2009 (1) TMI 765 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 77,78,535 as unexplained cash credit u/s 68.
2. Estimation of income from Marine Chamber property.
3. Estimation of income from Bhayander property.
4. Disallowance of interest of Rs. 1,06,980.
5. Levy of interest u/s 234B and 234C.

Summary:

Issue 1: Addition of Rs. 77,78,535 as unexplained cash credit u/s 68
The assessee contested the addition of Rs. 77,78,535 as unexplained cash credit u/s 68, claiming the amount was received as gifts from foreign friends of his father. The Assessing Officer (AO) and Commissioner of Income-tax (Appeals) (CIT(A)) found the evidence provided, such as confirmation letters and net worth certificates, insufficient to prove the genuineness and creditworthiness of the donors. The Tribunal upheld the CIT(A)'s decision, noting the lack of documentary evidence, the improbability of such large gifts from mere acquaintances, and the inconsistency in the dates and details of the gifts. The Tribunal concluded that the gifts were not genuine and confirmed the addition.

Issue 2: Estimation of income from Marine Chamber property
The assessee argued against the AO's estimation of income from Marine Chamber property at Rs. 5,67,000, claiming it was done without basis or opportunity for explanation. The Tribunal found that the AO did not provide a clear basis for the estimation and directed the AO to reconsider the annual letting value afresh, giving the assessee an opportunity to present evidence.

Issue 3: Estimation of income from Bhayander property
Similar to the Marine Chamber property, the assessee contested the AO's estimation of income from Bhayander property at Rs. 21,642. The Tribunal directed the AO to reassess the annual letting value, providing the assessee an opportunity to present evidence.

Issue 4: Disallowance of interest of Rs. 1,06,980
The assessee claimed a deduction for interest paid on a loan taken against fixed deposits, which was advanced to a sister concern. The AO and CIT(A) disallowed the deduction, citing the Supreme Court decision in CIT v. Dr. V. P. Gopinathan [2001] 248 ITR 449 (SC), which held that interest on a loan taken against fixed deposits cannot be deducted from interest earned on those deposits. The Tribunal upheld this disallowance, noting the lack of commercial expediency and the applicability of the cited Supreme Court decision.

Issue 5: Levy of interest u/s 234B and 234C
The assessee contested the levy of interest u/s 234B and 234C, which the Tribunal rejected as these are statutory and consequential in nature.

Conclusion:
The appeal was partly allowed, with the Tribunal directing the AO to reassess the annual letting value of the properties while upholding the other findings of the CIT(A). The order was pronounced in the open court on January 23, 2009.