2020 (6) TMI 77 - AT - Income Tax

Addition u/s 68 - unsecured loan received - observations of the AO that the assessee has failed to satisfactorily explain the cash credit - whether the assessee has satisfied conditions stipulated in section 68 of the Act or not in respect of cash credit availed? - HELD THAT - Details of accounts along with confirmation, addresses and PAN of the lenders have been furnished to the AO for verification. Even the assessee has furnished copy of assessment orders passed in the case of lender for the relevant year for verification. Apart from that, these funds have been received by the assessee through banking channel, and therefore, all the ingredients necessary for proving cash credit under section 68 has been satisfied by the assessee. Looking to the details provided to the Revenue authorities and copies also available in the paper book, we are satisfied that the assessee has discharged burden put upon it by virtue of section 68 of the Income Tax Act, 1961. Delete the addition - Decided in favour of assessee. Disallowance of expenditure - Disallowance for the reason that the appellant was not engaged in any business during the year under consideration - Stand of the assessee is that, it has received deposits from members who have purchased property in its projects Kaivana Building and of that it has incurred expenditure towards electricity as well as staff salary and other expenses - HELD THAT - It is pertinent to observe that the assessee has not shown any income or rental income nor it has pleaded before the AO that it was in the business of maintenance of the building. Both Revenue authorities have concurrently recorded a finding that complete details were not submitted. This expenditure has no connection with earning of interest income from the deposits- stand of the assessee, if it is being demonstrated that maintenance of the alleged building is one of its area of business operation and out of maintenance activity it would show income in future. There is nothing that sort of. The assessee was unable to point that any expenditure was claimed in subsequent year on this or any income for maintenance of building was ever shown by the assessee. After considering the finding of the ld.CIT(A), no merit in this ground of appeal. Also no merit in the alternative submissions of the ld.counsel for the assessee as interest income is altogether a separate income, and not linked with this expenditure. - Decided against assessee.

Issues Involved:
1. Validity of notice issued under section 153C read with section 153A.
2. Addition of ?17,54,784/- under section 68 of the Income Tax Act.
3. Disallowance of ?5,16,872/- being expenses incurred by the assessee.
4. Set-off of income of ?1,30,791/- against the expenses of ?5,79,872/-.
5. Procedural fairness and consideration of submissions by lower authorities.
6. Levy of interest under section 234A/B/C of the Act.
7. Initiation of penalty proceedings under section 271(1)(c) of the Act.

Issue-wise Detailed Analysis:

1. Validity of Notice Issued Under Section 153C Read with Section 153A:
The assessee did not press this ground for adjudication, and it was accordingly dismissed.

2. Addition of ?17,54,784/- Under Section 68 of the Income Tax Act:
The assessee argued that it received unsecured loans from Navratna Organizers & Developers P. Ltd. and Navratna (Kaivanna) Association. To substantiate this, the assessee provided confirmations, bank transaction details, and copies of accounts from the lenders. The Revenue authorities contended that there were insufficient evidences to prove the genuineness of the cash credits. However, the Tribunal found that the assessee had discharged the onus of proving the identity, genuineness, and creditworthiness of the lenders, as required under section 68. The Tribunal allowed this ground of appeal and deleted the addition.

3. Disallowance of ?5,16,872/- Being Expenses Incurred by the Assessee:
The assessee claimed that these expenses were for the maintenance of the "Kaivana Building" and were necessary for its business operations. The AO disallowed the expenses, stating that there was no business nexus between the income earned and the expenses incurred. The CIT(A) upheld the disallowance, noting that the assessee did not provide sufficient details or evidence to substantiate the expenses. The Tribunal agreed with the CIT(A) that there was no connection between the expenses and the earning of interest income from deposits. Consequently, this ground of appeal was rejected.

4. Set-off of Income of ?1,30,791/- Against the Expenses of ?5,79,872/-:
The assessee alternatively requested to set off the interest income against the expenses. The Tribunal found no merit in this submission, as the interest income was considered a separate income not linked to the claimed expenses. This alternative ground was also rejected.

5. Procedural Fairness and Consideration of Submissions by Lower Authorities:
The assessee claimed that the lower authorities did not properly consider the submissions and explanations provided. The Tribunal did not specifically address this procedural issue in isolation but dealt with it within the context of the other grounds of appeal.

6. Levy of Interest Under Section 234A/B/C of the Act:
The Tribunal did not provide a separate analysis for this ground, implying that it was not pressed or was considered to be consequential to the main issues.

7. Initiation of Penalty Proceedings Under Section 271(1)(c) of the Act:
Similar to the interest levy, the Tribunal did not separately analyze this ground, suggesting it was either not pressed or deemed consequential.

Conclusion:
The appeal was partly allowed. The Tribunal deleted the addition of ?17,54,784/- under section 68 but upheld the disallowance of ?5,16,872/- in expenses. The alternative request for set-off was also rejected. The procedural and consequential issues were not separately adjudicated. The judgment was pronounced in the Open Court on 1st June 2020.

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