2017 (9) TMI 309 - AT - Income Tax

Addition u/s 69 on account of unexplained investment - purchase of tenancy right - Contention of the assessee that he did not purchase the property however, he took Room along with two other on monthly rent - Held that - The assessee did not disclose the said transaction in his return income. It is also in dispute that an amount of ₹ 41,13,000/- was paid to acquire the tenancy right in the property mentioned above. The said agreement speaks about the fact that the assessee along with Kirtilal, M. Shah and Amarchand P Shah purchased the said property to the extent of 1/3 share each. The assessee failed to explain the source of the payment to the tune of ₹ 41,13,000/-.The full addition to the amount of ₹ 41,13,000/- u/s 69 doesn t seems justifiable because the assessee was having only 1/3 share therefore, the addition to the extent of 1/3 share of ₹ 41,13,000/- is hereby ordered to be confirmed - Decided partly in favor of assessee. Disallowance of interest - Held that - The figure of deposit and interest paid has duly discussed by CIT(A) in his order. Nothing distinguishable facts has been placed on record. Even, at the time of argument nothing was argued that which figure has wrongly being taken into consideration while declined the claim of the assessee regarding interest to the tune of ₹ 3,34,000/-. In view of the said circumstances we are of the view that the CIT(A) has rightly confirmed the said addition hence, the order of the CIT(A) in this regard is not liable interfere with at this appellate stage. Accordingly, this issue is decided against the assessee. Addition of personal expenses - AO has made the addition to the extent of 5,00,000/- on account of low withdrawal which was restricted by the CIT(A) to the extent of 2,00,000/- - Held that - Since, it was incumbent upon the assessee to explain the expenditure which has not been explained. Moreover, nothing distinguishable material has been produced before us to justify the claim raised by the assessee therefore in the said circumstances we confirmed the finding of the CIT(A) on this issue.

Summary

Issues:
1. Addition of ?41,13,000 under section 69 of the Income Tax Act, 1961 for the value of tenancy rights of office premises.
2. Disallowance of interest paid to the extent of ?3,34,000.
3. Addition of personal expenses of ?2,00,000 on account of low withdrawals.

Issue 1 & 2 - Addition of ?41,13,000 under section 69 of the Income Tax Act:
The assessee challenged the addition, claiming the amount was not for property purchase but for stamp duty. The tenancy agreement showed joint acquisition by three persons, with the assessee having a 1/3 share. However, no evidence was provided for the source of payment. The tribunal found the full addition unjustified due to the assessee's 1/3 share and lack of proof of payment source. Hence, the addition was partially allowed, confirming only 1/3 share of ?41,13,000.

Issue 3 - Disallowance of interest paid of ?3,34,000:
The CIT(A) confirmed the disallowance partially, considering various loan transactions and investments. The tribunal noted the detailed analysis by the CIT(A) and found no new facts presented. As no substantial argument was made, the tribunal upheld the CIT(A)'s decision, concluding that the disallowance of interest paid was justified. Therefore, this issue was decided against the assessee.

Issue 4 - Addition of personal expenses of ?2,00,000:
The addition of personal expenses was made due to low withdrawals, which the CIT(A) restricted. The tribunal observed that the assessee failed to explain the expenditure adequately and did not provide any new evidence. Consequently, the tribunal upheld the CIT(A)'s decision on this issue, as there was no justification for the claim raised by the assessee.

In conclusion, the tribunal partly allowed the appeal filed by the assessee, confirming the partial addition under Issue 1, upholding the disallowance of interest under Issue 3, and supporting the addition of personal expenses under Issue 4. The order was pronounced on 29.08.2017.