2018 (10) TMI 350 - AT - Income Tax

Assessment u/s 153C - assessment barred by the limitation - Held that - Examining the facts of the instant case, we observe that it was F.Y. 2011-12 during which the Assessing officer of the assessee was handed over the seized documents by the Assessing Officer of Mr. I.C. Dubey (husband of the assessee Geeta Dubey) and as the relevant date of handing over these seized documents falls after 1st April 2010 the second proviso to section 153B sub section (1) of the Act will have no application and the time limit for framing the assessment would be two years from the end of the financial year in which the documents were handed over and in the instant appeal these two years will end on 31st March 2014 i.e. two years from the end of A.Y. 2011-12 and the impugned assessment have been completed on 22.03.2013 which are well within the time limit provided in the Act. Therefore impugned assessment framed u/s 153C r.w.s. 143(3) of the Act are not barred by limitation and are thus valid. - Decided against assessee. Addition treating gifts from relative as unexplained - sum received without consideration by an individual as Hindu Undivided family - Held that - Sub-sections 56(2)(v), 56(2)(vi) & 56(2)(vii) shall not be applicable if any sum is received from any relative ( as defined in explanation (e) to section 56). There is no mention about the occasion to be a necessary condition for receiving any sum from any relative. In the instant case, the alleged gifts of ₹ 50,000/-, ₹ 1,00,000/- and ₹ 50,000/- for A.Ys. 2004-05, 2005-06 & 2006-07 have been received from relatives of the assessee i.e. father and sister-in-law through account payee cheques/demand draft. Therefore, the same cannot be included in the income of the assessee by any cannon of law. We, therefore, set aside the finding of the lower authorities and delete the addition made on account of unexplained gifts - Decided in favour of assessee Disallowance of expenses of vehicle expenses and vehicle insurance - CIT(A) partly deleted the disallowance and sustained to the extent of ₹ 10% of the alleged expenditure - Held that - We find that the expenditure in the nature of vehicle expenses and vehicle insurance have been incurred by the assessee in the course of business of earning commission. There is no suo motto disallowance on the part of any assessee nor has any amount been shown specifically under the household drawing. We, therefore, in the given facts and circumstances of the case, find no inconsistency in the finding of the ld. CIT(A) sustaining the disallowance of 10% of vehicle expenses and vehicle insurance. We, therefore, dismiss the relevant ground for all seven assessment years. Addition on account of alleged loan repayment out of undisclosed sources - Held that - From perusal of records as well as balance sheet and capital account placed in the paper book we find that in the balance sheet under the head loan taken from ICICI, Bank, assessee has reduced the portion of principal loan amount of ₹ 35,593/- whereas the interest on loan of ₹ 1,07,759/- have been reflected in the capital account placed at page 15 of the paper book and this interest amount is shown as a part of the withdrawal of ₹ 1,34,760/-. We, therefore, find merit in the contention of the Ld. counsel for the assessee and are of the view that the assessee has duly disclosed the interest expenditure of ₹ 1,07,759/-. Both the lower authorities erred in sustaining the addition for unexplained expenditure. We, accordingly delete the addition - decided in favour of assessee Disallowance of assessee s claim of interest on loan claimed as on deduction under the head income from house property - Held that - we find that the assesses s source of income is from commission. The assessee is not into the business of purchase and sale of land. The alleged annual property for which the loan has been taken is shown under the fixed asset. We fail to understood that how the interest paid on purchase of the land can be allowed as a business expenditure when the land is not used for business purpose nor the assessee has succeeded at any point of time to prove the use of land for business purpose. Even if it is for a project for future, the alleged interest amounts needs to be capitalized along with cost of land. In our view there is no room available to claim the alleged interest amount as business expenditure. The contentions of the Ld. Counsel for the assessee are brushed aside and no interference is called for in the finding of Ld. CIT(A) upholding the addition. - decided against assessee Addition on account of alleged difference in cost of land - Held that - The assessee received an advance of ₹ 2,31,000/- for sale of this agricultural land. For some reason this deal could not be completed. The assessee forfeited 10% of the advance amount and paid back the remaining amount of ₹ 2,07,900/- to the proposed buyer. Sum of ₹ 23,100/- being 10% of the advance amount was reduced from the total cost of land of ₹ 3,51,240/- and the remaining amount of ₹ 3,28,140/- has been shown in the balance sheet as on 31st March 2008. Both the lower authorities has considered the amount of ₹ 23,100/- as income of the assessee. In our view, as the assessee has reduced the forfeited amount from the cost of land as the deal could not materialized, the cost of land has been reduced by ₹ 23,100/- and the lower authorities erred in confirming the addition of ₹ 23,100/-. We accordingly delete the same. - decided in favour of assessee. Disallowance of deduction u/s 80C for the repayment of house loan - investment eligible for section 80C was ₹ 1,10,191/- which included the repayment of housing loan of ₹ 12,346/- - Held that - We find force in the contention for the Ld. counsel for the assessee and are of the view that out of eligible deduction claimed by the assessee at ₹ 1,10,191/-, the Ld. AO should have first reduced this amount by ₹ 12,346/- which results into a figure of ₹ 97,845/-. This sum of ₹ 97,845/- is eligible for deduction u/s 80C of the Act and the same should have been allowed to the assessee and therefore, the disallowance should have only been to the extent of ₹ 2,155/- and not ₹ 12346/-. The assessee gets partial relief and disallowance for deduction u/s 80C is restricted to ₹ 2,155/- only - Decided partly in favour of assessee

Summary

Issues Involved:
1. Validity of assessment orders under Section 153C read with Section 143(3) of the Income Tax Act.
2. Addition of gifts from relatives as unexplained income.
3. Disallowance of vehicle expenses and vehicle insurance.
4. Addition on account of alleged loan repayment from undisclosed sources.
5. Disallowance of interest on loan claimed under the head income from house property.
6. Addition on account of alleged difference in cost of land.
7. Disallowance of deduction under Section 80C for repayment of house loan.

Detailed Analysis:

1. Validity of Assessment Orders:
The assessee contended that the assessment orders under Section 153C read with Section 143(3) were barred by limitation and should be annulled. The search was conducted on 20.11.2009, and documents were handed over to the jurisdictional Assessing Officer on 19.03.2012. The assessee argued that the assessments should have been completed by 31.12.2012, but were passed on 22.03.2013, making them invalid. However, the Tribunal found that the relevant date for the limitation period was when the documents were handed over to the jurisdictional Assessing Officer, which was in the financial year 2011-12, making the assessments valid as they were completed by 31.03.2014.

2. Addition of Gifts from Relatives:
For Assessment Years 2004-05, 2005-06, and 2006-07, the Assessing Officer treated gifts from the assessee's father and sister-in-law as unexplained income, as the assessee could not specify the occasion for receiving the gifts. The Tribunal noted that the gifts were received through banking channels from identified relatives, making them exempt under Section 56(2). The Tribunal deleted the additions, stating that the law does not require specifying an occasion for receiving gifts from relatives.

3. Disallowance of Vehicle Expenses and Vehicle Insurance:
The Assessing Officer disallowed 20% of vehicle expenses and insurance, considering a personal element in the expenditure. The CIT(A) reduced this disallowance to 10%. The Tribunal upheld the CIT(A)'s decision, finding no inconsistency, as the expenses were incurred in the course of business, and the disallowance was reasonable.

4. Addition on Account of Alleged Loan Repayment:
For Assessment Year 2007-08, the Assessing Officer added ?1,07,759/- as undisclosed income, alleging it was not reflected in the assessee's records. The Tribunal found that the interest on loan was duly disclosed in the capital account and deleted the addition, stating that both lower authorities erred in their findings.

5. Disallowance of Interest on Loan Claimed Under House Property:
For Assessment Years 2008-09, 2009-10, and 2010-11, the assessee claimed interest on a loan for purchasing land under the head income from house property. The Tribunal noted that the land was not used for business purposes and upheld the CIT(A)'s decision to disallow the interest claim, as it should be capitalized with the cost of land.

6. Addition on Account of Alleged Difference in Cost of Land:
For Assessment Year 2008-09, the Assessing Officer added ?23,100/- as income, which was the forfeited amount from an advance received for selling agricultural land. The Tribunal found that the assessee had correctly reduced this amount from the cost of land and deleted the addition.

7. Disallowance of Deduction Under Section 80C:
For Assessment Year 2010-11, the Assessing Officer disallowed ?12,346/- claimed under Section 80C for repayment of a house loan. The Tribunal found that the total eligible deduction was ?1,10,191/-, and after reducing ?12,346/-, the allowable deduction should be ?97,845/-. The Tribunal partially allowed the assessee's claim, restricting the disallowance to ?2,155/-.

Conclusion:
The Tribunal partly allowed the appeals, providing relief on several grounds while upholding some disallowances. The judgment emphasized the importance of proper documentation and adherence to legal provisions in tax assessments.