2018 (5) TMI 1721 - AT - Income Tax

Rejection of the books of account - disallowance of interest expenditure - Held that - As now the assessee is in possessions of regular Books of Accounts, therefore, in the interest of justice we restore the matter back to the file of the AO to verify the relevant Books of Account and for deciding the issue afresh as per law. Disallowance of interest expenditure is primarily due to lack of documentary evidences - thus the matter is restored back to the file of AO to consider it again after giving reasonable opportunity of being heard to the assessee - Assessee s appeal allowed for statistical purposes.

Summary

Issues:
1. Rejection of books of account and addition made by AO.
2. Disallowance of interest expenditure.

Analysis:
1. The appeal was filed against the order of the CIT(A) for A.Y. 2012-13 under Section 143(3) of the Income Tax Act. The grievance was regarding the addition made by rejecting the books of account and disallowance of interest expenditure. The AO rejected the books of account as the assessee failed to produce them, estimating income at 10% of gross receipts. The CIT(A) confirmed this action. However, the ITAT found that the assessee now had regular books of accounts and restored the matter back to the AO for verification and fresh decision.

2. The next grievance related to the disallowance of interest paid on land utilized for business purposes. Referring to a previous tribunal order on a similar issue, the ITAT observed that the dispute was whether the interest expenditure was directly related to earning rental income. The authorities had rejected the claim due to lack of evidence on loan utilization for land development. The ITAT decided to restore the matter back to the AO for a fresh assessment, emphasizing the need for a reasoned order considering all documentary evidence and submissions.

In conclusion, the ITAT allowed the appeal for statistical purposes, directing the matters to be reconsidered by the AO in light of the available evidence and legal provisions.