2014 (2) TMI 259 - AT - Income Tax

Addition of interest on FDRs Held that - The matter requires reconsideration at the level of the AO - the assessee pointed out to the computation of income in which the income from business was shown at ₹ 67,310/- which includes the bank interest of ₹ 44,763/- which is supported by profit and loss account - assessee has shown interest under the head business as well as income from other sources - This point is not examined by the authorities below from the record and there appears some mistake on the part of the authorities below in not appreciating the contention of the assessee order set aside and the matter remitted back to the AO for fresh adjudication Decided in favour of Assessee. Addition made in the capital account Held that - The issue also requires reconsideration partly at the level of the AO - The assessee pointed out that from the joint account, cheques No. 205279 was credited to the personal account of assessee of ₹ 26,000/- and similarly, ₹ 1,00,000/- was transferred through cheques No. 205280, but the joint account statement shows the amount of this cheques was ₹ 631/- only order set aside and the matter remitted back to the AO for re-adjudication Decided partly in favour of Assessee. Addition made u/s 68 of the Act Unexplained cash credits Held that - The amount of ₹ 1,20,000/- was transferred from account of Mrs. Veena Khokha and from her bank account and the amount of ₹ 1,20,000/- was transferred on 04.11.2008 and similarly on 21.03.2009, there was a transfer of ₹ 1,00,000/- through cheques - the assessee submitted that no proper opportunity was given to explain this issue - Considering the bank accounts, the matter requires reconsideration at the level of the AO the order set aside and the matter remitted back to the AO for re-adjudication Decided in favour of Assessee. Addition made out of total addition Held that - The addition has been correctly made in the matter assessee pointed out that to show the account of Ankit Khokha from where another deposit of ₹ 1,50,000/- was made on 02.02.2009 - the assessee has not been able to contradict the finding of the ld. CIT(A) that the entry of ₹ 1,50,000/- was not appearing and source of cash deposited of ₹ 25,000/- was not explained - In the absence of any evidence on record to explain both these entries, the ld. CIT(A) was justified in confirming the addition of ₹ 1,75,000 Decided against Assessee. Computation of LTCG of residential property Held that - In the absence of any evidence of cost of construction, no further relief could be given to the assessee - the assessee, however, produced a duplicate copy of the valuation report (unsigned) and requested that the same may be admitted as additional evidence to give benefit of higher cost of construction in favour of the assessee - The request cannot be accepted - It is photocopy duplicate valuation report and is not signed by any person also, the valuation report cannot substitute actual cost incurred by the assessee towards the construction - In the absence of any proof regarding construction cost of such house and any investment made therein, would clearly disentitle the assessee from any relief Decided against Assessee. Long term capital gain Claim of Deduction Application u/s 154 of the Act pending - Held that - There is no question for the CIT(A) to have decided the issue of ₹ 20,00,000 - the CIT(A) was not required to adjudicate upon such alleged ground of appeal - The ld. counsel for the assessee further submitted that the assessee has moved application u/s. 154 before the CIT(A) which is still pending - Let the assessee may pursue his application given before the CIT(A) Decided against Assessee.

Issues Involved:

1. Addition of Rs. 66,012 as interest income.
2. Addition of Rs. 43,924 as interest income.
3. Addition of Rs. 1,26,000 in the capital account.
4. Addition of Rs. 2,20,000 under Section 68 of the IT Act.
5. Addition of Rs. 1,75,000 out of total addition of Rs. 9,33,000.
6. Computation of long-term capital gains on the sale of residential property.
7. Claim of deduction of Rs. 20,00,000 not considered.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 66,012 as Interest Income:

The assessee challenged the addition of Rs. 66,012, arguing that the interest income from bank FDs was split between business income and income from other sources. The authorities below did not examine the records properly and failed to appreciate the assessee's contentions. The Tribunal found merit in the assessee's argument and noted that the authorities did not provide an opportunity to explain the issue. Therefore, the Tribunal set aside the orders of the authorities and remanded the matter back to the AO for reconsideration, directing to give the assessee a reasonable opportunity of being heard.

2. Addition of Rs. 43,924 as Interest Income:

The assessee did not press this ground, and hence, it was dismissed as not pressed.

3. Addition of Rs. 1,26,000 in the Capital Account:

The AO observed that the assessee credited Rs. 1,26,000 in the capital account without justifying the source. The assessee explained that the amount was from the closure of a PPF account and other sources, but failed to substantiate it with evidence. The Tribunal found that part of the credit (Rs. 26,000) required reconsideration, while the remaining Rs. 1,00,000 was not explained satisfactorily. Thus, the Tribunal remanded the issue of Rs. 26,000 back to the AO for verification and confirmed the addition of Rs. 1,00,000.

4. Addition of Rs. 2,20,000 under Section 68 of the IT Act:

The AO added Rs. 2,20,000 as unexplained deposits in the Bank of India account. The assessee claimed the amount was from the sale of a car but failed to provide sufficient evidence. The Tribunal noted that the bank accounts required further examination and remanded the issue back to the AO for reconsideration, directing to provide a reasonable opportunity to the assessee.

5. Addition of Rs. 1,75,000 out of Total Addition of Rs. 9,33,000:

The AO found unexplained credits of Rs. 9,33,000 in the HDFC bank account, out of which Rs. 1,75,000 remained unexplained. The Tribunal upheld the addition of Rs. 1,75,000, as the assessee failed to provide evidence contradicting the findings of the CIT(A).

6. Computation of Long-Term Capital Gains on Sale of Residential Property:

The dispute was over the cost of acquisition of the house. The assessee claimed a higher cost than what the AO accepted. The Tribunal found no justification to interfere with the lower authorities' decision, as the assessee failed to provide any evidence of the cost of construction. The Tribunal also rejected the request to admit an unsigned duplicate valuation report as additional evidence.

7. Claim of Deduction of Rs. 20,00,000 Not Considered:

The assessee claimed that the CIT(A) did not consider the ground of deduction of Rs. 20,00,000. However, the Tribunal found that this issue was not specifically raised before the CIT(A). The Tribunal noted that the AO had already given credit for Rs. 35,17,520 in the computation of long-term capital gains. The Tribunal dismissed this ground but allowed the assessee to pursue the pending application under Section 154 before the CIT(A).

Conclusion:

The appeal was partly allowed for statistical purposes, with specific issues remanded back to the AO for reconsideration and other additions confirmed or dismissed based on the evidence and arguments presented.

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