2018 (5) TMI 805 - AT - Income Tax

TDS u/s 194A - disallowance of interest u/s 40(a)(ia) for non deduction of tax at source - Held that - The provisions of section 40(a)(ia) can be invoked to make a disallowance for non deduction of tax at source only while computing income under the head profits and gains of business or profession . Since the assessee during the year under consideration had no business income and the interest expenditure in question was claimed by him under the head Income from other sources , we find merit in the contention of the learned counsel for the assessee that the disallowance made by the A.O. and confirmed by the Ld. CIT(A) on account of interest by invoking section 40(a)(ia) is not sustainable. - Decided in favour of assessee Addition on account of interest on bank accounts - Held that - This issue is accordingly restored to the file of the A.O. with the direction to verify the claim of the assessee that the amount of interest in question has already been brought to tax in the hands of M/s. Anand Vinayak Coalfield Ltd. and if it is found to be correct, the addition made in the hands of the assessee on account of same income is liable to be deleted as the same would otherwise result in double addition. Ground treated as allowed for statistical purposes Deemed dividend under section 2(22)(e) - Held that - The nomenclature by the assessee alone cannot determine the exact nature of relevant transactions and it is required to be ascertained from the facts and record.T herefore, set aside the impugned order of the Ld. CIT(A) on this issue and restore the matter to the file of the A.O. for deciding the same afresh in the light of the decision of Tribunal in the case of Smt. Gayatri Chakraborty (2015 (11) TMI 1009 - ITAT KOLKATA) after verifying the exact nature of transactions from the relevant facats and record. Ground treated as allowed for statistical purposes.

Summary

Issues:
1. Addition under section 68 of the Income Tax Act, 1961
2. Disallowance of interest under section 40(a)(ia) for non-deduction of tax at source
3. Addition of interest on bank accounts
4. Deemed dividend under section 2(22)(e) of the Act

Issue 1: Addition under section 68 of the Income Tax Act, 1961
The appeal challenged the addition of ?4,06,737 made by the Assessing Officer (A.O.) and confirmed by the Ld. CIT(A) under section 68 of the Income Tax Act. The A.O. noticed cash deposits in the assessee's bank accounts that were not reflected in the cash flow statement. The tribunal directed the A.O. to verify the claim that expenses were incurred through credit cards and not reflected in the cash flow statement, setting aside the Ld. CIT(A)'s order.

Issue 2: Disallowance of interest under section 40(a)(ia) for non-deduction of tax at source
The A.O. disallowed interest expenditure under section 40(a)(ia) for non-deduction of tax at source. The tribunal held that since the interest was claimed under 'Income from other sources' and not 'profits and gains of business or profession,' the disallowance was not sustainable. The tribunal deleted the disallowance, allowing the assessee's appeal.

Issue 3: Addition of interest on bank accounts
The A.O. added interest income to the assessee's total income, as disclosed bank interest was lower than actual earnings. The tribunal directed the A.O. to verify if the interest income had already been taxed in the hands of another entity, potentially resulting in double taxation. The issue was restored to the A.O. for further examination.

Issue 4: Deemed dividend under section 2(22)(e) of the Act
The A.O. treated an amount received from a company as deemed dividend under section 2(22)(e), adding it to the assessee's income. The tribunal noted conflicting claims regarding the nature of the transaction. It set aside the Ld. CIT(A)'s decision and instructed the A.O. to reevaluate the nature of the transactions, considering relevant facts and records. The issue was treated as allowed for statistical purposes.

In conclusion, the tribunal partly allowed the assessee's appeal, addressing various issues related to additions and disallowances in the assessment. The matter was remanded to the A.O. for further examination and verification based on the tribunal's directions.