2011 (2) TMI 1600 - AT - Income Tax

Summary

Issues involved: The judgment involves the issue of directing the AO to substitute a sum in place of an addition made u/s 69C of the Income Tax Act.

Details of the Judgment:

1. The appeal was against the order of the CIT(A) for AY 2001-02, where the AO had made an addition u/s 69C of &8377; 9,36,509/- for unexplained expenses in stock and car expenses. The CIT(A) deleted this addition but noted other expenses claimed by the assessee. The CIT(A) divided the interest claimed into two parts, allowing a deduction of &8377; 68,245/- under the head of interest incurred on the cost of construction sold during the year. The balance of &8377; 8,63,513/- was required to be disallowed and added to the work in progress.

2. The assessee appealed against the CIT(A)'s order, arguing that the CIT(A) erred in making an enhancement that the AO had not considered. The counsel referred to a case law stating that the CIT(A) had no power to tax a new source of income. The DR contended that the same source of income was considered, and the case law did not apply.

3. The Tribunal found that the CIT(A) had the power to enhance the assessment and had only analyzed the same source of income. The argument that the CIT(A) taxed a new source of income was deemed devoid of cogency.

4. Another issue raised was regarding the deduction of interest paid in respect of capital borrowed for business purposes. The Tribunal clarified that the question was about interest allocated to stocks and sales made during the year, not interest on capital borrowed.

5. The assessee also raised concerns about not being given an opportunity to address the enhancement made by the CIT(A). The Tribunal agreed that the assessee should have been given a chance to respond and remitted the issue back to the CIT(A) for necessary action.

6. The appeal by the assessee was allowed for statistical purposes, and the decision was pronounced on 25th February 2011.