citibank Ltd reflecting the said bank loan was used for repaying the earlier housing loan received from the said Mr. Amrit Mahtani. The LAR has argued that as per circular no. 28[F.No.8/8/69-IT(A-I) dated 20.08.1969] interest on loan taken to repay the original loan raised for the purchase of house property, is allowabe deduction under old section 24(1)(vi). Such interest paid on fresh loan to repay the fir housing loon is now allowable u/s. 24(b) of the Act.
5.3.2. Having carefully and dispassionately considered the rival submissions and in view of the additional evidences not objected to by the LAO the impugned interest of Rs. 4,75,564/- is allowed u/s. 24(b) of the Act. Ground of appeal no. 2 is allowed.”
7. We have gone through the order of Ld. CIT(A). It is noted that Explanation to section 24(b) provides that for the purpose of this proviso, the expression “new loans” means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital. Thus, from the above, it is clear that the legislature has clearly provided that interest paid on loan taken for the purpose of repayment of original loan shall also be allowable u/s 24(b). Thus, we find that the CIT(A) has rightly allowed the claim and hence, the order of Ld.CIT(A) is upheld. As a result, ground raised by the revenue is dismissed.
In the result, appeal of the revenue is dismissed.
Order pronounced in the court on this 27th day of July, 2016.