2015 (2) TMI 105 - AT - Income Tax

Interest on PDCs Paid outside the books of account - part of purchase consideration of land was paid through PDCs - CIT(A) deleted addition - Held that - Ground raised by the Revenue is misconceived because learned CIT(A) has not deleted the addition but has only directed to recalculate the interest. - after examining the loose papers seized at the time of search at the assessee s premises, it was noticed that interest is paid on the PDCs only during the period of extension of PDCs and, therefore, he directed the Assessing Officer to recompute the interest on PDCs at the time of extension of the PDCs. He has further observed that if it is not possible to work out the extension of PDCs in each case, then the Assessing Officer is directed to recompute interest on PDCs after six months from the date of issue of the PDCs. Therefore, the ground of appeal of the Revenue that the CIT(A) deleted the addition of ₹ 5,06,625/- made by the Assessing Officer on account of interest on PDCs is factually incorrect and contrary to the order of the CIT(A). - Decided against revenue.

Summary

Issues:
Appeal against deletion of addition of interest on PDCs paid outside the books of account.

Analysis:
The appeal before the Appellate Tribunal ITAT Delhi concerned the deletion of an addition of interest on post-dated cheques (PDCs) paid outside the books of account. The case involved a company engaged in real estate projects, part of a group that followed a business model where part payments were made at the time of sale deed execution and the balance through PDCs with cash interest payments. The Assessing Officer (AO) added the interest amount to the income, contending it was not accounted for. The company argued that PDCs were issued without interest as part of the sale agreement. The AO, however, found evidence of cash interest payments outside the books and made the addition. The CIT(A) partially allowed relief, directing the AO to compute interest after 6 months from the sale date. The CIT(A) analyzed seized documents showing interest payments on PDCs during extensions, leading to a re-computation directive. The Tribunal noted a similar case where the CIT(A) directed re-calculation of interest on PDC extensions, rejecting the Revenue's appeal. Given the identical facts, the Tribunal dismissed the department's appeal, upholding the CIT(A)'s findings.

This judgment highlights the importance of proper accounting for financial transactions, especially interest payments, and the need for concrete evidence to support claims. It also emphasizes the significance of seized documents in establishing facts and making informed decisions. The Tribunal's reliance on precedent and consistency in applying legal principles ensure fair treatment and uphold the integrity of the tax assessment process.