2012 (8) TMI 765 - AT - Income Tax

Interest on borrowings in respect of house let out dis-allowance on ground of failure to furnish supporting evidence of same Held that - Interest payable on borrowings in respect of let out properties, the interest will be allowable only if the loan is taken for the acquisition of the house or for repaying a loan taken for acquisition of the property. Assessee has not produced any evidence to show that the loan has been taken for acquisition of property. Therefore, order of CIT(A) confirming dis-allowance is confirmed Various cash deposits in Bank Held that - Assessee had filed particulars of rent received and credited to the bank account. In the interest of justice, we remit this matter to the file of the AO for deciding the issue de-novo

Summary

Issues:
1. Disallowance of excess interest claim on housing loan.
2. Disallowance of interest claim on borrowings for let-out property.
3. Addition of unexplained cash deposits in the bank account.
4. Disallowance of deduction under section 24 for interest on mortgage loan.
5. Unexplained credits in the bank account.

Issue 1: Disallowance of excess interest claim on housing loan
The assessing officer disallowed the excess interest claim on the housing loan as it exceeded the limit specified under section 24(b). The appellant failed to provide supporting evidence for the claim, resulting in disallowance of Rs 2,65,141.

Issue 2: Disallowance of interest claim on borrowings for let-out property
The appellant claimed interest payable on borrowings for a property in Hyderabad but failed to furnish proof of the claim before the assessing officer. Consequently, the entire interest claim of Rs 76,756 was disallowed due to lack of supporting evidence.

Issue 3: Addition of unexplained cash deposits in the bank account
The assessing officer observed cash deposits in the appellant's bank account without proper documentation for transactions. Despite explanations provided by the appellant, the officer calculated unexplained cash and transfer credits, resulting in an addition to taxable income.

Issue 4: Disallowance of deduction under section 24 for interest on mortgage loan
The CIT(A) upheld the disallowance of Rs 76,756 for interest on a mortgage loan, stating that the purpose of mortgaging the property and the use of borrowed capital were not substantiated by the appellant. The deduction under section 24 was denied due to lack of evidence supporting the loan acquisition for property purposes.

Issue 5: Unexplained credits in the bank account
The CIT(A) enhanced the addition of unexplained credits in the bank account to Rs 21,59,631, as the appellant failed to explain the sources of these credits. The assessing officer's decision was upheld, emphasizing the appellant's inability to substantiate the unexplained credits.

In conclusion, the appellate tribunal partly allowed the appeal, granting the appellant an opportunity to explain the credits in the bank account. The judgment highlighted the importance of providing evidence to support deductions and claims, emphasizing compliance with tax regulations and the need for proper documentation in financial transactions.