2021 (9) TMI 1253 - AT - Income Tax

Disallowance of interest expenditure related to the amounts advanced to VVCIPL under the head business income - CIT(A) found that as there was excess expenditure incurred by the assessee, the Ld.CIT(A) held that there is no case for making the addition and accordingly deleted the addition - HELD THAT - In the instant case, there is no dispute that the assessee has earned interest income on the amounts lent to VVCIPL and at the same time, the assessee also paid the interest on borrowed funds. Since the assessee has earned interest of equal amounts and offered to tax, there is no loss of revenue. The department has not disputed the fact that the assessee has received income from VVCIPL and offered the same under the head income from other sources . There is no loss of revenue and the Ld.CIT(A) rightly deleted the addition. Hence, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. This ground of the revenue is dismissed. Addition on account of profits admitted - Since the assessee could not explain the nature of the expenditure, the AO made the addition to the returned income - HELD THAT - Though the assessee has claimed that the interest was paid on advance received on sale of flat which was cancelled subsequently, no details were made available either in the assessment proceedings or in the appeal proceedings. The assessee is supposed to furnish the details with regard to flat No., identify the buyer etc. to claim the expenditure. Without having furnished the above details, the AO cannot verify the genuineness of the expenditure. It also appears that the AO did not make any effort to collect the details. Therefore, we remit the matter back to the file of the AO with a direction to re-examine the issue in detail and decide the issue afresh on merits. Appeal of the revenue on this ground is allowed for statistical purpose. Disallowance of expenditure u/s 40(a)(ia) - Non deduction of commission, salary, electrical works, land development charges, carpentary works, NMR works, painting works etc - HELD THAT - There is no dispute that the assessee is maintaining the books of accounts and the books of accounts were duly audited by qualified Chartered Accountant and given his findings on TDS liability. The assessee has furnished the details of TDS made before the CIT(A) and the CIT(A) has given a finding that TDS is applicable only on commission payment, carpentary works and painting works and the assessee has deducted the TDS. The remaining payments were outside the purview of TDS since each payment was less than the threshold limit for deduction of TDS - AO did not identify each payment and the quantum of TDS that is required to be made. It is the obligation of the AO to ascertain the details of payments made to each person from the books of accounts and determine the TDS liability to make the addition. During the appeal hearing, the Ld.DR did not place any material to controvert the finding given by Ld.CIT(A). Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Appeal of the revenue on this ground is dismissed. Addition u/s 69A r.w.s. 115BBE - cash deposits made in the bank account during demonetization period - CIT- A deleted the addition - HELD THAT - Since the facts are identical respectfully following the view taken by this Tribunal in Mr.Jaya Prakash Babu 2021 (9) TMI 1192 - ITAT VISAKHAPATNAM and M/s Karthik Constructions 2018 (3) TMI 39 - ITAT MUMBAI we uphold the order of Ld.CIT(A) and dismiss the appeal of the revenue. Addition u/s 68 - unexplained cash credit - HELD THAT - The source for infusion of capital was the amount given by his father Shri Jaya Prakash Babu through transfer from his capital account. As per the ledger account, the said sum was credited in the capital account on 01.04.2016. Since, the assessee has submitted the ledger account of Shri V.Jaya Prakash Babu, which clearly shows that the said sum was credited in the capital account of the assessee, the source stands explained. In fact Shri Jaya Prakash Babu also assessed in the same circle/ward and the AO did not cause any enquiries to ascertain the correctness and thus did not make out any case for addition u/s 68.

Summary

Issues:
1. Disallowance of interest expenditure claimed under 'business income'.
2. Addition of undisclosed income due to lack of explanation for claimed expenditure.
3. Disallowance of expenditure under section 40(a)(ia) for non-deduction of tax at source.
4. Addition of cash deposits during demonetization period.
5. Addition of unexplained cash credit under section 68.

Analysis:

1. Interest Expenditure Disallowance:
- The AO disallowed interest expenditure claimed by the assessee related to amounts advanced to VVCIPL under 'business income'.
- The CIT(A) found that the assessee had earned interest income equal to the claimed expenditure, thus no loss of revenue.
- Tribunal upheld CIT(A)'s decision stating no reason to interfere as there was no loss of revenue.

2. Undisclosed Income Addition - Lack of Explanation:
- AO added an amount to returned income due to lack of explanation for claimed expenditure.
- CIT(A) deleted the addition as the expenditure was related to interest paid on advance received for flat sales, which was later canceled.
- Tribunal remitted the matter back to AO for detailed examination and decision on merits.

3. Expenditure Disallowance under Section 40(a)(ia):
- AO disallowed a portion of expenditure for non-deduction of tax at source.
- CIT(A) deleted the addition after finding that TDS was applicable only on specific payments.
- Tribunal upheld CIT(A)'s decision as the AO did not identify payments requiring TDS.

4. Cash Deposits during Demonetization Period:
- AO made an addition for cash deposits during demonetization period.
- CIT(A) deleted the addition as the source was explained as withdrawals from the bank account.
- Tribunal upheld CIT(A)'s decision based on similar cases and dismissed the appeal.

5. Unexplained Cash Credit Addition under Section 68:
- AO added an amount as unexplained cash credit under section 68.
- CIT(A) deleted the addition as the source was traced to a transfer from another account with evidence.
- Tribunal upheld CIT(A)'s decision as the source was explained and no further inquiries were made by the AO.

In conclusion, the Tribunal partly allowed the appeals of the assessee and partly allowed the cross objections, maintaining decisions that favored the assessee in most issues while remitting one issue back to the AO for further examination.