RAMESH KUMAR GARG,PANCHKULA vs. INCOME TAX OFFICER, PANCHKULA

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ITA 289/CHANDI/2024Status: DisposedITAT Chandigarh04 December 2024AY 2011-12Bench: SHRI. SANJAY GARG (Judicial Member)4 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that since the income was offered under section 44AD, books of account were not mandatory, and the business was small-scale. Similarly, the interest-free advances were from the wife's own funds. Therefore, the additions were unjustified.

What were the facts?

The assessee contested additions made by lower authorities treating Rs. 1,81,940/- as income from undisclosed sources and notional interest on interest-free advances given by the assessee's wife. The assessee's wife had offered the Rs. 1,81,940/- as business income under section 44AD, and the interest-free advances were out of her own interest-free funds.

What were the issues?

Whether the addition of business income offered under section 44AD without maintaining books of account is justified, and whether notional interest on interest-free advances from a spouse is to be added.

Which sections of the Income-tax Act were involved?

Section 44AD,Section 148

AI-generated summary — verify with the full judgment below

आयकर अपीलीय अिधकरण,च�डीगढ़ �यायपीठ “एस.एम. सी” , च�डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “SMC”, CHANDIGARH HEARD THROUGH: HYBRID MODE �ी संजय गग�, �ाियक सद� BEFORE: SHRI. SANJAY GARG, JUDICIAL MEMBER आयकर अपील सं./ 2024 िनधा�रण वष� / Assessment Year : 2011-12 Ramesh Kumar Garg, बनाम The ITO House No. 873, Sector 10, Panchkula Panchkula, Haryana-134109 �ायी लेखा सं./PAN NO: BOCPG9837G अपीलाथ�/Appellant ��यथ�/Respondent िनधा�रती क� ओर से/Assessee by : Shri Amitoz Singh Kamboj, C.A राज�व क� ओर से/ Revenue by : Dr. Ranjeet Kaur, Sr. DR सुनवाई क� तारीख/Date of Hearing : 14/11/2024 उदघोषणा क� तारीख/Date of Pronouncement : 04/12/2024 आदेश/Order Per Sanjay Garg, Judicial Member :

The present appeal has been preferred by the Assessee against the order of the Ld. Commissioner of Income-tax (Appeal), ADDL/JCIT(A)-6, Kolkata (hereinafter referred to as the “Ld. CIT(A) dt. 24/01/2024 pertaining to Assessment Year 2011-12.

2.

The Assessee in its appeal has taken four grounds of appeal.

AY 2011-12 3. Vide Ground No. 1, the assessee has contested the validity of reopening of the assessment under section 148 of the Act. Since Ground No. 1 is not pressed the same is accordingly dismissed.

4.

Vide Ground No. 2, assessee has contested the addition of Rs. 1,81,940/- made by the lower authorities treating the said amount as income from undisclosed sources, rejecting the claim of the assessee that the same was the business income of the assessee.

5.

At the outset the Ld. Counsel for the assessee has submitted that assessee’s wife namely Smt. Rajni Garg was engaged in a very small scale business of trading in Handlooms. The total receipt from the aforesaid business were of Rs. 4 to 5 lacs only, out of which it offered Rs. 1,81,940/- as her business income under section 44AD of the Act. Lower authorities however, made impugned addition observing that the corresponding evidence such as bills and vouchers relating to aforesaid business were not produced. It was therefore treated as unaccounted income of the assessee.

6.

I have considered the rival contentions. The aforesaid income of Rs. 1,81,940/- was offered by the wife of the assessee in the income tax return under section 44AD of the Income TaxAct,1961 (hereinafter referred to as the “Act”). She was not required to maintain books of account as the return was filed under section 44AD of the Act. Considering the very small scale business of total gross receipt of Rs. 4 to 5 Lacs only, it can be assumed that the necessary evidence relating to the business may not have been presumed by her. Under the circumstances I do not find justification on the part of lower authorities

7.

Vide Ground No. 3, the assessee has contested the addition of Rs. 77,332/-, Rs. 4,697/- and Rs. 13,200/- on account of notional interest in respect of interest free advances given by the wife of the assessee.

8.

Ld. Counsel for the Assessee in this respect has submitted that Wife of the assessee had advanced small amount of interest free loans amounting to Rs. 3,50,000/-, Rs. 2,00,000/- and Rs. 3,50,000/- to her near and dear ones. That the aforesaid loan was advanced out of interest free funds available with the wife of the assessee. He in this respect also invited my attention to the impugned order of the Ld. CIT(A) to submit that the only reason given for aforesaid addition / disallowance was due to the fact that the assessee had not filed regular return of income.

9.

I find that the Ld. CIT(A) himself has mentioned that the assessee had also received interest free advances from some concerns. The amount of Rs. 3,50,000/-, Rs. 2,00,000/- and Rs. 3,50,000/- was advanced by Wife of the assessee to near and dear ones. I therefore do not find justification on the part of lower authorities in making the impugned addition and the same is ordered to be deleted.

10.

Ground No. 4 is general in nature.

11.

In view of my findings given above, the additions made / confirmed by the Ld. CIT(A) are ordered to be deleted.

Order is pronounced on 04/12/2024

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